Stamp Duty on Stock Gifts and Inheritances: Hong Kong’s Tax Treatment

Key Facts: Stamp Duty on Stock Gifts and Inheritances in Hong Kong

Current Rate: 0.2% total (0.1% buyer + 0.1% seller) on the higher of consideration or market value
Gift Transfers: Subject to stamp duty based on fair market value, not consideration paid
Inheritance Exemption: Transfers from deceased estates to beneficiaries under wills or intestacy are exempt
Valuation Method: Listed shares use last trading day closing price; unlisted shares use Net Asset Value
Stamping Deadline: 30 days from signing in Hong Kong (2 days for stock exchange transactions)
Late Penalties: Up to 10× the original duty for delays exceeding 2 months

Understanding Hong Kong’s Stamp Duty on Share Transfers

Hong Kong’s stamp duty regime applies to all transfers of shares in Hong Kong companies, regardless of whether the transfer involves a sale, gift, or corporate restructuring. The Stamp Duty Ordinance (SDO) focuses on one critical element: change in beneficial ownership. When beneficial ownership of Hong Kong stock changes hands, stamp duty becomes payable unless a specific exemption applies.

This comprehensive guide examines how stamp duty applies to non-commercial share transfers—specifically gifts and inheritances—and explains the valuation rules, exemptions, documentation requirements, and practical considerations that individuals and families should understand.

The Stamp Duty Framework for Share Transfers

Current Stamp Duty Rates (Effective November 17, 2023)

Following a reduction that took effect on November 17, 2023, the total stamp duty rate on Hong Kong stock transfers is:

Component	Rate	Paid By
Ad Valorem Duty (Buyer’s Portion)	0.1%	Transferee (Buyer/Recipient)
Ad Valorem Duty (Seller’s Portion)	0.1%	Transferor (Seller/Donor)
Total Ad Valorem Duty	0.2%	Both Parties
Fixed Duty per Instrument	HKD 5	Per Transfer Form

Note: The duty is calculated on the higher of (a) the consideration paid, or (b) the fair market value of the shares transferred.

What Triggers Stamp Duty Liability?

Stamp duty in Hong Kong is triggered by a change in beneficial ownership of Hong Kong stock. The key elements are:

Beneficial Ownership Change: The primary legal event that creates stamp duty liability is the transfer of beneficial interest from one person or entity to another
Instrument of Transfer: The transfer must be documented through a written instrument (share transfer form)
Hong Kong Stock: Only shares in Hong Kong-incorporated companies are subject to Hong Kong stamp duty
No Estate Duty: Hong Kong abolished estate duty in 2006; there is no separate inheritance tax or gift tax

Stamp Duty on Gift Transfers of Shares

How Gifts Are Treated

A gift transfer occurs when shares are transferred without consideration (payment). Common scenarios include:

Parents gifting shares to children
Business partners reallocating equity ownership
Founders gifting shares to key employees
Inter-family wealth transfers for estate planning purposes

Important: Even though no money changes hands in a gift, stamp duty is still payable based on the fair market value of the shares at the time of transfer. The Inland Revenue Department (IRD) does not recognize “zero consideration” for stamp duty purposes when beneficial ownership changes.

Valuation Rules for Gift Transfers

The IRD applies different valuation methodologies depending on whether shares are listed or unlisted:

Share Type	Valuation Method	Documentation Required
Listed/Quoted Shares	Closing price on the Stock Exchange of Hong Kong (SEHK) on the last trading day before the transfer date	Stock exchange price records; transfer instrument
Unlisted/Private Company Shares	Net Asset Value (NAV) from the latest audited financial statements	Latest audited accounts (within 6 months) or management accounts (within 3 months); property valuation if company holds significant real estate

Critical Timing Note: For unlisted shares, the IRD requires that financial statements be reasonably current:

Audited accounts must be dated within 6 months of the transfer date
Management accounts must be dated within 3 months of the transfer date
If the company owns significant property, a professional property valuation may be required

Practical Example: Gift Transfer

Scenario: Mr. Wong wishes to gift 100,000 shares in his private Hong Kong company to his daughter. The latest audited accounts (dated 4 months ago) show a Net Asset Value of HKD 50 per share.

