May 2014 - Double stamp duty to be relaxed

• to impose Special Stamp Duty (SSD) on those who resell their property quickly; 
• to impose a 15 percent Buyer’s Stamp Duty (BSD) on both corporate buyers and non-permanent residents of the Hong Kong’s residential property transactions; and 
• to double the stamp duty - Double Stamp Duty (DSD) - on all properties costing more than HK$2 million, except for those bought by permanent residents who are either first-time buyers or selling their only home to buy another one.

Whilst the Stamp Duty (Amendment) Bill 2012 which covered the amendements on SSD and BSD has been passed in February 2014, the Stamp Duty (Amendment) Bill 2013 for the introduction of DSD is still being considered by the Bills Committee of the Legislative Council.

Having considered the views of the Bills Committee members and relevant stakeholders, on 13 May 2014, the Secretary for Financial Services and the Treasury, Chan Ka-keung, said that the Government will consider easing the proposed measures in two aspects as follows:

1. Timeframe relaxed

The Bill currently proposes that if Hong Kong permanent residents upgrade their flats by acquiring a residential property before disposing of their current one, they should pay the new DSD rates first.  They would be given six months from the date of acquisition of the new property to dispose of their old property.  When the buyers complete the conveyance on sale of the old property, they are allowed to claim a refund of stamp duty for the difference between the new and old stamp duty rates on the newly acquired property within two years from the date of execution of the provisional sale and purchase agreement for the newly acquired property.

The current “six-month” waiver period and “two-year” time limit for claiming stamp duty refund start right after the buyers sign the provisional sale and purchase agreement for the newly acquired property.  However, the proposed timeframe is considered too tight and not addressing the practical needs of the public.  Especially for buyers acquiring the property under construction with long pre-sale period, they may not be able to claim the stamp duty refund if the transaction cannot be completed within the two-year time limit.

To strike a balance between addressing the practical needs of the public and safeguarding the effectiveness of the measures, the Government further proposes that the “six-month” timeframe be adjusted to start after the conveyance on sale of the newly acquired property.  The new proposal will give buyers around an extra 30 to 45 days of grace period to sell their old property.

For those who want to acquire flats which are still under construction, the Government also proposes another amendment. While maintaining the two-year application timeframe after the execution of a provisional sale and purchase agreement for purchase of the new flat, the Government now proposes to include a new clause to allow for application within two months from the conveyance on sale of the original property, whichever is the later.  As developers are currently allowed to sell projects up to 30 months before completion, the proposal will extend the grace period to as long as three years for buyers acquiring flats which are still under construction. 

2. Acquisition of a residential property with a car parking space

Pursuant to the Bill and prevailing practice of the Stamp Duty Office, when a Hong Kong permanent resident acquires a residential property together with a car parking space by a single instrument, the latter is not exempted from DSD, even if the subject residential property in the transaction can be exempted under the relevant law concerning DSD, because it is a non-residential property.

In order to address the home ownership needs of the public, the Government proposes to extend the exemption of DSD on car parking space acquired by a single instrument along with a residential property which qualified for DSD exemption.  The exemption shall be stringently drawn up with the following conditions:

1. the buyer is a Hong Kong permanent resident who is acting on his or her own behalf and is not a beneficial owner of any other residential property nor car parking space in Hong Kong at the time of acquisition of the subject residential property and car parking space;
2. the concerned exemption is restricted to only one car parking space, irrespective of whether it is acquired for self-use or by a first-time buyer; and
3. the subject car parking space must be acquired together with the residential property in a single instrument, irrespective of whether the car parking space is located in the same residential development or not.  If the single instrument involves more than one car parking space, none of the parking spaces will be exempted from the DSD even if they are purchased together with the residential property.

The proposed amendments were warmly welcomed by buyers of better home.  The Government will submit the implementation plan of the above two adjustment proposals to the Bills Committee in due course.