Fairbairn Catley Low & Kong
Can anyone (including foreigners) own and occupy real estate in your jurisdiction (including shares in property owning companies)? Are there any restrictions?
In general, any individual or body corporate (whether local or foreign) is free to own real estate/shares of property holding companies in Hong Kong. There are generally no restrictions on foreign entities owning or occupying real estate. However, for such residential flats constructed on the selected residential sites under the "Hong Kong Property for Hong Kong People" pilot scheme, there are added land lease conditions for restricting the sale of the residential flats developed at the sites to Hong Kong permanent residents. The said restriction will remain effective for 30 years from the date of the relevant land grants.
Are there restrictions on lending for the purchase of real estate by foreign companies? If so briefly give an outline?
No. Lending policies with respect to local or foreign borrowers are subject to the lenders’ own commercial decisions and due diligence checks. Factors like the borrowers’ credit rating, property valuation, business potentials, etc. will be taken into account by the lenders.
Please provide a short summary of the fees and costs (including tax) relating to buying real estate in your jurisdiction.
Lawyers shall be engaged to prepare legal documents for the sale and purchase of property, investigate title and arrange registration of the legal documents with the Land Registry. Legal fees will be incurred and may be agreed beforehand. Besides, the buyer is responsible for the registration fee payable to the Land Registry.
There is also ad valorem duty (AVD) payable by parties of property transactions. AVD is chargeable upon every transaction of property at a specified rate with reference to the purchase price or the prevailing market value of the property, whichever is the higher. On top of AVD, any agreement for sale or conveyance on sale for acquisition of any residential property executed on or after 27 October 2012 will be subject to Buyer’s stamp duty (BSD) unless the transaction is otherwise exempted therefrom. One major exception is where a Hong Kong Permanent Resident acts on his or her own behalf in buying the residential property. The imposition of the BSD aims to address the home ownership needs of local buyers. However, despite introduction of the BSD, foreign buyers are still active in the property market of Hong Kong as return from property investment may probably justify the fees and costs involved.
If real estate agents are engaged, they will charge buyers commission usually by reference to the purchase price.
Are there taxes applicable to owning real estate and can the burden of the taxes be passed to someone else (e.g. a tenant or an occupier - not being the owner)?
Except for the payment of the AVD and if applicable, the BSD payable on the agreement stage for the sale and purchase of properties, there is no other tax payable for acquiring the real estate ownership.
During the currency of ownership of the property, the owner is liable to pay government rates and rent. Government rates are levied on properties as an indirect tax at a percentage of their estimated annual rental value. Government rent is payable by owners as lessees of land grants for their right to hold and occupy the properties for a specified term. The liability to pay government rates and government rent may be passed to the tenants or occupiers by agreement.
Where the property is rented out, the owner is required to report rental income in annual tax return and pay property tax and such payment obligation normally remains with the property owner.
Are there tax breaks or other incentives for foreigners to buy real estate in your jurisdiction? If so what are they?
Hong Kong has a relatively simple tax regime. There is no capital gains tax. The profits generated from sale of capital assets are generally not subject to capital gains tax. However should the property owner buy and sell properties as a business, the profits he makes will be subject to profits tax.
Regarding property tax on rental income, government rates and irrecoverable rent are deductibles. There is also statutory allowance for repairs and outgoings.
How is the ownership of Real Estate evidenced in your jurisdiction?
First and foremost, real estate ownership is evidenced by title deeds such as Assignments and Agreements for Sale and Purchase. In Hong Kong, a deeds registration system is managed by the Land Registry to record property transactions. Deeds registration enables the relevant title documents to gain priority over other documents which are registered after them or not registered at all. Therefore, property ownership is demonstrated in the land register maintained by the Land Registry in addition to title documents. Real estate lawyers review both title deeds and land search records of the respective properties in property transactions to verify property ownership.
Is it possible to keep the identity of owners of real estate confidential in your jurisdiction?
Hong Kong has a system of registration of documents affecting land. All registered documents in the land register are publicly accessible. By conducting a land search of a particular property, the searcher is able to obtain information about its registered owner. Those registered owners’ information appear in the registered documents can be obtained by ordering copies of such documents from the Land Registry. Hence, the identity of registered property owner is publicly accessible unless corporate structures or trust tool has been applied by the beneficial owner to shield his identity.