Rates and Property Tax

Rates = rateable value  rates percentage charge The tax which an owner or occupier of a property needs to pay to the government is called rates. Rates = rateable value  rates percentage charge Note: (1) For the financial year 2008/09, rates are charged at 5% p.a. (2) Rates are to be paid quarterly in advance.

Rates payable per quarter = $6000 ÷ 4 For example, the rateable value of a flat is $120 000 and the rates are charged at 5% p.a. ∴ Rates for a year = $120 000  5% Rates = rateable value  rates percentage charge = $6000 Rates payable per quarter = $6000 ÷ 4 There are 4 quarters in a year. = $1500

Follow-up question The rateable value of a flat is $80 000. If the rates are charged at 5% p.a., find the rates payable per quarter. Solution Rates for a year = $80 000  5% = $4000 Rates payable per quarter = $4000 ÷ 4 = $1000

Follow-up question (cont’d) 2. Cynthia pays $1200 per quarter for the rates of her flat and the rates are charged at 5% p.a. What is the rateable value of her flat? Solution Rates payable per year = $1200  4 = $4800 Rateable value of the flat = $4800 ÷ 5% = $96 000

Property Tax An owner of a property needs to pay property tax to the government if he rents out the property. Property tax = annual rental income  80%  property tax rate Note: For the financical year 2008/09, the property tax rate is 15%.

the annual rental income of a flat is $240 000 and the For example, the annual rental income of a flat is $240 000 and the property tax rate is 15%. Property tax that the owner should pay for a year = $240 000  80%  15% Property tax = annual rental income 80%  property tax rate = $28 800

Follow-up question 1. The annual rental income of a flat is $150 000. If the property tax rate is 15%, how much property tax should the owner pay for a year? Solution Property tax that the owner should pay for a year = $150 000  80%  15% = $18 000

Follow-up question (cont’d) 2. The owner of a flat pays a property tax of $13 824 for a year. If the property tax rate is 15%, what is the monthly rental income of the flat? Solution Let $x be the monthly rental income of the flat, then the annual rental income of the flat is $12x. 13 824 = 12x  80%  15% x = 9600 ∴ The monthly rental income of the flat is $9600.

Salaries Tax

Salaries tax based on the net chargeable income (2008/09) People who earn an income from their employment are required to pay salaries tax to the government. The calculation is based on the net chargeable income and the progressive tax rates. Salaries tax based on the net chargeable income (2008/09) Net chargeable income Tax rate Salaries tax On the first $40 000 2% On the next $40 000 7% 12% Remainder 17% $40 000  2% = $800 $40 000  7% = $2800 $40 000  12% = $4800 ---- Note: net chargeable income = total income – total allowance

the net chargeable income of Mr Chan is $90 000. For example, the net chargeable income of Mr Chan is $90 000. $90 000 = $40 000 + $40 000 + $10 000 Tax rate 2% 7% 12% Mr Chan’s salaries tax payable = $(40 000  2% + 40 000  7% + 10 000  12%) = $(1800 + 2800 + 1200) = $4400

Follow-up question Mr Leung’s total annual income for the year 2008/09 is $280 000. If his salaries tax allowance is $138 000, how much salaries tax should he pay? Solution Net chargeable income = $(280 000 – 138 000) Net chargeable income = total income – total allowance = $142 000

Follow-up question (cont’d) ∵ $142 000 = $(40 000 + 40 000 + 40 000 + 22 000) ∴ According to the progressive tax rate, Net chargeable income On the first $40 000 On the next $40 000 Remainder $22 000 Tax rate 2% 7% 12% 17% ∴ Mr Leung’s salaries tax payable = $(40 000  2% + 40 000  7% + 40 000  12% + 22 000  17%) = $(800 + 2800 + 4800 + 3740) = $12 140