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Hong Kong Eases Stamp Duty Rules For Residents

by Mary Swire, Tax-News.com, Hong Kong

22 January 2018


Hong Kong has relaxed the rules for those buying residential property, with the publication in the Official Gazette of The Stamp Duty (Amendment) Ordinance 2018 on January 19, 2018.

Hong Kong has made numerous changes to its stamp duty regime in the past few years to cool the market and ensure adequate housing for permanent residents. This included the introduction of Buyer's Stamp Duty (BSD) from October 27, 2012, in the Stamp Duty (Amendment) Ordinance 2014. Then, from November 5, 2016, Hong Kong increased the stamp duty rate on purchases of residential property, raising the 8.5 percent ad valorem stamp duty rate to a flat 15 percent rate.

Other changes to Hong Kong's property tax regime have included measures to prevent taxpayers from circumventing duty by grouping transactions under a single contract and ensuring that rates for individuals as against companies are enforced and vice versa.

Earlier, the Stamp Duty (Amendment) (No. 2) Ordinance 2014 was gazetted on July 25, 2014. This Amendment Ordinance provided that the ad valorem stamp duty (AVD) payable on certain instruments dealing with immovable properties executed on or after February 23, 2013, should be computed at higher rates (Scale 1), unless specifically exempted or provided otherwise.

The 2018 Amendment Ordinance establishes that ad valorem duty at Scale 1 – one of two scales – should be divided into a Part 1 (a flat rate of 15 percent) and a Part 2 (original Scale 1 rates under the 2014 (No. 2) Amendment Ordinance), with effect from November 5, 2016. Part 1 of Scale 1 applies to instruments of residential property and Part 2 of Scale 1, which features significantly lower rates, applies prospectively to instruments involving non-residential property only, the Government said.

A second change is expected to have a more pronounced change on market activity. Under Hong Kong's stamp duty regime, certain taxpayers may claim a partial refund of ad valorem stamp duty if they are a Hong Kong Permanent Resident and they sell the only home they owned subsequent to purchasing a new one. Previously there was a requirement that they should do so within six months or face stamp duty. The 2018 Ordinance extends this to 12 months after the date of conveyance of the new property, for property acquired on or after November 5, 2016.

TAGS: individuals | tax | property tax | stamp duty | Hong Kong | Other

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