[BUYING AND SELLING REAL ESTATE IN HONG KONG]
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2024) of the consideration or value of the residential property, whichever is the higher. Special Stamp Duty (“SSD”) Effective from 28 February 2024, any instrument executed thereafter for the sale and purchase, or transfer of residential property is no longer subject to SSD. Unless specifically exempted or provided otherwise, SSD is chargeable on a transaction involving the sale and purchase or transfer of a residential property if the subject property is acquired and resold within 36 months after acquisition between 27 October 2012 and 27 February 2024. The rate of the SSD payable varies from 10% to 20% of the consideration or value of the residential property, whichever is the higher, depending on when the subject property was resold within those 36 months. The purchaser and the vendor to the property transaction and any person who uses the instrument will be jointly and severally liable to pay SSD. Stamp duty refund and upfront relief for eligible incoming talents For incoming talent under the designated talents admission schemes who has acquired residential property in Hong Kong during the period from 19 October 2022 to 24 October 2023, he/she is eligible to apply for the stamp duty refund of the BSD, SSD or AVD at Part 1 of Scale 1 rates paid in respect of one residential property after the incoming talent becomes a Hong Kong Permanent Resident. Sale and Purchase of Property by way of Transfer of Shares On the other hand, it has now gradually become a common practice for potential purchaser in Hong Kong to acquire property by way of transfer of shares in a limited company. Under such an arrangement, the vendor, who is actually the shareholder of the limited company, agrees to sell and the purchaser
agrees to purchase all the issued share capital and liabilities of and in that limited company. As a result, the purchaser will acquire the property through becoming the shareholder of that limited company in place of the vendor. Unlike the usual PASP as aforesaid, an agreement for the sale and purchase of shares of a limited company is a more complicated legal document. Apart from taking over the shares of a limited company, the purchaser will also have to take over the debts and liabilities of that limited company which is associated with the share transfer transaction. However, such debts and liabilities of the limited company may not be easily discovered by the purchaser unless a thorough due diligence examination of the accounting records and corporate documents of that limited company has been conducted. Further, complications may arise from the share transfer transaction if financing is required by the purchaser. The approach will be totally different from applying for mortgage loan for financing the purchase of a property through a simple sale and purchase as aforementioned. From a tax perspective, a purchaser may prefer making his/her purchase through a company in order to enjoy lower stamp duty. As mentioned above, purchase of property in Hong Kong may be subject to AVD. Meanwhile, a share transaction is subjected to a significantly lower stamp duty, which is 0.1% (For each Transferor and Transferee) of the amount of consideration or the underlying net asset value of those shares, whichever is the higher. If parties intend to sell and purchase a property by way of transferring shares of a limited company, it is important that the parties’ interests are adequately protected, and comprehensive legal documentation is required. It is advisable to obtain legal advice before acquiring a property by way of share transfer.
ILN Real Estate Group – Buying and Selling Real Estate Series
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