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Stamp Duty Hikes 'Will Stabilize HK's Property Market'

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

16 November 2012


In his reply to a question in the Legislative Council, Secretary for Transport and Housing Anthony Cheung has said that last month’s increase to the rate of Special Stamp Duty (SSD) and introduction of the Buyer's Stamp Duty (BSD) should curb speculation amidst the tight supply and high demand in Hong Kong’s residential property market.

From October 27, the SSD payable for properties held for six months or less has increased from 15% to 20%, and to 15%, from 10%, if a property is held for more than six months but less than one year. It will rise from 5% to 10% if the property is held for more than one year but less than three years (rather than two years originally).

The BSD is not applicable to Hong Kong permanent residents, but other buyers, including local and non-local companies, are required to pay an additional duty of 15% on top of the existing stamp duty.

Cheung added that the measures should help reduce the risk of a property bubble, and maintain the stability of the macro-economy and the financial system, which are of vital importance to the overall business environment.

“In the past few months, we have been taking heed of different views of the community on the property market, including those from experts, academics, think tanks and the trade,” he continued. “In formulating the proposals, we have also fully taken into account the general calls from the public for further measures to... ensure that housing demand from Hong Kong permanent resident-buyers be accorded priority.”

Cheung concluded that the government believes “the enhancement of the SSD regime will increase the cost of speculation and thus a significant portion of such transactions would disappear following the announcement, especially short-term resale cases. As to the BSD, it should be effective in reducing demand from non-permanent resident buyers, thereby according priority to meeting the housing needs of permanent residents under the current tight demand/supply balance in the housing market.”

He was also asked whether the measures would have an impact on small- and medium-sized enterprises (SMEs) using residential properties as collateral to seek financing from banks. He replied that banks do not rely solely on the value of collateral to decide whether or not to offer loans to SMEs, and the government does not consider that its measures will have any real impact on those firms seeking financing.

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
TAGS: tax | investment | business | real-estate investment | property tax | speculation | real-estate | offshore | tax rates | stamp duty | Hong Kong

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