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Property Flip in Happy Valley

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  1. #1

    Join Date
    Mar 2007
    Posts
    13,099

    Property Flip in Happy Valley

    I have heard that if you buy and then quickly sell your property, you will be liable for a special tax because you are flipping it too quickly.

    I've been googling and looking thru the IRD site but have not been able to find any definitive rules on this scenario. I would appreciate a pointer to the right document from anyone who has done this.

    1) How long do you need to own a property so you can avoid this tax?
    2) What is the tax rate if you happen to sell too quickly?

    TIA-HC


  2. #2

    Join Date
    Feb 2009
    Posts
    8,280

    My understanding is that there was talk and speculation the government may introduce measures such as this to cool down the property market. But I was not aware that this was actually in effect at the moment. I could definitely be wrong.

    One 'tax' you defintitely do need to consider is the stamp duty. It's not cheap. For me, this was like 4% of the purchase price. Surely this alone, regardless of any new taxes, is enough to discourage flipping.


  3. #3

    Join Date
    May 2006
    Posts
    1,072

    yes, unless your name is Lau Wong Fat and are head of the Heung Yee Kuk and have Donald Tsang as your lackey.

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  4. #4

    Join Date
    Aug 2006
    Location
    HK
    Posts
    145

    I recently tried to find out more about this and while happy to be corrected on any of these points I found the following:

    If you are undertaking the act/business of trading properties and these properties are intended to be held for the short-term then any gains are classified as 'trading income' by the IRD and taxed as such, whether you are an individual or a company. If you sold a property that you were holding as a long-term asset one-off then its technically a capital gain and not taxed. The problem, as far as I can see, is the IRD has not released any specific numbers relating to property value or the length of time held as to what constitutes 'trading income' or 'capital gains'. I guess they just "know it when they see it" and tax you accordingly. Once you receive the tax bill, you can appeal and put forward your case - I believe the burden of proof lies with the taxpayer.

    The good news is, this has come up before and if you can read past judgements where tax-payers have appealed the IRD's decision and either won or lost.

    site:.gov.hk property gain - Google Search

    If you have flipped a few properties before, then I don't think you can keep getting away with it - however, if you sell in order to buy a larger flat for your bigger family or something, and the facts support this then I think you could successfully argue that point and not be taxed.

    Standard disclaimer: I am not a lawyer/accountant etc.

    Last edited by albahk; 26-10-2010 at 06:14 PM. Reason: tidy up
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