Illustrative examples of the application and computation of ad valorem stamp duty (AVD) – acquisition of more than 1 residential property under one single instrument

Note:

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 Hong Kong permanent resident (“HKPR”) who does not own any residential property in Hong Kong. On 12 April 2017, he entered into a provisional agreement for sale and purchase (“PASP”) to acquire 2 residential properties at the purchase price of $10M. What is the amount of AVD payable for the acquisition of the 2 properties?

Since Mr A acquires more than 1 residential property under one instrument, although he does not own any residential property in Hong Kong on the date of acquisition of the residential properties, AVD at the proposed new AVD rate will apply. The AVD payable is $1,500,000 ($10M x 15%).

Mr B is a HKPR who does not own any residential property in Hong Kong. On 12 April 2017, he entered into a PASP to acquire 2 adjacent residential properties at the purchase price of $10M. At the time of entering into the PASP, the partition wall dividing the 2 units had been demolished by the vendor and the two units were combined as one unit. The plan for alterations works had been approved by the Building Authority. What is the amount of AVD payable?

If Mr B is acting on his own behalf in acquiring the properties, AVD at Scale 2 rates will apply. The AVD payable is $375,000 ($10M x 3.75%).

Same as Example 2, but no approval was given by the Building Authority for the alterations works. What is the amount of AVD payable?

If there is no evidence to prove that the alterations works have been approved by the Building Authority, the properties will be regarded as two separate units. In the above situation, AVD will be computed at 15%. The amount of AVD payable is $1,500,000 (i.e. $10M x 15%).

Same as Example 1, but Mr A and the vendor are closely related persons. What is the amount of AVD payable?

The proposed amendments will not affect the stamp duty relief for transfer of residential property between close relatives. Thus, if Mr A is acting on his own behalf in acquiring the properties, AVD at Scale 2 rates will apply. The agreement will be charged with AVD of $375,000 ($10M x 3.75%).

Mr C, a HKPR, and his spouse Ms D, jointly purchased two residential properties under a PASP on 1 May 2017 at a purchase price of $10M. Ms D is not a HKPR. Neither Mr C nor Ms D owns any residential property in Hong Kong. What is the amount of AVD payable?

Since Mr C and Ms D acquire more than 1 residential property under one instrument, although they do not own any residential property in Hong Kong on the date of acquisition of the residential properties, AVD at the proposed new AVD rate will apply. The AVD payable is $1,500,000 ($10M x 15%).