to sell or not to sell

Need some advice...


Brought a property 13 months ago. Property is for own use, low floor apartment in Tung Chung.



We have been offered +43% more than what we paid 13 months ago and the offer is similar to what high floor apartments in our building are selling for. We are very tempted, as this will allow us to buy back into the UK market for a family home, low UK prices etc.


BUT, as we are planning to stay in HK for a few more years(2-3), we will need another home. I'm lucky enough to receive a generous housing allowance and so I'm able to rent as required, but prefer to buy back in.


Now we're stuck deciding. We dont really want to move and buying back into the HK market in the next 1-2 years might out weigh the advantage of selling now, but this will set us up when we leave HK.


Any thoughts??

I would agree with walkup2, the only proviso being if there is a good chance of you remaining in HK for the long-term (ie over 5 years), you may want to hold on. If you plan going back to the UK and it will buy you what you want there, then you should do it - though the HK$ is very weak against Sterling at the moment

the buyer has agreed to a long completion (march 11), so we can wait for better sterling rates. We want to stay where we are and sell at a later date (in 2 years time), but we are worried about where the HK market could be heading between now and then. Loyd, I have read your comments on the other thread.

It is always difficult to predict what’s going to happen in the property market…BUT a few considerations that will ALWAYS be relevant: 1) IF you sell the property within 2 years of purchase in HK the IRD will assume that you are trading in real estate and TAX the gain as INCOME on your annual tax; 2)…your STAMP DUTY, real estate fees and legal expenses of acquisition will have to be repeated in any alternative purchase ; 3) time costs….We would be pleased to discuss specifics of tax efficient acquisition and sales of property as required.


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

associates, do you have any ways to reduce tax obligation in this case? I would be interested in making an appointment if you can help in this case, please pm me your costs, thanks.


I have asked the purchaser for a long completion, so we would have been in the apartment for 19-20 months prior to exchanging contract. We have also only used the property for self use, wouldn't this make a difference for tax purposes, if you can prove self use only?


Does the IRD look at peoples accounts for large deposit activity?

Go ahead and sell. You can buy something on a higher floor later.

Kiwimoa. I'm not a lawyer but I have never heard the IRD acting like that unless the property is bought through a company and then you have to pay profits tax. I don't think you need to see a lawyer about it. Simply go to Revenue Tower on Gloucester Road Wan Chai, get a ticket, queue up and ask at the counter. They're very helpful and there usually isn't a long queue. I would bet several thouand dollars that you have no tax liability if the property is in your own name.

I found this in the HKIRD website; ''If a person sells his flat or any property as part of a scheme of profit-making, it will be regarded as a business and he is required to pay tax on any profit he may make. ''


So they have to prove that your using your property as part of a scheme of profit making....


I rang the IRD, and they said if you can prove you are using a property for own residential use, then you dont need to pay profit tax (@15%). The guy I talked to said they look at things like how long you have been in the property and proof you use the property for own use, I guess from utility bills etc. I have heard that if the property is sold outside of 2 years then they dont even bother looking at it and the guy I talked to mentioned something similar.


I rang a second time and got another person saying " if it's residential, own use, then there is no profit tax", so 2 similar replies, but not the same....


I've asked them to put something in writing and email, as there isnt really anything on their site other than what I have posted above.

kiwimoa. Don't worry; they're not going to tax you. If they did, there would be a revolution in Hong Kong. No need to get it in writing.

Below I have quoted part of an email I have received from the IRD. I had an email from my conveyancy solicitor, saying that I wouldnt have to pay... But, I just sold my last place in August, so it might look like I am trading if I sell another property so soon after. I just dont trust the IRD...


"In determining whether profit is arising from the sale of capital / revenue assets, there is no single factor to be decided but a number of factors which we termed ‘the badges of trade’ in determining its chargebility to Profits Tax. To name a few as example:


* How was the asset financed when acquired.

* What was the use of the asset since acquisition.

* How long was the asset owned before disposition.

* The frequency of similar transactions.

* The reason leading to the change of intention to dispose of the asset. etc.


Sale of Property


Persons, including individuals, corporations or partnerships carrying on any trade, profession or business in Hong Kong are chargeable to tax on all profits (excluding profits arising from the sale of capital assets) arising in or derived from Hong Kong from such trade, profession or business.


If a person sells his flat or any property as part of a scheme of profit making, it will be regarded as running a business and he is required to pay tax on any profits he may make.


Among other factors, the intention at the time of acquisition of the property is crucial in determining whether the profits on the sales of the property is assessable to the profits tax in Hong Kong.


As each and every case has to be decided on its own situation, I regret that I cannot give you a definite answer at this stage. To conclude, the longer you owned the property prior to sale; you have adequate fund to finance the property; transaction in selling the subject property is your first self-occupied property; etc. are favourable answers to support that you are selling capital asset, but not a revenue one.


For your information the current profits tax rate is :

Corporations: 16.5%

Unincorporated Businesses 15 %"

Kiwimoa, relax. You're not trading in property. If the IRD come after you for this then HK will be uproar. I'm suprised that associates even brought up this issue.

Hi Loyd, cheers, my solicitor said the same thing. I hope I'm not becoming to attached to this apartment, maybe i'm looking for an excuse not to sell & move....

When I talked to the IRD, they said that if I brought the property with the intention to make a profit then I needed to pay profit tax. Well wouldnt we all like to make a profit when we sell....


In my above post is the email reply I had from the IRD, it should be able to answer your question for you. Perhaps you could drop your solicitor an email and they should be able to give you further information. Could you post you findings here, cheers.


The property I am discussing is where I live, so it's a different scenario.

The world. No need to worry about profits tax but I assume you pay Property Tax on your rental income. No Capital Gains Tax in HK.