15 per cent stamp duty
To rein in the city's runaway housing prices, Hong Kong's Financial Secretary John Tsang Chun-wah announced an additional 15 per cent stamp duty on non-permanent-resident and corporate buyers starting from October 27, 2012. The move prompted speculation over the effectiveness of taxation on the real estate market and criticisms that Hong Kong was turning away from its roots as a free market economy in favour of a more protectionist market environment.
Government has no plan to plug stamp duty loophole
Officials say tax avoidance won’t be included in proposal as few deals involve company buyers
Officials have no immediate plans to plug a loophole that could let buyers in the secondary market evade new measures to cool the property market.
Those purchasing a property can sidestep the new Buyer's Stamp Duty of 15 per cent, along with other duties, by using a share transfer system.
If a person purchases a second-hand flat by buying the shares of the company that owns it, the buyer is regarded as purchasing shares and not property.
But a joint housing and finance panel preparing a draft bill to be introduced retrospectively in January, yesterday dismissed the need to close the loophole.
Inland Revenue Commissioner Chu Yam-yuen said: "We have no plans to put [anti-tax avoidance] in the bill because not many transactions involve company buyers."
Company buyers accounted for 10 per cent of annual residential property transactions, and 90 per cent of the corporates were set up in the city, he added.
Kenneth Leung Kai-cheong, representing the accountancy sector, asked why the government would not amend the law. "The loophole over share transfer existed in ordinary stamp duty. Why do you carry it to the new duties?" he said.
The Buyer's Stamp Duty, imposed last week, is charged on all corporate and non-local home buyers, excluding Hong Kong permanent residents.
It comes on top of the ordinary stamp duty, which ranges from HK$100 for flats priced under HK$2 million to 4.25 per cent of property values.
Last week also saw the special stamp duty on the resale of homes, introduced in 2010, extended from two to three years from the purchase date.
The rate levied was raised five percentage points to make it less profitable to sell a property soon after purchase.
The Real Estate Developers Association met yesterday to prepare a proposal.
The association's executive committee chairman Stewart Leung Chi-kin said members understood the government's concern about housing problems, but businesses felt there was a need to rethink the recent measures.
Leung said earlier the heavy duties might make it hard for developers to sell new flats.