Top Hong Kong government advisor Regina Ip has hit out at local media reports which claimed she saved HK$7.66 million in stamp duty by purchasing a flat via company shares. The idea that buying a property through a company amounted to tax evasion was “unfair and quite ignorant,” she said.
The chairwoman of the New People’s Party confirmed with HKFP on Wednesday that she bought a flat on Bowen Place in Mid-Levels for HK$51.8 million in recent months through the transfer of shares. Instead of paying the usual 15 per cent stamp duty, the convenor of the Executive Council – which advises the city’s leader – was only taxed 0.2 per cent.
Ip’s recent flat purchase was first reported on Tuesday by local news outlet HK01, which said the new property was disclosed on the Executive Council’s register of members’ interests. According to the document, Ip declared that there was one residential property with one car parking space in the Central and Western district held in the name of Magic Fiddle Limited for self-occupation.
Ip, who is also a legislator, told HKFP on Wednesday that she set up the limited company to purchase Allway Holdings Limited, which owned the flat in Central. It was “wrong” for local media outlets to assume she saved HK$7.66 million in stamp duty because her daughter had intended to make the purchase as a first-time home buyer, she said.
“The local media reports’ assumption that I saved HK$7 million in stamp duty is wrong, because my daughter actually wanted to purchase it as a first-time home buyer, in which case she would only pay HK$2.2 million stamp duty,” Ip told HKFP in a phone interview.
The ‘only option’
According to HK01 citing Companies Registry records, Magic Fiddle was established in March, with Ip and her daughter as the founding members and directors. Ip also became the director of Allway Holdings recently, the report read.
Ip said the transaction was handled by an agent, who told her that the vendor wanted to sell the flat through a holding company. Forming a new company to buy the holding company was her “only option,” she said.
She added that she incurred additional expenses such as legal fees and diligence fees to ensure Allway Holdings was not in debt or had other legal issues.
“It is wrong to suggest that I saved HK$7 million stamp duty. Everything I did was lawful and at the request of the vendor,” the lawmaker said.
Ip confirmed with HKFP on Wednesday that Allway Holdings was previously held by Michelle Cheng, owner and CEO of public relations company Occasions Asia Pacific. The legislator said Cheng’s company acted for her on one occasion, but she did not know Cheng personally.
In 2018, local development policy think tank Liber Research Community found that the government had lost at least HK$9.4 billion since 2010, after property buyers dodged stamp duty by making purchases through share transfers.
According to the study, among the 126 cases identified by the think tank, 90 cases involved foreign buyers, with some being high-level executives of mainland property companies, ex-members of the Chinese People’s Political Consultative Conference, and local celebrities.
CK Hutchison Holdings, founded by Hong Kong magnate Li Ka-shing, also sold flats using share transfers, Liber’s study found.
Asked on Wednesday about criticism that share transfer was a loophole to dodge stamp duty, Ip said the government would have changed the law if it was an “undesirable loophole.” She compared the practice to parents funding their children to buy property as fist-time home buyers, saying it was “quite lawful.”
“A lot of the comments are unfair and really quite ignorant… I think it is quite unfair to suggest that [property] purchased through a company is tax evasion… It is the buyer’s choice, in a way which is the most convenient,” she said.
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