Hong Kong’s Chief Executive announced in her 2020 Policy Address on 25 November 2020 that the double ad valorem stamp duty (DSD) imposed on non-residential property transactions will be abolished with effect from today, i.e., 26 November 2020.
The Government introduced the DSD in 2013 as one of the measures to rein in soaring property prices by doubling the ad valorem stamp duty on both residential and non-residential property transactions in Hong Kong. However, given falling non-residential property prices and demand amid the COVID-19 pandemic, the Government decided to abolish the DSD on non-residential property transactions, with a view to facilitating enterprises to cash out by selling non-residential properties to address their financial predicament or liquidity needs.
Practically, this means that any instrument executed on or after 26 November 2020 for the sale and purchase or transfer of non-residential property will be subject to ad valorem stamp duty at the rates under “Scale 2” of head 1(1) or head 1(1A) in the First Schedule to the Stamp Duty Ordinance (Cap.117 of the Laws of Hong Kong), i.e., the original rates applicable before the introduction of the DSD in 2013.
Pending the Legislative Council’s scrutiny of the relevant amendment bill, the Chief Executive made the Public Revenue Protection (Stamp Duty) Order 2020 to give effect to the proposed abolition.
However, DSD rates remain applicable in respect of instruments executed before 26 November 2020. The Government also expressed that it had no plan to adjust any of the stamp duty rates concerning residential properties.
It will be interesting to see whether the proposed abolition will achieve its intended effect of encouraging non-residential property transactions and thereby benefitting different stakeholders in the non-residential property market.