Do I pay stamp duty on a share transfer in Hong Kong

Do I Pay Stamp Duty on a Share Transfer in Hong Kong

Yes. Share transfers in Hong Kong attract stamp duty. The Inland Revenue Department levies ad valorem duty at 0.1% from the buyer and 0.1% from the seller, calculated on the higher of the consideration paid and the value of the shares. A fixed duty of HK$5 on the instrument of transfer is also payable. The Stamp Duty Ordinance (Cap. 117) governs this requirement.

Hong Kong Share Transfer Stamp Duty

This duty applies to transfers of "Hong Kong stock" as defined under Cap. 117. The ad valorem charge is 0.1% from the buyer and 0.1% from the seller, making the total duty 0.2% of the chargeable amount. Of the HK$5 fixed duty, the buyer and seller each pay HK$2.50 unless they agree otherwise. The Inland Revenue Department's Stamp Office assesses the duty and stamps the instrument of transfer.

Stamp Duty on Shares Hong Kong

Duty is payable on the instrument of transfer used to effect the share transfer. The Stamp Office bases its calculation on the higher of the consideration stated in the instrument and the value of the shares. If a transfer is made at nominal value but the company holds significant assets, duty will be assessed on the market value of the shares, not the nominal amount.

Share Transfer Tax Hong Kong

Hong Kong imposes no separate capital gains or transfer tax on shares. The only tax cost of transferring shares is the stamp duty under Cap. 117. The seller pays no other tax on the gain from the sale, and the buyer pays no tax beyond the stamp duty on the instrument of transfer.

Instrument of Transfer Duty

The instrument of transfer records the share transfer from seller to buyer. The Stamp Office stamps this document once duty is paid. Present the instrument of transfer to the Stamp Office for stamping within the prescribed time, typically before the transfer is registered in the company's register of members. The fixed HK$5 duty applies to each instrument of transfer regardless of the number of shares transferred.

The buyer and seller must also prepare bought and sold notes, which are contracts recording the transaction. These notes attract a separate stamp duty of 0.1% each, totalling 0.2%, and are also stamped by the Stamp Office. The Stamp Office will not stamp the instrument of transfer until the bought and sold notes are also stamped, or the instrument of transfer can be stamped with a composite stamp covering both the instrument and the notes.

After stamping, the company updates its register of members to reflect the new shareholder. Do not register the transfer on unstamped documents; doing so is an offence under Cap. 117. A legal practitioner or a licensed trust or company service provider can handle the stamping process and ensure compliance with the Stamp Office requirements.