Calculation:

Market Value: 100,000 shares × HKD 50 = HKD 5,000,000
Stamp Duty: HKD 5,000,000 × 0.2% = HKD 10,000
Fixed Duty: HKD 5
Total Duty Payable: HKD 10,005

Responsibility: In a gift scenario, the transferee (daughter) typically bears the duty, though parties can agree to share the cost. The transferor and transferee are each technically liable for their respective 0.1% portions.

Stamp Duty on Inheritance and Estate Transfers

The Inheritance Exemption

Hong Kong provides a complete exemption from stamp duty for genuine inheritance transfers. Specifically:

No stamp duty is payable on the transfer of shares or properties from a deceased person’s estate to a beneficiary under:

A valid Will (testamentary disposition)
The rules of intestacy (when no Will exists)
Right of survivorship (for jointly held shares)

Conditions for Exemption

To qualify for the inheritance exemption, the following conditions must generally be satisfied:

Proper Legal Authority: Grant of Probate (for wills) or Letters of Administration (for intestacy) must be obtained from the court
Genuine Estate Distribution: The transfer must represent a bona fide distribution of estate assets, not a disguised sale or exchange
Transfer by Personal Representative: The shares must be transferred by the executor or administrator in their official capacity
No Consideration: The beneficiary must not pay consideration for the shares beyond what they are entitled to under the will or intestacy rules

Right of Survivorship (Joint Tenancy)

A special scenario exists for jointly held shares:

When shares are held in joint tenancy with right of survivorship, ownership automatically passes to the surviving joint owner(s) upon death
This transfer occurs by operation of law, not through an instrument of transfer
Because no taxable instrument is executed, no stamp duty applies
Probate may not be required for these specific assets

Practical Example: Inheritance Transfer

Scenario: Mrs. Chan passes away, leaving a will that bequeaths her entire shareholding of 500,000 shares in ABC Limited (a private HK company) to her son. The shares have a Net Asset Value of HKD 120 per share based on the latest accounts. Probate is granted, and the executor transfers the shares to the son.

Calculation:

Market Value: 500,000 shares × HKD 120 = HKD 60,000,000
Stamp Duty: HKD 0 (exempt as inheritance)

Requirements:

Grant of Probate must be obtained
Transfer must be executed by executor in official capacity
Transfer form should reference the grant of probate and confirm no consideration paid
IRD will stamp the instrument as “exempt” upon verification

Other Exemptions and Relief Provisions

1. No Change in Beneficial Ownership (Section 27(5) SDO)

Under Section 27(5) of the Stamp Duty Ordinance, no ad valorem stamp duty is chargeable on transfers where:

The transfer is made for nominal consideration (or no consideration)
No beneficial interest passes in the stock transferred

Common Application: A person placing Hong Kong stock into a trust where they remain the sole beneficial owner. The legal title changes, but beneficial ownership does not—therefore, no duty is payable.

2. Spousal and Family Exemptions

Specific exemptions exist for certain family transfers:

Transfer Type	Stamp Duty Treatment
Between legally married spouses (as a gift)	Exempt – facilitates inter-spousal asset management
Civil partnership transfers	Exempt – same treatment as married couples
Transfers pursuant to divorce settlement	Exempt – when ordered by court or agreed in settlement
Transfers upon dissolution of civil partnership	Exempt – parallel treatment to divorce

3. Intra-Group Relief (Section 45 SDO)

Section 45 of the Stamp Duty Ordinance provides relief for transfers between associated bodies corporate:

Two companies are “associated” if one owns ≥90% of the issued share capital of the other, or
A third company owns ≥90% of the issued share capital of each
2025 Update: The Court of Final Appeal confirmed in June 2025 that this relief applies only to bodies corporate with issued share capital (traditional companies, not LLPs or certain LLCs)

Purpose: The relief recognizes that intra-group transfers represent changes in nominal ownership rather than ultimate beneficial ownership, and thus should not attract duty.

4. Stock Borrowing and Lending Transactions

Transfers of shares under approved stock borrowing and lending arrangements may be exempt. Detailed conditions are set out in the IRD’s Stamp Office Interpretation and Practice Notes.

