Does Hong Kong collect property tax?

Hong Kong collects property tax.

There are three main types of real estate taxes in Hong Kong: rates, government rent, and property tax.

1. Let’s start with rates. Rates are levied on the rental market value of land and buildings and are taxes levied on the use of properties. In recent years, the tax rate has been 5%, accounting for about 3% of Hong Kong's income and about 2% of Hong Kong household expenditures.

It is worth noting that Hong Kong law does not specifically stipulate whether the rate bearer is the lessor or the lessee. It is generally left to the tenant and the owner to agree on their own. If there is no other agreement, it will be paid by the user.

In terms of exemptions, Hong Kong mainly targets agricultural land and related buildings, buildings for religious purposes, cemeteries and crematoria, some government-owned properties, military land, etc.

In addition, the government also has the power to refund or reduce rates to rate payers. For example, when the economic situation is poor, the government can formulate some relief measures to reduce residents' taxes. In the years after the financial crisis, due to some rates relief measures, rates as a share of total revenue fell to around 3.

2. Let’s look at Hong Kong’s government rent. It is worth noting that the land in Hong Kong is also mainly public ownership, which is basically similar to that in the mainland.

Therefore, Hong Kong’s land leasing system and annual renting system run in parallel. Developers must pay a one-time land transfer fee when purchasing. In addition, a certain amount of ground rent must be paid for the land every year. The tax base of ground rent is the same as that of rates, with a tax rate of 3.

3. Finally, there is property tax. Hong Kong's property tax is levied on property owners, targeting rental income from land and buildings (if they are not rented out, no property tax is required). At the same time, there are some items that can be deducted. The current rate of property tax is 15.

In terms of deductions and exemptions, irrecoverable rent and rates paid by property owners can be deducted from rental income. In addition, the government also provides a standard tax exemption of 20% for repairs and related expenses. To put it simply, the tax amount = standard tax rate (15)*80* (rental income – irrecoverable rent – ??rates paid by the property owner).

Tax preferential treatment and tax collection process

1. Tax preferential treatment

a. For couples without children, the tax-free area is calculated as three people.

b. The tax-free area for unmarried singles or divorced singles is calculated based on 1.5 people, but the tax-free area does not exceed 60 square meters.

c. Singles who are widowed and singles whose children died in infancy are calculated as tax-free area for 2 people.

d. Demolition compensation properties and households receiving subsistence allowances are exempt from property tax.

e. Tourism properties that are not within the urban area can be exempted from or halved in property tax.

2. Taxation process

The tax department automatically generates tax family member information and local real estate information from the real estate tax computer collection and management system on January 1 of each year, and generates tax payment accordingly. A notice is mailed to the taxpayer, and the tax must be paid before the end of March. Late payment fees will begin to be calculated after the due date. Family member information can be obtained from census data or feedback from the public security household registration department.

Local real estate information is obtained from the National Housing Information Inquiry System of the Ministry of Housing and Urban-Rural Development, including information on all local properties and units of taxpayers, the tax-deductible area, and other information. If a taxpayer believes that the information on the tax payment notice is incorrect, he or she can bring the relevant documents to the local tax department for processing.