first time house buyer question (stamp duty postponement)

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  1. #1

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    first time house buyer question (stamp duty postponement)

    sorry but this is a repost from planning your move section of the forum.

    my good friend bought a property at Seasons Monarch for 9.3 mil hkd. I believe it is first purchase, which means he is buying it from the developer. There is a sales promotion for Seasons Monarch properties where the developer will pay for your stamp duty. As you know the stamp duty for property cost more than 6.7 mil hkd is 3.75%, which is sizable amount of money.

    The problem is that the developer (one of Cheung Kong's shell companies) will only pay the stamp duty after the finalization of the sale (which means after the purchase payment is complete). The real estate agent told my friend to pay 500 hkd postponement fee to mortage banks to delay the payment of stamp duty.

    I have two questions (they're sort of related).

    1. When do you have to pay the stamp duty? My friend is going to see the conveyance lawyer mid august to pay the remaining 8.865 mil hkd. does he need to give the stamp duty amount to the lawyer before mid august then wait for the developer to reimburse him the amount?

    2. 500 hkd stamp duty postponement mortgage fee to the bank only applies if you get the mortgage. But if my friend is able to get finance without using banks, does he need to use the conveyance lawyer to postpone the stamp duty payment? Or can he just go to the gov office and tell them the developer will pay them later (i donno whether it is the Inland Revenue office or the Land Registry office).

    thanks for your help. purchasing properties in hong kong is not that easy. there are so many little hidden fees that'll nickel and dime all the enthusiasm out of you.


  2. #2

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    Firstly, I have no idea why you would post this here rather than get the information direct from the lawyer / conveyance for who you are paying for just this advice.

    Stamp duty has to be paid before completion and will be handled by the lawyer and the lawyer of the developer from which they will no doubt have a letter of agreement to pay the duty as part of the contract. If in HK there is a fee to pay for postponement of such a charge - great, but I would suggest its the developers liability not yours.

    Talk to the guy your paying.


  3. #3

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    Quote Originally Posted by Boris:
    Stamp duty has to be paid before completion
    My reading is that it has to be paid with 30 days of completion.

  4. #4

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    The article refers to the stamping of the document not to the payment of tax. I would imagine the lawyers accept completion upon a receipt of the sales document being accepted by HMG.

    An interesting paragraph in the article reads --
    Agreement for sale and purchase of residential properties should be stamped within 30 days after execution of the earliest agreement for the same transaction (e.g. a provisional agreement) except otherwise provided in the Stamp Duty Ordinance (Cap. 117). Subject to certain conditions, an electronic or a paper application can be made for deferral of payment of stamp duty of a chargeable agreement until the related assignment is executed or re-sale of the property, as the case may be. The maximum period of deferral is 3 years after the date of the earliest agreement. The application for deferral should be made on or before the stamping deadline of the agreement. For details of the application and stamping procedures, please refer to the Stamping Procedures and Explanatory Notes on “Stamping of Agreements and Assignments” (IRSD120)

    I government deferring tax for 3 years !!! HMG is truly run by the property kings. Great cash flow advantage.


  5. #5

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    Quote Originally Posted by PDLM:
    My reading is that it has to be paid with 30 days of completion.
    my understanding is that it has to be completed within 30 days of completion like you said. my friend is going to have the full amount paid to the lawyer by mid august. so i think stamp duty has to be paid before mid sept.

    what is the penalty of not paying stamp duty on time?

    p.s. it is not my conveyance lawyer. just helping my friend out with the whole transaction.

  6. #6

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    Boris - From what I gather, the document is stamped when you pay the tax.


  7. #7

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    "Agreement for sale and purchase of residential properties should be stamped within 30 days after execution of the earliest agreement for the same transaction (e.g. a provisional agreement)"

    doesn't this mean 30 days after signing any agreement? even the provisional sales and purchase contract? and not 30 days after completion of the sale?

    i paid this through my solicitors a few days after i paid the big deposit on my flat (about 2-3 weeks after i signed my provisional agreement).

    the penalty of not paying is probably just that it wont be registered under your name. you should ask the solicitor/lawyer to help apply for deferral by however long is necessary or if your friend has the cash lying around, to pay it and then the developer will reimburse him as promised (hopefully).


  8. #8

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    Quote Originally Posted by KnowItAll:
    Boris - From what I gather, the document is stamped when you pay the tax.
    I would accept that feeling. No money, no document. But being able to have a property " in limbo " for up to 3 yrs - incredible.

  9. #9

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    Quote Originally Posted by pico:
    p.s. it is not my conveyance lawyer. just helping my friend out with the whole transaction.
    Friends should not give advice in these things. Its a job for professionals.