Tax on HK investment property - rental received

Posted by Foolonahill (262 days ago)

Hi, I have a small property in SOHO that I rent out. I filled in my tax forms & showed that I received 144,000 rent & paid about 54,000 mortgage interest.

The IRD sent me a tax demand notice (on top of my slary tax) of HK$75000. Seems that I am paying over 50% tax on this!!!!!!

Can anyone help??

Thanks

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Posted by Havefaith (261 days ago)

FH,

Hi! I am lawyer - with experience in profits tax area. May be I can help. There is something wrong if you are paying 50% profits tax. Do you have a breakdown of HK$75K? Are you including your provisional personal tax in HK$75K.

HF

Posted by Foolonahill (260 days ago)

Hello HF, seems we run into each other in the oddest of places :)

Sorry, I was incorrect. I rechecked my tax document last night. The HK$75k is 'nav' which will be added to my other income taxation. So, not too bad.

Starnge thing is, that it seems we cannot claim interest payments. Is this correct? The property is jointly owned, not as a company.

Cheers

Fool

Posted by Havefaith (260 days ago)

If you are paying property tax on the rental income, then you should be allowed 20% deduction after rates. If you are paying profits tax, then you should be allowed to deduct all expenses related to the rental (including interest expenses). Were you allowed 20% deduction?

Posted by Foolonahill (260 days ago)

Hi HF, I just checked again. I am a salary/commission earner so pay income tax - no profit tax.

I see that I was allowed a 20% deduction. Many thanks!

Fool

Posted by Havefaith (260 days ago)

If you are earning a salary income, then you are paying salaries tax on that portion. However, you are paying property tax on your rental income. There are only three types of taxes in Hong Kong: salaries tax, property tax and profits tax. There is no income tax per se in Hong Kong.

Posted by lace (259 days ago)

Foolonahill - You can only claim interest payments when you live in the property - not when you rent it out.

Posted by cwglin27 (190 days ago)

Hi, I'm in a difficult situation - I used to live in HK and left 4 years ago. Am now buying a HK property for investment and potentially for self-use when I return. I wonder what my tax situation will be with the property. Any advices? many thanks. Also if someone can advise on where to get mortgage financing if you're not living in HK, possibly from local banks?

Posted by kalvin (146 days ago)

It's very difficult to get a mortgage in HK unless you have evidence of income into a HK bank account. As for taxes, it'll just be the same as it is for everyone else. You pay 15% tax on rental income after deducting 20% allowance for maintenance, etc.

I do want to know though, is it possible to avoid the rental income tax?

Posted by beachball (144 days ago)

> It's very difficult to get a mortgage in HK unless you have evidence of income into a HK bank account.

Completely untrue in my experience - and that of several acquaintances.

Posted by Linde824 (142 days ago)

If you have income proof in any one of the Commonwealth countries, probably you can get a mortgage from HK bank. You can consult a local bank before further action. As for tax, I don't think you are liable for any profit tax if you are not selling it within very short time. But you are liable to pay for the demand notes.

Posted by cwglin27 (127 days ago)

Just a quick question - for tax purpose, how many properties can you claim as your own residence? How does the tax dept varify if you're actaully living there or renting it out?