Are you considering investing in Hong Kong’s dynamic mixed-use properties? With the city’s limited land supply and evolving urban landscape, developments that combine residential, commercial, and retail spaces have become increasingly popular. But here’s the crucial question: how does Hong Kong’s stamp duty regime apply to these hybrid properties in 2024-2025? The good news is that recent reforms have dramatically simplified the system, making it easier than ever to calculate your tax liabilities accurately.

What Are Mixed-Use Developments in Hong Kong?

Mixed-use developments represent Hong Kong’s innovative response to urban density challenges. These integrated structures seamlessly combine different property uses—typically residential units above commercial or retail spaces—within a single building or master-planned site. From traditional shop-houses to modern skyscrapers with offices, hotels, and apartments, these hybrid properties maximize land efficiency while creating vibrant, self-contained communities.

Official Classification Criteria

The Inland Revenue Department (IRD) determines property classification by examining several key documents. Understanding these criteria is essential for proper stamp duty assessment:

1. Building Plans: Approved plans from the Building Authority showing intended use of different floors and units
2. Deed of Mutual Covenant (DMC): The governing document defining permitted uses, restrictions, and management structure
3. Occupation Permit: Official permit specifying permitted use upon completion
4. Transaction Documents: Sale and purchase agreements describing the property and its permitted uses

Hong Kong’s Simplified Stamp Duty Regime (2024-2025)

The 2024 Reforms: A Game-Changer for Property Buyers

Hong Kong’s stamp duty landscape underwent historic changes in 2024, fundamentally altering how all properties—including mixed-use developments—are taxed. Effective February 28, 2024, the government abolished all demand-side management measures for residential properties:

• Special Stamp Duty (SSD) abolished: No more penalties for properties sold within 24 months of acquisition
• Buyer’s Stamp Duty (BSD) abolished: No additional duty for non-Hong Kong permanent residents
• New Residential Stamp Duty (NRSD) abolished: No extra tax for second-home buyers
• Unified Ad Valorem Stamp Duty (AVD): All buyers now pay Scale 2 rates regardless of residency status

Current Ad Valorem Stamp Duty (AVD) Scale 2 Rates

All property transactions in Hong Kong now follow the same Scale 2 progressive rate structure. The following table presents the current rates applicable to instruments executed on or after February 28, 2024:

Note: Stamp duty is calculated on the higher of the stated consideration or the market value of the property.

How Mixed-Use Developments Are Taxed Under the New System

The Unified Approach: One Rate for All Properties

The 2024 reforms have significantly simplified the stamp duty treatment of mixed-use properties. Under the current regime, all properties—whether purely residential, purely non-residential, or mixed-use—are subject to the same Scale 2 AVD rates. This means:

• A mixed-use building with residential units above retail shops is taxed at Scale 2 rates
• Individual units within a mixed-use development are taxed at Scale 2 rates
• There is no differential treatment based on the residential vs. commercial proportion
• No additional duties regardless of buyer’s residency status or property ownership history

Apportionment Considerations for Mixed-Use Properties

For properties containing both residential and non-residential elements, the following principles apply:

Entire Building Transactions: When an entire mixed-use building is sold (e.g., a development with shops on the ground floor and residential units above), the stamp duty is calculated on the total consideration at the applicable Scale 2 rate. No apportionment between residential and commercial components is required.

Individual Unit Transactions: When individual units within a mixed-use development are sold separately, each transaction is stamped based on its individual consideration. The classification of the specific unit (residential or non-residential) is determined by its approved use, though the tax rate remains the same under Scale 2.

Practical Calculation Examples for Mixed-Use Properties

Example 1: Residential Unit in Mixed-Use Development

Scenario: A Hong Kong permanent resident purchases a residential apartment on the 15th floor of a mixed-use building (ground floor retail, floors 1-20 residential). The purchase price is HK$8,000,000.

• Property Value: HK$8,000,000
• Applicable Rate: 3% (falls within HK$6,642,861 – HK$9,000,000 bracket)
• Stamp Duty Payable: HK$8,000,000 × 3% = HK$240,000
• Additional Duties: None (BSD and SSD have been eliminated)

Example 2: Commercial Shop in Mixed-Use Development

Scenario: A company purchases a retail shop on the ground floor of the same mixed-use development. The purchase price is HK$12,000,000.

