Illustrative examples of the application and computation of 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 illustrative examples 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.

Mr A is a HKPR and owns a residential property (the first property) in Hong Kong. On 5 November 2016, he entered into a provisional agreement for sale and purchase (PASP) to acquire another residential property (the second property) at the purchase price of $3M. The formal agreement for sale and purchase (ASP) was signed on 18 November 2016. What is the amount of AVD payable for the acquisition of the second property?

Since Mr A owns another residential property in Hong Kong on the date of acquisition of the second property, AVD at the proposed new AVD rate will apply. The AVD payable is $450,000 ($3M x 15%).

Same as Example 1, but the PASP for acquisition of the second property was entered into on 31 October 2016. What is the amount of AVD payable for the acquisition of the second property?

In this case, the second property is regarded as having been acquired on 31 October 2016, the date of the PASP. Hence, AVD at Scale 1 rates will apply. The AVD payable is $90,000 ($3M x 3%).

Mr B, a HKPR, and Ms C, jointly entered into a PASP to purchase a residential property on 1 December 2016 at a price of $4M. On the date of acquisition of the residential property, both Mr B and Ms C did not own any residential property in Hong Kong. Ms C is not a HKPR and not a close relative of Mr B. What is the amount of AVD payable?

If a residential property is jointly acquired by a HKPR and a non-HKPR, who is not a close relative of the HKPR, AVD at the proposed new AVD rate will apply. In the above situation, the amount of AVD payable is $600,000 (i.e. 4M x 15%). Furthermore, since Ms C is a non-HKPR and not a close relative of Mr B, the PASP is also chargeable with Buyer’s Stamp Duty (BSD) of $600,000 ($4M x 15%).

Mr D is a HKPR and does not own any residential property in Hong Kong. On 1 December 2016, he entered into an agreement for sale to acquire a residential property at a purchase price of $25M. On 30 December 2016, his spouse Ms E, who is a HKPR and owned a residential property in Hong Kong on that date, was added in the assignment as one of the joint owners of the property. Both Mr D and Ms E acted on their own behalf in acquiring the property. What is the amount of AVD payable?

On the date of acquisition of the residential property, Mr D did not own any residential property in Hong Kong. Scale 2 rates will apply. The agreement will be charged with AVD of $1,062,500 ($25M x 4.25%). Although Mr D and Ms E are close relatives, since Ms E owns a residential property in Hong Kong on the date of assignment, the assignment will be chargeable with AVD at Scale 2 rates, which is computed by reference to the stated consideration or the value of the property, whichever is the higher, less part of the stamp duty representing the share of the interest of Mr D in the property. Accordingly, AVD of $531,250 [($25M x 4.25%) x 50%] will be charged on the assignment.

Same as Example 4, but Ms E does not own any residential property in Hong Kong on the date of assignment. What is the amount of AVD payable?

The agreement will be charged with AVD at Scale 2 rates of $1,062,500 ($25M x 4.25%). Since Ms E does not own any residential property in Hong Kong on the date of assignment, the assignment is not chargeable with any AVD but will be charged with a fixed duty of $100 only.

Same as Example 4, but Ms E is not Mr D’s close relative. What is the amount of AVD payable?

The agreement will be charged with AVD at Scale 2 rates of $1,062,500 ($25M x 4.25%). Since Mr D and Ms E are not close relatives, the assignment will be charged with AVD at the proposed new AVD rate, which is computed by reference to the stated consideration or the value of the property, whichever is the higher, less part of the stamp duty representing the share of the interest of Mr D in the property. Accordingly, AVD of $1,875,000 [($25M x 15%) x 50%] will be charged on the assignment. Besides, Mr D is regarded as having sold 50% share of the property within 6 months. Special Stamp Duty (“SSD”) of $2.5M [$25M x 50% x 20%] is also payable on the assignment.

Mr F is a HKPR who owns a single residential property (the original property) in Hong Kong. On 20 November 2016, he entered into a PASP to acquire another residential property (the new property) at a purchase price of $6M. On 15 May 2017, he entered into a PASP to dispose of the original property. Can Mr F claim a partial refund of the AVD paid?

Since Mr F owns another residential property in Hong Kong at the time of acquisition of the new property, AVD at the proposed new AVD rate will apply. The AVD payable for acquisition of the new property is $900,000 ($6M x 15%). Since the original property was sold within 6 months from the date of assignment of the new property, Mr F can apply for a refund of part of the stamp duty paid (being the difference between the AVD payable at Scale 2 rates and the proposed new AVD rate) after the disposal transaction has been completed. The refund amount is $720,000 ($900,000 – $6M x 3%).