Guide to Tax Return Individuals

(D)

How to Complete the Return

Part 8

Deduction for Interest Payments / Domestic Rents

If you do not claim deduction for interest payments / domestic rents for a particular property,

you are not required to report the details of that property and the relevant information under

this part of your tax return.

8.3

Claim for Deduction for Interest Payments to Produce Rental Income from Properties
(Part 8.1 for Internet filing)

If you have elected for Personal Assessment (Part 7 of paper return), you may claim

deduction of interest paid by you during the year in respect of a loan obtained for the

purpose of acquiring a solely / jointly owned or co-owned property in Hong Kong which

was let.

Fill in your share of interest paid. Your share of interest must be proportional to the number

of joint tenants / share of your ownership. Amount allowed for deduction will not exceed

the net assessable value of each individual property as proportionately reduced.

Interest payments relating to periods when the property was not let (e.g. occupation

as residence for your own family or vacant) are not deductible.

8.4

Claim for Deduction for Home Loan Interest
(Part 8.2 for Internet filing)

You may claim deduction of interest paid by you in respect of a loan obtained for the

purpose of acquiring a property in Hong Kong which was used by you as your place of

residence, provided that the loan was secured by a mortgage or charge and the lending

institution providing the loan to you was an approved one.

Fill in your share of interest paid. Your share of interest must be proportional to the number

of joint tenants / share of your ownership. Amount allowed for deduction will be restricted

to the prescribed amount as proportionately reduced.

This deduction can be claimed under Salaries Tax or Personal Assessment. From the year

of assessment 2012/13 onwards, the number of years of deduction is extended from 10 to

15 years of assessment and further extended to 20 years of assessment commencing from

the year of assessment 2017/18, whether consecutively or not.

Ownership of a property is by reference to the registered owners of the property as shown

in the record of the Land Registry.

Spouse nomination: Your spouse who is entitled to a deduction for home loan interest but

has no income chargeable to tax, may nominate you to claim the deduction, see examples

under Scenario 2 and Scenario 3. If your spouse has income from employment, property,

trade, profession or business chargeable to tax, he / she should not make the nomination

but to elect for Joint Assessment or Personal Assessment, see example under Scenario 4.

Examples to show how the parts 'Claim for Deduction for Interest Payments to Produce Rental Income from Properties' and 'Claim for Deduction for Home Loan Interest' are to be completed

	Scenario 1: You have 2 solely-owned properties, Property A and Property B. Property
	A was used as a residence for the full year and the Property B was let for rental
	income also for the full year. Property A was subject to a re-mortgaged loan.
	Total interest paid by you:
	Property A (1/4/2023 - 31/3/2024) = $142,500 (See Notes for
	calculation of deductible interest $120,000.)
	Property B (1/4/2023 - 31/3/2024) = $240,000

	Scenario 2: You have income chargeable to tax. Property A is owned by your spouse
	and used by the family as residence. Your spouse does not have income chargeable
	to tax and wishes to nominate you to claim interest deduction.
	Total interest paid by your spouse:
	Property A (1/4/2023 - 31/3/2024) = $120,000

	Scenario 3: You and your spouse jointly own Property A for use as the family
	residence. Your spouse does not have income chargeable to tax and wishes to
	nominate you to claim his / her share of interest.
	Total interest paid by you and your spouse:
	Property A (1/4/2023 - 31/3/2024) = $120,000 (share per person, $60,000)

	Scenario 4: You and your spouse jointly own Property A and Property B, which were
	used at different periods as the family residence. Your spouse has income
	chargeable to tax.
	Total interest paid by you and your spouse:
	Property A (1/4/2023 - 30/6/2023) = $30,000 (share per person, $15,000)
	Property B (1/7/2023 - 31/3/2024) = $180,000 (share per person, $90,000)

The part 'Details of the Properties Involved' (Parts 8.1, 8.2, 8.3 and 8.4 of paper return) should be completed as:

