[Comprehensive Guide on Investment in a Parking Space] Tips to gain mastery on how to calculate the stamp tax for parking spaces and flats with parking spaces

Compared with the stamp duty on residential properties, the  duty on a parking space is much less. Since the government regards parking spaces as non-residential properties, there is no need for the buyer to pay the buyer』s stamp duty and special stamp duty. No matter how many parking spaces are purchased, a buyer is only required to pay a double stamp duty.

Investors pay less tax when purchasing more than one or multiple parking spaces than if they will purchase multiple  residential units.

Stamp duty on trading of parking spaces

When buying and selling a parking space, the applicable rate that needs to be paid is set at Scale 1 ( Part 2), or the so-called double stamp duty.

If a parking space, for instance, costs under HK$2 million, the stamp duty is 1.5 per cent of the price, but if a parking space is priced at HK$3 million , the stamp duty is 3 per cent of the transaction price.

As the price of a parking space gets higher, the stamp duty rate will also go higher. But unlike trading or buying and selling flats or residential properties, parking spaces are not subject to resale restrictions and no duty is imposed on a person who owns multiple parking spaces.

Anyone who purchases a parking space is required to pay double stamp duty. The same double stamp duty will apply even if an investor purchases more or multiple parking spaces.

Even if a parking space is sold within a short period of time from the date of purchase, no additional stamp duty will be imposed.

Trading residential units with parking spaces

People who own and drive their own cars prefer buying flats in  housing estates with parking spaces. But how is the  stamp duty calculated?

Suppose a Hong Kong permanent resident buys a residential property with a parking space for HK$9 million. If he does not own any residential property and parking space at the time of purchase, the tax is calculated at the old stamp duty which is ad valorem stamp duty Scale 2.

This means the buyer is liable to pay a stamp duty of 3.75 percent, or HK$337,500 out of the transaction price of HK$9 million. The double stamp duty for the parking space will be waived.

In this case, the residential property and parking space can be sold for a strata title.

In the event the buyer paid HK$ 7.5 million for the residential property and HK$1.5 million for the car park, the flat will still be subject to the ad valorem stamp duty Scale 2 , and the parking spaces will be subject to double stamp duty.

The buyer will be charged with a stamp duty of 3.75 percent and a 1.5 percent duty stamp duty on the parking space. The total stamp duty that needs to be paid is calculated at HK$ 7.5 million x 3.75% + HK$1.5 million x 1.5% = HK$303,750.

Although the stamp duty is lower after the property is sold using a strata title, the handling fee for drafting the deed is not cheap.

A lawyer or even a surveyor is required to prepare documents and floor plans. It would cost more than HK$10,000 to prepare the document and pay the handling fee.

Buying two parking spaces under the same contract

When buying connected parking spaces, the method of calculating the stamp duty is different.

If the buyer of a flat and two parking spaces is a permanent Hong Kong resident and he/she does not own any other residential property and parking space at the time of purchase, the calculation of stamp duty is as follows:

Residential properties can still be subject to the Ad valorem stamp duty Scale 2.

The total cost of the two parking spaces will be calculated as double stamp duty.

If the price of the flat is HK$7.5 million, the stamp duty rate is at 3.75 per cent, and the amount of duty to be paid is HK$281,250.

If each one of the two parking spaces costs HK$1.5 million, their total price is HK$3 million. The double stamp duty will then be charged on the total transaction price of HK$3 million, and the calculation goes this way: HK$3,000,000 ×3 percent = HK$90,000 instead of HK$1,500,000 × 1.5 percent x 2 = HK$45,000.

But generally speaking, the price of connected parking spaces is usually cheaper than buying separately two parking spaces.

If this is the case of two parking spaces being purchased separate from each other, the stamp duty will be charged on total transaction price, and the level of duty will jump to a higher tax band.

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