Hong Kong Launched Special Stamp Duty to Curb House Speculation

The Financial Secretary of Hong Kong Special Administrative Region announced on 19 November 2010 that he had proposed to amend the Stamp Duty Ordinance to introduce Special Stamp Duty (SSD) on disposal of residential properties on top of the current ad valorem property transaction stamp duty. Any residential property acquired on or after 20 November 2010, either by an individual or a company (regardless of where it is incorporated), and resold within 24 months will be subject to the proposed SSD. The implementation of the new measures is subject to the enactment of the proposed legislative amendments

It is hoped that the newly issued special stamp duty will help curb short-term property speculation since it will increase speculators?transaction costs.

According to new regulations, residential properties bought from 20 November 2010, and resold within 24 months will be subject to the proposed special stamp duty payable by the buyer and seller.

The special stamp duty payable will be calculated based on the consideration for the resale transaction at the following regressive rates for different holding periods:
* 15% if the property is held for six months or less;
* 10% if the property is held for more than six months but for 12 months or less; and,
* 5% if the property is held for more than 12 months but for 24 months or less.

Before the requisite legislative amendments take effect, the Hong Kong Inland Revenue Department will record all residential property transactions during the interim period - from tomorrow to the date legislative amendments take effect - to identify the parties liable for special stamp duty. Demand notes on special stamp duty will then be issued after the new legislation is enacted.

As part of the plan, the Hong Kong Monetary Authority (HKMA) also announced on Friday that maximum loan-to-value (LTV) ratio for residential properties with a worth of more than 8 million HK dollars ($1.03 million) will be lowered, in a bid to strengthen risk management in residential mortgage lending business.

In the first nine months of this year, Hong Kong’s house prices have moved up about 15 percent, with luxury flat prices surpassing their peak level in 1997 by 10 percent and prices of small-sized units increasing by 8.1 percent in the past six months.

Further Reading: How incorporation could help you reduce your stamp duty tax and possibly avoid this speculation tax