Only days after refusing to change its mind, Hong Kong’s Transport and Housing Bureau (THB) has indicated that it will now consider the suggestions made by the Real Estate Developers Association (REDA) when drafting the enabling legislation for the enhanced Special Stamp Duty (SSD) and introduction of the Buyer's Stamp Duty (BSD).
The THB issued a statement on December 7, after meeting with REDA on the new measures to address the overheated property market. "We have listened carefully to the association’s views," it confirmed. "Our current plan is to submit the Stamp Duty (Amendment) Bill 2013 into the Legislative Council in January, 2013."
From October 27 this year, the government increased the rates of the existing SSD for properties held for less than three years and introduced the BSD, to curb speculation amidst the tight supply and high demand in Hong Kong’s residential property market. The BSD is not applicable to Hong Kong’s permanent residents (HKPRs), but all 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.
REDA recently argued that targeting company purchasers would "thwart international investors and damage our reputation as one of the freest economies in the world." It has recommended 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 HKPRs.
In addition, it recommended that, 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 (USD3.9m) should be exempt; 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 advised 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."
In response, the THB had pointed out that, as the intention of the policy was to accord priority to HKPR buyers with a view to meeting their housing and home ownership needs under the current tight supply situation in the residential property market by reducing the ability of non-HKPRs to purchase properties, the government considered that other than HKPRs, all other persons and companies should be subject to the BSD.
However, the TSB now appears to have had a change of mind, primarily perhaps because of the effect the increased SSD rates and introduction of the BSD could have on Hong Kong’s reputation as an open market, and on an overall perception of increased intervention recently by its government.
For example, the recent annual listings released by the China Institute of City Competitiveness showed that Hong Kong remains China’s most competitive city, but that it is likely to be overtaken by Shanghai in the next few years. It was said to have remained at the top of the listings until now partly because of its established open market system, but that could now be under threat.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
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