Frequently Asked Questions Regarding the Recently Imposed Special Stamp Duty in Hong Kong
Questions and Answers
| 1. |
Q: |
When will the proposed SSD be effective? |
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A: |
Subject to the enactment of the new legislation, the proposed SSD will be effective from 20 November 2010. |
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| 2. |
Q: |
Under what circumstances, will SSD be payable? |
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A: |
The liability to SSD will arise if the following conditions are met:
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| (i) |
The transaction involves a residential property; |
| (ii) |
The property was acquired by the seller on or after 20 November 2010; and |
| (iii) |
The property was sold by the seller within 24 months from the date of acquisition. | |
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| 3. |
Q: |
Would the SSD apply to confirmor sale of property which was acquired by the seller on or after 20 November 2010? |
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A: |
The SSD is payable for confirmor sale of property which was acquired by the seller on or after 20 November 2010.
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| 4. |
Q: |
Who will be liable to pay the SSD, the vendor or the purchaser? |
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The seller and the buyer are jointly and severally liable for paying the SSD.
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| 5. |
Q: |
Would it be unfair to apply SSD to buyers who have entered into provisional agreement before 20 November 2010 and signed formal agreement after that date? |
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In general, the provisional agreement is not legally binding and the seller cannot transfer any interest in the property to the buyer through the provisional agreement. In law, there is no enforceable right in relation to the property at the date of the provisional agreement. However, if it is provided in the provisional agreement that legal action would be instituted against the party not completing the transaction, it will not be caught by the proposed amendment.
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| 6. |
Q: |
For the purpose of SSD, how to define the date of purchase and sale of the property? |
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The relevant date is when the buyer and seller enter into a legally binding agreement for sale and purchase, i.e. the date on which the purchaser acquires or the seller disposes an interest in the property. Normally it is the date of the formal agreement for sale and purchase. If it is provided in the provisional agreement that legal action would be instituted against the party not completing the transaction, the date of provisional agreement may be regarded as the date of purchase and sale of the property.
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| 7. |
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What are the rates of SSD and how it is calculated? |
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The SSD is calculated based on the stated consideration for the transaction or the market value of the property, whichever is higher, at the following rates for different holding periods by the seller before the disposal -.
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| (i) |
15% if the property has been held for six months or less; |
| (ii) |
10% if the property has been held for more than six months but for 12 months or less; |
| (iii) |
5% if the property has been held for more than 12 months but for 24 months or less. | |
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| 8. |
Q: |
Why the buyer has to be held liable for the SSD? |
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All along, all parties who executed the agreement for the sale of the residential properties are liable to stamp duty. The buyer, as one of the parties who executes the agreement, owes a duty to ensure that the stamp duty and SSD have been duly paid. Also, it is a measure to secure collection of the SSD.
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| 9. |
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Would the SSD apply if a property is transferred to me by way of gift on or after 20 November 2010 and I sell it within 24 months? |
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The date on which the property is transferred to you is taken as the date on which you acquire the property. You will be liable to pay SSD if you sell the property within 24 months from the date of gift.
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| 10. |
Q: |
If I inherit a property from a deceased relative on or after 20 November 2010. Does SSD apply if I sell it within 24 months? |
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It all depends on when your deceased relative acquired the property. If your relative acquired the property before 20 November 2010 or your relative acquired the property on or after 20 November 2010 but the period to the date you sell the property is longer than 24 months, no SSD will be payable. Otherwise, the SSD will be payable.
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| 11. |
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Are there any exemptions for paying the SSD? |
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Exemptions for the SSD are proposed in the following cases: ?/P>
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| (i) |
Nomination of a close relative to take up the assignment of a property under a sale and purchase agreement (“close relative?means parent, spouse or child); |
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Sale or transfer of properties to close relatives; |
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Sale or transfer of properties due to bankruptcy/involuntary winding-up; |
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Sale or transfer of properties between associated companies; and |
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Sale or transfer of properties to the Government. | |
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| 12. |
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Would exemption for the SSD be granted if I sell the property within 24 months without making any gain? |
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SSD is not a charge on gain or profit. As a levy of stamp duty, the SSD is payable irrespective of whether the property is sold at a gain or at a loss. |
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| 13. |
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If I manage to make a gain in selling the property within 24 months, would I be exempted from profits tax since the transaction have already been subject to SSD? |
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SSD is a levy on instrument whereas profits tax is a charge on profits derived from property trading activities. If the property transaction amounts to a trade or an adventure in the nature of trade, the seller will have to pay profit tax on the profits so derived despite SSD has been paid. |
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| 14. |
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Would the SSD be deductible in calculating the assessable profits? |
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If the SSD is paid by the seller, it is a business expenses and can be deducted from the assessable profits of the property transaction. |
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| 15. |
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If SSD applies, when should I pay? |
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The liability to pay the SSD will only arise upon the coming into effect of the new law. In respect of chargeable agreements for sale executed between 20 November 2010 and the date of entry into force of the new law, any applicable SSD has to be paid within 30 days from the date of the entry into force. In respect of chargeable agreements executed after the entry into force of the new law, the SSD is payable within 30 days of the signing of the agreement for sale and purchase. If there is no agreement for sale and purchase, the SSD is payable within 30 days of the date of the assignment. |
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| 16. |
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Will the SSD paid be refunded if the agreement for sale is cancelled subsequently? |
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In case the agreement for sale is cancelled (not because of further resale), the person who paid the SSD can apply for refund of the SSD within 2 years after the agreement has been cancelled. |
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| 17. |
Q: |
When will the cancellation of deferred payment of stamp duty to residential property transaction valued at $20 million or below be effective? |
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It will be effective on or after the entry into force of the new law. The option to defer payment of stamp duty chargeable on the agreements for sale and purchase executed on or after the date of the new law will be withdrawn. |
Source: Hong Kong Inland Revenue Department
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