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1. How is stamp duty calculated on a tenancy document?

Stamp duty is a tax on certain written documents that evidence transactions. Parties to a tenancy document are liable to pay stamp duty on the document according to Schedule 1 of the Stamp Duty Ordinance (Cap. 117 of the Laws of Hong Kong). The rate of stamp duty varies with the term/period of the tenancy. The current rates are as follows.

 

Term of the tenancy

Rate of stamp duty

Not defined or uncertain

0.25% of the yearly or average yearly rent

Not exceeding 1 year

0.25% of the total rent payable

Exceeding 1 year but not exceeding 3 years

0.5% of the yearly or average yearly rent

Exceeding 3 years

1% of the yearly or average yearly rent

$5 is also be payable for the stamping of each counterpart of the tenancy document.

 

licence does not transfer any interest in land and is not liable for stamp duty. However, if there is any doubt as to whether a tenancy document is liable for stamp duty, then it is good practice to seek adjudication from the Stamp Office. The current adjudication fee is $50.

 

No law specifies whether the landlord or the tenant should pay the stamp duty. Therefore, the parties to a Tenancy Agreement can freely agree between themselves on their respective shares of stamp duty. In most cases, the parties will pay the stamp duty in equal shares.


Example

 

There is a two month rent-free period in a tenancy with a term of three years and a rent of $10,000 per month. How can the stamp duty be calculated for this Tenancy Agreement?

 

The stamp duty chargeable on a tenancy document and its counterpart is based on the rent payable or the yearly or average yearly rent. A rent-free period will therefore diminish the base on which stamp duty is calculated. The following examples will serve to illustrate how a rent-free period affects the stamp duty payable.

 

Example A

Example B

A property is let for $10,000 per month and the term of the tenancy is 3 years without a rent-free period. The stamp duty payable is:

($10,000.00 x 36)/3 x 0.5% + $5 = $605

 

 

A property is let for $10,000 per month and the term of the tenancy is 3 years with a rent-free period of 2 months. The stamp duty payable is:

($10,000 x (36 – 2))/3 x 0.5% + $5 = $572

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