In her 2020 Policy Address on 25 November 2020, Hong Kong’s Chief Executive declared that the double ad valorem stamp duty (DSD) levied on non-residential land transactions would be eliminated with effect from today, i.e. 26 November 2020.
As one of the steps to rein in increasing house prices by increasing the ad valorem stamp duty for both non-residential and residential property transactions in Hong Kong, the government launched the DSD in 2013. Nevertheless in view of the decline in non-residential property prices and demand in the midst of the COVID-19 pandemic, the Government agreed to eliminate the DSD on non-residential property transactions with a view to encouraging the disposal of undertakings by selling non-residential properties in order to resolve their financial liquidity needs.
In effect, this implies that any instrument performed on or after 26 November 2020 for the selling and acquisition or conversion of non-residential land shall be liable to ad valorem stamp duty at the rates referred to in ‘Scale 2’ of Head 1(1) or Head 1(1A) of the First Schedule of the Stamp Duty Ordinance (Cap. 117 of the Hong Kong Laws i.e. the original rates available prior to the implementation of the DSD.
The Chief Executive rendered the Public Revenue Security (Stamp Duty) Order 2020 to give force to the planned abolition, awaiting the Legislative Council’s review of the related reform bill.
However in regard to instruments executed before 26 November 2020, DSD thresholds remain applicable. The Government also confirmed that it had no intention of changing any of the stamp duty rates for residential land.
It would be important to see if the planned abolition will have its expected result of facilitating investments of non-residential property and thereby helping the numerous players in the sector for non-residential land.