The term “Rates” is no stranger to industrial, commercial and shop owners and tenants in Hong Kong. It is closely related to our properties and is an important expense that must be borne when holding or using a property. However, do you truly understand the definition of Rates, its historical origins, calculation methods, and the payment responsibilities and related policies that are relevant to you? This article takes “What are Rates?” as its core, providing an in‑depth analysis of Hong Kong’s Rates system, and offers a detailed guide for industrial, commercial and shop owners and tenants, helping you enhance your understanding of Rates and better manage your property costs.

Definition of Rates: An important component of Hong Kong property tax

Simply put, Rates is a tax levied by the Hong Kong government on property owners and property users within the territory, and falls under the category of indirect tax. The government collects Rates and places them into its general revenue to support various public service expenditures. It is worth noting that Rates are payable quarterly in advance. In Hong Kong, in addition to Rates, some properties are also required to pay Government Rent. Therefore, understanding Rates is a key step in comprehending the cost of holding a property.

History of Rates: From “police pay” to a pillar of public services

The collection of Rates in Hong Kong has a very long history, dating back to 1845. Originally, Rates were called “police rate”, and as the name suggests, their main purpose was to pay for the salaries and provisions of the Hong Kong police force (i.e., the “police”). This also explains why the Chinese term “差餉” contains the character “差” (meaning police or official). With the development of Hong Kong society, the use of Rates gradually expanded to support a wider range of public services, such as public lighting, water supply, and fire services.

In 1888, the Rates Ordinance was formally enacted. This ordinance not only laid the foundation for Hong Kong’s Rates system in the 19th century, but also serves as the cornerstone of today’s Rates system. Prior to this, police rate, water rate, street lighting rate, and fire rate were assessed and collected separately, with different collection rates. The Rates Ordinance of 1888 consolidated these four rates into one and set a uniform percentage for different areas. For example, at that time, the Rates rate in Victoria City was 13%, at The Peak 8¾%, and in other areas 7%.

It is worth mentioning that the early Rates Ordinance also provided that the Governor could use 2% of the Rates collected in Victoria City to pay for water supply expenses. This special provision regarding water supply is still reflected in the current Rates Ordinance, namely that properties not supplied with water by the government may receive a corresponding reduction in Rates.

Since 1931, Rates revenue has been included in the government’s general revenue. After the establishment of the Urban Council and the Regional Council, part of the Rates revenue was used for their waste disposal and other expenses. With the dissolution of the two Councils, Rates ultimately reverted entirely to the government’s general revenue. Today, Rates has become one of Hong Kong’s longest‑standing taxes and an important source of fiscal revenue for the government.

Calculation method of Rates: Rateable Value and Rate Percentage

Understanding the calculation method of Rates is crucial for estimating the cost of holding a property. The calculation of Rates is based on two main factors: Rateable Value and the Rate Percentage.

Rateable Value: The basis for assessing property value

Rateable Value is assessed by the Rating and Valuation Department of Hong Kong. It is defined as the estimated annual market rental value that the property unit could command if it were vacant and let out on the designated valuation reference date. Even if the actual rent of the property changes after the valuation date, it does not affect the Rateable Value for that year.

When assessing Rateable Value, the Rating and Valuation Department refers to the market rents of similar properties in the same area during the valuation period. At the same time, they also take into account the specific circumstances of the property, such as floor area, location, surrounding amenities, building quality, and property management standards, to adjust the rental value.

To more accurately reflect changes in property market rental values, the Rating and Valuation Department usually re‑assesses the Rateable Value of all properties annually. The valuation reference date is 1 October each year, and the new Rateable Values come into effect on 1 April each year. Members of the public can check the Rateable Value of their properties on the Rating and Valuation Department’s website.

Rate Percentage: The percentage for calculating the amount payable

After calculating the Rateable Value, the next step is to multiply it by the Rate Percentage set by the government to arrive at the Rates payable. Hong Kong’s Rate Percentage varies according to the type of property and the Rateable Value.

Taking the 2025‑26 financial year as an example:

• Non‑domestic properties: For all non‑domestic properties (including commercial buildings, industrial buildings, shops, hotels, etc.), the Rate Percentage is 5% of the Rateable Value.
• Domestic properties: Domestic properties are subject to a progressive Rates system.
  • For domestic properties with a Rateable Value of $550,000 or less, the Rate Percentage is 5%. This covers approximately 98% of private domestic properties.
  • For domestic properties with a Rateable Value exceeding $550,000, the Rates payable are calculated at the following progressive Rates percentages:
    • First $550,000: 5%
    • Next $250,000 (i.e., $550,001 to $800,000): 8%
    • Remainder (above $800,000): 12%

Members of the public can use the “Rates and Government Rent Calculator” provided on the Rating and Valuation Department’s website to estimate the Rates and Government Rent payable on their properties.

