According to the Stamp Duty Ordinance (Cap. 117 of the Laws of Hong Kong), stamp duty is chargeable on any agreement for sale and purchase of a residential property. In Hong Kong, the parties will have signed a provisional agreement for sale and purchase in a property transaction before signing a formal agreement for sale and purchase. If the purchaser(s) signing the provisional agreement and the formal agreement is/are the same person(s), there would be no problem. If not, the following case has to be noted.
Mr Wang's younger sister was of marriageable age but had no intention of getting married. She lived with Mr Wang's family of three and all of them got along harmoniously. After Mr Wang's second son was born, he and his wife wanted to move to a larger flat and, after picking a suitable one through an estate agent and agreeing on all the terms with the vendor, he signed a provisional agreement for sale and purchase in his own name. When he got home, he discussed the matter with his wife and his sister. His sister felt that she should also share the responsibility of paying for the flat, and suggested that her name be added to the agreement. Mr Wang thought it not a bad idea, and asked the agent the next day about adding a name. The agent who was new in the trade had little experience in handling this type of requests and merely said that Mr Wang could instruct his solicitor to add his sister's name as one of the purchasers when preparing the formal agreement for sale and purchase.
His solicitor told Mr Wang that in principle, adding a name was no problem except that it might be necessary to pay stamp duty again on the nomination document, and suggested Mr Wang should include the extra stamp duty in his budget of buying the flat. From the point of view of the Inland Revenue Department, Mr Wang was the only person who purchased the property originally. Now that he allowed another person to take up half of the property right, it would amount to transferring half of the property to that person and so stamp duty was chargeable. Fortunately, stamp duty was computed based on half the purchase price of the flat. Even with that extra payment, Mr Wang would still be able to stay within his budget and go ahead with his purchase plan.
Under the Stamp Duty Ordinance, the definition of an agreement for sale and purchase includes any document in which a purchaser nominates or instructs another person to complete the transaction, but does not include any document nominating or instructing the purchaser's parents, spouse or children. Unless the person nominated or instructed comes under one of the above-mentioned categories, any nomination document will be regarded by the Inland Revenue Department as a transfer on which stamp duty is chargeable.
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