How to calculate Hong Kong stamp duty on property - update 2018
It is time for me to update the guidance I provided on HK property stamp duty few years ago here: HK Stamp Duty on Property for 2018.
Whilst the principles remain the same (eg charge stamp duty, as part of various measures to keep the market from rising too quickly), the stamp duty calculation formula is a little more complicated.
This increasing complexity is a shame, as Hong Kong has always prided itself on simplicity when it comes to doing financial transactions, as well as being a country (well now actually in fact a "city", albeit a very special one) that embraces the free market and abstains as much as possible from interference in the free market.
These "cooling measures" are intended to suppress value, (eg keeping prices down below what would be the case in a more open market). Sooner or later, when stamp duties are normalized, the prices of property in Hong Kong will move up higher as the many years of suppressed value is unlocked released.
The Government's thinking is that it will release such suppressed value slowly, by gradually relaxing the various cooling measures in place at a time when demand for property from current levels has eased. Some would argue this is somewhat analogous to trying to open a bottle of champagne "slowly" - hard to do, as eventually there is a pop as the bottled up froth is released, or the bottle explodes before the release due to all the pent up demand that can no longer be contained. The Government could use this "pop" for a "special occasion" - in particular if we have another severe global economic crisis, when a decline in property prices and global assets generally could be reversed by "opening the bottle". More likely though, is that they will release the bubbles slowly, by gradually reducing duties as interest rates rise. Time will tell if this works and achieves the intended effect of maintaining constant and gradual price increases as opposed to a sudden more cyclical sharper upward price movement (or a "meltup" to use a phrase which has become popular in financial circles in recent years).
In the meantime, Hong Kong people who want to enter the secondary market are being screwed by a progressive stamp duty scheme, and Hong Kong property developers are as a consequence building ever smaller apartments (as these have a lower stamp duty imposed) and are making ever increasing profits.
The "good news" for owners of larger units (and these days pretty much even the smallest units on Park Island are considered "large"), is that the total % of such sized units in HK is shrinking, making such units increasingly rare over time. Long term, this phenomenon will greatly compound the demand and prestige of larger units in HK - the inevitable effect of supply and demand. So it you are sitting on a 750 sqft Park Island apartment that's great news for you. 900 sqft even better. And anything bigger than that and you are sitting on gold! Larger sized unit owners in Hong Kong will over time be handsomely rewarded for the scarcity and size of the space they own.
Calculating HK property stamp duty:
The "good news" for owners of larger units (and these days pretty much even the smallest units on Park Island are considered "large"), is that the total % of such sized units in HK is shrinking, making such units increasingly rare over time. Long term, this phenomenon will greatly compound the demand and prestige of larger units in HK - the inevitable effect of supply and demand. So it you are sitting on a 750 sqft Park Island apartment that's great news for you. 900 sqft even better. And anything bigger than that and you are sitting on gold! Larger sized unit owners in Hong Kong will over time be handsomely rewarded for the scarcity and size of the space they own.
Calculating HK property stamp duty:
The main factors to consider in the current stamp duty calculation formula for property in Hong Kong are:
1. Is the buyer a HK citizen or permanent resident (eg - need to have been born here, or lived here for 7 years).
2. Is this a first property purchase?
3. Is the property being bought in the name of a company or as an individual.
4. What is the value of the property being purchased.
5. How many months have passed since the property was last acquired.
The rates below apply for a PR of Hong Kong making their first purchase:
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| HK stamp duty rates for PRs |
For non-PR's, or buyers who already own a property, the stamp duty rates are higher:
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| Stamp Duty Rates for non PRs. |
If the buyer is a company, then its a flat rate of 15%.
On top of that, if the property has been held for less then certain periods of time, a "special stamp duty" is imposed. Supposedly an "anti-speculation" measure. (Anti-speculation??? How un-Hong Kong is that!)
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| Hong Kong Property Special Stamp Duty Rates |
Good resources on the topic of HK property stamp duty are below:
And here is a handy HK property stamp duty calculator
If you have any questions, your property agent or a conveyancing lawyer should be able to assist you.
Good luck, and may your property purchase (whether on Park Island or elsewhere in HK) be a profitable one!
Taxes of any sort disgust me. Its shameful that HK is starting to tax where once it did not. Let us hope we get back to normal and HK doing business as usual ASAP!!!
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