• Property Value: HK$12,000,000
• Applicable Rate: 3.75% (falls within HK$10,080,001 – HK$20,000,000 bracket)
• Stamp Duty Payable: HK$12,000,000 × 3.75% = HK$450,000
• Additional Duties: None

Example 3: Entire Mixed-Use Building

Scenario: A property developer purchases an entire mixed-use building containing 5 retail shops and 30 residential units for redevelopment. The total purchase price is HK$150,000,000.

• Property Value: HK$150,000,000
• Applicable Rate: 4.25% (exceeds HK$21,739,120)
• Stamp Duty Payable: HK$150,000,000 × 4.25% = HK$6,375,000
• Additional Duties: None

Example 4: Traditional Shop-House Property

Scenario: An individual purchases a traditional shop-house where the ground floor is used for commercial purposes and the upper floor is used as a residence. The purchase price is HK$5,500,000.

• Property Value: HK$5,500,000
• Applicable Rate: 2.25% (falls within HK$4,935,481 – HK$6,000,000 bracket)
• Stamp Duty Payable: HK$5,500,000 × 2.25% = HK$123,750
• Notes: Despite the mixed use, the property is taxed at the unified Scale 2 rate based on total consideration. No apportionment is required under the current system.

Before vs. After: The Impact of the 2024 Reforms

To illustrate the dramatic impact of the February 2024 reforms, consider this comparison for an HK$8 million property:

As the table demonstrates, the reforms have resulted in substantial savings for most property buyers, particularly non-Hong Kong permanent residents (80% reduction) and those purchasing additional properties (60% reduction).

Important Compliance Considerations

Valuation Methodology for Mixed-Use Properties

Stamp duty is calculated based on the higher of:

• The stated consideration in the sale and purchase agreement, or
• The market value of the property as determined by the IRD

For mixed-use properties, valuation can be more complex due to the different income-generating potential and market dynamics of residential versus commercial components. The IRD may conduct its own valuation if it believes the transaction price doesn’t reflect fair market value.

Payment Deadlines and Penalties

Stamp duty must be paid within 30 days from the signing of the Provisional Agreement for Sale and Purchase (PASP), unless it is superseded by a Formal Agreement signed within 14 days. In the latter case, stamp duty is payable within 30 days from the signing of the Formal Agreement.

Late payment attracts significant penalties:

• Up to 2 times the stamp duty payable if stamped within 1 month of the deadline
• Up to 4 times the stamp duty payable if stamped more than 1 month after the deadline

Rental Stamp Duty for Mixed-Use Properties

In addition to stamp duty on property purchases, tenancy agreements for mixed-use properties are also subject to stamp duty. The rates are:

Multiple Properties Under One Instrument

When purchasing multiple properties (including a mix of residential and non-residential units) under a single sale and purchase agreement, stamp duty is calculated on the total consideration for all properties combined. The applicable rate is determined by the total value bracket.

Special Situations and Professional Guidance

When to Seek Professional Advice

While Hong Kong’s stamp duty system has been simplified, certain situations still require professional guidance:

• Transactions Between Connected Persons: Transfers between spouses, parents and children, or associated companies
• Nominee Arrangements: Properties held by nominees where both initial acquisition and subsequent transfer may attract duty
• Corporate Reorganizations: Property transfers during corporate restructuring that may qualify for relief
• Properties with Unclear Classification: When official documents conflict or classification is ambiguous
• Cross-Border Transactions: Involving international parties or complex ownership structures

Required Documentation for Stamping

When submitting documents for stamping to the IRD, prepare the following:

• Original Provisional Agreement for Sale and Purchase (PASP) or Formal Agreement
• Hong Kong Identity Card (for individuals) or Business Registration Certificate (for companies)
• Bank draft or cheque for stamp duty payment
• Copy of the Government Lease or Conditions of Sale
• Supporting documents evidencing the property’s classification (if requested)

Hong Kong’s simplified stamp duty regime has made investing in mixed-use properties more accessible and predictable than ever before. With the elimination of complex additional duties and the unification of rates across all property types, buyers can now calculate their tax liabilities with greater certainty. However, the unique characteristics of mixed-use developments—combining different property uses, income streams, and regulatory considerations—still warrant careful planning and professional advice. Whether you’re purchasing a traditional shop-house or a modern mixed-use tower, understanding the current stamp duty framework is essential for making informed investment decisions in Hong Kong’s dynamic property market.