Q1. How to proceed with the transfer of residential property between close relatives?
Like ordinary property transactions, such transfer entails the engagement of a solicitor to handle the agreements for sale and purchase, and schedule a transaction date. Hence, solicitor’s costs is inevitable.
Q2. How much stamp duty shall be paid for the transfer of residential property between close relatives?
According to the old rates, the stamp duty payable for properties valued less than HK$2 million is HK$100.
Q3. How to define close relatives?
Parents, siblings, spouse and children of the original owner are all regarded as close relatives.
Q4. When shall the stamp duty for removing someone’s name from a property title deed be settled?
According to Inland Revenue Department (IRD), such stamp duty shall be paid within 30 days after the signing of the first agreement for sale and purchase. In general, the solicitor will require the owner to have the cheque for stamp duty ready before signing the provisional agreement which is usually the first document involved.
Q5. How much will the stamp duty be if the husband or wife of a couple wishes to transfer his/her ownership of a jointly-owned property to a close relative?
The stamp duty of the above case will be calculated based on the transacted price and the percentage of ownership. If the transacted price is HK$6 million, the stamp duty will be HK$6 million x 50% x 1.5% (the old rates), which will then be HK$45,000.
Q6. If the property is worth around HK$6 million, can it be transferred to a close relative at a price way lower than the market price, say HK$2 million?
Sure. However, IRD may suspect that such transaction is intended for tax avoidance, and may therefore demand from the buyer the avoided tax and a fine resulting from the offence.
Q7. If I transfer the property to my wife who already owns one or more properties, will it incur a 15%-stamp-duty?
No. As long as the transferee is a close relative of the transferor, the old rates will apply. Contrarily, if a grandson transfers a property to his grandfather, the stamp duty will be 15% of the property price as the transferee and transferor in this case are not close relatives.
Q8. Is Special Stamp Duty (SSD) applicable to the transfer of residential property between close relatives?
No. However, if the transferred property is further transferred to another person who is not a close relative of the owner within 3 years of the first transfer, SSD will apply.
Q9. Upon the transfer of the property, when will the original owner become a first-time homebuyer again?
A person will resume the status of a first-time homebuyer after he/she has signed the initial document for the property transfer. In other words, that person can sign the provisional agreement for property transfer to a close relative in the morning and another provisional agreement for property purchase in the afternoon, and then enjoy lower stamp duty as a first-time homebuyer.
Q10. If the transfer of residential property between close relatives is cancelled, can the stamp duty be refunded?
If the agreement is voided for reasons other than the buyer transferring or selling the associated property to a third party, it is possible that the stamp duty can be refunded. The person(s) involved could duly complete and submit the IRSD125 form to the Collector of Stamp Revenue within 2 years of the agreement cancellation for such refund, which will be at the discretion of Stamp Office.
Q11. Can the ownership of property be divided into parts and transferred to another person one by one?
Yes. However, IRD may require the transferor to provide explanation for such act to investigate if there』s any intended tax avoidance. Without legitimate explanation, the transferor may need to repay the avoided tax.
Q12. If the transferee of the property wants to apply for mortgage, does he/she need to pass the stress test again?
If the transferred property is still subject to a mortgage, the transferee who wish to apply for a mortgage loan will still need to submit relevant documents, such as income proof, and undergo a stress test conducted by relevant banks, just like ordinary mortgage application. As such, if a person plans to transfer a property to a close relative, he/she shall consider whether or not the transferee is capable of passing the stress test.
Q13. Who may not be an ideal transferee of a property that is still subject to a mortgage?
It may not be a good idea to transfer a mortgaged property to a person without income as the latter will not be able to provide the bank with a proof of income sufficient for mortgage repayment. If a husband transfers a property to his wife who has no income but wishes to apply for mortgage, he has to be the guarantor. However, it is worth noting that, if the husband wants to submit a mortgage application for another property in the future, being the guarantor for his wife』s mortgage will affect the loan-to-value ratio for his own property.
Q14. What will be the consequence of transferring the mortgaged property during penalty period?
If a mortgaged property is transferred during penalty period, the transferor will be required to fully repay the mortgage first as the transferee will need to submit a re-mortgage application. The bank involved will regard this as early loan redemption and demand penalty interest and repayment of cash rebate from the owner.
Q15. Is there a period during which the transfer of residential property between close relatives must be completed?
No, therefore the transaction can last for a period that is long enough for the people involved to settle all their property-related business. However, if the change of ownership is yet to be completed, the original owner will need to repay the mortgage until the property transaction is realized.
Q16. If I plan to acquire more then one property, is it possible that I keep transferring them to my close relatives so that I can keep resuming my status as a first-time homebuyer?
This is theoretically possible. Yet, prior to the transfer(s), the buyer or transferee must declare that he/she is acting on his/her own behalf, and the Stamp Office may question the creditability of such declaration. It is worth noting that it is a criminal offense to make any false declaration.