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Stamp duty 

Stamp duty [SD] is payable by all parties executing a document in relation to: (a) purchase and sale of a real property, (b) leasing of a real property, or (c) purchase and sale of company shares. Real property means a land, a building, or part of a land and building. The duty rate for purchase and sale of a real property is as follows. 

Purchase and sale of real property  樓宇買賣

 

In land law, assignment of landed property must be by deed; transfer of an interest in land must be evidenced in writing. Penalty for delay and legal consequence of non-stamping is same as those for leasing.

 

SD = SD rate x Consideration

 

Consideration includes waiver of debt, vide S24(1) .  Disclosure of full information for SD is required, vide S11(1)․Non-disclosure can lead to criminal prosecution with level 6 penalty and 1 yr imprisonment, vide S11(2)

 

SD rate varies with Consideration.   Marginal relief computation for excess of consideration slightly over marginal band-rate.

 

From 23 Feb 2013, New AVD should apply; and Old SD is still applicable to the purchase of residential property by a Hong Kong permanent resident who does not own any other residential property in Hong Kong at the time of purchase. 

 

New AVD rates apply from 23 Feb 2013 onward: consideration below $2,000,000: SD rate 1.5%; $2,000,001 to $3,000,000 SD rate 3%; $3,000,001 to $4,000,000 SD rate 4.5%; $4,000,001 to $6,000,000 SD rate 6%; $6,000,001 to $20,000,000 SD rate 7.5%; $20,000,001 and above SD rate 8.5%

 

Old SD rates apply to purchase of residential property by HK permanent resident without any residential property in HK: consideration below $2,000,000: SD $100; $2,000,001 to $3,000,000 SD rate 1.5%; $3,000,001 to $4,000,000 SD rate 2.25%; $4,000,001 to $6,000,000 SD rate 3%; $6,000,001 to $20,000,000 SD rate 3.75%; $20,000,001 and above SD rate 4.25%

 

From 27 October 2012 onward, any residential property acquired by any person (including a company incorporated) except a Hong Kong Permanent Resident will be subject to the Buyer Stamp Duty at 15%, on top of the existing stamp duty and the special stamp duty if applicable.

 

For residential property purchased between 20 November 2010 and 26 October 2012 and sold within 24 months, Special Stamp Duty is charged at old rates as follows: 15% for sale within 6 months; 10% for sale within 6 to 12 months; 5% for sale within 12 to 24 months.

 

For residential property purchased from 27 October 2012 onward and sold within 36 months, Special Stamp Duty is charged at new rates as follows: 20% for sale within 6 months; 15% for sale within 6 to 12 months; 10% for sale within 12 to 36 months.

 

New AVD and OSD is payable within 30 days of the execution of Sale and Purchase Agreement. A duty of $100 is payable within 30 days of the execution of Assignment Deed.  No SD is payable on Provisional Sale and Purchase Agreement.   

 

Except Buyer Stamp Duty all parties executing the documents are liable to pay stamp duty. In practice, the stamp duty is usually paid by the purchaser based on on the standard provisional agreement if not amended by the related parties.

 

Exemptions

  • Full exemption for the transaction with government and Housing Authority

  • Full exemption for gifts made to charitable institution.

  • No SD is payable if marriage is the consideration for the transfer of property.

  • No SD is payable if there is no change in beneficial interest.

  • S45 exemption is granted for transfer of property between associated companies. See below.

Delay in stamping causes penalty

  • Delay less than one month: penalty is two times the SD

  • Delay 1 to 2 months: penalty is four times the SD

  • Delay more than 2 months: penalty is ten times the SD.

  • Collector has discretionary power to waive the whole or part of the penalty. 

  • Collector may take legal action to recover the unpaid duty.

  • Any dutiable instrument which is not stamped is not admissible as evidence in legal proceedings except criminal proceedings or recovery action by IRD.

土地及樓宇法律知識

Purchase and sale of company shares 股票買賣

The duty rate on purchase or sale of private shares is 0.2% of the value of the transaction. For shares listed on stock exchange, the duty rate is 0.1% on the transaction value of bought note (payable by buyer) and 0.1% on sold note (payable by seller).  

 

SD is levied on bought note and sold note of the shares listed on the HK Stock Exchange. The SD rate for the bought note and the sold note is 0.1% on the value of each transaction. SD for instrument of transfer is $5.

 

For transfer of shares of a private company, SD is 0.2% on the value of the shares transferred payable within 2 days of the execution of the contract note and $5 for the instrument of transfer.

 

Consideration includes waiver of debt and injection of capital: vide S27 of SDO.

 

Disclosure of full information for SD is required.  Non-disclosure can lead to criminal prosecution with level 6 penalty and 1 year imprisonment. 

 

S45 exemption is available for intra-group transfer of shares or property between associated companies. Adjudication for exemption is required. An associated company means one is the beneficial owner of at least 90% of the issued share capital of the other, or if a third company is the beneficial owner of at least 90% of the issued share capital of each. The associated relationship must remain for at least 2 years after the transfer.

 

Beneficial ownership is determined by substance. B shares without voting rights cannot qualify S45 exemption: vide Arrowtown Assets Ltd. case.

 

All parties executing the documents are liable to pay stamp duty. But in practice, the stamp duty is usually shared equally between buyer and seller. 

 

Consequences of late stamping are same as those of purchase and sale of property. See above.

Leasing of real property 樓宇租賃

A lease for 3 years or more must be in writing. If a written lease is executed, SD must be paid within 30 days of the execution. A duty of $5 is payable on any duplicate of the lease.

 

The duty rate for leasing of a real property is as follows. 

Length of lease

Duty  Rate

Less than 1 year

0.25% of the total rent

1 year to 3 years

0.5% of the yearly rent

more than 3 years

1%* of the yearly rent

Key money etc.

4.25% of the consideration

Duplicate or counterpart

$5 per copy

SD = SD rate x Yearly rent 全年租金; plus 4.25% of premium if rent is also payable under the lease

 

Contingency principle applies when consideration depends on a future event. If consideration cannot be ascertained, no stamp duty is payable. If a maximum amount is specified, use the maximum amount. If only a minimum amount is specified, use the minimum amount.  Example: A shop is let out for 2 years at a monthly rent of between $400,000 and $300,000 depending on monthly sales.  SD is $400,000 x 12 x 0.5% = $24,000.

 

All parties executing the documents are liable to pay stamp duty. But in practice, the stamp duty is usually shared equally between the landlord and the lessee.

 

Consequences of late stamping are same as those of purchase and sale of property. See above.

 

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