HONG KONG SAR, CHINA Law and Practice Contributed by: Alfred Ip, Hugill & Ip
1.5 Taxation of Real Estate Owned by Non- Residents and Non-Citizens Hong Kong imposes taxes on real estate based on its location, irrespective of the owner’s residency or citizenship status. Property Tax at a standard rate of 15% is levied on the net assessable value (inamely, the rental income less a statutory 20% allowance for repairs and outgoings) of Hong Kong real estate. Owners who are also subject to Profits Tax on the same rental income may elect to be assessed under Profits Tax instead, with a corresponding offset. In a significant policy reversal, the Hong Kong gov - ernment abolished all demand-side management stamp duty measures for residential properties with effect from February 2024. This included the Buyer’s Stamp Duty (BSD), which had previously imposed an additional 15% on non-permanent residents, and the New Residential Stamp Duty (NRSD). Non-residents now pay the same ad valorem stamp duty (AVD) as Hong Kong permanent residents, substantially reduc - ing the cost of entry for foreign buyers. The current AVD rates are set out on the government’s stamp duty rates page. In the 2026/27 Budget, the Financial Secretary pro - posed to increase the stamp duty rate for residential properties valued above HKD 100 million from 4.25% to 6.5%, targeting the ultra-luxury segment. Indirect ownership through a corporate vehicle, typically a British Virgin Islands or Hong Kong company, remains a common strategy, as the transfer of shares in such a company attracts stamp duty at only 0.2% of the consideration or net asset value, compared with the higher AVD on direct property transfers. However, this approach requires corporate governance, annual fil - ing obligations, and potential Profits Tax exposure if the company is deemed to be carrying on a property trading business. For detailed analysis of investment vehicle options, see Choosing the Right Investment Vehicle for Hong Kong Real Estate and Property Hold - ing Trusts for Family Wealth PreservationChoosing the Right Investment Vehicle for Hong Kong Real Estate and Property Holding Trusts for Family Wealth Pres - ervation on the Hugill & Ip website.
tures and requires careful review of existing arrange - ments. For individuals, the use of personal allowances, deductions for self-education expenses, approved charitable donations and mandatory provident fund contributions can reduce the effective Salaries Tax burden. The IRD publishes annual tax measures in the Budget, which in recent years have included one-off tax reductions subject to a ceiling, providing modest relief to individual taxpayers. 1.4 Pre-Immigration and Exit Planning Hong Kong imposes no entry or exit taxes on indi - viduals. There is no deemed disposal of assets upon becoming a Hong Kong tax resident, and no exit charge on departure. This makes Hong Kong an exceptionally clean jurisdiction from a pre-immigration and exit planning perspective, particularly when com - pared with jurisdictions that impose deemed realisa - tion taxes or departure levies. Pre-immigration planning typically focuses on restruc - turing offshore assets and income streams before establishing Hong Kong residency, to ensure that future income and gains are generated in a manner consistent with the territorial tax principle. Individuals relocating from high-tax jurisdictions should obtain advice on whether existing structures, such as con - trolled foreign corporations or offshore trusts, may inadvertently generate Hong Kong-sourced income once the individual is resident. On exit, individuals must settle all outstanding Salaries Tax liabilities. Under the Inland Revenue Ordinance (Cap. 112), an employer is required to notify the IRD when an employee intends to leave Hong Kong for a period exceeding one month, and the IRD will issue a tax clearance letter before the individual departs. Careful planning of the timing of departure and the cessation of Hong Kong-sourced income can optimise the final tax position. Individuals should also consider the tax implications of their destined jurisdiction, par - ticularly regarding the treatment of trust distributions, deferred compensation, and unrealised gains.
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