Who is liable for Rates? Division of responsibilities between owners and tenants

Under Hong Kong law, both the property owner and the property user (tenant) are liable for paying Rates. However, in practice, who bears this expense usually depends on the terms expressly set out in the tenancy agreement.

In Hong Kong’s leasing market, many owners let units on an “all‑in‑inclusive” basis, meaning that the rent already includes Rates, management fees, and other charges. In such cases, although both owner and tenant are legally liable, the owner usually handles the payment of Rates. If the tenancy agreement does not specifically state that the owner is to pay Rates, then according to law, the user of the property (the tenant) is required to pay.

Whether the property is owner‑occupied or used by a tenant, the basis for assessing Rateable Value is the same.

Payment timing of Rates: Payable quarterly in advance

Rates are payable quarterly in advance. Generally, the Rating and Valuation Department issues demand notes in early January, April, July, and October each year. The payment deadline is usually at the end of the respective month.

For example, the demand notes for Rates and/or Government Rent for the April to June 2025 quarter were issued in early April, and owners and tenants of industrial, commercial and shop properties are required to pay on or before 30 April.

Payment methods for Rates: Multiple convenient channels

Hong Kong provides a variety of convenient methods for paying Rates to facilitate the public. Common payment methods include:

• Bank autopay: Payers can fill in a direct debit authorisation form and return it to the bank to set up autopay. The payment will be deducted from the designated account on the final payment date.
• Faster Payment System (FPS): You can use the mobile banking app or e‑wallet that supports QR code payment of government bills to scan the “FPS” QR code on the quarterly demand note for payment.
• PPS (Payment by Phone Service): Registered users can pay via the PPS phone service (18033, merchant code: 09) or online platform.
• Online banking or bank ATMs: Many banks provide online banking and ATM payment services.
• Electronic cheque or electronic cashier’s order: Payers can upload an electronic cheque or electronic cashier’s order via the “e‑Cheque Payment” website (www.payecheque.gov.hk) payable to “The Government of the Hong Kong Special Administrative Region”.
• Postal cheque: Send a crossed cheque by post to the Treasury, P.O. Box 28000, Sham Shui Po Post Office, Hong Kong, with the cheque made payable to “The Government of the Hong Kong Special Administrative Region” and write the account number and payer’s contact phone number on the back of the cheque. Please note that mail with insufficient postage will not be accepted.
• In person at a post office: You may pay by cash or cheque at any post office in Hong Kong (except mobile post offices).
• In person at a convenience store: Bring the Rates and/or Government Rent demand note with a barcode to any 7‑Eleven, OK便利店, VanGO, or U購Select convenience store in Hong Kong to pay by cash. The payment limit per transaction is HK$5,000.

If the payer has not yet received the demand note, they may visit the Rating and Valuation Department’s website (www.rvd.gov.hk), call 2152 0111, fax 2152 0113, or visit the department in person at 15/F, Cheung Sha Wan Government Offices, 303 Cheung Sha Wan Road, Kowloon, to enquire or request a replacement copy.

Consequences of late payment of Rates: Surcharge

If Rates are not paid by the specified final payment date, additional charges will be incurred. According to regulations, a surcharge of 5% will be levied on the overdue amount. If the overdue amount remains unpaid six months after the final payment date, an additional surcharge of 10% will be levied. Therefore, to avoid unnecessary additional expenses, be sure to pay Rates by the deadline. Even if you have lodged a proposal or objection to the Rates valuation, you must still pay Rates and Government Rent on time.

Rates concession measures: Government welfare policies

The Hong Kong government introduces Rates concession measures in certain financial years to relieve the public’s financial burden or share the fruits of economic development. These concession measures are usually announced in the annual Budget.

For example, in the 2024‑25 financial year, the Hong Kong government introduced Rates concession measures, with a concession for the first quarter (April to June) at a cap of HK$1,000 per property. If the Rates payable on that property were less than HK$1,000, no Rates were payable for the first quarter, but there was no concession for the second, third, and fourth quarters.

The latest Budget also announced Rates concessions for the first two quarters (April to June and July to September) of the 2026/27 financial year, with a concession cap of HK$500 per quarter for each unit, covering both domestic and non‑domestic properties.

Since 1997, Hong Kong has implemented numerous one‑off Rates concession measures. Members of the public should pay attention to relevant government announcements to stay informed about the latest Rates concession policies.

