Quick Overview of Stamp Duty Changes in Hong Kong (2023/2024)

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Introduction

Hong Kong has recently introduced significant alterations to its stamp duty regulations, aimed at reshaping property transactions and encouraging a more favorable environment for both buyers and sellers. The amendments, effective from October 25, 2023, come with several noteworthy modifications:

Lower the rate Ad Valorem Stamp Duty (AVD)

AVD, known as “harsh measure” are strict rules made by the government to control how many houses people buy. These rules help keep house prices stable and stop people from buying houses just to sell them for a higher price. They often mean
higher taxes or limits on who can buy houses.

Recently, these strict rules, or “harsh measures” have stayed the same. That means the tough rules about buying houses haven’t changed. But there’s some good news too! The government has changed how much tax people pay when they buy or sell a
house. They made these changes to help regular families buy houses without paying as much tax. By doing this, they hope to make buying a house easier for families with average incomes.

Adjusted value bands of ad valorem stamp duty payable for the sale and purchase or transfer of residential and non-residential properties (Rates at Scale 2) (including marginal relief)

Examples

Exemption

However, if you are a Hong Kong Permanent Resident (“HKPR”) acquiring a residential property on your own behalf and do not own any other residential property in Hong Kong at the time of acquisition, you may apply for exemption of the new AVD and then be entitled to pay Stamp Duty at a lower rate (Scale 2).

Subject to the Ordinance, the followings are the major exceptions to the New AVD: –

  1.  joint acquisition of a residential property by a HKPR with one or more non- HKPR close relative(s) (近親) (i.e. spouse, parents, children, brothers and sisters) each acting on his/her own behalf and none of them own any other residential property in Hong Kong at the time of acquisition;
  2. acquisition or transfer of residential properties between close relatives, whether or not they are HKPRs and beneficial owners of other residential property in Hong Kong at the time of acquisition or transfer;
  3. acquisition or transfer of a property by or pursuant to a court order, e.g. divorce;
  4. inheritance of a property by the beneficiary of an estate under a will or the law of intestacy; and
  5. replacement of other property if your original property is either acquired by Urban Renewal Authority or resumed by the Government or under order made by the Lands Tribunal under the Land (Compulsory Sale for Redevelopment)
    Ordinance (Cap. 545).

 

Buyer’s Stamp Duty (BSD) and New Residential Stamp Duty (NRSD) rate reduced

Differences between BSD & AVD
BSD and AVD differ in their focus and application in property transactions. BSD specifically targets residential property acquisitions in Hong Kong, regulating the residential market by influencing purchasing behavior through tailored taxation.

In contrast, AVD is a more expansive stamp duty applicable to both residential and non-residential properties, aiming to generate government revenue from a wide spectrum of real estate transactions beyond residential holdings.

For non-Hong Kong permanent resident buyers and those owning other residential properties in Hong Kong, BSD and NRSD rates have been reduced from 15% to 7.5%. However, these revised rates apply only to sale and purchase agreements
entered into on or after October 25, 2023.

For instance
1. Suppose a non-Hong Kong permanent resident buys a property in Hong Kong for $5,000,000:
Previous BSD and NRSD Calculation: $5,000,000 * 15% = $750,000
Revised BSD and NRSD Calculation: $5,000,000 * 7.5% = $375,000

2. Consider a buyer who already owns residential property in Hong Kong and
purchases another property for $8,000,000:
Previous BSD and NRSD Calculation: $8,000,000 * 15% = $1,200,000
Revised BSD and NRSD Calculation: $8,000,000 * 7.5% = $600,000

 

Changed in Special Stamp Duty period (SSD)

The government has announced a reduction in Special Stamp Duty (SSD) period from 3 years to 2 years, providing property owners with increased flexibility. Notably owners are now exempt from 10% SSD if they sell the property after a minimum of 2
years of acquisition, reflecting a more response approach to the evolving real estate landscape.

 

Stamp Duty on Stock Transfer Reduced:

Previously, the stamp duty rate applied to stock transfers was 0.13%, and it has been decreased to 0.1%. This reduction in the stamp duty rate on stock transfers means that individuals or entities involved in transferring stocks will now pay a lower percentage as a stamp duty tax on the value of the stocks being transferred.

Example

Let’s examine a stock transfer amounting to $500,000
– Previous Stamp Duty Calculation: ** $500,000 * 0.13% = $650.00
– Revised Stamp Duty Calculation: ** $500,000 * 0.1% = $500.00

 

Stamp Duty for Eligible Incoming Talents Purchasing Residential Property

A stamp duty suspension mechanism has been introduced for eligible incoming talents buying residential properties in Hong Kong, aimed at attracting and retaining talent in the region.

 

Conclusion

When purchasing property in Hong Kong, understanding the current Stamp Duty regulations, including AVD, BSD, and SSD, is crucial. These duties might apply to your property transaction, impacting both end-users and property investors. Some might opt to acquire the full issued share capital of a property-holding corporation to avoid higher Stamp Duty rates.

The legal framework and procedures related to this topic are intricate and specialized. This article serves as a broad overview intended for reference purposes and should not be considered as legal advice for individual cases. It is advisable for readers to consult with professional legal advisors to address their specific legal inquiries.