The Inland Revenue (Amendment) (Tax Deductions for Domestic Rents) Bill 2022 (the Bill) was gazetted on May 6, 2022. Subject to the passage of the Bill, the tax deduction for domestic rents will be effective from year of assessment 2022/23. 

Qualifying Conditions

• A taxpayer chargeable to salaries tax or tax charged under personal assessment is eligible to claim deduction of the rent paid by him/her or his/her spouse (who is not living apart from the taxpayer) as a tenant under a qualifying tenancy of domestic premises.
• A deduction is only allowable in respect of rents paid under a qualifying tenancy of domestic premises used by the taxpayer as his/her place of residence. If the taxpayer has more than one place of residence, the relevant premises must be his/her principal place of residence.
• If a qualifying tenancy is procured in respect of a domestic premises and a car parking space, and the car parking space is not sublet, the car parking space will be taken to be part and parcel of the domestic premises for the purposes of the deduction.
• The tenancy domestic premises must be stamped under the Stamp Duty Ordinance.

Circumstances in which Deduction is Not Allowed

• the taxpayer or his/her spouse is a legal and beneficial owner of any domestic premises in Hong Kong;
• the landlord of the tenancy concerned (or the principal tenant in the case of sub-tenancy) is an associate of the taxpayer or his/her spouse (e.g. spouse, a parent, child, sibling, partner of the taxpayer or his/her spouse, or a corporation controlled by the taxpayer or his/her spouse);
• the taxpayer or his/her spouse is provided with a place of residence by his/her employer or an associated corporation of the employer; or the rents payable or paid by the taxpayer or his/her spouse in respect of a place of residence are wholly or partly paid or refunded by the employer or the associated corporation;
• the taxpayer or his/her spouse (who is not living apart from the taxpayer) is a tenant or an authorised occupant of a public rental housing flat of the Hong Kong Housing Authority or the Hong Kong Housing Society;
• the tenancy concerned is prohibited by any law or a Government lease;
• the taxpayer or his/her spouse has entered into a lease purchase agreement in respect of the premises concerned with the landlord;
• the rents are allowable as a deduction under any other provision of the Inland Revenue Ordinance; or
• any rent paid in respect of any other domestic premises has been allowed to the taxpayer or his/her spouse as a deduction for the same period for which the rent is paid.

Amount of Allowable Deduction

The maximum amount of deduction allowable to a taxpayer is $100,000 for each year of assessment according to the following basis:

• if there is more than one tenant under the tenancy – in proportion to the number of co-tenants; or
• if the period of the tenancy for which the domestic rents are paid covers only a part, but not the whole, of a year of assessment – in proportion to the period of the tenancy falling within the year of assessment.

For the purposes of provisional salaries tax for the year of assessment 2022/23, eligible taxpayers can provide the amount claimed for deduction for the year of assessment 2022/23 in Part 10A of your Tax Return – Individuals for the year of assessment 2021/22.

For more information, please contact Ms. Amie Cheung at amie.cheung@lccpa.com.hk