Hong Kong’s New Stamp Duty Amendment Explained

Posted: Oct 28 2022Last Updated: Nov 11 2022
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In the recent 2022 Policy Address, the Hong Kong government announced a concession of the extra stamp duty in a bid to attract overseas professionals and talents to the city. Under the new stamp duty amendment, eligible non-locals who purchase residential property in Hong Kong will be entitled to nearly a 30% refund of the stamp duty paid on the property upon staying in Hong Kong for 7 years and obtaining a permanent residence.

What exactly does the new tax-refund incentive entail, and how will it affect the Hong Kong property market? Let us take a deeper look into Hong Kong’s stamp duty policy and unravel the implications of the new policy change.

Understanding Hong Kong’s Stamp Duties

Simply put, stamp duty is a government tax levied on property transactions. It is payable at the time of purchase based on the value of the property and exerts a significant influence on the final cost of the transaction. In light of the overheating property market in 2010 and skyrocketing housing prices, the Hong Kong government has been implementing “cooling measures” in the last decade through stamp duty tax to slow down the drastic rise in residential property prices. Hong Kong permanent residents are exempted from most of the stamp duties on their first home purchase, while non-locals and property investors are subjected to additional or higher taxes.

Stamp duty in Hong Kong is payable at the time of purchase and should be settled within 30 days of the date of sale. Currently, there are three types of stamp duties for buying or selling Hong Kong residential properties:

1. Ad Valorem Stamp Tax (AVD)

Ad Valorem Stamp Duty (AVD) is payable at Scale 1 and Scale 2 rates. Non-locals as well as Hong Kong permanent residents buying a second home are subject to the AVD Part 1 Scale 1 flat rate of 15% (i.e. the New Residential Stamp Duty). Meanwhile, Hong Kong residents buying their first homes, switching homes, or who acquire homes under registered companies fall under the Scale 2 category, which charges rates ranging from 0.01% to 4.25%, varying based on the property price.

2. Special Stamp Duty (SSD)

Designed to curb property flipping, Special Stamp Duty (SSD) is levied when a property is sold and applies to residential properties acquired after 20 November 2010. The SSD rate is payable by the vendor based on the holding period of the property before it is re-sold:

- Property held for 6 months or less: 20%

- Property held for 6 months to 12 months or less: 15%

- Property held over 12 months but for 36 months or less: 10%

- Property held for over 36 months: 0%

3. Buyer’s Stamp Duty (BSD)

Buyer’s Stamp Duty (BSD) is an additional upfront tax levied on the purchase of all residential properties on top of the AVD, except for properties purchased by Hong Kong permanent residents. It is payable at a flat rate of 15% of the market value of the property.

Stamp Duty Amendment 2022

In effect for properties sold on or after 19 October 2022, non-locals will be able to apply for a refund of the extra stamp duties paid after becoming a Hong Kong permanent resident. This includes tax concessions of the Buyer’s Stamp Duty (15%) as well as the New Residential Stamp Duty (15%), but the lower AVD Scale 2 rates will still be payable.

The policy is adjusted so that eligible incoming talents will pay an overall stamp duty on par with Hong Kong permanent residents purchasing residential property for the first time. The stamp duty change is implemented as a measure to attract more global professionals and retain overseas talent for long-term development in Hong Kong.

To qualify for the tax concession, incoming non-locals must hold a visa under designated talent admission schemes at the time of purchasing the residential property. This includes GEP, ASMTP, QMAS, IANG, TechTAS, the Admission Scheme for the Second Generation of Chinese Hong Kong Permanent Residents and the Top Talent Pass Scheme.

New Purchasing Power In The Market

With the new relaxation of home ownership restrictions for qualified foreigners, what is to be expected next from the local Hong Kong property market? Experts predict that property prices will remain high but that new purchasing power will be brought into the property market. The stamp duty amendment will accelerate the decision of those looking to enter the market, especially non-local talents who have already been living in Hong Kong for nearly five or more years. It is estimated that up to 184,000 incoming talents will benefit from the tax-refund incentive.

For more news and insights on the latest in Hong Kong’s property market, visit OKAY.com.

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