Higher property taxes for Hong Kong as government warns it is monitoring speculators |
| Friday, 26 February 2010 | |
 Hong Kong new taxes Hong Kong’s new fiscal budget for 2010/2011 includes additional taxes to reduce volatility in the property market and monitoring of speculators. Although Hong Kong’s gross domestic product (GDP) only fell by 2.7% in 2009 and growth in GDP of up to 5% is expected this year, the government is still concerned about the sustainability of the current economic recovery.Financial Secretary John C Tsang announced an HKD20 billion relief package that includes tax rebates, rates concessions and public housing rental waivers, to provide financial assistance to the community during the economic recovery. The package includes reducing 75% of salaries tax and tax under personal assessment for 2009/10, subject to a ceiling of HKD6,000; waiving rates for 2010/11, subject to a ceiling of HKD1,500 per quarter for each rateable property; and waiving business registration fees for one year. He said that due to the surge in global liquidity as a result of the eased monetary policies in a number of countries, Hong Kong has received an inflow of funds exceeding HKD640 billion since the fourth quarter of 2008, increasing the potential risk of creating asset-price bubbles, particularly in the property market. As a result the government is closely monitoring the situation in the property market. The inflow of funds has fuelled an increase in the prices of luxury flats, which to some extent has affected the prices of small and medium sized flats. Overall, property prices are 8% above their peaks before the global recession. While the government will therefore take measures to improve the supply of flats and land for development, and reduce excessive mortgage lending, Tsang revealed that the government will also increase the transaction cost of property speculation with appropriate tax measures so as to reduce the risk of creating a property bubble. From April 1 the rate of stamp duty on transactions of properties valued more than HKD20 million will be increased from 3.75% to 4.25%, and buyers will no longer be allowed to defer payment of stamp duty on such transactions. ‘In parallel, we will closely monitor the trading of properties valued at or below HKD20 million. If there is excessive speculation in the trading of these properties we will consider extending the measures to these transactions,’ said Tsang. He also revealed that the Inland Revenue Department has established procedures to track property transactions involving speculation and will follow up each case closely. If it is found that such transactions constitute a business, the IRD will levy profits tax on the persons or companies concerned for profits arising from such transactions.
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