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.
Call to leave local-owned companies out of 15pc tax
Developers make counter-proposal to an increase of stamp duty on non-local buyers
Developers have made a counter-proposal to the government over a new property tax, suggesting that small companies with no more than five shareholders - who must all be locals - should be exempted from paying a 15 per cent duty.
The bill for the Buyer's Stamp Duty, which is imposed on non-local and corporate buyers in order to favour permanent residents, is under discussion in the Legislative Council.
It will take effect retrospectively to cover transactions made since late October.
Lawmakers are divided as to whether companies purely owned by locals should be exempted from the tax.
The Real Estate Developers Association submitted a proposal yesterday to fight for a government concession.
"There is no substantive difference between the acquisition of residential properties by permanent residents and … by Hong Kong companies owned and controlled by HKPRs," the association argued.
"There seems to be no sense or reason to penalise those HKPRs who wish to use a company to make a property purchase," it said, citing family investments and bank financing practices of small and medium enterprises as examples.
The association suggested that if a corporate buyer had no more than five shareholders, all of whom were permanent residents, it should be exempted as long as the shareholders made a declaration that they were holding the company shares as beneficial owners for themselves.
The government told lawmakers this week that companies would receive no exemption since it would be difficult to put in place a mechanism that could plug all loopholes open to abuse.
The association also suggested the tax should be refunded to developers for acquisition for redevelopment projects at an earlier stage. The government plan is to refund developers if they complete the work six years after uniting the ownership of an old block.
Developers say such a prolonged refund would add to their costs and "significantly reduce" the production of new homes.
Lawrence Poon Wing-cheung, of the Institute of Surveyors, said in the case of corporate buyers with local shareholders, a refund would be more suitable than an exemption, which would require the government to free up resources to keep track of any share transfers.