Want to buy property in Hong Kong? Foreigners take note

Vincent Cheung is an executive director of valuation and advisory services, Asia, at Colliers International. He describes the stamp duty a foreigner must pay when buying a property here.

Under the stamp duty regime, how much tax does a foreigner have to pay when buying a home?

If the agreement is executed on or after November 5 this year by any [foreigner], or owner of any existing residential property, the proposed new stamp duty of 15 per cent would be applied to an agreement or conveyance for a residential property. For a residential property sale or conveyance executed on or after October 27, 2012, the [foreigner] also needs to pay the buyer’s stamp duty (BSD) at a rate of 15 per cent of the consideration or the value of the subject property, whichever is higher.

Can a foreigner be eligible for tax exemptions as a first-time buyer?

There is no such exemption for [foreigners] as the new [stamp duty] rate is only exempted for an agreement or conveyance for a residential property where the purchaser/transferee is a [Hong Kong permanent resident] acting on his/her own behalf and does not own any other residential property here at the time of acquisition of the property.

If a foreign husband and a Hong Kong permanent resident wife buy a home and own it in joint tenancy, in which case the wife is a first-time buyer, how does one calculate the stamp duty?

In this case, the BSD is exempted, but the [new stamp duty] remains applicable. According to the BSD rules, an acquisition of residential property by a Hong Kong permanent resident jointly with a close relative, such as spouse, parent, child, brother or sister, who is not a permanent resident and each is acting on his or her own behalf, is not chargeable to the BSD. If a residential property is jointly acquired by a permanent resident and a [foreigner] on or after November 5, this year and the [foreigner] is a close relative of the [permanent resident], the agreement will be charged the new stamp duty [at the lower rate]. For a HK$25 million residential property, the applicable stamp duty is equal to HK$1,062,500 (HK$25 million x 4.25 per cent).

Can a Hong Kong permanent resident homeowner buy a new home and then sell all their old properties, and apply for a refund of the new stamp duty? How does one calculate the refund?

Based on the existing refund mechanism, a permanent resident buyer who changes his or her single residential property within six months of completing the new transaction can apply for a refund. The tax refund is only applicable on a one-for-one basis, so the applicant is eligible for a refund only if he or she buys one new home to replace one old home. Suppose the consideration value of the property purchased is HK$6 million. The effective stamp duty payable is HK$900,000, that is HK$6 million x 15 per cent. Since the original property was sold within six months of the assignment of the new property, the owner can apply for a refund of part of the stamp duty paid, being the difference between the stamp duty payable at the [lower rates] and the proposed new stamp duty rate [15 per cent] after the disposal transaction has been completed. In this example, the refund amount is HK$720,000 that is HK$900,000 – HK$6 million x 3 per cent) based on the new proposed stamp duty rate of 15 per cent.

Are there mortgage restrictions for foreigners buying a Hong Kong home?

The mortgage loan amount the bank is willing to lend you depends on details such as your annual income and income source [local versus overseas], the consideration value of the property, nature of the property, number of properties owned, value of assets owned, your credit score or rating, rather than your nationality or place of residence.