A common question after a unit has been successfully rented out and the landlord and tenant have signed the tenancy agreement is how to arrange for the agreement to be “stamped”. Below, we will share information including the methods for stamping, the required documents, the fees payable and the deadline for completion.
What does “stamping” mean? It refers to completing the stamp duty procedures for a tenancy agreement. After the landlord and tenant sign the tenancy agreement, the corresponding stamp duty must be paid to the Inland Revenue Department, and the agreement must be stamped to confirm that the relevant tax procedures have been completed.
Generally, the stamp duty is borne equally by the landlord and tenant, while the actual sharing arrangement may be negotiated by both parties. To avoid misunderstandings or disputes in the future, it is recommended that the tenancy agreement clearly state the proportion of stamp duty to be borne by each party and the payment arrangements.
How can a tenancy agreement be stamped? At present, there are three ways to handle this. The simplest and most convenient method is to use the Inland Revenue Department’s e-Stamping service. After logging into the system, the applicant fills in the tenancy agreement details on the form, including the property address, date of signing, tenancy period, rent, and the number of original and duplicate copies of the tenancy agreement, and then submits the application.
After submitting the application, payment can be made online or through traditional tax payment methods. Online payment methods include the Faster Payment System, PPS and credit card. After payment is completed, the stamp certificate can generally be downloaded and printed immediately. The stamp certificate should then be attached to the tenancy agreement and properly kept by both the landlord and tenant.
The second method is to apply by post. The applicant sends the completed application form to the Inland Revenue Department by post, calculates the amount of stamp duty payable, and encloses a crossed cheque. With this method, there is no need to mail the original tenancy agreement, which can prevent it from being lost or damaged during delivery. After receiving the complete application information and payment, the Inland Revenue Department will usually mail the stamp certificate to the applicant within five working days.
The third method is to apply in person at an Inland Revenue Department counter. During office hours, the applicant may bring the completed application form and the relevant tenancy agreement information to the Inland Revenue Department to complete the stamping procedures. This method is more suitable for people whose tenancy terms are more complicated or who have questions about how stamp duty is calculated. Applicants can make enquiries with staff on the spot to reduce the chance of errors when filling in information or calculating the tax payable.
As for the calculation of the stamp duty fee, it is determined according to the tenancy period and rent stated in the tenancy agreement. The longer the term, the higher the stamp duty rate, with rates ranging from 0.25% to 1%. Taking a common two-year tenancy with “one year fixed and one year flexible” as an example, the stamp duty is calculated at 0.5% of the annual rent or average annual rent. Assuming the monthly rent is HK$15,000, the annual rent is HK$180,000, and the total stamp duty payable is HK$900, with an additional HK$5 for each duplicate copy.
The tenancy agreement must be stamped within 30 days after signing. If the agreement is stamped late, a penalty must be paid. If the delay does not exceed one month, the penalty is twice the original stamp duty. If the delay is more than one month but does not exceed two months, the penalty is four times the original stamp duty. If the delay exceeds two months, the penalty is as high as ten times the original stamp duty.
As for penalties arising from the late stamping of a tenancy agreement, the legal responsibility is borne by the landlord, and the tenant is not required to bear the relevant legal responsibility. A tenancy agreement that has not completed the stamping procedures may not be accepted by bodies including the Lands Tribunal, which handles tenancy disputes, thereby affecting the landlord’s or tenant’s ability to recover rent, handle tenancy disputes or make related claims in the future.
