STAMP DUTY

PSPA – (7-14 days)  FSPA – (14-30 days)  Assignment

Documents in a conveyancing transaction:

 Agreement for sale
 Assignment
 Mortgage / Charge
 Discharge / Release
 Title deeds

What is stampable and the respective Charging Heads:

HEAD 1 IMMOVABLE PROPERTY IN HONG KONG

Head 1(1) Conveyance on Sale (Assignment executed on completion)
Head 1(1A) Agreement for Sale of Residential Property (PSPA, FSPA, Nomination, Sub-sale
agreement)
Head 1(1AA) and 1(1B) Agreement for Sale chargeable with Special Stamp Duty (SSD)
Head 1(1AAB) and 1(1C) Agreement for Sale chargeable with buyer’s stamp duty (BSD)
Head 1(2)(a) Lease – Rent
Head 1(2)(b) Lease – Premium

Provisions in SDO requiring parties to enter into a written agreement

 Written agreements required for conveyanging transactions:
o S 3 CPO: No action shall be brought… unless there is an agreement in writing
o S 4 CPO: Legal estate to be disposed of by deed
o s 5 CPO: Instruments creating equitable interests to be in writing
 S 29B(1) SDO: Each P and V under an unwritten agreement for sale shall, not later than 30 days after the relevant date,
execute an agreement for sale containing the matters specified in s 29B(5)
 The agreement must contain (s 29B(5) SDO)
o (a) name and address of V and P
o (b) [if individual] ID no.
o (c) [if not individual] BR no.
o (d) description and location of immovable property
o (e) Statement as to whether the immovable property is residential property or non-residential property, within the meaning of
s 29A(1)
o (f) date on which the agreement for sale was made
o (g) if the agreement for sale was preceded by an unwritten sale agreement, or an agreement for sale, made between the same
parties and on the same terms, the date on which the first agreement was made
o (h) Statement as to whether or not a date has been agreed for a conveyance on sale, and if so, that date
o (i) Statement as to whether or not there is an agreed consideration, and if so, the amount or value of consideration
o (j) Amount or value of any other consideration which each person executing the document knows has been paid or given, or
has been agreed to be paid or given
o (k) If P has not executed the agreement, a statement as to whether or not to the best of knowledge of each person executing
the agreement, the P knew, at the time of agreement made, that it affected him

Oral agreements possible to evade SD?

 General rule:
o No instrument  no SD
o Mere transfer of beneficial interests (i.e. declaration of trust) does not attract SD
 But oral transactions are almost impossible to support a conveyancing transaction (see above)
o The only exception where oral agreement is allowed:
 S 6(2) CPO (leases taking effect in possession for a term not exceeding 3 years at best rent that can be
reasonably obtained without a premium) –

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 Non-compliance with SDO

 Instrument not admissible in evidence in litigation (s 15(1))

o Only inadmissible in civil proceedings
o Does not include civil proceedings by collector to recover SD / any penalty
 Instrument CANNOT be registered at the Land Registry (s 15(2))
o Thus affect your priority!
 Penalty (s 9)
o As much as 10 times SD payable
 Criminal offences (s 11(2))

1. Agreement for Sale

(a) Definition – s 29A:

 PSPA
 FSPA
 Sub-sale agreements

(b) Obligation to have a written agreement for sale of immovable property in HK

 Part IIIA, Head 1(1A), s 29B(1)
o Parties entering into an agreement for sale of HK immovable property are obliged to
 (i) execute a written agreement
 (ii) within 30 days of the first (written or unwritten) agreement
 (iii) containing a no. of specified matters (s 29B(5))
o Applies to all HK immovable properties, irrespective of user (residential or non-residential)
 Non-compliance: wills till deem the agreement as chargeable with SD

(c1) Liability to pay ad valorem duty

 (i) Differentiate between residential vs. non-residential
o Relevant regarding (i) chargeability to duty (SSD and BSD) and (ii) quantum
o See PERMITTED use under conditions of:
 Government lease / Conditions of Sale
 DMC
 OP
 Any other instrument effectively restricting permitted use of property
 Subsequent town planning legislation overriding permitted use under OP (as long as
already in force at the time of sale)
o Residential: where the documents permits ANY part of the property to be used for residential purposes
 A single agreement involving both residential and non-residential units (property + carpark space)
 considered residential
o Non-residential: cannot be used at any time for residential purposes under conditions in the above docs

