Recently, a user on social media platform Threads shared their experience of receiving a notification to pay additional stamp duty after purchasing a property in 2024. The user sought advice online about appealing the case, with some questioning whether the notice was a scam. In reality, this is not a scam. Under certain circumstances, the Inland Revenue Department (IRD) has the authority to recover the stamp duty shortfall. So, what exactly is going on?
The user explained that they purchased a property for less than HK$3 million in 2024 and paid a stamp duty of HK$100. However, they later received a notice from the Rating and Valuation Department (RVD) stating that the property’s market value at the time of purchase was HK$4 million. If no objection is filed within 14 days, the stamp duty will be recalculated based on the HK$4 million market value, requiring the buyer to pay an additional HK$60,000.
According to the Stamp Duty Ordinance, stamp duty for property transactions is calculated based on either the sale price or the market value of the property, whichever is higher. If the government believes the transaction price is significantly below market value, they have the legal right to recover the shortfall in stamp duty. This process can be initiated within seven years of the transaction's completion.
If you receive a notice to pay additional stamp duty but believe the recalculation is unreasonable, you can file an objection. The key to a successful appeal lies in completing the objection notice accurately and addressing each reason listed for the reassessment. It’s also essential to submit sufficient evidence and supporting documents to increase the chances of your appeal being accepted.
In cases like this, you can appeal additional stamp duty from several angles, such as the valuation of the property, the condition of the unit, or by comparing sales of similar properties in the same area.
Before purchasing a property, most buyers request valuations from multiple banks, which often vary in price. These valuation reports can be submitted as evidence when filing an appeal. For example, if the government values the property at HK$4 million but a bank has estimated it at HK$3 million, you can use the bank’s valuation report to argue for the stamp duty to be calculated at the lower price. Even if the bank valuation is HK$3.5 million, you can still use this as evidence to request a recalculation based on HK$3.5 million instead of HK$4 million. However, it’s important to note that appeals are not always successful, and the final decision rests with the Inland Revenue Department.
If the property’s sale price is not significantly below market value, you can also provide transaction records of similar properties in the same building or neighborhood. This includes details such as sale prices, unit sizes, and transaction dates, which can help prove that your property’s price was not unreasonably low.
Another approach is to explain why the property was sold at a lower price due to its condition. For instance, the property might be on a very low floor, lack elevator access, or require extensive renovations due to poor condition. To support these claims, you’ll need to provide concrete evidence, such as photos of the property’s interior at the time of purchase, to substantiate your reasoning.
It’s important to remember that when the Inland Revenue Department issues a notice to recover additional stamp duty, it usually means they have sufficient evidence to justify their assessment. This makes it difficult to avoid paying extra stamp duty entirely. However, by submitting strong supporting documents and addressing their reasons with well-structured arguments, you may still be able to reduce the amount owed.
