shell company property ownership

AsiaXPAT: What are the advantages of using a shell company to own property in HK? Taxation? Stamp duty when divesting?


Dear Sirs,

Sorry, the thread was lost so I post new.

In response to your query regarding the differences between owning real property personally or through a shell company in Hong Kong, there are several considerations:

Should the taxpayer decide to own the property personally, the taxpayer will have the choice to elect to be subject to either property tax or profits tax. Under the property tax regime, for all income derived from the property (i.e. rents), taxpayer will be allowed a deduction of 20% of the balance of the rental income after deducting the rates paid by the taxpayer. If taxpayer instead elects to be subject to the profits tax (typically much more beneficial), all deductions to the extent to which they have been incurred by the taxpayer in the production of chargeable profits (i.e. rents) are allowed as deductions.

If the taxpayer decides to purchase real property using a shell company, the company will be liable to the property tax, unless it elects for profits tax treatment. It should also be noted that if a company divests property within two years of its purchase, the company will be deemed (subject to proof to the contrary) by the Inland Revenue Department that the owner has been engaged in property trading within Hong Kong and will be liable for profits tax on any profit made.

Regardless of how the property is owned, the purchaser is responsible for the stamp duty on acquisition.


Yours faithfully,

Weir & Associates

Solicitors & Notaries

16th Floor Tak Shing House

Theatre Lane

20 Des Voeux Road Central

Central

Hong Kong

Tel : 2526-1767

Fax : 2868-3568

email : weirlaw@hongkonglaw.com

www.HongKongLaw.com/weirlaw

in some countries, a shell company owns 1 or 2 properties. instead of selling the property, you sell out the "shell company" that owns the property. this way, the cost associated with change of ownership of the company is much lower than the related cost when selling the property (stamp duty or capital gains tax although not applicable in HK under certain condition). are you aware of cost related to this scheme?