(9 yrs ago)
I'm getting such conflicting info from Real Estate people and also twice from the tax office themselves.
Here is my situation......
I want to sell a brand new apartment I bought just under a year ago. I bought it with the intention of living there. Unfortuantely due to personal circumstances it has remained empty since I got the keys (only in June).
I have been led to beleive that I may be liable to a 16% profit tax when i sell it, as it appears I an trying to buy and sell property for profit.......in reality my early sale will net me less $$ than I have invested in it!!!
Again the sale is a reluctant one, because of personal circumstances.
I know that HK has no capital gains tax so why would I be liable for this tax....and also would it just be lumped in with my personal tax return...I am so confused.
well I would make some profit but after paying the early sale penalty on my mortgage and factor in costs then the 'profit' is less than the money i put in upfront as a deposit etc...although on paper it's still sold for more than I bought it!
I assumed the tax office would just look at sale price against purchase price.
Sorry, this is the first property I have ever bought and I am completely clueless and naive. It doesn't help that the tax office are telling me in one call that I am liklely to pay profit tax then another day...wondering why I'd been told that!!!
There is NO capital gains tax in HK!
You have already answered your own question: While there is no capital gains tax in Hong Kong, the ‘profit’ on the sale of an apartment can either be considered a capital gain on your investment (in which case it is tax free) or a trading gain (in which case it is taxable income). In which way this profit will be classified depends on a number of factors, including (but not limited to):
- how long you owned the apartment,
- whether you ever lived in the apartment (or whether you intended to), and
- how many purchases/sales of property you have made.
Essentially the distinction is between investment and trading for gain.
You will be served with a profits tax notice upon your sale of property because of the following reasons: (i) you have had the property for less than 2 years, and (ii) the selling price is more than purchase price.
Upon receipt of the notice of profits tax you will be liable to pay the profits tax before the deadline stated in the notice. Thereafter, you can dispute it based on the costs of purchase, costs of sale (including penalty levied by mortgage bank), etc.
If your paper gain is more than HK$2m, it might be worthwhile getting someone to represent you. Otherwise, it is probably not.
Thanks guys, that is SO much clearer than the vague info I had been previously given.
That helps enormously in deciding whether to sell or not.