The Hong Kong government on 25 November 2020 announced repeal of the “double rate” of stamp tax (duty) on sales of commercial property.
The announcement indicated that the ad valorem stamp duty on commercial properties would be returned to the standard rates (effectively halving the tax payable) but would not affect residential property. The measures have an effective date of 26 November 2020.
In recent years, stamp tax on commercial property has been levied at rates of up to 8.5%, and this rate has been one reason that large scale real estate transactions have typically been structured as corporate sales rather than direct asset sales. Stamp tax on commercial properties was increased in 2013 as part of measures intended to address real estate inflation. The current market situation is different, with many businesses struggling as a result of COVID-19 and social unrest. Certain real estate sectors such as retail are also facing longer term trends such as increased digitalization. The measures are expected to benefit businesses needing to liquidate real estate assets as a result of declining revenues.
While the burden of the stamp tax is normally borne by the real estate purchaser, the tax can be a factor in reaching the purchase price. In practice, most large real estate transactions have been structured as sales of property in a “corporate wrapper” (subject to much lower rates of stamp duty).
For more information, contact the head of KPMG’s Global Indirect Tax Services:
Lachlan Wolfers | +852 2685 7791| email@example.com
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