 (ii) SD payable
 Residential property Exceptions where Scale 2 rates apply
For PSPA executed after 5 November 2016 Exception1:
Chargeable agreements for residential properties will be subject to  Where the purchaser / transferee of a
the new flat rate at 15% (Part 1 Scale 1) residential property is a Hong Kong
Permanent Resident (HKPR) acting on
For PSPA executed before or ON 5 November 2016 his or her own behalf AND
 Scale 1 rates: Higher and subject to exceptions  Does not beneficially own another
 Scale 2 rates applies where Scale 1 exceptions apply: residential property in Hong Kong at the
4.25% time of acquisition.
 Non-residential property
Unless specifically exempted or otherwise provided, all agreements Exception2: Transaction between closely-related

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 liable to new ad valorem duty (Part 2 Scale 1 rates; max: 8.5%). parties: Only applies to RESIDENTIAL properties

o Exception (1): HKPR acting on his/her own behalf who does not own any other residential property in HK
 (i) HKPR:
 √ A holder of valid Hong Kong Permanent Identity Cards as defined under the Registration
of Persons Ordinance (Cap 177)
 X Company, wherever incorporated, in which its shareholders and directors are HKPRs
 X Act on other’s behalf in the acquisition (e.g. as trustee)
o Unless for a HKPR who is mentally incapacitated / a minor who does not
beneficially own another residential property in HK (s 29AH)
 (ii) Acting on his own behalf
 Must not beneficially own another residential property at the time of acquisition
 Partial refund possible on disposal of his/her original property within the following 6
months (s 29DF; Ho Kwok Tai v Collector of Stamp Revenue)
 Effect:
 Individual ownership: Enjoy Scale 2
 Joint ownership: Enjoy Scale 2 rates in the case of joint purchase with a close relative who
is a HKPR [SAME PERSON RULE] OR from a close relative who may or may not be a
HKPR [TRANSACTION BETWEEN CLOSELY RELATED PARTIES]
o Exception (2): Transactions between ‘closely related’ parties are subject to Scale 2 rates (s 29BD) [Only
applies to residential parties]
 Closely related: parent, spouse, child, as well as brother or sister
 Irrespective of whether the parties are HKPRs or beneficial owners of another residential property

(c2) Certificate for value

 If Scale 1 / Scale 2 applies – add certificate of value certifying the transaction does not form part of a larger
transaction or series of transaction, the aggregate of consideration exceeding the relevant margin in para (a) to (j) of
the duty scale
 Effect = SD will be charged at a lower duty scale

(d) Timing of Stamping

 General rule: stamp BOTH (PSPA and FSPA) within 30 days of the first chargeable instrument (PSPA)
 Exceptions: where the two SPAs are in conformity (i.e. same party, term and price)
o Same parties: names of the respective parties must be the same under both agreements (s29A(3A))
 Same person rule:
 Spouse, parent and child = same person (s29C(5AB)-5(AD))
 P and his nominee (who is also trustee) = same person (s 29AB(1)(a))
 Agent acting on behalf of a disclosed P = same person
o An agent acting on behalf of undisclosed principal do not qualify
 Subsequent sale in favor of common P: (P1 sells a part of his interest to P2)
 Note 5 to Head 1(1A):
o (i) Must be residential
o (ii) P1 and P2 are closely related persons
o (iii) P1 and P2 acting on his own behalf
o (iv) Neither P1 nor P2 owns another residential property
 If satisfied  two agreements deemed to be made with same parties = in conformity
 If not  considered a sub-sale
o Additional AVD payable on the sub-sale
o Which scale depends on whether exemption applies
o Same terms:
 Same property + same consideration specified (s 29A(4))
 In conformity + NOT more than 14 days apart
o Note 2 to Head 1(1A): an agreement for sale is superseded by another agreement for sale made between the
same parties in the same terms
 (i) 2nd agreement deemed to be made on the relevant date under s 29B(3) (Note 2(aa) to Head 1(1A)) [for
determining quantum of SD]
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  If an agreement for sale is NOT preceded by an unwritten agreement, and is made between the same
parties and in same terms, the relevant date = date on which this 2 nd agreement was made (s 29B(3)(b))
 If an agreement for sale is preceded by 1 or more unwritten agreement, and is made between the same
parties and in same terms, the relevant date = date on which the 1 st agreement was made (s 29B(3)(c))
o FSPA deemed made on the same day as PSPA  relevant date for determining SD is date of
PSPA
 (ii) Stamping no later than 30 days after the 2nd SPA was executed (Note 2(a) to Head 1(1A))
 (iii) If 2nd agreement is duly stamped, the obligation to stamp any preceding agreement is discharged (Note 2(b) to
Head 1(1A))
 PSPA cease to be chargeable
  30-day period runs from date of FSPA; after this is done, PSPA not chargeable
o Although PSPA not chargeable, in practice, may still want to stamp PSPA for priority purposes
 In conformity + more than 14 days apart
o Note 3 to Head 1(1A):
 (i) All agreements deemed to be made on the relevant date under s 29B(3) – PSPA continues to be chargeable for
ad valorem duty
 (ii) If any of the SPA is duly stamped, the FSPA is only charged with fixed duty of $100
 (iii) Time for stamping for each SPA = no later than 30 days of its own date of execution
o  Usual time for stamping must be observed; where either agreements is duly stamped, the other is chargeable
with fixed duty of $100
o In practice, parties still prefer to pay full AVD on FSPA + have fixed charge stamped on PSPA
 If so, FSPA should be stamped within 30 days of execution of PSPA (no postponement of payment)

