Updates of 2023 Policy Address on Hong Kong Stamp Duty Scheme

In this article, our Founder and Managing Director Victoria Allan explains stamp duty rates for Hong Kong buyers and investors on residential properties, including how stamp duty is calculated and how much you can expect to pay for stamp duty in Hong Kong.

What are stamp duties?

In the simplest terms, stamp duties in Hong Kong are sales taxes paid to the government by anyone taking part in a property transaction. They can have a significant impact on the final cost of the property for a host of reasons:

• Are the parties Hong Kong permanent residents?
• Is the purchaser a first-time buyer?
• How long has the vendor held the property?
• Is the property a commercial asset?

These are just a few of the host of factors influencing stamp duty rates in Hong Kong.

The Hong Kong Government began implementing a series of increased stamp duties on real estate in 2010, when the property market was heading towards overheating due to rampant speculation. These so-called ‘cooling measures’ were designed to control prices that were being driven up by investors and non-residents. Prices in this high-demand market skyrocketed approximately 400% between 2000 and 2010, forcing many local residents out of the market altogether.

Stamp duties weren’t the only tool: the Hong Kong Monetary Authority set down a new policy for bank lending and loan-to-value ratios as well as strengthening stress tests for buyers. Cooling measures haven’t been repealed, but they have been adjusted regularly since they were put in place, including provisions to allow partial refund of stamp duty paid for permanent residents of Hong Kong who are upgrading.

Who pays stamp duties in Hong Kong?

Because stamp duties were designed to curb speculation, Hong Kong permanent residents who are buying their first home as their primary residence are exempted from most of the extra or higher taxes. They are required only to pay the base stamp duty, which is levied at a sliding scale based on the value of the property purchased.

For any buyers that fall outside those parameters – non-permanent residents, second home buyers – there are additional taxes and/or higher taxes on the sales price.

Recent Stamp Duty amendments from 2023 Policy Address

1. Special Stamp Duty (SSD) has been shortened from 3 to 2 years, with immediate effect

2. Buyer's Stamp Duty (BSD) has been reduced by half from 15% to 7.5%, with immediate effect

3. Suspension of Stamp Duty for overseas talent unless they fail to become a HKPR

4. No development on green belt

5. Develop Kau Yi Chau Artificial Islands as a new central district, connecting Hong Kong Island, Lantau Island, the airport, New Territories West and even Qianhai of Shenzhen

6. The Northern Metropolis plan prioritizes economic and social development through strategic initiatives, including reserving sites for international schools development

Stamp Duty Changes @ 23 February, 2023

The HK Government has just announced immediate changes to the calculation of Ad Valorem Stamp Duty payable for the sale and purchase of both residential and non-residential properties, effective immediately from today, 23 February 2023.

The Stamp Duty adjustments impact properties $10M and under and will particularly benefit those first-time home buyers of smaller apartments. It is anticipated that some 37,000 buyers will benefit from the revised measures.

The Ad Valorem Stamp Duty will be amended to $100 for properties up to $3M, instead of the previous $2M threshold.

The rates have also been adjusted within different brackets up to $10M, generating substantial savings compared to the previous calculations.

The latest adjusted rates have been updated in our Stamp Duty Table below.

There has been no relaxation to Ad Valorem Stamp Duty above $10M and no adjustment of Stamp Duty for purchasing 2nd properties or purchasing property if you do not hold an HK Permanent residency. These Stamp Duties remain the same

What are Hong Kong’s stamp duties?

Currently, there are 3 main stamp duties applied to immovable property in Hong Kong residential sales transactions:

1. Ad Valorem Stamp Duty (AVD)
2. Buyer’s Stamp Duty (BSD)
3. Special Stamp Duty (SSD)

AVD – Ad Valorem Stamp Duty

The Ad Valorem Stamp Duty for residential property (AVD) is payable at a scaled rate ranging from HK$100 for properties under HK$3 million up to 4.25% of the sale price for property over $21,739,120. The stamp duty rate jumps to 7.5% for non-permanent residents and Hong Kong permanent residents buying a second property. The AVD is payable by:

• Buyers
• Permanent residents
• Non-permanent residents
• Purchases registered to companies

BSD – Buyer’s Stamp Duty

The Buyer’s Stamp Duty (BSD) is payable by the purchaser of any residential property in Hong Kong, unless the purchaser is a Hong Kong permanent resident. It is levied at 7.5% and is payable in addition to the AVD.

SSD – Special Stamp Duty

The Special Stamp Duty (SSD) is applicable to any residential property sold after November 20, 2010 in Hong Kong. The SSD was created to disincentivise speculating and quick turnover transactions, and so it is paid at the time of sale by the vendor. It is calculated depending on how long the vendor has owned (held) the property:

• Property owned for 6 months or less – 20% of the sale price
• Property owned for over 6 months to 12 months or less – 15% of the sale price
• Property owned for over 12 months and for 24 months or less – 10% of the sale price

How are stamp duties in Hong Kong calculated, and when are they paid?

As complicated as Hong Kong’s stamp duty scheme may seem at a glance, the rates are transparent and easily calculated once vendors and purchasers know where they slot in.

When are Hong Kong stamp duties payable?

Once a property is purchased, the stamp duty is payable within 30 days from the signing of the Provisional Agreement for Sale and Purchase (PASP) unless superseded by a Formal Agreement that is signed within 14 days, in which case stamp duty is payable within 30 days from when the Formal Agreement is signed.