Wealthiest Hong Kong Investors Skip Property Tax

August 17, 2018 Taxation in Hong Kong

Hong Kong housingHONG KONG – Shell companies are helping Hong Kong’s wealthiest people pay less to purchase houses and property.

Hong Kong has some of the most expensive property and housing in the world, and recent media reports are indicating that some wealthy investors and buyers are managing to bypass the taxes aimed at reducing house prices.

Under the standard rules applicable for most locals, property purchases carry with them a stamp duty of 15 per cent, or an even higher 30 per cent duty of the purchaser is not a local.

However, some wealthy locals have been reducing the applicable rate of stamp duty to as low as 0.2 per cent.

The reduced rate applies if the property in question is held in a company, and the buyer purchases the company and not the underlying asset.

Share sales are eligible for a stamp duty of only 0.2 per cent, instead of the much steeper 15 per cent.

The same method also works for properties being purchases by foreigners, meaning that the savings can be even higher.

Investigations carried out by the local think tank Liber Research Community indicate that the government of Hong Kong has lost out on at least HKD 9.4 billion in tax revenues due to the loophole.

The opportunity to reduce taxes via this method is reserved almost exclusively for wealthy individuals, as purchasing via companies essentially precludes the purchaser from obtaining a mortgage, meaning that everybody bar the affluent are not able to use the method.