(e) Uncompleted Agreement for Sale

 Cancelled / annulled / rescinded / not performed
 P.f. SPA and Cancellation agreement NOT chargeable  can sask for refund of SD already paid (s 29C(5B))
o Unless cancellation is due to a specified event in s 29C(5AA)
 (a) Re-sale by way nomination
 (b) Re-sale by direction of P1
  PSPA remains chargeable, despite not completed
o Exceptions to the exception:
 (i) Where the new person is a trustee for 1st P (s 29C(5AB)(a))
 (ii) Where the property is residential + the other person is closely related to P + the other person acts on
his/her own behalf + the other person is not beneficial owner of any other residential property in HK (s
29C(5AB)(b) and s 29C(5AC))

2. Conveyance on Sale

(a) Definition – s 2: Every conveyance where by any immovable property, upon the sale thereof, is transferred to or vested in a P
or any other person on his behalf of by his direction
 √ Assignments
 √ Foreclosure order
o An order / decree for or having the effect of an order for possession of property when interest or capital has not
been paid at the required time
o E.g. where mortgagee takes action against mortgagor for non-payment of interest or indebtedness
 X mortgage / charge / release / discharge
 X will of testator
 X an asset conveying estate interest to a beneficiary, unless in satisfaction of a pecuniary legacy
 X Government lease / Conditions of sale

(b) Subsequent assignments in conformity with duly stamped chargeable agreement

 Subject to fixed duty of $100 only
 Payable after 30 days of execution of the assignment

(c) Certificate for value

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  If Scale 1 / Scale 2 applies – add certificate of value certifying the transaction does not form part of a larger transaction
or series of transaction, the aggregate of consideration exceeding the relevant margin in para (a) to (j) of the duty scale
 Effect = SD will be charged at a lower duty scale

(d) Series of transactions

 Each case considered on its own merits
 Generally require coordination or interdependence between the transactions
o E.g. purchase flat and carpark on same date within a short time span under two separate instruments –
depending on whether there exists a pre-condition that flat must be sold with the car park and vice versa

(e) Voluntary dispositions

Instrument effecting transaction for nominal consideration / undervalue / inadequate consideration / as a gift / as an asset
 S 27(1): the conveyance is chargeable with SD as a conveyance on sale, with the substitution of the value as the value fo
consideration for the sale
o Effect = deemed as conveyance for sale; SD will refer to market value of property to decide SD payable
 s 13: Adjudication is mandatory
 Except where no beneficial interest has passed under the transfer (s 27(5))

 Special Stamp Duty (SSD) – [QUICK DISPOSAL TAX]

o Applicable to Residential Property only
o Not applicable if an exemption applies
 Closely related party transactions
o In addition to any SD and BSD payable
o If only part of the interest is sold – SSD applies only to those part of the interest sold (s 29CA(4), 29DA(3))
Applicable to any HK residential property Rates Disposed after
 Acquired between 20 November >12 months but
5%
2010 and 26 October 2012 <=24 months
 AND be disposed of within 24 >6 months but
10%
months from the date of <=12 months
acquisition 15% <=6 months
>12 months but
 Acquired on or after 27 October 10%
<=36 months
2012
 AND be disposed of within 36 >6 months but
15%
months [3 years] <=12 months
20% <=6 months