Part in paper return	Scenario	1		2	3	4
8.1	Location of Property	Pty A	Pty B	Pty A	Pty A	Pty A	Pty B
8.2(1)	Secured by a mortgage or charge	Yes	Yes	Yes	Yes	Yes	Yes
8.2(2)	A re-mortgaged loan is involved #	Yes	No	No	No	No	No
8.2(3)	My share of ownership	100%	100%	0%	50%	50%	50%
8.3	My share of interest payments to produce the rental income		240,000
8.4(1)(a)	Total home loan interest payments	142,500		120,000	120,000	30,000	180,000
8.4(1)(b)	My share of home loan interest payments	142,500 (see Notes)			60,000	15,000	90,000
8.4(2)(a)	Nominated by spouse to claim deduction	No	No	Yes	Yes	No	No
8.4(2)(b)	My spouse's share of ownership	Not Applicable	Not Applicable	100%	50%	Not Applicable	Not Applicable
8.4(2)(c)	My spouse's share of home loan interest payments	Not Applicable	Not Applicable	120,000	60,000	Not Applicable	Not Applicable
8.4(3)	Property was occupied as my residence for FULL YEAR	Yes	Not Applicable	Yes	Yes	No	No

# If a re-mortgaged loan is involved, you must complete Section 10 of the Appendix. Please

refer to Section 10 of the Appendix in this Guide for details.

Notes: In Scenario 1 under Part 8.4, you had re-mortgaged Property A to ABC Bank

	on 1/7/2023 to obtain a new loan of $2.5 million. At that date, the unpaid balance
	of the old loan was $2 million. The total mortgage interest paid during the year was:
	1/4/2023 - 30/6/2023 = $30,000 on old loan
	1/7/2023 - 31/3/2024 = $112,500 on new loan
	Calculation of the allowable interest: $30,000 + $112,500 x 2,000,000/2,500,000 = $120,000 *

* restricted to the deduction limit specified under the Inland Revenue Ordinance

8.5

Claim for Deduction for Domestic Rents
(Part 8.3 for Internet filing)

(1)

If you are chargeable to Salaries Tax or tax charged under Personal Assessment, you may claim deduction of the rents paid by you or your spouse (not living apart) as a tenant under a qualifying tenancy (e.g. stamped tenancy agreement) of domestic premises. The deduction is applicable to the year of assessment 2022/23 and after.

(2)

The rented domestic premises must be used by you as your principal place of residence in Hong Kong.

(3)

Amount of allowable deduction

(a) The maximum amount of deduction allowable to you is $100,000 for each year of
assessment (“Maximum Deduction”).

(b) The amount of deduction allowable is (A) the Qualifying Rental Amount or (B) the
Deduction Ceiling for the tenancy in relation to the year of assessment, whichever is
less.

(c) The Qualifying Rental Amount is (i) the amount of rents paid under the tenancy in relation
     to the period, divided by the number of tenants under the tenancy; and (ii) if the premises
     are used partly as a place of residence and partly for other purposes, it is such part of the
     amount that is reasonable in the circumstances of the case.

(d) The Deduction Ceiling for a tenancy is the Maximum Deduction reduced in proportion to:
(i) the number of co-tenants, if any; and
(ii) the contractual period of the tenancy falling within the year of assessment.

(e) If you are married and not living apart from your spouse, the total amount of deduction
     allowable to you and your spouse is the amount determined in accordance with paragraph
     (3)(b) above. You may claim deduction for total amount of rents paid by you and / or your
     spouse, or in accordance with an agreement on the respective claim amount reached by
     you and your spouse, but the amount already claimed in your spouse's return should be
     excluded.

(f) If there is more than one qualifying tenancy in relation to a year of assessment, the
total amount allowable is the aggregate of the amount determined in accordance with
paragraph (3)(b) above for each of the tenancies.

(4)

Circumstances in which deduction is not allowed

(a) You or your spouse (not living apart):
     (i) is the legal and beneficial owner of any domestic premises in Hong Kong;
     (ii) is provided with a place of residence by employer or an associated corporation of the
          employer (including a refund for any rent paid); or
     (iii) is a tenant or an authorised occupant of a public rental housing flat.

(b) The landlord of the rented property is an associate of you or your spouse (e.g. spouse,
parents, child, brother/sister, partner, or a corporation controlled by you or your spouse,
etc).

(c) The premises concerned is prohibited from being used for residential purposes or tenancy
is prohibited under any law or a Government lease.

(d) The rents are allowable as a deduction under any other provision of the Inland Revenue
Ordinance.

(e) Any rent paid in respect of any other domestic premises has been allowed to you or your
spouse (not living apart) as a deduction for the same period for which the rent is paid.

(f) You or your spouse has entered into a lease purchase agreement in respect of the
premises.

(5)

More information is available at www.ird.gov.hk/eng/tax/drd.htm.

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