Foreigners To Face More Tax in Hong Kong
October 28, 2012 Taxation in Hong Kong
HONG KONG – Foreign investors looking to enter the property market in Hong Kong will now face new tax barriers, as the local government looks to quell the potential risk of a bubble in the housing market.
From October 26th a new 15 percent tax was imposed in Hong Kong on the purchase of property by local and foreign corporate entities and by all individuals who do not permanently reside in Hong Kong.
At the announcement of the new tax the Financial Secretary of Hong Kong John Tsang also revealed that the tax rate applicable on the resale of property, which is already instated in Hong Kong, was also raised by 5 percent, with all homes sold within the first six month of purchase now facing a tax of 20 percent, and sales of homes held by investors for a period of between 7 and 12 months subject to a tax of 15 percent, and all sales of residential property sold within 3 years charged at a rate of 10 percent.
The new measures are aimed at curbing the excessive growth of prices on the local property market, and the Secretary said that “…the risk of a property bubble forming has increased greatly. It may be a threat for the Hong Kong macro-economy and the stability of the financial system.”
Explaining how the new taxes will aid Hong Kong residents, John Tsang said that “…the current housing supply lags behind the soaring demand; we need to work on the demand-side measures,” and “…these measures target specifically property investors who resell the flats within three years, but not the genuine end-users.”
The cost of residential property in Hong Kong is estimated to have risen by approximately 20 percent in the first 9 month of 2012 alone, with the escalating prices being fueled by low interest rates and easy credit conditions in mainland China.