Abolition of Doubled Ad Valorem Stamp Duty in Hong Kong

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Is it a silver lining for Hong Kong’s commercial property market?

On 25 November 2020, the Chief Executive, Mrs Carrie Lam, announced in her Policy Address to abolish the Doubled Ad Valorem Stamp Duty (“DSD”) on non-residential property transactions, with effect from 26 November 2020. Accordingly, any chargeable instruments on non-residential property transactions executed on or after 26 November 2020 will be subject to Stamp Duty at the lower Scale 2 rates instead of the “doubled” rates under Part 2 of Scale 1 which are as follows.

Part 2 of Scale 1Scale 2
Consideration or value (whichever is higher)RatesConsideration or value (whichever is higher)Rates
Up to $2,000,0001.50%Up to $2,000,000$100
$2,000,001 to $2,176,470$30,000+20% of the excess over $2,000,000$2,000,001 to $2,351,760$100+10% of the excess over $2,000,000
$2,176,471 to $3,000,0003.00%$2,351,761 to $3,000,0001.50%
$3,000,001 to $3,290,330$90,000+20% of the excess over $3,000,000$3,000,001 to $3,290,320$45,000+10% of the excess over $3,000,000
$3,290,331 to $4,000,0004.50%$3,290,321 to $4,000,0002.25%
$4,000,001 to $4,428,580$180,000+20% of the excess over $4,000,000$4,000,001 to $4,428,570$90,000+10% of the excess over $4,000,000
$4,428,581 to $6,000,0006.00%$4,428,571 to $6,000,0003.00%
$6,000,001 to $6,720,000$360,000+20% of the excess over $6,000,000$6,000,001 to $6,720,000$180,000+10% of the excess over $6,000,000
$6,720,001 to $20,000,0007.50%$6,720,001 to $20,000,0003.75%
$20,000,001 to $21,739,130$1,500,000+20% of the excess over $20,000,000$20,000,001 to $21,739,120$750,000+10% of the excess over $20,000,000
$21,739,131 and above8.50%$21,739,121 and above4.25%

The DSD was introduced in 2013 to cool down the overheating non-residential property market. However, due to the uncertainties surrounding the pandemic, prices and transactions for non-residential properties have been dropping over a period of time. The Government considers now the right time to abolish the DSD.

Having said that, some analysts believe that the market correction is almost completed and hence the drop in the values of non-residential properties, coupled with the reduction in Stamp Duty, will create some triggers for commercial property investment. In fact, according to data by Centaline Commercial, the value of property bought and sold jumped to HK$ 13.74 billion of 318 deals in the first 22 days of November, from HK$ 2.62 billion of 208 transactions in the same period last year.

If you have any questions regarding the above or other tax matters, please do not hesitate to contact us on +852 2804 0889 or by email taxservices@hkwj-tax.hk.

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