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    Home > Frequently Asked Questions  > Ad valorem stamp duty (AVD) - Proposed new AVD rate

Note: 

On 11 April 2017, the Government announced that it would introduce legislative amendments to tighten up the existing exemption arrangement for Hong Kong permanent resident (“HKPR”), to the effect that, unless specifically exempted or otherwise provided in the law, acquisition of more than 1 residential property under a single instrument executed on or after 12 April 2017 will be subject to the proposed new AVD flat rate at 15%, even if the purchaser/transferee is a HKPR who is acting on his/her own behalf and is not a beneficial owner of any other residential property in Hong Kong at the time of acquisition. Please refer to the FAQs and the illustrative examples for AVD – Proposed new AVD rate: acquisition of more than 1 residential property under one single instrument for further details. 

The following FAQs are prepared based on the Government’s current proposals, which have to be put into effect through the enactment of legislation and are subject to amendment during the legislative process.

1.

Q:

Under what circumstances will a property transaction be subject to the proposed new AVD rate?

  

A:

Under the current proposal, unless specifically exempted or otherwise provided, AVD is payable at the proposed new AVD rate on an agreement for sale for the acquisition of any residential property, if the agreement is executed on or after 5 November 2016.  The proposed new AVD rate also applies to a conveyance on sale of such a property executed on or after that date, unless the related agreement for sale was executed before 5 November 2016.  However, the proposed new AVD rate does not apply to an agreement/conveyance for a residential property where the purchaser/transferee is a Hong Kong permanent resident (HKPR) acting on his/her own behalf and does not own any other residential property in Hong Kong at the time of acquisition of the subject property.  Scale 2 rates will apply to such agreement/conveyance on sale.

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2.

Q:

Does the proposed new AVD rate apply to acquisition of non-residential property?

  

A:

Under the current proposal, the proposed new AVD rate does not apply to the acquisition of non-residential property.  AVD at Scale 1 rates under the existing law still apply to non-residential property transactions.

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3.

Q:

What is the proposed new AVD rate?

  

A:

The proposed new AVD rate is a flat rate of 15%, applicable irrespective of the amount or value of the consideration of the residential property concerned.

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4.

Q:

Under what circumstances will a residential property transaction not be subject to the proposed new AVD rate?

  

A:

Under the current proposal, there is no change to the circumstances under which AVD at Scale 2 rates is applicable or AVD is exempt.  Question 12 of the FAQs for AVD at Scale 1 rates and Scale 2 rates sets out the circumstances where Scale 2 rates is applicable or AVD is exempt.

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5.

Q:

Does AVD at Scale 2 rates only apply to those who acquire residential property for the first time?

  

A:

Under the current proposal, irrespective of whether the buyer/transferee is acquiring a residential property for the first time, the proposed new AVD rate does not apply to an agreement for sale or conveyance on sale in respect of a residential property where the purchaser/transferee is a HKPR acting on his/her own behalf and does not own any other residential property in Hong Kong at the time of acquisition of the subject property. Scale 2 rates will apply to such agreement/conveyance.

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6.

Q:

Is there any change in the partial refund mechanism for change of residential property cases?

  

A:

The refund mechanism under the existing regime for HKPR buyer who changes his/her single residential property will be retained.  After paying AVD at the proposed new AVD rate and upon proof that the conditions for partial refund are satisfied, the applicant may seek a refund of the AVD paid in excess of that computed under Scale 2 rates.

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7.

Q:

Who will be liable to pay AVD at the proposed new AVD rate, the buyer or the seller?

  

A:

Same as the existing regime, both the buyer and the seller will be jointly and severally liable to pay AVD at the proposed new AVD rate. In other words, the buyer and the seller will have the same extent of liability, under the law, to pay AVD at the proposed new AVD rate on the chargeable instrument, irrespective of any agreement to the contrary made between them.

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8.

Q:

Under what circumstance is the buyer the only liable person to pay the AVD at the proposed new AVD rate?

  

A:

In general, all parties to the chargeable agreement for sale or conveyance on sale and the person who uses the instrument shall be jointly and severally liable, as the case may be, to the payment of AVD at the proposed new AVD rate.  However, if AVD had been charged at Scale 2 rates on an instrument based on the buyer’s declaration that he/she is a HKPR and is not a beneficial owner of any other residential property in Hong Kong on the date of acquisition of the subject property and it was subsequently found that the declaration of the buyer is not correct, only the buyer is liable for the specified amount, that is, the difference of the AVD computed at the proposed new AVD rate and Scale 2 rates.

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9.

Q:

When should AVD at the proposed new AVD rate be paid?

  

A:

Subject to enactment of the relevant legislation by the Legislative Council, a chargeable agreement for sale/conveyance on sale for the acquisition of any residential property that is executed on or after 5 November 2016 is to be stamped with AVD at the proposed new AVD rate within 30 days after the execution date.

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10.

Q:

What are the transitional stamping arrangements for residential properties transactions?

  

A:

Before the proposed legislation is enacted, instruments relating to residential properties chargeable with AVD at the proposed new AVD rate will be stamped by reference to Scale 1 rates first. The additional AVD, representing the difference between AVD payable at the proposed new AVD rate and Scale 1 rates, will have to be paid within 30 days commencing immediately after the date of gazettal of the enacted legislation.

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