Many people think it is hard to differentiate rates and government rent or don’t know how to calculate the payment. There are even rumours that people living in Hong Kong Island and Kowloon are exempted from government rent.
Rates are 5% of the estimated annual rental value
Almost all property owners have to pay rates. The amount is the estimated annual rental value (rateable value) x 5% (rates percentage charge). The rateable value is estimated by the government based on the reasonable annual rent instead of the actual or market rent. Take a 500-square-feet property as an example, the estimated monthly rental value is $20,000, in other words, it is $240,000 x 5% annually, making it $12,000. The rates would be $3,000 quarterly.
Government rent is 3% of the estimated annual rental value
Government rent is also calculated based on the same method, which is the estimated annual rental value (rateable value) x 3% (rates percentage charge). For the above example, the government rent would be $240,000 x 3%, making it $7,200. One has to pay $1,800 quarterly.
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It is important to note that not all properties are liable to Government rent as the rent is targeted at properties with “non-permanent land rights“. Historically, Hong Kong Island and south of Boundary Street in Kowloon are “permanently ceded” to Britain, for example the land lease of Taikoo Shing was signed on a term of 999 years. There are still over 800 years from now until the expiry date, in other words one does not have to pay Government rent in over 800 years. The New Territories (including New Kowloon north of Boundary Street) was leased out and the original land lease expired on 30 June 1997, but according to the “Sino-British Joint Declaration”, these land leases could be extended to 30 June 2047 automatically. However, one has to pay Government rent starting from the renewal date, which is 1 July 1997. Therefore, it is inaccurate to judge whether a person has to pay Government rent based on whether the property is located in the New Territories.
The following types of properties are liable for Government rent:
1. Most properties in the New Kowloon north of Boundary Street and the New Territories ;
2. Properties with land leases granted on or after 27 May 1985;
3. Properties with their non-renewable land leases extended on or after 27 May 1985, e.g. the lease of Pokfulam Garden was extended in 2005, afterwards it is liable to an annual Government rent payable at 3% of the rateable value of the lot.
One point to note is that due to historical reasons, the New Territories village houses and small houses owned by indigenous villagers are entitled to exemption from liability to pay the rates and Government rent.