Resilience Budget on property tax
As part of the Resilience Budget announced on 26 Mar 2020, qualifying nonresidential properties (“qualifying properties”) will be granted up to 100% of property tax rebate for the period of 1 Jan 2020 to 31 Dec 2020.
For most properties that are eligible for 100% property tax rebate, this is equivalent to slightly more than one month’s rental.
Owners of qualifying properties are required to unconditionally and fully pass on to their tenant(s) the rebate for the property tax account that is attributable to the rented property, by either reducing or offsetting current or future rentals or through a payment to their tenant(s), within the prescribed time frame.
Prescribed Amount of Rebate for Passing on – Where the Whole Property is Leased or Licensed to Single Tenant
There are two options for the property owner to fulfil his obligation in passing on the prescribed amount of rebate to his tenant(s), Option 1A and Option 2A.
Option 1A
The owner must pass on to a tenant the total of the sums calculated for each month of the year 2020 in which the tenant rents the property.
PTR / 12 X D/D(Month)
“PTR” is:
(a) the rebate amount for the property before any change in circumstances occurs;
(b) Zero, if there is no rebate amount mentioned in (a);
“D” is the number of days in the month for which the tenant is a prescribed lessee or prescribed licensee of the property;
“D(Month)” is the number of days in the month
Option 2A
The property owner may choose to pass on the whole of the rebate amount of the property to:
(a) The tenant of the property on 3 April 2020;
(b) If there is no tenant as mentioned in (a) for the property, the first tenant of the property in the period between 4 April 2020 and 31 July 2020 (both dates inclusive); or
(c) If there is no tenant of the property, in paragraphs (a) or (b), then only Option 1A applies.
Prescribed Amount of Rebate for Passing on – Where Part of Property is Leased or Licensed to Tenant or Different Parts of the Property are Leased or Licensed to Different Tenants
There are two options for the property owner to fulfil his obligation in passing on the prescribed amount of rebate to his tenant(s), Option 1B and Option2B.
The property owner has to adopt the same option, either Option 1B or Option 2B, in respect of the different parts of the property.
Option 1B
The owner must pass on to a tenant the total of the sums calculated for each month of the year 2020 in which the tenant is such a lessee or licensee.
𝑁𝑅 × 10% × 𝑃𝑇𝑅(%) × 𝐷/𝐷(𝑀𝑜𝑛𝑡ℎ)
“D” is the number of days in the month for which the tenant is a prescribed lessee or prescribed licensee of the part of the property;
“D(Month)” is the number of days in the month;
“NR” is the net rent* payable by the tenant for the part of the property for the month;
“PTR(%)” is the rate of the property tax rebate granted for the part of the property
*This net rent is the rent, licence fee or similar payment payable by the prescribed lessee or prescribed licensee of the property or part of the property to the owner of the property under the lease or licence agreement between the prescribed lessee or prescribed licensee and the owner which (a) Includes the following amounts payable under the agreement:
(i) any amount determined by the gross turnover (GTO)** of any business carried on by the lessee or licensee at the property or part of the property;
(ii) fees for repair, insurance, maintenance and upkeep of the property or part of the property, and property tax payable by the owner; but
(b) Excludes the following amounts payable under the agreement:
(i) any amount in respect of the provision of services (e.g. cleaning,
refuse disposal and advertising and promotion) by the owner to the lessee or licensee; and (ii)any goods and services tax.
Where for any month, the month amount plus previous months cumulative amount determined using Option 1B for every tenant would together exceed the rebate amount for the property, the amount of that rebate amount less the previous months cumulative amount is to be passed on to each tenant on a proportionate basis if there is more than one subject tenant; or the tenant in whole, if there is only one tenant
Option 2B
The property owner may choose to pass on the rebate for each part of the property as follows:
(a) Where the part of the property is granted a property tax rebate of 100% or 60%, an amount of at least 1.2 x AR
(b) Where the part of the property is granted a property tax rebate of 30%, an amount of at least 0.36 x AR
to the tenant as follows:
(i) The tenant of the part of the property on 3 Apr 2020;
(ii) If there is no tenant as mentioned in paragraph 9.17(i) for the part of the property, the first tenant of that part in the period between 4 Apr 2020 and 31 Jul 2020 (both dates inclusive); or
(iii) If there is no tenant of the property, in paragraphs 9.17(i) or (ii), then only Option 1B applies.
“AR”’ is the average net rent* per month payable by the tenant for the part of the tenant’s lease or licence that falls in the period starting on 1 Jan 2020 and the last day of the month immediately before the month in which the owner passes on or begins to pass on the benefit (both days inclusive). If the duration of the lease or licence in the period 1 Jan 2020 and the last day of the month in which the owner passes on or begins to pass on the rebate (both days inclusive) is less than one month, the net rent payable for that part of the month must be used to determine a proportionate amount for the whole month, which is then to be treated as the average net rent per month for the period.
Where the sum total of the amounts determined for all such tenants of the property would exceed the rebate amount for the property, then the amount of rebate must be passed to those tenants on a proportionate basis.