On 29 October and 1 November 2012, we published the first and second of two legal updates on the introduction of Buyer's Stamp Duty (BSD) and the adjusted rates and extension of the holding period in respect of Special Stamp Duty (SSD).

Exemption for redevelopment purposes?

BSD is chargeable on all sales and purchases of residential flats except where a buyer is a Hong Kong Permanent Resident (HKPR).

The Government says that exemption will be given for the acquisition of residential properties for redevelopment purposes, but how this will work is not yet clearly defined:

  • In the "FAQ" session for BSD on the Inland Revenue Department's website, Q6 lists out the circumstances in which BSD will be exempted. Item (ix) provides that acquisition for redevelopment purposes will be exempted: "acquisition of residential properties (including bare sites) for the construction of a prescribed number of residential properties after demolishing the residential properties, if any, acquired and the properties are to be completed and put up for sales within a specified period of time after acquisition of the first residential property concerned (the BSD exempted will be recouped if the conditions are not fulfilled)".
  • The wording of item (ix) raises the following questions and uncertainties, which are significant to the overall scheme and strategy in acquiring old residential properties for redevelopment purposes:
    • What is the time limit for a developer to complete the whole process (i.e., from acquiring the first property to putting up the new development for sale)?
    • How to identify the time of the first acquisition and the time of putting up the new development for sale?
    • How to identify the "first residential property" in the acquisition process when the relevant "site" for the proposed redevelopment is subject to change by the developers from time to time?
    • What is the "prescribed number" of properties which should be constructed in the new development?
    • Is it necessary that the new development comprise residential properties?

Suggestions from REDA

On 22 November 2012, the Real Estate Developers Association of Hong Kong (REDA) issued a letter to the Permanent Secretary of Transport and Housing making proposals on BSD which include the operation of the above exemption.

General proposals

  • Exemption should be available for Hong Kong companies whose directors and shareholders are Hong Kong Permanent Residents, as confirmed by self-declarations in their annual returns.
  • BSD should be waived for “larger flats”. REDA suggests that flats with a purchase price of HK$30 million and above should be regarded as “larger flats”.
  • A “sunset clause” should be incorporated into the legislation to ensure that BSD will automatically expire after a certain period, and would only be renewed after due and careful consideration of the then circumstances.
  • Ad valorem stamp duty should be waived for first-time buyers, and the loan-to-value ratio of mortgages should be relaxed to 80% or 90%.

Exemption for redevelopment purposes

  • Direct BSD exemption should be granted to a company and its associate(s) or joint venture partner(s) when:
    • making a purchase of a residential property of no less than 40 years of age;
    • making a purchase of a bare site; and
    • such company owns not less than 80% of the interest of a residential site/property, as assessed under the Land (Compulsory Sale for Redevelopment) Ordinance.
  • Refund of BSD should be granted upon application by a company and its associate(s) or joint venture partner(s) which have collectively owned no less than 20% interest in the site within the 5 years prior to the date of application.


Acquisition of old residential buildings for redevelopment purposes should not be regarded as short-term property speculation, which is the reason the Government gave for introducing BSD. The Government should therefore take into account the comments and legitimate concerns expressed by those within the industry to take appropriate measures and make appropriate arrangements concerning this category of exemption.