Taxes and Fees Involved in Buying Property in Hong Kong

When purchasing property in Hong Kong, it is mandatory to pay stamp duty, as transactions without it are not legally valid. The courts will not recognize your ownership rights if stamp duty is not paid. Do not assume that private agreements exempt you from paying stamp duty.

The basis for stamp duty calculation is generally the property’s transaction price. However, if the transaction price is lower than the property’s assessed value, the stamp duty will be calculated based on the property’s value. Transactions between relatives often involve setting a transaction price significantly below market value to save on stamp duty, but such prices are likely to be challenged by the Inland Revenue Department (IRD).

The transaction price for stamp duty purposes does not take into account the proportion of property ownership being transferred. For example, if a property is worth HKD 10 million and one party sells 10% of the ownership to another, the transaction price will be HKD 1 million, and the stamp duty will be calculated based on that HKD 1 million, not the full HKD 10 million. However, do not think that splitting ownership transfers into multiple transactions will save on stamp duty. The IRD will treat such transactions as a single deal and levy stamp duty accordingly.

It is important to note that stamp duty is typically borne by the buyer. Even if developers offer stamp duty discounts to attract buyers, these discounts are reflected in the property price, and the buyer is still responsible for paying the stamp duty.