Documentation and Procedural Requirements

Required Documents

To stamp a share transfer with the IRD, the following documents are typically required:

Document	Purpose	Notes
Instrument of Transfer	Legal document evidencing the share transfer	Must be signed by transferor and transferee
Form IRSD231	IRD’s share transfer calculation form	Serves as stamp duty calculation basis
Latest Audited Accounts	Valuation basis for unlisted shares	Must be within 6 months of transfer date
Management Accounts	Alternative if audited accounts outdated	Must be within 3 months of transfer date; certified
Form IRSD102	Schedule of landed properties	Required if company/subsidiaries own property
Property Valuation	Professional valuation of real estate holdings	May be requested if company holds significant property assets
Grant of Probate / Letters of Administration	Legal authority for inheritance transfers	Required to claim inheritance exemption
Will or Intestacy Documentation	Evidence of entitlement	To verify beneficiary’s entitlement to shares

Stamping Deadlines

Strict deadlines apply for stamping share transfer instruments:

Execution Location	Stamping Deadline	Notes
Instrument signed in Hong Kong	30 days from signing	Standard deadline for most share transfers
Instrument signed outside Hong Kong	30 days from receipt in Hong Kong	Clock starts when document arrives in HK
Stock exchange transactions	2 days from execution	Accelerated deadline for exchange-traded shares

Late Stamping Penalties

Penalties for late stamping are severe and escalate based on delay duration:

Delay Period	Penalty
Less than 1 month late	Up to 2× the stamp duty
Between 1 and 2 months late	Up to 4× the stamp duty
More than 2 months late	Up to 10× the stamp duty

Important: Unstamped instruments are not admissible as evidence in Hong Kong courts and may render the transaction legally invalid. Always ensure timely stamping to preserve legal rights.

Stamping Methods

The IRD offers two methods for stamping share transfer documents:

e-Stamping: Online submission through the IRD’s e-Stamping portal (faster, more convenient)
Physical Stamping: In-person submission at the IRD Stamp Office

Comparison: Gift vs. Inheritance vs. Sale Transfers

Feature	Sale Transfer	Gift Transfer	Inheritance Transfer
Consideration	Payment received	None (or nominal)	None
Valuation Basis	Higher of consideration or market value	Fair market value on transfer date	Not applicable (exempt)
Stamp Duty Rate	0.2% total	0.2% total (on market value)	0% (exempt)
Who Pays	0.1% buyer + 0.1% seller	Typically recipient (but negotiable)	N/A
Key Documents	Sale agreement, transfer form, accounts	Transfer form, accounts, gift declaration	Grant of probate/letters of admin, will, transfer form
Exemption Available	Only if qualifies for specific relief (e.g., s.45)	Only if spouse/civil partner or no beneficial change	Yes – automatic exemption
Stamping Deadline	30 days (or 2 days for exchange)	30 days	30 days (for exempt stamp)

Post-Transfer Compliance Requirements

After a share transfer is stamped, several additional compliance steps must be completed:

Share Certificate Issuance: New share certificates must be issued to the transferee within 2 months of the transfer
Register of Members Update: The company’s statutory Register of Members must be updated to reflect the new ownership structure
Significant Controllers Register (SCR): If ownership exceeds 25%, the SCR must be updated accordingly within 15 days
Annual Return Filing: The updated shareholding must be reflected in the company’s next Annual Return (Form NAR1) filed with the Companies Registry

Strategic Considerations for Estate Planning

Gift Now vs. Inherit Later

Individuals planning wealth transfers face a strategic choice:

Strategy	Advantages	Disadvantages
Lifetime Gift	• Immediate transfer of control • Donor sees benefit during lifetime • Can be structured incrementally • Exemptions available (spouse, no beneficial change)	• Stamp duty of 0.2% on market value • Loss of control over assets • Cannot be easily reversed
Inheritance (Via Will)	• No stamp duty on transfer • Donor retains control during lifetime • Flexibility to change beneficiaries • Clear legal framework	• Requires probate process • Transfer delayed until death • Probate fees and legal costs • Potential for disputes

Using Trusts for Tax-Efficient Transfers

Trust structures can provide stamp duty efficiency when properly structured:

Bare Trust (No Beneficial Change): If the settlor remains the sole beneficial owner, no stamp duty applies under Section 27(5)
Discretionary Trust: If beneficial ownership changes, stamp duty will apply on the initial transfer to the trust
Subsequent Distributions: Distributions from the trust to beneficiaries may trigger additional stamp duty depending on structure

Professional advice is essential when structuring trusts to ensure compliance and optimize tax efficiency.

Common Pitfalls and How to Avoid Them

Pitfall #1: Undervaluing Gift Transfers

Mistake: Declaring nominal or artificially low values for gift transfers to minimize stamp duty.

