An Overview Of Special Stamp Duty, Buyer’s Stamp Duty And Ad Valorem Stamp Duty
Over the past few years the Government of the Hong Kong SAR has introduced a number of amendments to the stamp duty regime with the intention of cooling an over-heated property market. The measures introduced comprise:
- Special Stamp Duty (SSD). Payable on any residential property acquired by a company or an individual and resold within:
- 24 months, if the property was acquired between 20 November 2010 and 26 October 2012; or
- 36 months, if the property was acquired on or after 27 October 2012.
SSD is assessed at rates varying from 5% to 20% depending on when the property was acquired and the period the property was held for and is payable in addition to basic stamp duty. There are certain exemptions.
- Buyer’s Stamp Duty (BSD). Payable on any residential property acquired on or after 27 October 2012 by a company or an individual except a Hong Kong Permanent Resident (HKPR). BSD is charged at a flat rate of 15% in addition to basic stamp duty and any SSD. There are certain exemptions.
- Ad Valorem Stamp Duty (AVSD). Payable on any residential and non-residential property acquired on or after 23 February 2013. Different AVSD rates apply. Scale 1 is the basic scale and ranges from 1.5% to 8.5% and applies to all commercial or residential property acquired before 5 November 2016 whether by a company or an individual. A new AVSD rate was introduced pursuant to which a flat rate of 15% is payable on any residential property acquired on or after 5 November 2016 and the original Scale 1 rates continue to apply to all commercial property acquisitions. There are, however, certain exemptions and where Scale 2 rates apply (which is the lower scale and ranges from 1.5% to 4.25%). The most notable exemption is where a residential property is acquired by a HKPR acting on his own behalf and who does not own any other residential property in Hong Kong at the time of acquisition. As of 12 April 2017, this exemption no longer applies where multiple properties are acquired pursuant to a single instrument.
We have summarised the main provisions of each of the above duties in Appendix 1 to this paper, with the various stamp duty rates being set out in Appendix 2.
The Government’s objectives for introducing SSD, BSD and AVSD are to:
- further control residential prices by suppressing demand;
- support HKPRs in buying one residential property, enabling owner occupation;
- deter speculative investment (meaning investment purely for short term capital appreciation) in an over-heated residential property market until the Government has increased land supply;
- curb speculation in the non-residential property market as a result of speculators moving from the residential property market due to the introduction of SSD and BSD; and
- contribute to the stable development of the Hong Kong property market.
The Government has indicated that these measures are not permanent and may be reviewed in the future when the Government feels that it has achieved its objectives, but it remains to be seen whether the current measures will have the desired effect in the future and whether the Government will be required to take further action.