Proposed Amendments to the Stamp Duty Ordinance

Following the 2022 Policy Address delivered on 19 October 2022 and 2023-24 Hong Kong Budget delivered on 22 February 2023, the Hong Kong Government has proposed certain changes to the Stamp Duty Ordinance (Cap. 117). We wish to provide you with a snapshot on the development.

Adjustments to Scale 2 of the Ad Valorem Stamp Duty

Since 2010, no adjustments have been made to the value bands of the ad valorem stamp duty payable for the sale and purchase or transfer of residential and non‑residential properties (Rates at Scale 2). The Hong Kong Government announced in the 2023-24 Hong Kong Budget that adjustments should be made in this regard (For details, please refer to our Insight on the 2023 – 24 Hong Kong Budget.

The Stamp Duty (Amendment) Bill 2023 (the Bill No.1), which aims to adopt the said adjustments, has passed the first reading on 15 March 2023. It is now under the consideration of the Bills Committee of the Legislative Council and is pending the resumption of second and third reading.

Introduction of Refund Mechanism under the Buyer’s Stamp Duty and New Residential Stamp Duty Regimes

In the 2022 Policy Address, the Hong Kong Government announced that a refund mechanism (Proposed Refund Mechanism) under the Buyer’s Stamp Duty (BSD) and the New Residential Stamp Duty (NRSD) will be introduced to attract talents.

As a background, BSD and NRSD were introduced in October 2012 and November 2016 respectively. BSD applies to all residential property transactions except for those acquired by a Hong Kong permanent resident (HKPR) acting on his / her own behalf. NRSD applies to all residential property transactions except for those acquired by a HKPR acting on his / her own behalf and not owning any other residential property in Hong Kong. Both are charged at a flat rate of 15% of the amount or value of the consideration. In other words, non-HKPRs are currently subject to a stamp duty of 30% for acquisition of residential property.

Under the Proposed Refund Mechanism, for an eligible incoming talent who acquired a residential property in Hong Kong on or after 19 October 2022, and has subsequently become a HKPR, he / she can apply for a refund of the BSD and the NRSD paid for the residential property provided that certain conditions are satisfied. Please see below a snapshot of some of the conditions:

• The eligible incoming talents must enter Hong Kong under designated talent admission schemes, namely the General Employment Policy, Admission Scheme for Mainland Talents and Professionals, Quality Migrant Admission Scheme, Immigration Arrangements for Non-local Graduates, Technology Talent Admission Scheme, Admission Scheme for the Second Generation of Chinese Hong Kong Permanent Residents and the newly launched Top Talent Pass Scheme.
• At the time when the residential property was purchased, the residential property was the only residential property (save for replacing property) of the eligible incoming talents.
• The eligible incoming talents still hold such property on the date of the application for refund.

In order not to encourage eligible incoming talents to make property speculation, the Hong Kong Government proposes that the refund shall not be applicable if the eligible incoming talent has acquired multiple residential properties under a single instrument.

The Stamp Duty (Amendment) (No. 2) Bill 2023 (the Bill No. 2), which aims to introduce the Proposed Refund Mechanism, was gazetted on April 6. The Bill No. 2 will be introduced into the Legislative Council on April 19 for First Reading and Second Reading debate. In the meantime, taxpayers are strongly encouraged to stay tuned for further announcements by the Hong Kong Government and contact their tax representatives for tax planning once more details are known. We will keep a close eye on the development and alert you as soon as we know more.