Consequence: The IRD will challenge the valuation and assess duty based on fair market value, plus potential penalties for understatement.

Solution: Always use proper valuation methods—closing price for listed shares, NAV from current accounts for private companies. Obtain professional valuations if needed.

Pitfall #2: Missing Stamping Deadlines

Mistake: Delaying stamping beyond the 30-day deadline due to administrative oversight.

Consequence: Penalties up to 10× the original duty; instrument inadmissible in court.

Solution: Implement a tracking system with calendar reminders. Stamp immediately after executing the transfer instrument. Use e-Stamping for faster processing.

Pitfall #3: Claiming Inheritance Exemption Without Proper Documentation

Mistake: Attempting to transfer shares as an “inheritance” without obtaining grant of probate or letters of administration.

Consequence: IRD will reject the exemption claim and assess full stamp duty.

Solution: Always complete the probate process first. Ensure the transfer instrument references the grant and clearly identifies the transfer as an estate distribution.

Pitfall #4: Using Outdated Financial Statements

Mistake: Submitting audited accounts that are more than 6 months old (or management accounts more than 3 months old).

Consequence: IRD will request updated accounts, delaying the stamping process and potentially causing deadline violations.

Solution: Ensure accounts are current before initiating the transfer. Commission interim management accounts if necessary.

Practical Decision-Making Framework

Use this flowchart approach to determine stamp duty treatment:

Step 1: Is the transfer from a deceased person’s estate?

YES → Proceed to claim inheritance exemption (ensure proper documentation)
NO → Go to Step 2

Step 2: Is the transfer between legally married spouses or civil partners as a gift?

YES → Exempt from stamp duty
NO → Go to Step 3

Step 3: Does beneficial ownership actually change?

NO (e.g., transfer into bare trust where settlor remains beneficial owner) → Exempt under Section 27(5)
YES → Go to Step 4

Step 4: Is the transfer between associated companies qualifying for Section 45 relief?

YES (and all conditions met) → Exempt
NO → Go to Step 5

Step 5: Stamp duty is payable at 0.2% on the higher of consideration or fair market value.

Key Takeaways

Gift transfers are dutiable: Even though no money changes hands, gifts of Hong Kong shares attract stamp duty at 0.2% based on fair market value. Proper valuation is essential—use closing price for listed shares and Net Asset Value for private companies.
Inheritance transfers are exempt: Genuine transfers from a deceased’s estate to beneficiaries under a will or intestacy rules are fully exempt from stamp duty, provided proper documentation (grant of probate/letters of administration) is obtained.
Spousal transfers enjoy exemption: Share gifts between legally married spouses or civil partners are exempt, facilitating tax-efficient family wealth management. Divorce settlements also benefit from exemption.
No beneficial change = no duty: Section 27(5) exempts transfers where legal title changes but beneficial ownership does not, such as settling shares into a bare trust where the settlor remains the beneficial owner.
Valuation must be current: For unlisted shares, audited accounts must be within 6 months of the transfer date (management accounts within 3 months). The IRD will reject outdated valuations.
Stamping deadlines are strict: 30 days from execution for most transfers, with penalties escalating to 10× the duty for delays exceeding 2 months. Unstamped instruments are legally invalid and inadmissible in court.
Intra-group relief has limitations: Following the June 2025 Court of Final Appeal ruling, Section 45 relief for associated companies applies only to bodies corporate with issued share capital—certain structures like LLPs may not qualify.
Estate planning requires strategy: Choose between lifetime gifts (immediate control transfer, but 0.2% duty) and inheritance (no duty, but requires probate). Each has distinct advantages depending on objectives and circumstances.
Documentation is critical: Maintain proper evidence of exemption claims—probate grants for inheritances, marriage certificates for spousal transfers, trust deeds for no-beneficial-change claims. The IRD scrutinizes exemption applications.
Professional advice is valuable: Complex transactions involving trusts, corporate structures, or significant values benefit from professional tax and legal guidance to ensure compliance and optimize outcomes.

Disclaimer

This article provides general information about Hong Kong stamp duty on share transfers, gifts, and inheritances. It is not intended as legal, tax, or financial advice. Stamp duty rules are subject to change, and specific circumstances may affect the treatment of individual transactions. For advice tailored to your specific situation, consult a qualified Hong Kong tax professional, solicitor, or corporate services provider. The information is accurate as of December 2025.

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