HONG KONG individuals or companies renting Chinese properties for their staff should make sure that the lease requires landlords to pay China's rental tax, warns Alfred Shum, partner in accountancy firm Ernst and Young. He said individuals and companies stood to lose out significantly if leases did not specify that landlords were to pay China's 20 per cent rental tax. Mr Shum said problems were beginning to surface because companies were neglecting to state this clearly in rental contracts. Tenants have a 'withholding obligation' to pay the tax on behalf of the landlord if the landlord does not reside at the property. Mr Shum said having the money in hand from the landlord would facilitate the work of the local government tax bureaus, which would otherwise have to track down the landlord. He said the effective tax rate was 16 per cent and, although a monthly tax, was usually collected every six months. Tax payments by foreigners have become more difficult following the scrapping of the foreign tax bureau office, which catered to foreigners. Local taxes, including the rental tax, are collected by tax offices in districts where the leased properties are located. In another area, Mr Shum said the effects of the Real Estate Property Gains Tax, introduced to curb land speculation, would not be felt for two or three years because a majority of the developments were signed prior to January 1, 1994. Taxes on property transaction gains range from 30 to 60 per cent, with the lower rate applying to gains of 50 per cent or less. The tax regulations include a five-year exemption period for transactions entered into before January 1994.