Homeowner wins tax refund in triple deals
Updated: 2016-02-19 09:16
By Emma Dai in Hong Kong(HK Edition)
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High Court rules double stamp duty does not apply to those who just want to improve living conditions
In a case described by market experts as "too rare" in Hong Kong, the High Court on Thursday ordered that a stamp duty tax of HK$273,000 be refunded to a homeowner, who sold two small apartments for a bigger one to house his family.
It's believed that the ruling is not likely to boost property transactions in the city as the incentive would not be attractive enough for people seeking bigger homes.
Ho Kwok-tai, a Hong Kong permanent resident, was granted a refund of the tax he paid for an apartment in Ma Wan he had bought in June 2013 for a reported HK$7.3 million as he needed it to house a larger family with a second child.
The government had introduced a double stamp duty (DSD) in February 2013 to curb property speculation, whereby homeowners have to pay twice the required stamp duty if they purchase another property worth HK$2 million or above. However, exceptions are made for those who sell their old home within six months of the purchase.
In Ho's case, by August 2013 - just two months after he had bought a new home - he had sold two old apartments in Tsing Yi for about HK$8 million. He applied for a tax refund but was rejected. The Inland Revenue Department argued that a refund could only apply to those who sell only one old property for a new home.
The High Court, however, ruled on Thursday that Ho was entitled to the refund because he had ended up with only one residential property.
Deputy High Court Judge Brian Keith referred to Financial Secretary John Tsang Chun-wah's blog in 2013 saying that "Hong Kong permanent residents, as long as they intend to only own one residential property regardless of whether it's a first-time property or a change of properties, do not need to pay the double stamp duty".
"I have not really understood why he (John Tsang) might want to deny a refund to someone who happens to have a second residential property but wishes to sell both of them to finance the purchase of a new residential property", the judge said in his ruling.
He added that administrative inconvenience in granting a refund in such a case "would be very modest at best".
Legislator Tse Wai-chuen, who represents the architectural, surveying and planning sector, welcomed the judgment, saying it's in line with the original intention of the DSD, which is to curb speculation, but support genuine homes buyers at the same time.
"It's not about how many old properties are sold, but the purpose of selling them," Tse said. "Homeowners should be entitled to tax refunds as long as the deals are made to improve their living conditions. Not to mention that in Ho's case, the proceeds of selling just one old property are not enough to cover the cost of a new one."
Thomas Lam, Greater China head of research and consultancy at Knight Frank, believes the case is not likely to boost property transactions in Hong Kong given that the incentive is "not attractive enough" for those seeking a bigger home.
"The major concern of potential homes buyers is still the market outlook and investment return," Lam said. "Given the current weak market sentiment, end-users who expect further falls in real-estate prices would not move just because of a tax refund."
He added that although end-users account for more than 60 percent in the property market, in most cases, they only have one old property to sell. "Ho's case is rather rare."
Secretary for Transport and Housing Anthony Cheung Bing-leung told the Legislative Council on Thursday the government has no intention of withdrawing the measures introduced to cool the property market, including the DSD.
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A real-estate agent checks his smartphone behind a model of Park Vista, a residential property developed by Sun Hung Kai Properties. The High Court on Thursday ordered that a stamp duty tax of HK$273,000 be refunded to a homeowner, who sold two small apartments for a bigger one to house his family. But experts believe potential homes buyers, who expect further falls in property prices, would not move just because of such a "rare case". Billy H.C. Kwok / Bloomberg |
(HK Edition 02/19/2016 page9)