When it comes to acquiring a property in Hong Kong, whether residential or non-residential, one of the major costs buyers should definitely watch out for is stamp duty. Aside from the obvious cost of the property itself, solicitor’s fees, mortgage charges and insurance, stamp duty can take up a big chunk of your budget.
When planning to purchase a property, you need to be aware of and understand the 3 different types of stamp duties – Ad Valorem Stamp Duty, Special Stamp Duty and Buyer’s Stamp Duty – that can be incurred depending on the status of your residentship, the number of properties owned and their holding period.
Take note that AVD applies to any sort of property transaction, while SSD and BSD only apply to the transaction of a residential property.
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Ad Valorem Stamp Duty (AVD)
By definition, Ad Valorem Stamp Duty (AVD) is a tax whose amount is based on the valuation of a transaction or of property. In Hong Kong, the AVD rates on property are divided into Scale 1 and 2, with transactions executed on or after 23 February 2013 computed at higher rates (Scale 1); however, there are major exceptions for residential properties and purchasers or transferees who are a Hong Kong permanent resident acting on his/her own behalf and does not own any other residential property in Hong Kong at the time of acquisition.
The AVD rates for residential properties have been recently revised (on 4 November 2016) to a flat rate of 15% and are applicable to all transactions executed on or after 5 November 2016, meaning that the purchaser or transferee has to pay a flat rate at 15% or the rates stated in Scale 1, whichever is the higher. This amendment will not affect the exceptions stated above, transactions relating to non-residential properties, or the existing refund mechanism.
Note: The stamp duty calculated includes a fraction of $1, round-up the duty to the nearest $1.
Special Stamp Duty (SSD)
In order to discourage speculation and cool down the overheated property market, Special Stamp Duty (SSD) was introduced by the government on top of AVD in October 2010.
SSD is applicable when an individual or a company, regardless of place of incorporation, acquires a residential property and resells it within 24 months (property acquired on or after 20 November 2010 and before 27 October 2012) or 36 months (property acquired on or after 27 October 2012).
There are 3 levels of regressive rates of SSD depending on holding period. The rate is 20% if the property has been held for six months or less; 15% if held for more than 6 months but less than 12 months; and 10% if held for more than 12 months but less than 36 months.
Buyer’s Stamp Duty (BSD)
On top of the existing AVD and SSD, a flat rate of 15% Buyer’s Stamp Duty (BSD) is charged on all residential properties acquired by an individual or entity with effect from 27 October 2012. However, Hong Kong Permanent Residents are exempted.