Please enter your email address to receive a password reminder.
Log into Tax-News+
The Real Estate Developers' Association (REDA), which represents the interests of Hong Kong’s property developers, has asked the government for changes in the new Buyer's Stamp Duty (BSD) that is targeted at foreign and corporate property buyers.
The government increased the rates of the existing Special Stamp Duty (SSD), for properties held for less than three years, and introduced the BSD in late October this year to curb speculation amidst the tight supply and high demand in Hong Kong’s residential property market.
From October 27, while the BSD is not applicable to Hong Kong’s permanent residents, other property buyers, including local and non-local companies, are required to pay an additional duty of 15% on top of the existing stamp duty.
The government has said that it expects the measures to help reduce the risk of a property bubble, and maintain the stability of the macro-economy and the financial system. However, REDA has now replied the operation of the BSD risks damaging “Hong Kong’s reputation as an open economy.”
In a letter written on November 22 to the Permanent Secretary for Transport and Housing, REDA suggests that the real causes of rising house prices are the USD/HKD peg and the shortage of land supply. However, while time will be needed to improve land supply, REDA points out that, with the further intervention by the government in the meantime, “every aspect of the real estate market was now under direct government control, which we consider is unhealthy and potentially dangerous."
Targeting company purchasers will, it adds, “thwart international investors and damage our reputation as one of the freest economies in the world. The reality is that such measures will inevitably cast a shadow in the minds of international investors on the attractiveness of Hong Kong as an investment destination of choice.”
REDA recommends that, if corporate buyers are to be included within the ambit of the BSD, exemptions should be granted to Hong Kong companies whose directors/shareholders are Hong Kong permanent residents, while, as the current property price inflation appears to be concentrated in the prices of mass market properties, buyers of larger flats costing more than HKD30m (USD3.87m) should be exempt.
Further, it recommends that the tax measure should contain a sunset clause, after which it should only be renewed if market conditions then justify it, and that first time buyers should be helped by waiving the stamp duty for them and relaxing the loan-to-value ratio of their mortgages “to 80% or even 90%.”
Finally, REDA advises the government “against taking any measures for the sake of short-term expediency at the cost of risking Hong Kong’s hard-earned reputation as one of the freest and most productive economies in the world.”A comprehensive report in our Intelligence Report series dealing with the issues raised by international property investment, and the possible taxation implications raised by such purchases, with an account of the likely (and some less obvious) potential countries for your consideration, is available in the Lowtax Library at http://www.lowtaxlibrary.com/asp/subs_reports.asp and a description of the report can be seen at http://www.lowtaxlibrary.com/asp/description_report15.asp
IMPORTANT NOTICE: Wolters Kluwer TAA Limited has taken reasonable care in sourcing and presenting the information contained on this site, but accepts no responsibility for any financial or other loss or damage that may result from its use. In particular, users of the site are advised to take appropriate professional advice before committing themselves to involvement in offshore jurisdictions, offshore trusts or offshore investments.
All rights reserved. © 2017 Wolters Kluwer