Thinking about turning your Hong Kong property into a short-term rental? Before you list on platforms like Airbnb, you need to understand the complex legal landscape and significant tax implications. Hong Kong has some of the strictest regulations for short-term rentals in Asia, with severe penalties for non-compliance. This guide breaks down everything landlords need to know about operating legally and managing tax obligations in 2024-2025.

Understanding Hong Kong’s Short-Term Rental Regulations

Hong Kong’s approach to short-term rentals is governed by the Hotel and Guesthouse Accommodation Ordinance (Cap. 349), which creates a clear legal framework but also significant barriers for residential property owners. The key distinction lies in the duration of rental periods.

What Exactly is a Short-Term Rental?

Under Hong Kong law, any accommodation provided for a fee for periods of less than 28 consecutive days qualifies as short-term rental. This definition triggers licensing requirements under the Hotel and Guesthouse Accommodation Ordinance.

The 28-Day Exemption Rule

Properties are exempt from licensing requirements only if they meet strict conditions:

• All accommodation is provided exclusively for a minimum of 28 consecutive days per letting
• No waiver, refund, or reduction of fees if the letting is shortened to less than 28 days
• These terms must be clearly stated in the rental agreement
• The property cannot be marketed or operated as short-term accommodation

Severe Penalties for Unlicensed Operation

The Hong Kong government has significantly strengthened enforcement against unlicensed short-term rentals. Recent amendments have increased penalties to deter illegal operations:

The Licensing Process: Why It’s So Challenging

Obtaining a hotel or guesthouse license in Hong Kong is a rigorous process that few residential properties can satisfy. Here’s what’s required:

1. Application Submission: Submit detailed application to the Office of the Licensing Authority, Home Affairs Department
2. Building Compliance: Meet specific building safety standards that most residential units cannot satisfy
3. Fire Safety Requirements: Implement comprehensive fire safety measures beyond residential standards
4. Necessary Consents: Obtain written approval from landlords and comply with building’s Deed of Mutual Covenant
5. Ongoing Compliance: Maintain standards throughout license validity (12-84 months)

Tax Implications for Short-Term Rental Income

Whether you operate legally licensed short-term rentals or are considering the option, understanding Hong Kong’s tax system is crucial. The type of tax you pay depends on whether your rental activities constitute a business.

Property Tax: The Standard Approach

For individuals receiving rental income where activities don’t constitute a business, Property Tax applies at a flat rate of 15% on net assessable value. Here’s how it’s calculated:

Important: Property Tax uses a standard 20% allowance for repairs and outgoings. You cannot deduct actual expenses—only this statutory allowance applies.

Profits Tax: For Business Operations

If your rental activities constitute a business (such as operating multiple properties or providing additional services), Profits Tax applies instead. Hong Kong uses a two-tiered system:

Hotel Accommodation Tax: New for 2025

Effective from January 1, 2025, Hong Kong has reintroduced the Hotel Accommodation Tax at a rate of 3% on accommodation charges. Licensed operators must:

• Collect 3% HAT from guests on top of accommodation charges
• Remit collected tax to the Inland Revenue Department
• Maintain proper records of all accommodation transactions
• File quarterly returns (first due April 14, 2025 for Q1 2025)

Compliance Requirements and Practical Challenges

All landlords receiving rental income must comply with Hong Kong’s tax system requirements:

• Registration: Register with the Inland Revenue Department (IRD)
• Record Keeping: Maintain accurate records for 7 years
• Annual Filing: File tax returns accurately and on time (typically due early June)
• Provisional Tax: Pay tax in advance under Hong Kong’s provisional tax system
• Full Disclosure: Report all rental income regardless of amount

Additional Hurdles for Tenants

Tenants considering short-term rental operations face even more challenges:

• Landlord Approval: Written consent from the landlord is mandatory
• Lease Restrictions: Most tenancy agreements prohibit subletting or commercial use
• Building Regulations: Must comply with building’s Deed of Mutual Covenant
• Legal Consequences: Operating without approvals can result in lease termination and eviction

Why Short-Term Rental Platforms Struggle in Hong Kong

Unlike cities like Tokyo, Paris, or London that have implemented specific short-term rental registration systems, Hong Kong maintains strict licensing requirements without creating alternative frameworks for home-sharing platforms. The practical reality is that most residential properties cannot meet the building and fire safety standards required for hotel/guesthouse licensing, effectively making legal short-term rental operations impossible for the vast majority of residential property owners.

Navigating Hong Kong’s short-term rental landscape requires careful consideration of both legal requirements and tax implications. While the potential income from short-term rentals can be attractive, the risks of non-compliance are substantial. Before listing your property, consult with qualified legal professionals and tax advisors who understand Hong Kong’s specific regulations. Consider whether long-term rentals (28+ days) might offer a more viable and legally compliant alternative for your property investment strategy.