In the 2023/24 Budget, the Hong Kong government proposes to adjust the value bands of the Scale 2 rates of the ad valorem stamp duty (AVD) payable for sale and purchase or transfer of both residential and non-residential properties.
The measure aims to ease the burden on buyers purchasing small and medium sized properties and car parking spaces. There are several salient points to note regarding the proposed adjustment:
- The new AVD Scale 2 rates apply to transactions of both residential properties and non-residential properties entered into at or after 11 a.m. on 22 February 2023.
- A Hong Kong permanent resident who purchases a residential property (with or without a car parking space) acting on his/her own behalf and does not own any other residential property in Hong Kong may be eligible for the new AVD Scale 2 rates. Otherwise, a flat rate of AVD at 15% of the purchase price will still be chargeable.
- There is no change to existing AVD Scale 1 rates, special stamp duty and buyer stamp duty.
- The old AVD Scale 2 rates will continue to apply to partial refund of AVD upon redevelopment or disposal of existing residential property, if the acquisition of residential properties for redevelopment purpose or the purchase of the new residential property was entered into before 11 a.m. on 22 February 2023.
- The adjustment of the AVD Scale 2 rates will be effected by amendment to the Stamp Duty Ordinance (Cap. 117). The government gazetted the Public Revenue Protection (Stamp Duty) Ordinance 2023 (the Order), coming into force at 11 a.m. on the same day, 22 February 2023. The Order is annexed with a bill to amend the Stamp Duty Ordinance (the Bill) to effect the proposed adjustment, but the Bill is yet to be tabled to, and scrutinised by, the Legislative Council. According to section 2 of the Public Revenue Protection Ordinance (Cap. 120), all provisions of the Bill shall have the full force effect of law so long as the Order remains in force. Furthermore, the Order shall expire and cease to be in force (a) upon the rejection by the Legislative Council of the Bill; or (b) upon the withdrawal of the Bill or the Order; or (c) upon the Bill becoming law; or (d) upon the expiration of four months from the day on which the Order came into force, whichever event first happens. In other words, the government will have four months to push for the Bill to be passed and enacted as law.
- The Stamp Office updated the FAQs on AVD to address the proposed adjustment.
While the proposed adjustment is relatively conservative, we expect this measure will be welcomed by the general public, developers and the real estate industry. The measure effectively lowers the transaction costs associated with sale and purchase of small and medium residential and non-residential properties (in which the AVD is customarily borne by the purchasers solely). We believe it is likely that, as Hong Kong's economy recovers from the pandemic, this measure will further boost the transaction count, particularly in small and medium residential units.
A summary of the proposed adjustment to the AVD Scale 2 rates is appended below:-
| Post-Budget | Pre-Budget | ||
| Amount or value of the consideration (whichever is the higher) |
New AVD Scale 2 rate | Amount or value of the consideration (whichever is the higher) |
Old AVD Scale 2 rate |
| Up to $3,000,000 | $100 | Up to $2,000,000 | $100 |
| $3,000,001 to $3,528,240 | $100 + 10% of the excess over $3,000,000 | $2,000,001 to $2,351,760 | $100 + 10% of excess over $2,000,000 |
| $3,528,241 to $4,500,000 | 1.5% | $2,351,761 to $3,000,000 | 1.5% |
| $4,500,001 to $4,935,480 | $67,500 + 10% of the excess over $4,500,000 | $3,000,001 to $3,290,320 | $45,000 + 10% of excess over $3,000,000 |
| $4,935,481 to $6,000,000 | 2.25% | $3,290,321 to $4,000,000 | 2.25% |
| $6,000,001 to $6,642,860 | $135,000 + 10% of the excess over $6,000,000 | $4,000,001 to $4,428,570 | $90,000 + 10% of excess over $4,000,000 |
| $6,642,861 to $9,000,000 | 3.00% | $4,428,571 to $6,000,000 | 3.00% |
| $9,000,001 to $10,080,000 | $270,000 + 10% of the excess over $9,000,000 | $6,000,001 to $6,720,000 | $180,000 + 10% of excess over $6,000,000 |
| $10,080,001 to $20,000,000 | 3.75% | $6,720,001 to $20,000,000 | 3.75% |
| $20,000,001 to $21,739,120 | $750,000 + 10% of the excess over $20,000,000 | $20,000,001 to $21,739,120 | $750,000 + 10% of excess over $20,000,000 |
| $21,739,121 and above | 4.25% | $21,739,121 and above | 4.25% |
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