Hong Kong home buyers and those named in purchases warned of jail if they skirt stamp duty rules
Financial Secretary Paul Chan sounds warning after some purchasers buy multiple flats under different names, thereby paying lower stamp duty
Hong Kong’s finance minister has warned homebuyers and those who provide their names for multiple transactions to skirt new stamp duty rules that they are breaking the law .
The government last month plugged a legal loophole that was allowing first-time homebuyers to legitimately purchase multiple flats under a single transaction agreement without having to pay the mandatory 15 per cent stamp duty for each property.
In his online blog on Sunday, Paul Chan Mo-po reminded those who were still evading the extra duty by getting others to pose as first-time buyers for them that it was a criminal offence. .
“If buyers deliberately make a false statement to the Inland Revenue Department, they violate rules under the Crimes Ordinance. If convicted, they face imprisonment for up to two years and fines,” he wrote.
Hong Kong homebuyers must declare to the department that they are acting only for themselves to be able to pay lower duty. First-time buyers pay a rate of 1.5 per cent to 8.5 per cent, depending on the flat’s value.
The rate for non first-time buyers was raised to 15 per cent in November 2016.
If tax officers later find a statement is incorrect, the buyer will not only have to make up the difference, he or she will also be fined for the delay, with the amount up to 10 times the unpaid levy, according to Chan.
The minister said he had instructed the Financial Services and the Treasury Bureau and the Inland Revenue Department to check and verify the authenticity of such statements strictly, and vowed to prosecute the buyers and those who gave their names.
“Given the crime’s seriousness, I remind Hong Kong people ... not to test the law,” he said.
After the existing loophole was closed last month, wily buyers found a workaround by using other people’s names in making purchases barely a day after the announcement.
In one case, a family bought three flats for HK$170 million after discounts at Cheung Kong’s Harbour Glory project in North Point. By splitting their purchases among three people, each of whom was not an existing property owner, they were able to skirt the 15 per cent stamp duty.
Barrister Albert Luk Wai-hung said it was not easy for the government to prove guilt, especially for home buyers who make purchases under relatives’ names. but using strangers could prompt suspicions.
Knight Frank senior director Thomas Lam Ho-man said it was difficult for agents to tell whether the name appearing on the contract was the real beneficiary.
“We wouldn’t investigate the identities of buyers ... We choose to believe [them]. That’s all we can do,” Lam said.
Sammy Po, chief executive of Midland Realty’s residential department, said he saw increasing use of such tactics in the luxury housing market after the tax rule was changed in April
But he did not think stringent checks would significantly harm the property market, as homes bought in other people’s names accounted for only a very small proportion of overall sales.