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Legal Update

Buyer's Stamp Duty: Another Step Closer as Government Gazettes Stamp Duty (Amendment) Bill 2012

28 December 2012
Mayer Brown JSM Legal Update

On 28 December 2012, the Government gazetted the Stamp Duty (Amendment) Bill 2012 to (a) adjust the duty rates and extend the holding period in relation to Special Stamp Duty (SSD) and (b) introduce Buyer’s Stamp Duty (BSD) on residential properties acquired by any person or company except a Hong Kong Permanent Resident (HKPR).

On 29 October, 1 November and 27 November 2012, we published the firstsecond and third of three legal updates giving some brief introduction to BSD and SSD.

Recap of key concepts

The adjusted SSD will have three levels of regressive rates for different holding periods:

  • 20% of the amount or value of the consideration if the residential property has been held for six months or less;
  • 15% of the amount or value of the consideration if the residential property has been held for more than six months but not more than 12 months; and
  • 10% of the amount or value of the consideration if the residential property has been held for more than 12 months but not more than 36 months.

The BSD will be charged at a flat rate of 15% for all residential properties, on top of the existing stamp duty and the SSD, if applicable, acquired by any person or entity, except a HKPR.

No exemption for Hong Kong companies

There are views that companies incorporated in Hong Kong whose shareholders and directors are all HKPRs should be exempted from BSD.

However, the Government takes the view that it would be difficult to put in place a mechanism that can effectively plug all the loopholes identified if exemption is granted to Hong Kong companies. Accordingly, the Bill maintains that BSD would still apply to all companies in order not to compromise the effectiveness of the BSD.

Acquisition for redevelopment

The Bill allows a refund of the BSD if the residential properties are acquired for redevelopment purposes. In other words, the buyers will still need to pay the BSD upfront and then apply for a refund subsequently.

Refund of the BSD (without interest) will be made upon application by a person (applicant) if the following conditions are fulfilled:

  • The residential property consists or forms part of a lot.
  • The applicant becomes the owner of the whole of the said lot (or two or more lots which include the said lot). This includes the granting of a new lot by way of surrender and regrant.
  • The building(s) previously on the lot has or have been demolished by the applicant.
  • The applicant has constructed a new building or buildings (whether or not residential property).
  • The new building or, if more than one new building, the first new building is completed within six years.

The six-year period is calculated from the following dates:

  • If acquired by a compulsory sale order: within six years after the date on which the applicant became the owner of the lot pursuant to a compulsory sale order or, if the Lands Tribunal allows an extension, the end of the extended period. (If more than one order, six years from the date on which the applicant became the owner of the last lot pursuant to the relevant order).
  • If acquired without a compulsory sale order: within six years after the date on which the applicant became the owner of the whole lot (where the site consists of more than one lot, the owner of the last lot).
  • If lease modification is involved: within six years from the date of the lease modification (if more than one modification, six years from the date of the first modification).
  • If surrender and regrant is involved: within six years after the date on which the new lot was granted to the applicant.

BSD may be refunded if the site has been transferred to an associated company under an intra-group transfer for which stamp duty is exempted under section 45. The refund is to be made to the transferee.

A building is considered "completed" on the date on which an occupation permit is issued.

Introduction into the Legislative Council

According to the Government, the Bill will be introduced into the Legislative Council on 9 January 2013.

The full version of the Bill is available via this weblink.

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