Sometimes, you’re exempt from paying some of the property taxes. It all comes down to your residency status, the property type, the holding period, and whether you’re a first time buyer. We cover this in greater detail in our FAQ below.
Below, you can find commonly asked questions from buyers and our replies.
Can I use this calculator for a previous purchase, for example, if I bought a property in 2014?
As tax rates have changed over the years, we advise you to only use the calculator for new purchases.
Will the calculator deduct any closing costs for the ROI?
Closing costs are the expenses (in addition to the purchase price) that buyers and sellers sometimes incur to complete a real estate transaction. Some of these costs originate from fees for property value appraisals, title searches, title insurance, surveys, property taxes, legal fees, and more.
Having that said, we’ve only deducted the property taxes and a real estate agent commission of 1%, which is the normal rate in Hong Kong. The syntax is created based on a scenario where you pay interests over the holding period and repay the property loan in full when the property is sold.
Where can I find the tax rates used?
In which cases do I need to pay the taxes and what are the rates?
Below you’ll find more information about the taxes and for whom these apply.
Ad valorem stamp duty (AVD):
- If you’re a non-resident foreigner or a permanent resident (HKPR) and acquires property for a second time or more, you’ll be charged an AVD of 15%
- If you’re a permanent resident and a first time home buyer, the AVD increases progressively, as shown in Scale 2
- The rates for non-residential property (i.e. commercial property) increase progressively from 1.5% – 8% for non-residents, permanent residents, and local citizens. In addition, you can sometimes enjoy marginal relieves that reduce the rates significantly
Buyer’s stamp duty (BSD):
A BSD of 15% applies to non-resident foreigners, but not to local citizens and permanent residents (HKPRs).
Annual property tax:
The annual property tax is calculated at a standard rate of 15%. It’s multiplied by the yearly estimated rental value of the property, running from April 1st to March 31st of the following year.
However, you’re allowed to deduct an allowance of 20% of the estimated yearly rental value. Thus, the annual property tax is around 12%.
Special stamp duty (SSD):
A Special stamp duty (SSD) is charged if you sell the property within 36 months. The rates decrease progressively as follows for property acquired after October 27th, 2012:
- 20%: if the holding period is 6 months or less
- 15%: if the holding period is more than 6 months and 12 months or less
- 10%: if the holding period is more than 12 months and 36 months or less
How often do you check the tax rates?
We review the rates on a quarterly basis.
What are the main differences when buying commercial and residential property?
The Ad valorem stamp duty (AVD) rates are significantly lower when buying commercial property (compare Part 2 of Scale 1 with Part 1 of Scale 1). In addition, non-permanent residents aren’t subject to any Buyer’s stamp duty (BSD).
Have you deducted any allowances from the yearly rental income when computing the Annual property tax?
Yes, we have deducted a 20% allowance which results in a rental income tax of around 12%. The official rental income tax is 15%.
Have you multiplied the annual property tax x 2, as a withholding tax for the following year?
Even if the government multiplies the annual property tax x 2 (to keep a withholding tax for the following year), we’ve only included the original value for the current year.
If I inherit a property in Hong Kong and want to buy a second property, am I treated as a first time buyer?
No, you are treated as a second time buyer.
Do you have other questions?
If you have any other questions, feel free to contact us by email. We normally reply the same day!