The Stamp Duty (Amendment) (No. 2) Ordinance 2014 (2014 (No. 2) Amendment Ordinance) was gazetted on 25 July 2014. The 2014 (No. 2) Amendment Ordinance provides that the ad valorem stamp duty (AVD) payable on certain instruments dealing with immovable properties executed on or after 23 February 2013 shall be computed at higher rates (Scale 1).
A major exception is where a property is a residential property, and the purchaser/ transferee is a Hong Kong permanent resident (HKPR) who is acting on his/ her own behalf and does not own any other residential property in Hong Kong at the time of the acquisition. In this case, the instrument will be subject to AVD at lower rates (Scale 2).
An illustrative example of Scale 1 Ad Valorem Tax
Mr Lee is a HKPR and owns a residential property (the first property) in Hong Kong. On 1 December 2016, he, acting on his own behalf, entered into a PASP to acquire another residential property (the second property) at the purchase price of $6M. The formal agreement for sale and purchase (ASP) was signed on 30 March 2017. What is the amount of AVD payable for the acquisition of the second property?
Since Mr Lee owned another residential property in Hong Kong at the time of acquisition of the second property, the flat rate of 15% under Part 1 of Scale 1 applies. The AVD payable is $900,000 ($6M x 15%).
An illustrative example of Scale 2 Ad Valorem Tax
Mr Chan is a Hong Kong Permanent Resident (HKPR) and does not own any residential property in Hong Kong. On 1 December 2016, acting on his own behalf, he entered into a provisional agreement for sale and purchase (PASP) to acquire a residential property at a purchase price of $6M. What is the amount of AVD payable?
Since Mr Chan did not own any other residential property in Hong Kong at the time of acquisition of the subject property, lower rates (Scale 2) will apply. The AVD payable is $180,000 ($6M x 3%).
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