Hong Kong’s richest tycoons are saving millions in taxes. (Photo: Exploringlife, Wikimedia Commons)
Some wealthy home buyers have found ways to avoid paying Hong Kong’s hefty property taxes, which were imposed as part of the government’s property cooling measures, reported Bloomberg.
For instance, billionaire Edwin Leong saved 10.75 percent in taxes, or nearly US$17 million, after he qualified as a first-time home buyer when he bought three high-end apartments at the Peak for HK$1.2 billion, all on the same day in November 2016.
This is because he previously did not own any real estate in his name, even though his firm Tai Hung Fai Enterprises Co. hold over 300 properties, including hotels, apartments, and shopping malls.
“Since the policies of Hong Kong’s Chief Executive Leung Chun-ying were introduced, most of the tycoons have been finding ways around them,” said Alan Wong, HK Director at Landscope Christie’s International Real Estate.
Since the latest property curbs were announced on 4 November, around 70 percent of the new condos sold involved first-time buyers who were eligible for the lower rate, versus about 30 percent before the new tax was introduced, noted Henry Mok, Regional Director of markets at JLL.
Another method used by the rich to reduce their property taxes when purchasing a home is to acquire a shell company that holds a property. This is categorised as a share transfer and merely incurs a stamp duty of 0.2 percent. If the firm is registered overseas, the buyer is exempt from tax.
This was the loophole used in the sale of a free-standing home with a yard and swimming pool with an appraised value of HK$410 million in the Kowloon district. The buyer is China Soft Power Technology Holdings, whose chairwoman is Lin Yuehe, a property developer in mainland China.
If it was not sold via a British Virgin Islands-registered company, the buyer would have paid 45 percent in taxes, or more than HK$180 million. Instead, the tax imposed was zero.
“This is clearly a loophole. The government hadn’t thought about this before they launched the measure,” said Raymond Yeung, Australia & New Zealand Banking Group’s chief economist in Hong Kong.
Romesh Navaratnarajah, Senior Editor at PropertyGuru, edited this story. To contact him about this or other stories, email romesh@propertyguru.com.sg
