Hong Kong: Taxes


Tax on acquisitions

Types of taxes

  • Ad Valorem Stamp Duty (AVD)

For purchases on or after 5 November 2016, AVD at a flat rate of 15% of the purchase price, irrespective of the amount or value of consideration, would be applicable to all residential property transactions. The seller and the buyer are both liable. However, the buyer usually contracts to pay the AVD.

Key Exemptions:
i. A Hong Kong permanent resident (HKPR) who is acting on his/her own behalf, and does not own any other residential property in Hong Kong at the time of acquisition will be subject to lower rates (AVD at Scale 2 rates); and
ii. Intragroup transfers of property between associated companies may be exempt from AVD.

  • Buyer’s Stamp Duty (BSD)

For purchases on or after 27 October 2012, BSD at a flat rate of 15% of the purchase price would be applicable to all residential property transactions. The buyer is liable to pay the BSD.

Key Exemptions:
i. A HKPR who is acting on his/her own behalf, and does not own any other residential property in Hong Kong;
ii. Joint acquisition by a HKPR with one or more non-HKPR close relative(s) (i.e. spouse, parents, children, brothers and sisters) each acting on his/her own behalf;
iii. Transfer between close relatives, whether or not they are HKPRs, each of them acting on his/her own behalf; and
iv. Intragroup transfers of property between associated companies may be exempt from BSD.

  • Special Stamp Duty (SSD)

While AVD and BSD target acquisition of residential property, SSD targets disposition. Residential property acquired on or after 27 October 2012 and resold within 36 months will be subject to SSD. The applicable SSD rate depends on the date of acquisition and the holding period of the property by the seller.

Key Exemptions:
i. Nomination of a close relative(s);
ii. Sale of the estate of a deceased person;
iii. Sale solely related to a bankrupt’s estate or a company being wound up; and
iv. Intragroup transfers of property between associated companies may be exempt from SSD.

With the above stamp duties in place, many find it tempting to purchase property in the name of a HKPR who does not already own residential property in Hong Kong in order to enjoy the relevant exemptions. In doing so, both the homebuyer and the HKPRs who provide their names might be liable to criminal offences and other risks and liabilities.


Recurring taxation

Profits tax

Profits from a business conducted by a property owner in Hong Kong is subject to profits tax. This includes running a business of letting real properties. Nevertheless, the amount of property tax paid may be set off against the profits tax payable.

Property tax

Property tax is payable if the land owner lets his/her property and collects rent. The amount payable is 15% of the Net Assessable Value. The Net Assessable Value is calculated by taking the rental income less irrecoverable rent, rates paid by the owner(s) and 20% statutory allowance for repairs and outgoings.

Other costs

Property owners must pay government rent, which cannot be offset. Typically, government rent is 3% of the property’s ratable value. Property owners are also subject to the payment of rates quarterly in advance. The percentage charge of rates is determined by the legislature. Owners may offset the payment of rates against the payment of property tax.

Tax on sale of real estate

Types of taxes

The same types of taxes as acquisitions apply for sales.

Taxation of distributions

There are no such additional taxes as there is no withholding tax on dividends in Hong Kong.

Tax treaties

Hong Kong has entered into Comprehensive Double Taxation Agreement/Arrangement (DTA) with several jurisdictions. Double taxation arises when two or more tax jurisdictions overlap, such that the same item of income or profit is subject to tax in each, and DTA prevents double taxation and fiscal evasion and encourage cooperation between Hong Kong and other international tax administrations.

Under the arrangement of DTA, Hong Kong adopts the territoriality basis of taxation, whereby only income/profit sourced in Hong Kong is subject to tax and that derived from a source outside Hong Kong by a local resident is in most cases not taxed in Hong Kong. Accordingly, Hong Kong residents generally do not suffer from double taxation. Many countries which tax their residents on a worldwide basis also provide their residents operating businesses in Hong Kong with unilateral tax credit relief for any Hong Kong tax paid on income/profit derived from Hong Kong. Hong Kong allows a deduction for foreign tax paid on turnover basis in respect of an income which is also subject to tax in Hong Kong. For example, when a Japan tax resident collects rent on his Hong Kong property, the DTA between the Hong Kong and Japan taxes Hong Kong rental income in Hong Kong. Therefore, no tax is collectable on this foreign sourced rental income when it is brought back to Japan.

Updated on 1 February 2019.

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