Section 5 of the Hong Kong Inland Revenue Ordinance (“IRO”) levies property tax on the property owner in respect of the rental income of his land or buildings or land and buildings in Hong Kong. In general, the tax will be equal to: (Rental income less rates paid by owner and irrecoverable rents) x 80% x Standard rate.
“Owner” as defined in section 2 of the IRO includes:

a)	a person holding the land and/or buildings directly from the Hong Kong government;
b)	a beneficial owner;
c)	a life tenant;
d)	a mortgagor;
e)	a mortgagee in possession;
f)	a person with adverse title to land receiving rent from buildings or other structures erected on that land;
g)	a person who is making payments to a co-operative society registered under the Co-operative Societies Ordinance (Cap. 33) for the purpose of the purchase of the land and/or buildings;
h)	a person who holds land and/or buildings subject to a ground rent or other annual charge;
i)	a corporation registered under section 8 of the Building Management Ordinance (Cap. 344) or a person who, on the person’s own behalf or on behalf of another person, receives any consideration, in money or money’s worth, in respect of the right of use of any common parts solely or with another; and
j)	an executor of the estate of an owner.

If the owner is a corporation carrying on a business in Hong Kong, the company can apply for an exemption of Property Tax under section 5(2)(a) of the IRO on the ground that the income will be assessed under Profits Tax. If the company has paid Property Tax, the Property Tax paid can be utilized to set-off under section 25 of the IRO its profit tax liability, please note that the profits derived from such property should be part of the profits of the business carried on by the company or the property is occupied or used by the company for the purposes of producing profits chargeable to tax. If the property tax paid exceeds its profits tax liability, the excess will be refunded to the company.

As the owner is granted a broad-brush 20% deduction every year, no deduction for actual expenses will be allowed. Government rent, building management fees, decoration fees, rent-collection fees, insurance and mortgage interests are all non-deductible for Property Tax purposes. Deduction for mortgage interests incurred on the acquisition of the property can only be claimed by those owners who are eligible to and elected for Personal Assessment.

Source：Hong Kong Inland Revenue Department’s website

- https://www.gov.hk/en/residents/taxes/property/propertycompute.htm
- https://www.ird.gov.hk/eng/pdf/dipn14.pdf
- https://www.ird.gov.hk/eng/pdf/pam54e.pdf