 Buyer’s stamp duty (BSD) – [NON-HKPR TAX]

o Applicable to any HK residential property acquired on or after 27 Oct 2012 by a non-HKPR
o Not applicable if an exemption applies
 Closely related party transactions
 HKPR + close relative who is non-HKPR (s 29CB(2)(b) and s 29DB(2)(b))
 Transactions between closely related persons (s 29CB(2)(c) and 29DB(2)(c))
o In addition any SD and SSD payable
o  Rates at 15% on the consideration / market value of property, whichever is higher

3. Exchange of Properties
 Ad valorem duty on any equality money paid or difference in market values of properties concerned (ss 27 and 29F)
o Scale 1
o Scale 2 if
 Each party is HKPR acting on his/her own behalf and does not own another HK residential property
OR
 Exchange is between closely related persons acting on his/her own behalf
 SSD: if exchanged residential properties were acquired at different times, the earlier one is taken for counting the holding
period
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 o Exchange of residential for non-residential property: only the date of acquiring the residential property is
relevant for counting the holding period
 BSD: Exempt if it is between closely related persons each acting on his/her own behalf
o Exchange of residential properties: exempt if equality money is paid by the person who is HKPR acting on
his/her own behalf
o Exchange of residential for non-residential property: exempt if the person to whom residential property is
transferred is HKPR acting on his/her own behalf

4. Leases
 √ Leases
 √ Sub-leases
 X Orally-created leases under s 6(2) CPO
 X Licences
Charging Head 1(2):
 Head 1(2)(a): Scale 2 – 4.25% on any consideration other than rent (= premium)
o Premium = sums paid as ‘rent in advance’ for at least half of the term of a lease was held premium, not rent
 Head 1(2)(b): 0.25% to 1% yearly or average yearly rent depending on the term of lease

LIABILITY FOR SD
 Joint and several liability by ALL parties and other persons executing the relevant instrument
o Except BSD: sole liability of P
o SSD: depends on bargaining position
 In practice, SPA invariably provide that P will be liable to pay AVD

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 EXEMPTION TO SD

1. No beneficial interest has passed + the circumstances exempting the conveyance from charge are set forth in the
instrument (s 27(5))
 Use of trust
o At the time of nomination and conveyance to the beneficiary, the instruments are not liable to duty provided that
the terms on which the exemption applies are set out in the instruments (s 27(5))
 Distribution in specie upon liquidation
o On voluntary winding-up by shareholders of land-holding company
o Immovable property distributed in specie to shareholders
o No beneficial interest passes  no duty

2. s 45 Exemption
 Applicability: Head 1(1), 1(1A), 1(2A), and 2
 Transfer between associates is free from duty, on condition that the association remains (i.e. transferee stays in the
association) for at least 2 years after the transfer
o Associated corporates = >=90% (s 45(2))
 Subject to anti-avoidance provisions
 Procedure: detailed disclosure by way of statutory declaration

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 Illustrations

ONE: Buying multiple properties

(1) Property 1:
 PSPA: 4 Nov 2016
 FSPA: 11 Nov 2016
 By HKPR without any residential property in HK

(a) Chargeability:
 FSPA:
o FSPA executed in conformity with PSPA + within 14 days
o  Time of stamping: within 30 days of execution of FSPA (Note 2(a) to Head 1(1A))
 PSPA: upon stamping FSPA, PSPA no longer stampable (Note 2(b) to Head 1(1A))

(b) Rate:
 Relevant date:
o FSPA deemed to have been made on the same day as PSPA (Note 2(aa) to Head 1(1A))
o = 4 Nov 2016
 Old scale rate applies
 Scale 1 or 2?
o HKPR exception applies since P is buying his first property + HKPR
o Scale 2 applies

(2) Property 2:
 PSPA: 2 Dec 2016
 FSPA: 9 Dec 2016
 Added another person into the FSPA (non-HKPR + not close relative)

(a) Chargeability
 PSPA
 FSPA:
o FSPA and PSPA not in conformity
 Since there is 50% disposal to a person who is not regarded as same person
o See Note 5 to Head 1(1A)
 (i) Must be residential
 (ii) P1 and P2 are closely related persons
 (iii) P1 and P2 acting on his own behalf
 (iv) Neither P1 nor P2 owns another residential property
o Also stampable

(b) Rate:
 PSPA: New flat rate of 15%
 FSPA:
o New flat rate applicable to 50% of the property disposed to a different person  7.5%
 SSD applicable:
o Quick disposal of 50% of the property
o 20% / 2 = 10%
 BSD applicable to the new purchaser who is non-HKPR
o 15% on full consideration
Total = 15 + 7.5 + 10 + 15 on full consideration

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