📋 Key Facts at a Glance

• Current Stock Transfer Rate: 0.2% total (0.1% buyer + 0.1% seller) – reduced from 0.26% in November 2023
• Family Gift Transfers: Subject to full stamp duty based on market value – only spousal transfers are exempt
• Inheritance Advantage: Transfers under a Will or intestacy are completely exempt from stamp duty
• Intra-Group Relief: Section 45 relief available for 90%+ associated companies with issued share capital only
• Valuation Rule: Duty calculated on higher of consideration paid or market value (NAV for private companies)
• Recent Court Ruling: June 2025 Court clarified Section 45 relief only applies to entities with traditional share capital

⚠️ Important: Cash-settled derivatives, ETFs (exempt since 2015), and other index-based basket instruments are not subject to stamp duty. The focus here is on direct share transfers of family business holdings.

Party	Rate	Fixed Fees
Buyer (Transferee)	0.1%	HK$2.50
Seller (Transferor)	0.1%	HK$5.00 (transfer deed stamp)
Total	0.2%	HK$7.50

Share Type	Valuation Method	Documentation Required
Listed Shares	Closing price on SEHK on the last trading day before transfer	Stock exchange records
Private Companies	Net Asset Value (NAV) from latest audited accounts	Audited accounts (within 6 months) or management accounts (within 3 months)
Property-Rich Companies	NAV adjusted for current property valuations	Professional property valuation report may be required

⚠️ Important: For unlisted family business shares, the IRD may request updated management accounts if audited accounts are more than 6 months old. Property valuations must be current if the company holds significant real estate assets.

Transfer Type	Stamp Duty Treatment	Duty Base	Key Requirements
Sale at Market Price	Full duty payable (0.2%)	Consideration paid	Standard transfer documentation
Gift to Child/Parent	Full duty payable (0.2%)	Market value of shares	Form IRSD120B, proof of relationship
Gift to Spouse	EXEMPT	N/A	Marriage certificate required
Inheritance (Will)	EXEMPT	N/A	Grant of probate, Will
Inheritance (Intestacy)	EXEMPT	N/A	Letters of administration
Charitable Donation	EXEMPT	N/A	Recognized charitable status

⚠️ Critical Limitation: No relief from stamp duty is available for lifetime gifts of Hong Kong stock between family members other than spouses. Gifts to children, siblings, parents, or other relatives are fully taxable at market value.

Scenario 1: Transferring Business Shares to Next Generation

Situation: Mr. Chan owns 100% of Chan Manufacturing Ltd., a private Hong Kong company valued at HK$50 million (based on latest audited NAV). He wants to gift 30% to his daughter while retaining control.

Stamp Duty Calculation:

• Transfer value: HK$15 million (30% × HK$50 million)
• Stamp duty rate: 0.2%
• Total stamp duty: HK$30,000 (plus HK$7.50 fixed fees)

Alternative Strategy: If Mr. Chan is married, he could first transfer the shares to his spouse (exempt), then the spouse could transfer to the daughter. However, this still results in 0.2% duty on the spouse-to-daughter transfer and adds complexity. The better approach is to plan for inheritance under a Will (exempt) rather than lifetime gifts.

Scenario 2: Restructuring Through a Family Holding Company

Situation: The Lee family owns three operating companies directly. They want to establish Lee Holdings Ltd. as a parent company for centralized management and eventual succession.

Stamp Duty Implications:

• Transferring operating company shares to Lee Holdings will trigger 0.2% stamp duty on the market value of each operating company
• Section 45 intra-group relief is NOT available for the initial transfer (no 90% association exists yet)
• After the holding structure is established, future transfers between 90%+ associated companies may qualify for relief

Cost Example: If the three operating companies have a combined value of HK$100 million, the stamp duty cost for restructuring would be approximately HK$200,000.

90% Association Test

Two bodies corporate are “associated” if:

• One is the beneficial owner of at least 90% of the issued share capital of the other, OR
• A third body corporate is the beneficial owner of at least 90% of the issued share capital of each

Additional Requirements

• Minimum holding period: The 90% association must generally exist for at least 2 years before the transfer
• Share capital requirement: Both transferor and transferee must have issued share capital (critical limitation)
• Clawback provision: If the association is broken within 2 years after the transfer, the relief is withdrawn and duty becomes payable

⚠️ Key Ruling: Section 45 relief is ONLY available to associated companies with “issued share capital” in its ordinary legal meaning. The relief does NOT extend to UK Limited Liability Partnerships (LLPs), US Limited Liability Companies (LLCs), Dutch cooperatives, trusts, or other hybrid entities without traditional share capital.