Rates exemption: Relief under specific circumstances

Certain properties in Hong Kong are eligible for exemption from assessment or payment of Rates. Exemptions can be divided into two categories: exemption from assessment and exemption from payment.

Generally, factors considered for Rates exemption include social factors (e.g., cemeteries and crematoria), administrative factors (e.g., properties with a Rateable Value below a specified threshold), political factors (e.g., properties occupied by consulates and military land), and historical factors (e.g., certain New Territories village houses).

Common categories of exempted properties include:

• Agricultural land and related buildings.
• Village houses occupied by indigenous New Territories residents or their immediate families meeting specific conditions.
• Properties used for public religious worship.
• Properties in New Territories resettled villages.

If your property is eligible for exemption, you may submit an application to the Rating and Valuation Department, providing relevant property information and the reasons for the application.

Objecting to a Rates valuation? Channels for lodging objections and appeals

If an owner or tenant disagrees with the Rateable Value assessed by the Rating and Valuation Department, they may lodge an objection. After the new valuation list is published in March each year, if dissatisfied with any entry in the list, they may submit a proposal (using Form R20A) to the Commissioner of Rating and Valuation on or before 31 May of that year. Grounds for submitting a proposal may include that the valuation of the property unit is higher than the proper Rateable Value.

If still dissatisfied with the Commissioner’s decision on the proposal, an appeal may be lodged with the Lands Tribunal within 28 days after the notice of decision is issued. It should be noted that even if an objection or appeal has been lodged, Rates must still be paid on time; late payment will incur a surcharge. If the Rateable Value is successfully revised as a result of the objection or appeal, the Rating and Valuation Department will adjust the relevant Rates and/or Government Rent amounts in subsequent demand notes.

Guide to legal tax reduction strategies

• Make good use of Rates concession measures
• 2026/27 financial year first two quarters (April‑June and July‑September) Rates concession: cap of HK$500 per quarter per unit for domestic/non‑domestic properties.
• Timely follow new Rates measures announced in the Budget.
• Apply for Rates exemption
• The following may qualify for exemption:
  • Agricultural land and related buildings.
  • Village houses occupied by indigenous New Territories residents.
  • Properties used for religious worship.
  • Properties in New Territories resettled villages.
• Lodge reasonable objections to Rates valuations
• If the Rates valuation is considered too high:
  • Submit Form R20A by 31 May each year.
  • If dissatisfied with the outcome, appeal to the Lands Tribunal within 28 days.
• Optimise tenancy agreement clauses
• Clarify the sharing of Rates responsibilities.
• Consider a linkage adjustment mechanism between rent and Rates.
• Tax planning advice
• Diversify property holding methods.
• Assess long‑term holding costs.
• Consult professional tax advisors.

Frequently Asked Questions

To help you better understand Rates, the following are answers to some common questions:

• How can I check the Rateable Value? You can check the Rateable Value of your property in the Rating and Valuation Department’s valuation list. You may also check it through the Rating and Valuation Department’s website.
• When is the Rateable Value updated? The Rateable Value is usually re‑assessed annually and adjusted based on factors such as the economic and social conditions at that time. The valuation reference date is 1 October each year, and the new Rateable Value takes effect on 1 April each year.
• Does a tenant need to pay Rates? There is no statutory requirement that either the tenant or the owner must pay; it depends on the terms of the tenancy agreement. If not specifically stated, it is generally paid by the owner.
• What if I have not received a demand note? You may visit the Rating and Valuation Department’s website (www.rvd.gov.hk), call 2152 0111, fax 2152 0113, or visit the department in person at 15/F, Cheung Sha Wan Government Offices, 303 Cheung Sha Wan Road, Kowloon, to enquire or request a replacement copy.
• How do I change the payer’s information for Rates? You may make changes through the Rating and Valuation Department’s website or by filling in the relevant forms. You may need to apply for an account on the “My Government One Stop” website and then add the relevant property’s Rates and/or Government Rent accounts to your online account.

Conclusion

Rates are an important cost in holding and using industrial, commercial and shop properties in Hong Kong. Through this detailed introduction, we believe you now have a comprehensive understanding of “what Rates are”, including their definition, history, calculation method, payment responsibilities, timing, methods, consequences of late payment, concession measures, exemption provisions, and channels for lodging objections. As an owner or tenant of industrial, commercial or shop premises, it is crucial to understand and fulfil your Rates payment obligations in a timely manner. If you have any questions, it is advisable to consult the official website of the Rating and Valuation Department or contact the relevant department directly for the most accurate and up‑to‑date information.