An Expert Understanding of Hong Kong Stamp Duty & Stamp Duties calculation

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 Cooling measures haven’t been repealed, but they have been adjusted regularly since they were put in place, including provisions to allow partial refund of stamp duty paid for permanent residents of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.

UPDATE: 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

Recent Stamp Duty amendments from 2022 Policy Address

Eligible Talents who purchased residential properties in Hong Kong and thereafter obtained Permanent Residents status (after 7 years of staying in HK) will be entitled to a refund of the BSD (Buyer Stamp Duty) and the Scale 1 AVD (Ad Valorem Stamp Duty) – Scale 2 AVD. This means a refund of 25.75% stamp duties (i.e. 30% - 4.25%).

Eligible Talents are defined as those who enter Hong Kong under designated Talents admission schemes, including GEP, ASMTP, QMAS, IANG, TechTAS, Admission Scheme for the Second Generation of Chinese Hong Kong Permanent Residents and the newly launched Top Talent Pass Scheme.

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 15% 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 15% 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 36 months or less – 10% of the sale price
• Property owned for over 36 months – 0%

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.

If I purchase a 2nd property, how much time do I have to sell my current property without incurring 15% stamp duty?

If you already own a property in your personal name and want to purchase another property, you can avoid paying 15% stamp duty as long as you sell your 1st property within 12 months of the completion of the 2nd property purchase. You are required to pay the 15% stamp duty (AVD) upfront, but you will be reimbursed the differential, if you sell that property within the required 12 months time frame. If the sale of the 1st property does not complete for some reason, then no refund is provided.

Case studies: Which stamp duties are due in various scenarios ?

As the payable stamp duty varies based on the status of those involved in the transaction, as well as the cost of the property, let's use a fictional home on the Southside of Hong Kong Island to demonstrate how the stamp duties work.

The property in question is a newly renovated, two-storey townhouse with a usable flat roof and an ocean view, somewhere around Deepwater Bay. It’s roughly 2,400 gross square feet, and the final sale price was negotiated at HK$75 million.

Case 1:

The buyer is a local Hongkonger and the property is going to be their home, whilst the seller is also a permanent resident of Hong Kong who has owned the property for 11 years. Their total stamp duty will be:

• In this case the buyer will pay 4.25% stamp duty or $3,187,500, no BSD or SSD is payable.

Case 2:

The seller has only owned the flat for 18 months:

• In this case, the buyer still pays 4.25% stamp duty or $3,187,500 and the vendor is subject to SSD of 10% being $7,500,000 as they have owned the property for less than 36 months

Case 3:

The buyer is a permanent resident of Hong Kong, but the buyer currently owns a residential property and the flat is a second property being purchased as an investment property:

• In this case, the buyer is subject to pay an AVD of 15% as it’s a second property i.e.: $11,250,000

Case 4:

The buyer is a non-permanent resident, but is buying their first property for self-use, the total stamp duties payable:

• In this case, the buyer is subject to AVD of 15% plus BSD of 15% for a total of 30% tax or $22,500,000.

Case 5:

The steepest taxes come if the purchaser is a non-permanent resident buying from a vendor who has held the property for only 3 months:

• In this case, the buyer is still subject to 30% tax at $22.5M but the vendor would also be liable to pay SSD at 20% of the sale price or $15,000,000.

* All information provided here by Habitat Property is written in good faith as Property information sourced from the EAA, HK Government and IRD websites. However in no way does it provide accurate financial or legal advice and we always recommend to work with professional specialists in all fields as well as your licensed Habitat Agents throughout this process.

* Full details and a comprehensive FAQ can be found at www.ird.gov.hk/eng/tax/sdu.htm, and www.gov.hk/en/residents/taxes/stamp/stamp_duty_rates.htm.

* Details about refund the extra stamp duty paid by eligible incoming talents can be referred to The Chief Executive’s 2022 Policy Address IV. Continue to Create Strong Impetus for Growth at https://www.policyaddress.gov.hk/2022/public/pdf/policy/policy-full_en.pdf.