Hong Kong’s Highest Court Clarifies the Scope of Intra-group Stamp Duty Relief

The Hong Kong Court of Final Appeal (CFA) handed down its judgment for the case John Wiley & Sons UK2 LLP and Wiley International LLC v The Collector of Stamp Revenue [2025] HKCFA 11 on 16 June 2025. The CFA unanimously dismissed the Appellants’ appeal and held that UK limited liability partnerships (LLPs) fall outside the scope of intra-group stamp duty relief under Section 45 of the Stamp Duty Ordinance (Cap. 117) (the Ordinance) as LLPs do not have “issued share capital” in its ordinary meaning as required under the Ordinance.

 

Background

This case arose from a restructuring within the John Wiley & Sons group. In 2019, the Appellants, John Wiley & Sons UK2 LLP (Wiley LLP) and Wiley International LLC (Wiley LLC), sought intra-group stamp duty relief under Section 45 of the Ordinance for a transfer of shares in John Wiley & Sons (HK) Limited (HK Company). Specifically:

• Wiley LLP, a UK-incorporated LLP, transferred its shares in the HK Company to Wiley LLC.
• Wiley LLC indirectly owned Wiley LLP through another intermediary LLP.

 

Requirement for Intra-group Stamp Duty Relief under Section 45 of the Ordinance

Section 45 of the Ordinance provides relief for transfers of Hong Kong stock or immovable property between “associated bodies corporate”. To qualify as “associated”, (i) one body corporate must be the beneficial owner of not less than 90% of the issued share capital of the other; or (ii) a third body corporate must be the common beneficial owner of not less than 90% of the issued share capital of both bodies corporate. 

 

Issue in Dispute

The issue in dispute was whether Wiley LLP qualifies as a “body corporate with issued share capital” under Section 45 of the Ordinance.

The Stamp Office denied relief on the basis that Wiley LLP lacked the required “issued share capital” and charged the Appellants stamp duty of around HKD 6 million.

Subsequently, the Appellants lodged an appeal against the Stamp Office’s assessment at the District Court.  In 2022, the District Court held in favour of the Appellants on the basis that the term “issued share capital” should be interpretated broadly to include interests akin to shares, so long the capital of the body corporate was divided into quantifiable portions with all portions together making up 100% of the total capital value. 

The Collector of Stamp Revenue appealed against the District Court’s decision at the Court of Appeal.  In 2024, the Court of Appeal overruled the District Court’s decision and held that the term “issued share capital” should be given its ordinary meaning under company law context. 

Dissatisified with the Court of Appeal’s decision, the Appellants brought an appeal in the CFA. 

 

CFA Decision

The Appellants argued that the term “issued share capital” should be interpreted broadly to include any class of participation interest resembling shares.   

Taking into account the legislative history of Section 45 relief, the CFA rejected this broad interpretation and held that the term “issued share capital” must be given its ordinary and natural meaning in the company law context regardless of whether a foreign corporation was involved.  LLPs’ members’ capital contributions or participation interests that are merely analogous to shares do not meet the definition of share capital.  Wiley LLP is therefore not eligible for Section 45 relief.

The CFA also emphasised that extending the relief to LLPs would require legislative amendment, not judicial interpretation. For example, Singapore explicitly extended intra-group relief to LLPs through the Stamp Duties (Amendment) Act 2008.

 

Our Observations

The Stamp Office has put on hold all Section 45 relief applications involving hybrid entities only with interests or units similar to share capital, such as US limited liability companies (LLCs), and Dutch cooperatives etc., since the Appellants first pursued this case at the District Court. The Stamp Office is reviewing its assessing practice in respect of such cases in accordance with the CFA’s decision. Since there is a huge backlog of pending cases, we expect the Stamp Office will prioritize the review of those cases that are close to being time barred.  In the meantime, affected taxpayers should assess the potential stamp duty exposure in case the Stamp Office rejects their application. 

The CFA’s decision brings long-awaited clarity to the eligibility criteria for Section 45 relief, but also underscores the rigidity of Hong Kong’s current regime. As global business structures continue to evolve, there is a compelling case for Hong Kong policymakers to modernise the Ordinance to accommodate contemporary entities, which is commonly used amongst multinational groups and other structures such as trusts or private investment holding companies. However, whether legislative amendments will be made to extend relief to LLPs or other types hybrid entities with interests materially analogous to share capital remains to be seen.  Until such changes are made, taxpayers are advised to carefully assess their internal restructuring plans to avoid unexpected stamp duty costs.

We will continue to monitor the developments in this area and provide timely updates to help you navigate the evolving landscape.