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(Source : Information Services Department)

Government's response to press enquiries on Buyer's Stamp Duty


      In respect of press enquiries concerning a developer's transfer of its residential property to its subsidiary and then transfer of shares of the subsidiary to a non-Hong Kong Permanent Resident (HKPR) buyer with a view to circumventing the Buyer's Stamp Duty (BSD), the Government spokesman responded today (October 30) as follows –

      The Government has announced that, subject to the passage of relevant legislation, all non-HKPRs (including local and overseas companies) have to pay the newly introduced BSD for residential properties acquired on or after October 27, 2012.

      If a company transfers its residential property to its subsidiary on October 27, 2012 (that is, the day after Government's announcement of adjustments to the Special Stamp Duty (SSD) and introduction of BSD) or after, and then sells the shares of the subsidiary to a non-associated body corporate or person within two years after the property transfer, such property transfer will not be exempted from the payment of stamp duty. The said company should notify the Inland Revenue Department (IRD) in 30 days after the transfer of shares and pay the stamp duty payable for the property transfer, i.e. the ad valorem stamp duty and the new BSD.

      If the subsidiary subsequently sells the property concerned in three years, it should pay SSD according to the level of rate as applicable.

      Section 45 of the existing Stamp Duty Ordinance provides relief to the transfer of immovable property within a group of associated body corporates. The said provision exempts stamp duty in case of acquisition of a residential property by a body corporate from an associated body corporate or in case of transfer of a residential property among associated body corporates.

      The reason for this exemption is that generally speaking, when the relevant transaction is between associated body corporates, what is in effect an exchange of property for shares or money is more a matter of internal administration than a sale in the ordinary sense. Nonetheless, for the purpose of the exemption, associated body corporates are defined as (a) having no less than 90% of the issued share capital of each other; and (b) no cessation of association within a period of two years after the relevant property transaction. If the conditions are not fulfilled, IRD will recoup from relevant parties the stamp duty payable for the relevant transaction.

      The relevant exemption is already applicable to the existing ad valorem stamp duty and SSD. Our current intention as announced is to extend the existing exemption and the relevant conditions as provided in section 45 to cover the revised SSD and the new BSD.

Ends/Tuesday, October 30, 2012
Issued at HKT 22:56