Hong Kong imposes Stamp Duty on various types of documents and transactions:
- Stock Transfer: Imposed on transfers of Hong Kong stock.
- Land Transactions: Levied on property transactions, including sale and purchase agreements and leases.
- Mortgages: Imposed on instruments of mortgage.
- Leases: Levied on leases and agreements to lease property.
- Insurance Policies: Applies to certain insurance policies.
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Cheques: Imposed on certain negotiable instruments.
Rates and Calculation Methods
Transfer of Hong Kong Stock
Stamp duty is levied on the transfer of Hong Kong stock through sale and purchase at a rate of 0.26% of the consideration per transaction, or the higher of the market value. Hong Kong stock refers to stock whose transfer must be registered within Hong Kong SAR.
Transfer of Property
For the conveyance on sale of immovable property within Hong Kong SAR, the amount of stamp duty payable is dependent on the type of property being transferred (e.g., residential or non-residential) and the value of the property consideration. Presently, the stamp duty charges for property transfers are as follows:
- Transfer of residential property: A uniform rate of 15% applies, with exceptions. One common exception is the purchase of a single residential property by a Hong Kong permanent resident who does not possess any other residential property in Hong Kong SAR at the time of acquisition (refer to point 2 below).
- Purchase of a single residential property by a Hong Kong permanent resident with no other residential property in Hong Kong SAR during acquisition, and under certain specified scenarios: Scale 2 rates range from HKD 100 (for property consideration up to HKD 3 million) to 4.25% (for property consideration exceeding HKD 20 million).
- Transfer of non-residential property: Scale 2 rates range from HKD 100 (for property consideration up to HKD 3 million) to 4.25% (for property consideration exceeding HKD 20 million).
The stamp duty payable is calculated by applying the relevant rate to the consideration or market value of the property (whichever is greater). When dealing with Scale 2 rates, there is marginal relief for transfers where the consideration slightly exceeds the lower limit of each rate band.
In the case of leasing immovable property within Hong Kong SAR, stamp duty is determined based on a specified rate of the annual rent, which varies depending on the lease term. The current applicable rate varies from 0.25% (for leases of up to one year) to 1% (for leases exceeding three years).
Exemptions are available for specific transactions, including the transfer of shares or immovable property between associated corporate entities, transfer of shares or units of exchange-traded funds (ETFs) listed within Hong Kong SAR, transfer of shares by ETF market makers in the process of allotting and redeeming ETF units listed in Hong Kong SAR, transfer of shares linked to dual-counter stock conducted by dual-counter market makers, and specific stock borrowing and lending transactions, provided that the specified exemption conditions (if any) are met.
Special Stamp Duty (SSD)
Special Stamp Duty (SSD) is imposed on the resale of residential property within 36 months of acquisition. SSD is applied in addition to the ad valorem stamp duty for the conveyance on sale or agreement for sale of residential property, with limited exemptions. The payable SSD is calculated based on the stated consideration or higher market value of the resold property using the following regressive rates:
- 20% for residential properties held for six months or less.
- 15% for residential properties held for more than six months but less than 12 months.
- 10% for residential properties held for more than 12 months but less than 36 months.
Filing and Payment
Stamp Duty is typically paid through the Inland Revenue Department (IRD) within a specified timeframe from the date of execution of the relevant document. Late payment may result in penalties.
Conclusion
Stamp Duty in Hong Kong requires a clear understanding of the types of duties, applicable rates, calculation methods, and exemptions.
As Stamp Duty laws and regulations may evolve, contact our tax professionals and keeping up-to-date with the latest information for effectively managing your Stamp Duty responsibilities.