Hong Kong Government Removes All Property Curb Measures
On 28 February 2024, Hong Kong financial chief presented his annual budget speech to announce measures that will be taken this year to address the financial challenges Hong Kong faces. During his presentation, he announced that all property price curb measures the Hong Kong Government previously put in place will be removed, effective immediately.
The Removal of Buyer’s Stamp Duty
Prior to the announcement made on 28 February 2024, non-Hong Kong Permanent Residents needed to pay an extra stamp duty of 7.5% of the purchase price on the purchase of a residential property. As of 28 February 2024, the Buyer’s Stamp Duty has been completely removed, allowing non-Hong Kong Permanent Residents to purchase residential properties at no extra taxes.
The Removal of Special Stamp Duty
Prior to the announcement made on 28 February 2024, residential property owners needed to hold their property for at least 24 months before selling. If the property was sold within a 24 month period, the seller would be liable to pay a Special Stamp Duty up to 20% of the selling price. As of 28 February 2024, the Special Stamp Duty has been completely removed, removing any minimum amount of time residential property must be held for.
Purchasing a Residential Property with a Limited Company
The removal of Buyer’s Stamp Duty and Special Stamp Duty extends to buyers that used a limited company to purchase a residential property, allowing buyers to once again use limited companies to purchase residential properties without paying extra stamp duty taxes.
Tax benefits of Buying Hong Kong Residential Properties with a Limited Company
If the residential property purchased is an investment property producing rental income, there are tax benefits of using a limited company to hold the property. The two major benefits are:
- Lower taxes on the rental income received from the property
- Lower stamp duty if the property were to be sold by selling the holding company
If a person receives rental income from a property, that rental income is charged a rate of 15% after deducting government rates and a 20% general deduction. If a company receives rental income from a property, and the company qualifies for the 2-tier tax rate, then the tax rate starts at 8.25%. The tax deductions are more much wide ranging for a company receiving rental income. Any expenses related to the upkeep and letting of the property is tax deductible, as long as those expenses were incurred in the production of the rental income.
If the company only holds a single residential property without any other business operation, if the owner wishes to sell the property, there is a sizeable tax benefit to selling the entire holding company, instead of just selling the property. If the seller were to sell the shares of the holding company, the stamp duty tax rate is 0.1%.
For example, if a property was sold for HK$10 million between two individuals, the normal stamp duty liability would be HK$370,000. If the property is sold by selling the shares of the entire holding company, the stamp duty liability would be HK$20,000.
Disadvantages of Buying Hong Kong Residential properties with a Limited Company
Although there are tax benefits for residential property buyers that use a limited company. If a mortgage loan is required to purchase the property, the allowed loan-to-value tends to be lower for a limited company, requiring a higher deposit payment from the buyer.
Setup a Hong Kong Company to purchase an Investment Property
If you have any questions about using a Hong Kong company to purchase a residential investment property, let us know!
