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(Source : Information Services Department)

LCQ21: BSD of units acquired under TPS


     Following is a question by the Hon James To Kun-sun and a written reply by the Secretary for Transport and Housing, Professor Anthony Cheung Bing-leung, in the Legislative Council today (April 16):


    According to the Stamp Duty (Amendment) Ordinance 2014 (the Ordinance) enacted by this Council in February this year, all non-permanent residents of Hong Kong acquiring residential properties on or after October 27, 2012 are required to pay the Buyer's Stamp Duty (BSD).  It has been reported that some tenants of public rental housing (PRH) earlier purchased under the Tenants Purchase Scheme (TPS) the PRH flats in which they lived but they have fallen into financial difficulties as they have been notified, after the enactment of the Ordinance, that they are required to make back payments for BSD because their flats were acquired in the names of their household members who are not Hong Kong permanent residents (HKPRs).  In this connection, will the Government inform this Council:

(1) during the period from October 27, 2012 to the day before the Ordinance was gazetted on February 28 this year, of (i) the number of agreements for sale or conveyances on sale for TPS flats processed by the Housing Department; and (ii) the number of such cases in which back payments for BSD are required because the buyers are not HKPRs, and the average amount of such tax involved in each case;

(2) whether the staff of the Housing Department, when processing TPS cases in (1), had reminded non-HKPR buyers that they would be subject to back payments for BSD after the enactment of the Ordinance; if they had, of the details, including whether such reminders were given orally or in writing; if not, the reasons for that;

(3) whether the Housing Department will take measures to alleviate the burdens of those buyers of TPS flats who are subject to back payments for BSD, such as (i) allowing their close relatives who are HKPRs to become the joint owners of their flats, so that they can be granted exemptions from BSD, or (ii) allowing such buyers to make the back payments for BSD by interest-free instalments; and

(4) given that TPS flats are subject to a 5-year resale restriction period from the first assignment, and the objectives of the authorities introducing BSD were to accord priority to meeting HKPRs’ needs for home purchase and cool down the overheated property market, whether the authorities have examined if it is justifiable to include non-HKPR buyers of TPS flats in the ambit of the Ordinance; if they have, of the results; if not; whether they will do so?



    The Government introduced a number of demand-side management measures in the past two years, including the enhancement of the Special Stamp Duty (SSD), the introduction of the Buyer's Stamp Duty (BSD) and the doubled ad valorem stamp duty (AVD), with the objective of addressing the exuberant property market.  To accord priority to the home ownership needs of Hong Kong permanent residents (HKPRs), a HKPR acquiring a residential property on his/her own behalf is exempted from the BSD in accordance with the gazetted Stamp Duty (Amendment) Ordinance 2014 (the Amendment Ordinance).  In addition, the Stamp Duty (Amendment) Bill 2013 (the Amendment Bill), which is currently under the scrutiny of the Legislative Council, proposes that a person who is a HKPR acting on his/her own behalf in acquiring a residential property and not being the beneficial owner of any other residential property in Hong Kong will also be exempted from the doubled AVD rates as proposed under the Amendment Bill.  Apart from the foregoing, only acquisitions made under specified circumstances will be exempted from the relevant stamp duty, such as gifts of properties to approved charitable institutions, acquisitions of a property to replace another property of the same nature that has been acquired or resumed pursuant to certain Ordinances etc., so as not to unduly undermine the effectiveness of the demand-side management measures.  Units acquired under the Tenants Purchase Scheme (TPS) are similar to all other residential properties and hence are subject to the BSD.  

    Our consolidated reply to the various parts of the question raised by the Hon James TO is as follows.

    The "Terms and Conditions of Sale" of TPS flats stipulates that the applicant is responsible for paying all types of stamp duty related to the transaction, and points out that payment of stamp duty will be borne solely by the purchasers.  Purchasers have also signified that they have read and understood the "Terms and Conditions of Sale" in the "Letter of Offer" to purchase the TPS flats.  The Housing Department (HD) also requires a TPS purchaser to appoint a solicitor firm to represent him/her to handle relevant transaction procedures.  To ensure that solicitor firms were kept abreast of information regarding the related stamp duty measures and operation details, after the announcement of the measures on October 27, 2012, the Inland Revenue Department (IRD) notified the Law Society of Hong Kong (the Law Society) on the same day of the relevant information and the Law Society subsequently informed the legal sector accordingly.  Relevant "Frequently Asked Questions" have also been uploaded onto the website of the IRD.  Besides, the Government has repeatedly explained to different sectors of the community about the relevant policy objectives and implementation details of the measures on different occasions and through different platforms.  Relevant measures were also widely reported by the media.  The HD will continue to scrutinise various information provided to prospective purchasers so as to ensure the accuracy of the information.

    From the introduction of the BSD on October 27, 2012 up to February 27 this year, assignments of a total of about 4 740 TPS flats were completed.  The value of these properties for stamp duty purpose ranges from about $300,000 to $1,000,000.  According to the Amendment Ordinance, the BSD is calculated on the basis of the stated consideration for the transaction or the market value of the property, whichever is the higher.  By applying 15% BSD rate as stipulated in the Amendment Ordinance, the amount of the BSD payable ranges from $45,000 to $150,000.  Regarding the number of these purchasers who are subject to the BSD, the IRD will, upon receipt of the relevant stamping requests, ascertain whether the instruments of the transactions are subject to the payment of BSD under the Amendment Ordinance.  According to the records of the IRD, a total of about 77 500 requests for stamping in respect of residential properties transactions were received during the period from October 27, 2012 to February 27, 2014.  Since the gazettal of the Stamp Duty (Amendment) Ordinance 2014, the IRD is still ascertaining whether the relevant cases are chargeable with the BSD, and there is no statistics on the number of TPS flats which are subject to the BSD at this stage.

    Stamp duty is charged on an instrument basis.  The HD has no authority to alter the instruments nor exempt the payment of relevant stamp duty, including the BSD.  Upon execution of a conveyance on sale, the relevant transaction is completed, with parties to the instrument liable to pay the relevant stamp duty.  A buyer subject to the BSD cannot cancel or alter an assignment which had already come into effect on the date of its execution.  Even if a close relative of the buyer who is a HKPR is subsequently added as a joint owner of the property, the assignment previously executed will not be exempted from the BSD.  Under the existing stamp duty regime, depending on the actual circumstances of individual cases, the IRD may consider accepting payment of stamp duty by installment and may also consider remitting any penalty payable.

Ends/Wednesday, April 16, 2014
Issued at HKT 12:51