Property Tax | Rental Income Tax Filing & Advisory | Deep Blue CPA

Property Tax Services

Hong Kong property tax is governed by the Inland Revenue Ordinance (Cap. 112, Part II) and is charged on the owner of land or buildings in Hong Kong at the standard rate of 15% on the net assessable value of the rental income. Unlike profits tax, property tax allows very limited deductions and is assessed separately from other taxes.

At Deep Blue CPA Limited, we provide comprehensive property tax compliance and advisory services to help property owners, landlords, and corporate investors meet their Hong Kong property tax obligations accurately and on time. Our team of AFRC registered CPAs brings practical experience in handling complex property tax matters, including property tax vs profits tax elections, IRD enquiries, and cross-border real estate investment structures.

Our Property Tax Services

Property Tax Return Filing

• Property Tax Return preparation and filing (BIR57 — Property Tax Return) for individual and corporate property owners
• Net assessable value computation — accurate calculation of assessable value after deducting government rates paid by the owner and irrecoverable rents
• Rental income reconciliation — matching rental income declared across property tax returns, profits tax returns, and audited financial statements
• Multiple property portfolio management — consolidated filing strategy for owners with multiple rental properties
• Timely filing reminders — ensuring returns are submitted within the one-month deadline to avoid penalties and estimated assessments

Property Tax vs Profits Tax Election

Where a company owns rental properties, the rental income may be subject to either property tax or profits tax. Under Section 25(1) of the Inland Revenue Ordinance, corporate owners can elect to have their rental income assessed under profits tax instead of property tax. This election is often beneficial when the property is financed by a mortgage, as mortgage interest is deductible under profits tax but not under property tax.

We assist clients in:

• Election feasibility analysis — assessing whether a Section 25(1) election is advantageous for your specific circumstances
• Election application filing — preparing and submitting the formal election notice to the IRD within the prescribed time limits
• Ongoing compliance — managing the interaction between property tax and profits tax for companies with mixed income streams

Rental Income Compliance

• Rental agreement review — reviewing lease agreements to identify potential tax implications and ensure proper withholding and reporting
• Rent receivable tracking — advisory on accounting for rental income, including rental deposits, premiums, and service charges
• Bad debt claims — documentation and filing of irrecoverable rent claims to reduce property tax liability
• Rates and government charges — proper allocation of government rates between owners and tenants for tax deduction purposes
• Partial period assessments — handling property tax for properties bought, sold, or leased during the year of assessment

IRD Enquiries & Tax Disputes

We act as your authorised tax representative in all dealings with the Inland Revenue Department, including:

• Handling IRD letters of enquiry related to property tax returns and rental income declarations
• Preparing responses to property tax assessments and estimated assessments
• Filing objections against excessive property tax assessments
• Representation during IRD field audits and investigations concerning property holdings
• Applying for holdover of provisional property tax

Property Tax Rates & Computation

Hong Kong property tax is charged at a standard rate of 15% on the net assessable value. The computation follows this formula:

Net Assessable Value = [Actual Rent Received − (Government Rates paid by owner)] × 80% − Irrecoverable Rents (bad debts)

The 20% statutory deduction (factored as 80% of the net rent after rates) is intended to cover outgoings such as repairs and other expenses. No further deductions are allowed.

Note: If the property is owned by a company and the rental income is also subject to profits tax, the property tax paid may be deducted from the profits tax liability, or the company may elect under Section 25(1) to have the rental income assessed under profits tax only.

Why Choose Deep Blue CPA for Your Property Tax Needs?

• AFRC Registered CPA Firm (Registration No. M0307) — all tax services are supervised by qualified certified public accountants with practising certificates
• Over 15 Years of Experience — established since 2008, serving hundreds of property owners ranging from individual landlords to corporate real estate investors
• Ex-Big Four Expertise — our directors bring international best practices from leading global accounting firms
• Property Tax Specialists — deep expertise in HK property tax compliance, Section 25(1) elections, and IRD enquiry handling
• Proactive Tax Planning — we identify opportunities to minimise property tax liabilities through proper structuring and elections
• End-to-End Service — from rental income record-keeping to property tax filing and dispute resolution, we cover your full compliance cycle

Frequently Asked Questions

What is the Hong Kong property tax rate?

Hong Kong property tax is levied at a standard rate of 15% on the net assessable value of the property. Net assessable value is calculated as 80% of the actual rent received after deducting government rates paid by the owner, less any irrecoverable bad debts. No deductions are allowed for repairs, mortgage interest, or other expenses.

Who needs to pay property tax in Hong Kong?

Any owner of land or buildings in Hong Kong who receives rental income is liable for property tax. For individual owners, property tax is the primary tax on rental income. For corporate owners, the rental income is generally chargeable to profits tax instead, and the property tax paid can be deducted from or set off against the profits tax liability.

Can property tax be avoided if the company already pays profits tax?

Yes. Where rental income is already included in a company's assessable profits for profits tax purposes, the property tax paid on that rental income can be deducted from the profits tax assessed. Alternatively, a corporate owner can make an election under Section 25(1) of the Inland Revenue Ordinance to have the rental income treated as part of the profits tax computation instead of being separately assessed to property tax.

What deductions are available against property tax?

Deductions under property tax are limited to: (1) government rates paid by the owner (not the tenant), and (2) irrecoverable bad debts (rent that has been assessed but not received by the owner). No deductions are permitted for repairs and maintenance, mortgage interest, insurance premiums, management fees, or any other outgoings. This is a key difference from profits tax, which allows a full range of deductible expenses.

When is the property tax return due?

The Inland Revenue Department (IRD) issues property tax returns (BIR57) on or around 1 April each year. The return must be filed within one month of the issuance date. Unlike profits tax, there is generally no block extension scheme for property tax returns. Late filing may result in penalties and the IRD issuing estimated assessments. Engaging a tax representative early is strongly recommended.

How is property tax different from profits tax on rental income?

Individual owners pay property tax at 15% on the net assessable value with limited deductions. Corporate owners pay profits tax on rental income at the two-tiered rate (8.25% on the first HK$2 million and 16.5% thereafter), with full deduction for all business expenses including mortgage interest and repairs. Corporate owners can elect under Section 25(1) to have rental income assessed under profits tax instead of property tax, which is often more beneficial when significant deductible expenses exist.

Related Services

• Hong Kong Salaries Tax Filing — Employment income tax compliance for employers and employees
• Hong Kong Profits Tax Services — Comprehensive profits tax compliance and advisory
• Transfer Pricing Services — TP documentation and advisory for related party transactions
• Tax Audit & Tax Investigation — IRD enquiry handling and dispute resolution
• Bookkeeping Services — Accurate financial records to support timely tax filing