ExclusiveHong Kong’s property stamp duty leaves a gaping loophole

Hong Kong’s government, which more than doubled a stamp duty over the weekend to tame runaway real estate prices, has left a gaping loophole in the tax regime, allowing first-time buyers of multiple properties to get away with not paying the levy.

The tax ordinance collects stamp duty based on the total value of each instrument, or sales agreement, according to a statement by the Hong Kong Transport & Housing Bureau, in response to a query by the South China Morning Post.

“For a single instrument involving multiple residential properties, the Inland Revenue Department will regard the concerned residential properties as a single transaction,” according to the statement. The government has no plan to change the instrument-based stamp duty regime and will adopt the same arrangement on the new stamp duty charges, the statement said.

At least one Hong Kong buyer has already found and exploited the loophole.

Two days after the stamp duty was doubled to 15 per cent, a buyer bought four apartments on Sunday at the Met Bliss project in Ma On Shan for a lump sum of HK$19.93 million, agents said.

By lumping all four units under one agreement, the buyer -- who doesn’t own any other property and was considered a first-time buyer -- was able to skirt the new stamp duty, saving about HK$1.6 million in levies, agents said.

“The government should look into the issue and make clarifications,” said Eddie Hui, professor at the Hong Kong Polytechnic University’s Department of Building & Real Estate, adding that the loophole has undermined the intent of the new measure.