Q9. How do I handle property tax obligations when my flat is no longer habitable?

Q9. How do I handle property tax obligations when my flat is no longer habitable?

In Hong Kong, “property tax” usually refers to a tax on rental income from letting out property, not a general ownership tax for simply owning a flat.

Section 5 of the Inland Revenue Ordinance (Cap. 112) charges property tax on the owner of land or buildings in Hong Kong.  However, the charge is calculated with reference to the “net assessable value”. Under Section 5B(2) of the Inland Revenue Ordinance (Cap. 112), this is linked to the consideration, in money or money’s worth, payable in that year to, to the order of, or for the benefit of, the owner in respect of the right of use of that land or buildings or land and buildings.  In simple language, property tax is generally driven by rent or rent-like payments from letting, not by the mere fact that the owner still holds title.

Therefore, if the flat is no longer let, no new rent is payable, and the tenancy is terminated or effectively ends, there may be little or no assessable rental value for that period.  On the other hand, if rent remains payable under the tenancy despite the damage, or if there is a dispute and rent continues to accrue, the tax position may be more complicated. 

This does not mean you can simply ignore tax forms. You still need to handle the reporting with the Inland Revenue Department properly. Property owners must declare rental income from property letting on the specified tax return.  Thus, if the fire changes the letting position, you should update your records and ensure your next return reflects the actual rent, if any, payable during the relevant period. See: https://www.ird.gov.hk/eng/faq/pty.htm

Ask a tax adviser or a lawyer to review whether rent remained legally payable under the tenancy despite the fire.

Practical steps:

1. Gather the tenancy agreement, any termination notice, rent receipts and bank records (if any) showing when the flat ceased to be let out and rent ceased to be payable/paid.

2. File the relevant IRD return on time and state the actual rental position clearly.