Speech at Council Meeting-Gov. Bills-2 Read.- Stamp Duty (Amendment) (Residential Properties) Bill 2023


President, in my capacity as Chairman of the Bills Committee on Stamp Duty (Amendment) (Residential Properties) Bill 2023 (“the Bills Committee”), I now report to the Legislative Council on the main deliberations of the Bills Committee.

The Stamp Duty (Amendment) (Residential Properties) Bill 2023 (“the Bill”) seeks to amend the Stamp Duty Ordinance to give effect to the proposals in the 2023 Policy Address to adjust Special Stamp Duty (“SSD”), Buyer’s Stamp Duty (“BSD”) and New Residential Stamp Duty (“NRSD”), and to introduce a stamp duty suspension arrangement for incoming talents who acquire residential properties in Hong Kong.

Under the proposed stamp duty suspension mechanism, stamp duties payable by an incoming talent at the time of acquiring a property will be suspended, and during the suspension, a specified charge would be constituted in favour of the Collector of Stamp Revenue (“the Collector”) of the Inland Revenue Department (“IRD”) for securing the amount.  Members have sought clarification on the priority of the Collector’s specified charge vis-a-vis the charge of the mortgagee bank under various scenarios, such as refinancing a mortgage to obtain an additional loan or creating a new charge.

The Administration has advised that in terms of priority, the specified charge is second only to the first mortgage for acquiring the subject property to the extent of the “reserved amount”.  The arrangement strikes a proper balance between protecting the Government’s revenue and facilitating incoming talents’ acquisition of mortgage for purchasing the subject property.  If an incoming talent refinances his mortgage, the additional loan amount is not used for the acquisition of the subject property under the first acquisition mortgage, the amount concerned will not form part of the “reserved amount”, and the priority of the mortgage or charge in respect of the additional loan amount will rank below that of the charge of IRD.  Under the same principle, the amount of the loan in a new charge will also not form part of the “reserved amount”, so the priority of the charge on the new charge will also rank below the specified charge of IRD.

Members have sought clarification from the Administration on the definition of “reserved amount”, and whether it includes costs in addition to the principal and interest in respect of the loan for acquiring the subject property.  In response to members’ concern, the Administration has proposed an amendment to amend the meaning of “reserved amount” in the proposed new section 29DR(2)(a) to clarify that the “reserved amount” should refer to the sum of any outstanding principal, any outstanding interest in respect of that loan, and any costs due under the acquisition mortgage, which also reflects the policy intent.

Given that under the Bill, only an “eligible person” as defined in the existing provisions can apply for the discharge of the specified charge, members have requested the Administration to consider expanding the definition of “eligible person” so that a person other than the “eligible person” (e.g. a prospective buyer or the mortgagee bank of the subject property) who pays the specified amount to the effect that there is no outstanding liability to stamp duty, may also apply for the discharge of the specified charge.  Members consider that this would provide flexibility and is in line with the objective of protecting the Government’s stamp duty revenue.

In response to members’ concern, the Administration has agreed to introduce an amendment to expand the definition of “eligible person” to allow a person who can show to the satisfaction of the Collector that he/she has sufficient interest, he/she may apply to the Collector for the issue of a certificate of discharge after payment of the specified amount.  In other words, the “eligible persons” (e.g. the mortgagee bank and subsequent buyers) may, according to their needs, apply to the Collector for the issue of a certificate of discharge after payment of the specified amount.

Members of the Bills Committee generally support the proposals in the Bill and have no objection to the amendments proposed by the Administration.

President, the above is my report on the deliberations of the Bills Committee.

I will now express my personal views on the Bill.

First of all, in the past year, with the significant rise in interest rates and the economic slowdown in a number of regions, transactions in the local property market have decreased.  Considering that the future housing supply in Hong Kong will continue to increase, it is timely for the Chief Executive to introduce three “relaxation measures” for the property market in the latest Policy Address.

Secondly, the banking sector to which I belong generally supports the management measure of the stamp duty suspension arrangement, but some members of the sector have asked in the consultation process whether the measure could also be applied to the creation of a new charge.  Although I have just reported that the measure is not applicable in such cases, the reason for the suggestion given by members of the sector is that this measure will give more choices to incoming talents in the future and it may even save interest costs.  In this regard, the Government has made it clear that the original intent of the measure is to not hinder incoming talents’ applications for mortgage for purchasing the residential properties while protecting the Government’s stamp duty revenue.  Section 29DR of the Stamp Duty Ordinance stipulates that in terms of priority, the Government only accepts the bank’s first legal charge for acquiring the subject property to take priority over the Collector’s specified charge to the extent of the “reserved amount” under the stamp duty suspension arrangement.  In other words, the measure is not applicable in the creation of a new charge.  The industry understands the Government’s explanation.

President, talents are the driving force of Hong Kong’s prosperity.  In the Chief Executive’s first Policy Address, he mentioned a number of initiatives to “compete for talents”.  Housing is the first and foremost issue faced by each and every talent coming to Hong Kong for development, and whether the talents can live and work in Hong Kong in peace and contentment is, in fact, closely related to whether they will stay here for long-term development.  Home ownership is a major decision in life, and most of the incoming talents who intend to acquire properties in Hong Kong are willing to stay in Hong Kong for long-term development.  The stamp duty refund arrangement implemented earlier has made it necessary for these people to reserve a large sum of money to pay tax if they acquire properties, thus affecting their determination to do so.  On the contrary, the stamp duty suspension arrangement has helped them to reduce the immediate financial burden of home ownership and gain a cushion of time.

According to the Housing Bureau, the enhanced stamp duty suspension arrangement is well received by incoming talents.  From late October last year to mid-January this year, IRD has received 474 applications, of which 394 have been approved, showing that the measure has achieved significant results in enabling incoming talents to acquire properties in Hong Kong and attracting them to stay in Hong Kong for development.

The enhancement of the stamp duty refund arrangement previously implemented to the stamp duty suspension arrangement demonstrates the Government’s ability to adapt its policies in response to the market situation and incorporate the suggestions put forth by Members in a timely manner.  It is also a testament to the collaborative efforts of various government departments, including the Housing Bureau, IRD, the Stamp Office and the Department of Justice, which have turned seemingly inoperable tax arrangements feasible.  This shows that as long as government departments can cooperate with each other, pool together their wisdom, strive for results, and jointly come up with ideas for policies that are more favourable to Hong Kong, they will be able to solve problems that may be difficult for a single department to tackle alone.  It is hoped that there will be more successful cases of interdepartmental cooperation and breaking away from the old mindset in the future, so that members of the public can feel the impactful outcomes of the Government’s concerted efforts.

President, in fact, this exercise to amend the Stamp Duty Ordinance still leaves a loose end by retaining some of the “harsh measures”, and there are still strong calls in the community for withdrawal of all the “harsh measures”.  I hope that the Government can objectively review the current transaction data of the property market and act decisively to facilitate its healthy development if necessary.

I would like to thank members of the Bills Committee for their careful and pragmatic approach in actively making suggestions on the inadequacies of the Bill.  I would also like to thank the Administration for patiently listening to the suggestions made by Members, the Legal Adviser of the Legislative Council and the public (including the Hong Kong Association of Banks) and accepting them, and for improving the provisions of the Bill.

President, on behalf of the “G19” Members, I indicate that we will definitely support the passage of the Bill and all the amendments.  I so submit.