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Hong Kong stamp duty

Hong Kong government under pressure to close property tax loophole for flat grabs in first-time buys

Housing minister says officials are gathering data on the matter and will act soon if necessary

PUBLISHED : Thursday, 06 April, 2017, 10:29am
UPDATED : Thursday, 06 April, 2017, 10:29am

The Hong Kong government is under pressure to close a property tax loophole, after a sharp rise was reported in the number of buyers purchasing multiple homes in one go to avoid higher levies.

Secretary for Transport and Housing Anthony Cheung Bing-leung said that the government was aware of the situation.

“We are currently looking into whether these are just extreme cases or whether it has already become a general trend,” Cheung told lawmakers at a Legislative Council special finance committee meeting on Wednesday.

“We will closely monitor the development of the overall property market,” he added.

In November last year, the stamp duty on property transactions for non first-time buyers was raised to 15 per cent for individuals and corporate clients, as part of government efforts to curb speculation and tame soaring real estate prices.

According to the existing tax ordinance, first-time buyers who purchase multiple residential properties in one go are only taxed 4.25 per cent, as this is considered a single transaction.

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Last week Chinese-language newspaper Ming Pao reported that more than 420 registered sales and purchase agreements of over 950 flats involved single buyers acquiring more than two units.

In one case, a customer bought 15 units for more than HK$145 million at K City in Kai Tak in a single transaction.

Under the system, if the individual in this case was a first-time buyer and owned no other properties, he or she would have only paid 4.25 per cent of the transaction value in stamp duty – HK$6.16 million – instead of 15 per cent – HK$21.75 million.

The loophole, which has fuelled the rising number of investors seeking to bundle multiple units under one agreement, has undermined repeated assertions by government officials that property cooling measures have been effective.

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Lawmakers criticised authorities for their inaction despite knowing that homebuyers have taken advantage of the system over the years.

Authorities were made aware of the loophole in 2013 when lawmakers were vetting a double stamp duty bill that came into effect that year. The amendment to close the gap in the system was eventually voted down in Legco.

Addressing Cheung, Democratic Party lawmaker James To Kun-sun said: “How can you say you’re still looking into the situation at this time? You were already aware of this loophole way back in 2013 and [the government] did not take the problem seriously then.”

Civic Party lawmaker Kwok Ka-ki added: “Your answers [on this issue] are completely unacceptable. How long are you going to continue looking into this? Can this law even be amended before your end of term?”

In response, Cheung said that the government was analysing data and needed to make careful considerations before coming to a conclusion.

“We are looking at these numbers now. I hope lawmakers will give us more space ... if the problem is really serious, we will not wait until the end of June to deal with this,” Cheung said, referring to when he is expected to leave office before the new administration takes over in July.