Are you a Hong Kong property owner wondering how much tax you’ll pay on your rental income? With property prices stabilizing and rental yields becoming increasingly important, understanding Hong Kong’s straightforward property tax system is more crucial than ever. Whether you own a luxury Mid-Levels apartment, a commercial space in Central, or an investment property in the New Territories, this step-by-step guide will demystify exactly how your property tax is calculated for the 2024-2025 assessment year.

Hong Kong Property Tax: The Simple 15% Flat Rate System

Hong Kong’s property tax system stands out for its simplicity and predictability. Unlike many jurisdictions with complex progressive tax brackets, Hong Kong maintains a straightforward 15% flat rate on the net assessable value of rental properties. This rate has remained unchanged since the 2008/09 assessment year, providing stability for property investors and owners. The system applies equally to all property owners—whether you’re a local resident, overseas investor, individual, or corporation—as long as your property is situated in Hong Kong and generates rental income.

The 3-Step Property Tax Calculation Method

Calculating your property tax involves just three simple steps. Let’s break down each component so you can accurately determine your tax liability for the 2024/25 assessment year.

Step 1: Determine Your Assessable Value (AV)

The Assessable Value is the foundation of your property tax calculation. It represents all consideration you receive for granting the right to use your property during the assessment year (April 1, 2024 to March 31, 2025).

Formula for Assessable Value:
Assessable Value = (Rental Income + Apportioned Lease Premium) – Rates Paid by Owner – Irrecoverable Rent

Step 2: Calculate Net Assessable Value (NAV)

This is where Hong Kong’s property tax system gets interesting. After determining your Assessable Value, you automatically deduct 20% for repairs and outgoings—regardless of your actual expenses. This statutory deduction is one of the system’s most valuable features.

Formula for Net Assessable Value:
Net Assessable Value = Assessable Value × 80%
(or: NAV = AV – (AV × 20%))

Step 3: Apply the 15% Tax Rate

The final step is beautifully simple: multiply your Net Assessable Value by Hong Kong’s standard property tax rate of 15%.

Formula for Property Tax Payable:
Property Tax Payable = Net Assessable Value × 15%

Simplified Combined Formula:
Property Tax = [(Rental Income – Irrecoverable Rent – Rates Paid by Owner) × 80%] × 15%
Which simplifies to:
Property Tax = (Rental Income – Irrecoverable Rent – Rates Paid by Owner) × 12%

Real-World Calculation Examples (2024/25 Assessment Year)

Example 1: Standard Residential Rental

Mr. Chan owns a residential apartment in Mid-Levels with these details for April 1, 2024 to March 31, 2025:

1. Step 1 – Assessable Value:
   Monthly rent: HK$30,000 × 12 = HK$360,000
   Less rates paid by owner: HK$12,000
   Assessable Value = HK$348,000
2. Step 2 – Net Assessable Value:
   HK$348,000 × 80% = HK$278,400
   (20% statutory deduction = HK$69,600)
3. Step 3 – Property Tax Payable:
   HK$278,400 × 15% = HK$41,760

Example 2: Commercial Property with Lease Premium

Ms. Lee owns a commercial property in Tsim Sha Tsui with a 2-year lease starting July 1, 2024:

1. Lease Premium Apportionment:
   HK$120,000 premium ÷ 24 months = HK$5,000/month
   9 months in 2024/25 year (July 2024-March 2025) = HK$45,000
2. Assessable Value:
   Rental income: HK$25,000 × 9 months = HK$225,000
   Plus lease premium: HK$45,000
   Total AV = HK$270,000
3. Net Assessable Value:
   HK$270,000 × 80% = HK$216,000
4. Property Tax Payable:
   HK$216,000 × 15% = HK$32,400

Corporate vs. Individual Property Owners: Key Differences

Corporate Property Owners: Profits Tax Exemption

If you operate through a Hong Kong corporation and own rental properties, you have an important option: you can apply for exemption from property tax. This is because rental income earned by a corporation carrying on a trade, profession, or business may already be assessable under profits tax.

Why consider this? To avoid double taxation. If your rental income is taxed under profits tax (at corporate rates of 8.25% on first HK$2 million, 16.5% on remainder), you shouldn’t also pay property tax on the same income. Corporations must formally apply for this exemption with the IRD.

Individual Property Owners: Personal Assessment Election

Individual property owners have a powerful alternative: electing for Personal Assessment. Under this option, your rental income is combined with other income sources (employment, business profits) and taxed under Hong Kong’s progressive salaries tax rates.

Compliance Timeline & Payment Schedule

Staying compliant with Hong Kong’s property tax requirements is straightforward if you understand the timeline:

1. May 2025: Receive Property Tax Return (Form IR6120) from IRD
2. Early June 2025: File return within one month of issue
3. November 2025: Pay first instalment (provisional tax for 2025/26)
4. April 2026: Pay second instalment (final tax for 2024/25 + additional provisional)

Special Scenarios & Common Questions

Short-Term Rentals (Airbnb/VRBO)

Yes, short-term rental income is absolutely subject to property tax using the same calculation method. However, be aware that short-term rentals may face additional regulatory considerations under Hong Kong’s landlord-tenant laws and building management rules.

Non-Resident Property Owners

The property tax calculation applies equally to resident and non-resident owners. However, non-residents should consider appointing a local tax representative to handle filings and communications with the IRD.

Multiple Property Owners

If you own multiple properties, you must aggregate all rental income from all Hong Kong properties when calculating your property tax. There’s no separate calculation for each property—it’s your total rental income that matters.

Hong Kong’s property tax system stands out for its simplicity and predictability in a world of complex tax regimes. Whether you’re a seasoned property investor or a first-time landlord, understanding these calculations empowers you to make informed financial decisions. Remember that while the 15% rate and 20% deduction provide a clear framework, your individual circumstances—especially the choice between Property Tax and Personal Assessment—can significantly impact your tax liability. As always, when in doubt, consult with a qualified Hong Kong tax professional who can provide advice tailored to your specific situation.