BUSI 0018 Hong Kong Taxation

Tutorial Questions
Unit 2 Property Tax
Question 4
(a)

Explain the conditions under which a person is subject to Hong Kong Property Tax.

(b)

Miss Chan purchased a residential property in March 2008. It was let out on 1 June
2008 on the following terms:
1.
2.
3.
4.
5.

Term of lease: 2 years from 1 June 2008.

Rent: $15,000 per month for the first year and $16,500 for the second year
(payable on the 1st day of each month).
Initial premium: $225,000, payable on 1 June 2008.
Rates: $3,200 per quarter, payable by tenant.
Management fee: $1,900 per month, payable by tenant to landlord.

Miss Chan paid mortgage interest of $25,000 per month to the bank in respect of the
aforesaid property for a period of 10 years commencing from 1 March 2008.
Required:
Based on the information given above, compute Miss Chan's property tax liabilities for
the years of assessment 2007/08, 2008/09 and 2009/10. Ignore provisional tax in your
calculation.

TQ_U2_Property

Question 5
Mr. Mo bought a shop unit in Chaiwan on 1 August 2007. The shop unit was let to a retail
company on 1 September 2007 on the following terms:
1.
2.
3.
4.
5.
6.

Term of lease: 3 years from 1 September 2007 plus 2-year renewal option
Rent free period: 1 September 2007 to 31 October 2007.
Rental deposit: $112,000 payable on 1 September 2007. As per lease agreement, rental
deposit is used to compensate any loss of revenue when tenant is default in payment.
Rent: $56,000 per month payable in advance.
Rates: $8,100 per quarter, payable by landlord.
Management fee: $4,500 per month, payable by tenant directly to the management
company.

Starting from 1 February 2008, the tenant failed to pay rents to Mr. Mo. It also failed to pay
management fees to the management company. On 1 May 2008, the tenant moved out and
could not be contacted any more. Mr. Mo was required to pay the overdue management fee
of $13,500 to the management company in respect of the period from February to April; and
agreed to settle the management fee on time for the subsequent months until further notice.
On 1 July 2008, Mr. Mo let the shop again to Pizzas Ltd. on the following terms:
1.
2.
3.
4.
5.
6.

Term of lease: 2 years from 1 July 2008.

Monthly rent: $30,000 for the first year and $35,000 for the second year, payable in
advance.
Rent deposit: $60,000. As per lease agreement, rent deposit is used to compensate
the loss of revenue to landlord when the tenant is default in payment.
Initial premium: $240,000
Rates: $8,100 per quarter (payable by tenant).
Management fee: $4,800 per month (payable by tenant to management company
directly).

Required:
Based on the information given above, compute Mr. Mos property tax liabilities for the years
of assessment 2007/08 and 2008/09. Ignore provisional tax in your calculation.

TQ_U2_Property

Question 6
Mr. Newton is a Canadian citizen. In June 2008, he came to Hong Kong and purchased a
property in North Point for investment purposes. On 1 July 2008, Mr. Newton signed a 4-year
tenancy agreement with a Mr. Wong on the following terms:
1.
2.
3.
4.
5.
6.
7.

The lease started on 1 July 2008.

Monthly rent: $30,000 for the first 12 months; $33,000 for the following 12 months;
$35,000 for the last 24 months.
A premium of $90,000 was paid to Mr. Newton on 1 July 2008.
The landlord is responsible to pay the rates of $1,800 per quarter and for all repairs and
maintenance of the property.
The tenant is responsible to pay management fee of $800 per month directly to the
management company.
The rent is payable on the first day of each month to Mr. Chau who is the landlords
appointed agent in Hong Kong.
Mr. Newton has to pay 2% of the monthly rental received per month to Mr. Chau as the
agency service fee.

After signing the tenancy agreement, Mr. Newton returned to Canada. In October 2008, Mr.
Chau received a provisional property tax return for the year of assessment 2008/09. Mr.
Chau considered that Mr. Newton was not a chargeable person in Hong Kong as he was not a
Hong Kong resident. He therefore ignored the return and the subsequent reminder. In
December 2008, Mr. Chau received a notice of demand for payment of provisional property
tax for the year of assessment 2008/09, dated 10 December 2008. In the notice, the Assessor
estimated the net assessable value of the property as $280,000. Total property tax of $44,800
is payable on 28 January 2009. Mr. Chau was shocked and approached you as a tax
consultant for advice.
(Remark: assuming that it is now 20 December 2008 for the purpose of this question).

Required:
Advise Mr. Chau on Mr. Newtons property tax liability for the year of assessment 2008/09.

TQ_U2_Property