Structure Type	Section 45 Relief Available?	Notes
HK Company → HK Company	✓ YES	Standard relief applies if 90% test met
BVI Company → HK Company	✓ YES	BVI companies have share capital
Trust → HK Company (PIC)	✗ NO	Trusts do not have share capital
US LLC → HK Company	✗ NO	LLCs have membership interests, not shares
UK LLP → HK Company	✗ NO	2025 CFA ruling explicitly excludes LLPs

💡 Pro Tip: Ensure all entities in your family holding structure are incorporated companies with traditional share capital (Hong Kong companies, BVI companies, etc.) rather than LLPs, LLCs, or other hybrid entities to preserve access to Section 45 relief.

Advantages:

• No stamp duty on transfers under a Will or intestacy
• No estate duty (abolished for deaths after 11 February 2006)
• No gift tax in Hong Kong
• Maximum tax efficiency for wealth transfer

Disadvantages:

• Founder retains control until death (cannot gradually transfer management)
• Potential family disputes if Will is contested
• Probate process can take time
• Less flexibility for adjusting to changing family circumstances

Advantages:

• Allows founder to mentor next generation while gradually transferring ownership
• Can test successors’ capabilities before full transfer
• Flexibility to adjust succession plan based on performance
• Reduces concentration of control transition risk

Disadvantages:

• 0.2% stamp duty on each gift based on market value
• Multiple transfers multiply stamp duty costs
• Valuation required for each transfer
• Administrative burden of multiple stamping processes

Cost Example: Transferring 10% of shares annually over 5 years (total 50%) in a company worth HK$50 million would cost approximately HK$50,000 in stamp duty (HK$10,000 per year × 5 years), versus zero if transferred through a Will.

Advantages:

• Centralized control and professional management
• Facilitates future intra-group transfers stamp duty-free (after 90% association established)
• Can separate operating assets from family ownership structure
• Easier to implement complex succession arrangements (different classes of shares)
• Potential asset protection benefits

Disadvantages:

• Initial restructuring triggers stamp duty (no relief for first transfer)
• Requires 2-year holding period before relief available for subsequent transfers
• 2-year clawback risk if association broken
• Increased administrative complexity and costs (additional entity to maintain)
• Must use entities with share capital (post-2025 ruling)

Best for: Large family business groups with multiple operating companies where centralized management and frequent restructuring provide operational benefits beyond tax savings.

Late Stamping Penalties:

• Up to 2 times the duty for delays up to 1 month
• Up to 4 times the duty for delays between 1-2 months
• Up to 10 times the duty for delays exceeding 2 months

For a HK$10 million share transfer (HK$20,000 duty), a 3-month delay could result in penalties up to HK$200,000 – ten times the original duty amount.

Transfer Type	Required Documents
Gift to Family Member	• Form IRSD120B (instrument of transfer) • Audited accounts or management accounts (for valuation) • Proof of relationship (birth certificate, family tree) • Declaration of gift (deed of gift)
Spousal Transfer	• Transfer instrument • Marriage certificate • Application for exemption
Inheritance (Will)	• Grant of probate • Copy of the Will • Assent or transfer from executor • Application for exemption
Section 45 Intra-Group	• Transfer instrument • Group structure chart • Share registers proving 90% ownership • Audited accounts showing ownership for 2+ years • Form IRSD118 (application for relief) • Undertaking re clawback

✅ Key Takeaways

• Testamentary transfers win: Inheritance through a Will is completely stamp duty-free, making it the most tax-efficient succession method
• Limited family exemptions: Only spousal transfers are exempt; gifts to children, parents, and other relatives incur full 0.2% duty on market value
• Structure matters: Section 45 relief requires traditional companies with share capital—trusts, LLPs, and LLCs don’t qualify after the 2025 court ruling
• Valuation is key: IRD charges duty on the higher of consideration or market value; keep audited accounts current (within 6 months)
• Timing is critical: Stamp within 30 days or face penalties up to 10× the original duty; monitor 2-year clawback for Section 45 relief
• Hybrid strategies work best: Combine holding company structures, spousal exemptions, minority lifetime gifts, and testamentary transfers for optimal results
• Professional advice pays: The cost of expert guidance is typically