Leasing Costs Stamp Duty Stamp duty is a one-off tax payable to Hong Kong’s Inland Revenue Department. The norm in Hong Kong is for both the tenant and landlord to pay the stamp duty fees in equal proportion. This is required in order for the agreement to be enforceable at law by the landlord for arrears rent etc and registered with the Land Registry. Lease Duration Stamp Duty Rate Not defined or uncertain 0.25% of the annual or average annual rent Not exceed 1 year 0.25% of the total rent payable over the term of the TA Exceed 1 year but does not 0.5% of the annual or average annual rent exceed 3 years Exceed 3 years 1% of the annual or average annual rent Government Rates Government Rates are payable quarterly in advance, equivalent to 5% of the annual rental value. If the rental is quoted “inclusive”, the Government Rates are already factored into the rental. If the rental is quoted “exclusive”, the tenant is required to pay the Government Rates separately. Deposit The tenant has to pay a month’s rent as a holding deposit prior to signing the TA. This will later serve as the rent for the first month. The tenant is also required to pay a security deposit, equivalent to two to three months’ rent. Once the TA is signed, the deposit held by the landlord throughout the term free of interest will be refunded to the tenant upon lease expiration if there is no breach of terms and conditions in the TA. Compensation for loss and damage suffered and costs for necessary reinstatement work of the property can be deducted from the deposit. Agency Fee The industry standard is a commission equivalent to half a month’s rental from the tenant and half a month’s rental from the landlord, both payable once the formal TA is executed. Legal Fee The TA is usually provided by the landlord or the landlord’s representative solicitor for the tenant's consent. The tenant may also appoint a solicitor to review the TA at his/her discretion. Each party shall pay for their own solicitor’s fees. Property Management Fee Payable by either the landlord or the tenant, subject to mutual agreement, covering communal services such as security, general cleaning, maintenance of common areas and amenities. GUIDE FOR LEASING A PROPERTY IN HONG KONG 7