Question

Roy is a resident in Singapore who came to Hong Kong in March 2018 for holiday. He was introduced by a HK property agent to visit a residential property in Tai Koo Shing. The property was owned by a Hong Kong company, Blue Ltd, which is wholly owned by Mr. Chan. After consulting with Frankie, Roy’s cousin, Roy acquired the property in his own name in April 2018 in HK$30 million. He settled 70% of the acquisition cost by cash and financed the balance with a 1-year loan from a bank. After the acquisition, Roy returned to Singapore and placed the property for sale with a few HK property agents for HK$33 million, but was unsuccessful in the sale. In June 2018, Roy let Frankie use the property temporarily. In February 2019, Roy found the buyer and sold the property, making a profit of HK$3 million. Roy wondered whether the HK$3 million profit on disposal of the property would be subject to Hong Kong tax or not.

Answer 1

Hong Kong does no have capital gain tax and under usual circumstances gains from disposal of property are not subject to tax.Therefore, if the property sold is a capital asset, the profit arrived from the disposal will not be subject to tax.

There is no distinction made between residents and non-residents when it comes to liability to profits tax. A resident may therefore derive profits from abroad without being charged to tax; conversely, a non-resident may be chargeable to tax on profits arising in or derived from Hong Kong.

Hong Kong does no have capital gain tax and under usual circumstances gains from disposal of property are not subject to tax. On the other hand, if the purchase and sale of property was in the nature of trade that is hold for short period of time, the profit will be assessable to profits tax.

Thus,HK$3 million profit on disposal of the property would be subject to Hong Kong tax.