Question

Royis a residentin Singaporewho came to Hong Kong in March 2018for holiday. Hewas introduced by a HK property agent to visit a residentialproperty in Tai Koo Shing. The property was owned by a Hong Kong company, BlueLtd, which is wholly owned by Mr. Chan. After consultingwith Frankie, Roy’s cousin, Royacquired the property in hisown name in April 2018in HK$30million. He settled 70% of the acquisition cost by cash and financed the balance with a 1-year loan from a bank. After the acquisition, Royreturned to Singaporeand placed the property for sale with a few HK property agents for HK$33million, but was unsuccessful in the sale. In June2018, Roylet Frankieuse the property temporarily. In February2019, Royfound the buyer and sold the property, making a profitof HK$3million. Roy wondered whether the HK$3million 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 as property hold for short period of time.