The Financial Secretary of Hong Kong, Mr. John Tsang, announced on 22 February 2013 that further stamp duty measures will be implemented, all effective from midnight on 23 February 2013. This legal update highlights certain key aspects of those new measures.

Substantial Increase in Stamp Duty Rates

Regular stamp duty will be substantially increased :-

For property priced under HK$2 million, stamp duty will be 1.5 percent of the Consideration or value of the property (whichever is the higher), as compared to the recent charge of fixed sum of HK$100.

For all other prices, rates of stamp duty will be doubled, bringing the high level to 8.5 percent from currently 4.25 percent :-

Click here to view table.

Exemptions

It was proposed that the new rates will not apply under the following circumstances :- Acquisition of residential property by a Hong Kong Permanent Resident (HKPR) who is acting on his/ her own behalf and does not own any other residential property in HK at the date of acquisition.  

  • Acquisition of residential property by 2 or more HKPRs jointly and each of them is acting on his/her own behalf and does not own any other residential property in HK at the date of acquisition.  
  • Acquisition of residential property by a HKPR jointly with a close relative(s) (i.e. spouse, parents, children, brothers and sisters) who is/are not HKPR and each of the purchaser is acting on his/her own behalf and does not own any other residential property in HK at the date of acquisition.  
  • Acquisition or transfer or residential property between close relatives (HKPR or non-HKPR) who may or may not own other residential properties.  
  • Acquisition or transfer of residential or non-residential property by a court order.  
  • Transfer of mortgaged property (residential or non-residential) to a mortgagee.  
  • Acquisition or transfer of residential or non-residential property by or to a body corporate from an associated body corporate (i.e. section 45 stamp duty relief).  
  • Acquisition of residential or non-residential property by a person to replace another property which was owned by that person and that has been purchased or acquired pursuant to redevelopment projects pursued by the Urban Renewal Authority, or is resumed or purchased under the Lands Resumption Ordinance, or is sold pursuant to an order for sale made by the Lands Tribunal under the Land (Compulsory Sale for Redevelopment) Ordinance and the person is acting on his/her own behalf.  
  • Acquisition or transfer of residential or non-residential property by or to the Government.  
  • Gift of residential or non-residential property received by a charitable institution.

Genuine Change of Residence by HKPR

If a HKPR owns only one residential property (“1st property”) at the time he or she acquires another residential property (“2nd property”) but with the intent to dispose of the 1st property shortly, the new rates will apply to the acquisition of the 2nd property, but he/she may seek a refund of the stamp duty paid in excess of that computed under the old rates upon proof that the 1st property has been disposed of within 6 months from the date when he/she executed the agreement to acquire the 2nd property.

After the disposal transaction for the 1st property has been completed, the person can, within 2 years from the date of the agreement for the 2nd property, lodge an application to the Stamp Office for a refund of the excess stamp duty paid on the agreement to acquire the 2nd property.

Stamping of agreements for sale in relation to Non-residential properties

Under the existing stamp duty regime, for non-residential property, the agreement for sale is not chargeable with stamp duty, and only the conveyance on sale (i.e. assignment) is chargeable with the ad valorem stamp duty. The Government proposed to advance the charging of ad valorem stamp duty in respect of non-residential property transactions from the conveyance on sale to the agreement for sale, in line with the practice in residential properties.

In the existing regime, when the purchaser of the a non-residential property wishes to sub-sell the property, the agreement for the sub-sale will not be chargeable with the ad valorem stamp duty. However, with the introduction of the new regime, every such sub-sale agreement will be chargeable with ad valorem stamp duty.

Conclusion

According to the Government, a Bill to introduce these amendments to the Stamp Duty Ordinance will be tabled before the Legislative Council shortly.