Hong Kong Domestic Rental Tax Deduction: How to apply

As a tenant residing in Hong Kong, a substantial part of your earnings is allocated to your accommodation.

Did you know that part of your rental expenses could actually be deducted from your income subject to Salaries Tax?

On top of the general deduction scheme, Hong Kong Government has introduced a special deduction for the tax year 2022/2023. You may consider these options when filing your next Individual Tax Return (2023).

Special deduction for 2022/2023

Applicants who fulfil the below listed criteria are eligible for a deduction of up to HKD 100,000 from their taxable income, for the tax year running from 1st April 2022 to 31st March 2023:

1. The building is your main residence and is for residential use only;
2. The tenancy agreement has been stamped under the Stamp Duty Ordinance (Cap. 117);
3. You are not:
   
   • a property owner registered in Hong Kong;
   • associated with your landlord (e.g. the landlord is your spouse, a parent, child or partner);
   • aided by your employer fully or partly to pay the rent of the tenancy;
   • a tenant of a public rental housing flat in Hong Kong;
   • into a lease purchase agreement with the landlord.

You may already have applied for this deduction in your Individual Tax Return (ITR) 2022, as it was provided as an option, in anticipation of 2022/23 provisional tax computation.

If not, it’s not too late, and application can still be made directly within your Individual Tax Return (ITR) (which will be issued by the Inland Revenue Department around April-May) for computing 2022/23 final tax payable and 2023/23 provisional tax.

General Deduction Scheme

If you are not eligible for the Special Deduction opened for 2022/2023, you may still apply for the general deduction scheme, which includes 2 scenarios:

1. Your employer provides you with a rent-free accommodation, meaning the tenancy agreement is under the name of your employer; or
2. Your employer reimburses you part of (or the entire) rent paid to your landlord, meaning the tenancy agreement is under your personal name.

In both scenarios, and as long as the employer exercises a proper degree of control over the employee’s expenses, only the “Rental Value” of the flat will be deemed taxable (as benefit in kind), instead of taxing the employee on the actual amount of rent paid or reimbursed by the employer. 

This is very advantageous to the employee (while neutral for the employer), as the Rental Value is computed at the standard rate of 10% of the employee’s total remaining income.

Application shall be made directly within your Individual Tax Return (ITR) for 2023 (which will be issued by the Inland Revenue Department around April-May).

Fidinam can help

Have you considered one of these alternatives to reduce your personal tax exposure?

If you are looking for assistance on applying for one of these schemes - or your Tax Filing in general - get in touch with Fidinam.

Our tax experts are here to help you. Fill out the form below or email info@fidinamgw.com or WhatsApp +852 6791 1806