Law change to plug loophole in new stamp duty
A legal clause will be introduced soon to plug a loophole that allows homebuyers to evade the new 15 per cent stamp duty on purchases, the government announced last night.
The announcement came on the back of news spreading among real estate agents that a Happy Valley project developer was planning to set up a subsidiary company to hold its flats before selling them by transferring the subsidiary's shares to the buyers.
Doing so would allow buyers to avoid registering their names with the Land Registry and hence evade paying the buyer's stamp duty, which is payable by non-permanent residents and those buying flats through companies.
The government said it would extend a clause in the Stamp Duty Ordinance.
Under the existing ordinance, stamp duty doesn't have to be paid when a company transfers a unit to a subsidiary.
Under the change, if the company ceases to hold 90 per cent of its subsidiary's shares within two years, the flat buyer will have to pay the 15 per cent stamp duty.
The government said the intention was to extend the exemption to cover the new stamp duty and the special stamp duty payable on resales of homes within three years of purchase.
The new clause to plug the loophole is expected to be introduced retrospectively in January.
The Buyer's Stamp Duty was imposed last week in a bid to curb speculation, and comes on top of existing stamp duty, which ranges from HK$100 - for flats under HK$2 million - to a maximum of 4.25 per cent of the value of the property.
The government said last week it was aware of people trying to evade stamp duty by way of share transfer.
It warned against doing so, as buyers would be penalised much more than the duty that should be due.