Hong Kong Rental Income & Property Tax Guide

Property Tax Rate — 15%

Property Tax is charged at a flat rate of 15% on the net assessable value (NAV) of the property. The NAV is calculated as the actual rent received or receivable, less an automatic 20% deduction for repairs and outgoings, plus any Government Rent and Rates paid by the tenant (not the owner). The 20% deduction is a standard statutory allowance — no actual expenses need to be incurred, and no actual deduction for specific repair costs is available under Property Tax (though the owner can claim actual deductions by electing Personal Assessment).

The formula for Property Tax is: Property Tax = 15% × (Rent × 80% + Rates paid by tenant). For example, if the annual rent is HKD 360,000 and the tenant pays rates of HKD 6,000, the assessable value is HKD 360,000 × 80% + HKD 6,000 = HKD 294,000, and the Property Tax payable is 15% × HKD 294,000 = HKD 44,100. The tax is assessed on the owner of the property — typically the person whose name appears on the land registry as the owner. If the property is owned jointly, each owner is assessed separately on their share of the rental income.

Personal Assessment Election

Property owners can elect for Personal Assessment under Section 41 of the Inland Revenue Ordinance. This allows rental income to be aggregated with other income (employment, business, and pension) and taxed at progressive Salaries Tax rates (2% to 17% in 2026) instead of the flat 15% Property Tax rate. Personal Assessment is particularly beneficial for owners with lower total income — the progressive rates on the first HKD 50,000 of chargeable income is just 2%, and many owners may pay less than the 15% flat rate.

Under Personal Assessment, the owner can claim a deduction for actual mortgage interest paid on the property (unlike under Property Tax, where only the standard 20% deduction is available). This can significantly reduce the effective tax rate for leveraged property owners. Other deductions allowable under Personal Assessment include the 20% statutory deduction for repairs (or actual expenses if higher — though this must be justified), Government Rent paid by the owner, and rates paid by the owner. The election for Personal Assessment must be made in writing within the time limit — generally within one month of the notice of assessment, or by the filing deadline of the tax return if the owner wishes to request Personal Assessment in advance.

The progressive Salaries Tax rates for 2026 are: 2% on the first HKD 50,000 of chargeable income, 6% on the next HKD 50,000, 10% on the next HKD 50,000, 14% on the next HKD 50,000, and 17% on the remainder. However, the total tax payable under Personal Assessment cannot exceed the standard rate of 15% on the taxpayer's net total income (before allowances) — meaning the maximum effective rate remains 15%. The advantage of Personal Assessment is primarily for owners with significant mortgage interest deductions or those whose total income falls below the thresholds where the progressive rate is less than 15%.

Already Subject to Profits Tax

If the rental income is already subject to Profits Tax (because the property is held as trading stock by a company carrying on a property development or investment business), the property owner can claim exemption from Property Tax. The IRD will not assess Property Tax on the same rental income that has been included in the Profits Tax computation. This avoids double taxation on rental income for corporate property investors.

Corporations that hold properties as investments and receive rental income typically pay Profits Tax at 16.5% (standard rate) instead of Property Tax at 15%. In most cases, the Profits Tax computation will produce a slightly higher tax liability, but the corporation can claim full deductions for all actual expenses including mortgage interest, management fees, repairs, and depreciation — which may result in a lower effective tax rate than the Property Tax calculation with its fixed 20% deduction. Property held by a corporation for rental purposes should be clearly designated as a capital investment to avoid the onerous property tax rules designed for individual landlords.

Filing Requirements

Property owners must report rental income on their annual tax return. Individual owners report rental income on the BIR60 (Salaries Tax return). If the individual has elected Personal Assessment, the rental income is included in the Personal Assessment computation on the same form. Corporate property owners report rental income on the BIR51 (Profits Tax return). There is no separate Property Tax return form — the IRD includes Property Tax assessment as part of the overall assessment process based on information submitted through the BIR60 or BIR51.

The IRD cross-references property ownership data from the Land Registry with tax return information to identify owners who may have unreported rental income. Failure to report rental income can result in penalties of up to three times the tax undercharged. The IRD has been increasing its enforcement efforts in the property rental sector, and property owners should ensure that all rental income — including rent from short-term lets, serviced apartments, and commercial properties — is properly declared. If the property was vacant for part of the year or occupied by the owner, this should be clearly explained in the return to avoid inquiries from the IRD.