• Tue
  • Dec 23, 2014
  • Updated: 9:21am
Leung Chun-ying
NewsHong Kong
FINANCE

Leung snubs city developers' plea for tax exemption

Chief executive announces that new property 'stamp duty' will apply to all non-local and corporate buyers in bid to close loopholes

PUBLISHED : Wednesday, 19 December, 2012, 12:00am
UPDATED : Wednesday, 19 December, 2012, 7:01am

The government has rejected calls from developers to exempt city companies from its first property tax aimed at non-local and corporate buyers.

Chief Executive Leung Chun-ying announced after an Executive Council meeting yesterday that the original plan to impose a special tax of 15 per cent of the transaction price - known as the buyer's stamp duty - on all company buyers would be upheld.

Leung said: "Now the duty rate is relatively high and property prices also remain high, we do not want to see buyers being tempted into finding loopholes in the law to save themselves the large sums of tax. We are being strict when we draft the bill."

The tax will now cover nonlocal buyers and all corporate buyers. Only permanent Hong Kong residents who buy a property under their own names will be exempt. Leung's comment was a clear rebuff to a proposal of the Real Estate Developers' Association that local companies should be exempt from the tax.

REDA argued that most local company directors or shareholders are permanent residents and should enjoy the same rights as individual local buyers. But Leung's administration stood firm despite repeated lobbying by developers. Many feared that speculators could exploit a loophole to avoid the tax.

It was claimed some speculators could use shell companies to buy properties and then sell them in the second-hand market through a share transfer. The transaction would then be considered a company takeover and would not be subject to the special tax. That loophole is closed.

The only other exemption from the new tax now is for acquisitions by private developers and the Urban Renewal Authority, but the details have yet to be seen in the bill, which will be published on Friday next week and vetted by the Legislative Council on January 9. Once passed, it will take effect retrospectively, dating back to October 27.

Stewart Leung Chi-kin, chairman of REDA's executive committee, said he would meet officials in the next few days to lobby again. He said the association had come up with a suggestion to plug the loophole without subjecting local company buyers to the new tax.

REDA suggested as an alternative that company shareholders should make a declaration not to sell their shares within a set number of years when the company bought a property.

James Tien Pei-chun, of the Liberal Party, said he would seek to amend the bill to exempt permanent residents buying through a company.

But some lawyers said a company buyer could still sell the property without transferring shares, such as by setting up a trust.

Company buyers account for 10 per cent of annual residential property transactions, with 90 per cent of the corporate purchases set up by permanent residents.

The tax is aimed at curbing speculation and addressing locals' complaints about unaffordable home prices.

Sales of new homes have slowed since it took effect.

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This article is now closed to comments

keresearch
Of course its the taxpayers and capital works reserve fund that ultimately lose and not the developers. Their auction bids and lease modification payments are residual valuations of the market price of the end product. They just ended up paying less for land once current development cycle finishes if property prices are lower. Sadly, the way that the HK govt has always extracted value from its land ownership always benefits developers.
mcheung
Well Done C.Y. ! Stay firm on this one!
babyhenry
The REDA and the Liberal Party - should seriousily consider plugging their but*holes first.
rchan_ssd
Well done, C.Y. Leung! Thanks for looking out for the interests of the lesser ones. We need more people like you in the government. I am an expatriate and I don't mind being "discriminated" by your new tax policy. The HK government is elected to look out for HK people, not foreigners like me.
donniemcm
True, and if you really like HK, staying for 7 years to reach permanent residency isn't a big trade-off.
HK_eh!
please...
Special interest groups will always look for loopholes and clauses to benefit their interests. Look at the USA, dominated by PAID lobbyists.
Kudos to the Govt for standing firm.
The SCMP spin is just as bad, sensationalist or in the pocket of big business?
CY/Govt didn't "snub" the request, simply stand firm on no loopholes. Trying to stir a fuss over a simple NO.
hard times !
maybe this new bill is one of the most welcomed acts committed by the Leung administration in the last few months after C.Y.took over the top post in the SAR administration.Bravo ! Never yield to the pressure of the all-powerful and super-rich members of the Real Estate Developers Association who is still trying to lobby for exemption of the 15% stamp duty exerted on any foreign buyers or local company buyers who can transact the properties through share transfer of the company or even by setting up a trust. As all know, many smart/sly local businesspersons are just clever enough to make use of any loopholes in government policies.A strict and uncompromising attitude should be adopted by C.Y.'s government if it really wants to do something for we Hongkongers and lower the astronomical flat prices in town.In this way,his government's prestige and reputation plus popularity will all be restored and alleviated as well.Right ?
rongeo
Well done CY .At long last the Government is standing up to the greedy property cartels.
ianson
The move is not to be interpreted as a blow directed at big developers, though this is how Leung's spin merchants would like it to appear. It was simply necessary for him to take this stance or the entire tax plan would be a laughing stock. So this is not courageous championing against big corporates; it's avoidance of abject failure.
Byebye
We are in support of the good works of your team and you - brilliant accomplishment. Please do not kowtow to the few over powerful developers who seem to be in control of the daily life of the vast majority of Hongkongers.

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