Ad Valorem Stamp Duty (AVD) in Hong Kong: Rates and Guide

Understand how Ad Valorem Stamp Duty (AVD) works in Hong Kong property transactions, including rates for different buyer categories, exemptions, and practical steps for calculating and paying the tax.

Ad Valorem Stamp Duty, commonly abbreviated as AVD, is one of the most significant costs when buying property in Hong Kong. It is a tax levied on property transactions based on the property's purchase price or market value, whichever is higher. AVD applies to most residential and non-residential property sales and is payable by the buyer. Understanding how AVD works, the different rates for various buyer categories, and the exemptions available can help you budget accurately and avoid unexpected financial surprises. This article explains the current AVD structure as of 2025, how it interacts with other stamp duties, and what you need to know before completing a transaction.

What is Ad Valorem Stamp Duty (AVD)?

Ad Valorem Stamp Duty is a progressive tax imposed on property transactions in Hong Kong. The term "ad valorem" means "according to value," meaning the duty is calculated as a percentage of the property's consideration or market value, whichever is higher. AVD is one of several stamp duties that may apply when buying property in Hong Kong, alongside Special Stamp Duty (SSD) and Buyer's Stamp Duty (BSD). The Hong Kong Inland Revenue Department (IRD) administers the collection of AVD.

AVD applies to both residential and non-residential properties, but the rates differ. For residential properties, the rates are scaled according to the property value and the buyer's status (e.g., first-time buyer, existing owner, or company). For non-residential properties, a flat rate generally applies. It is important to note that AVD is payable on top of the purchase price and other transaction costs, such as legal fees, agent commission, and management fees and other recurring costs.

AVD Rates for Residential Properties

For residential property transactions, AVD rates are structured in a progressive scale. The rates depend on the property's value and whether the buyer is a Hong Kong permanent resident (HKPR) acquiring the property as a first-time buyer or as an existing owner. The following table outlines the AVD rates for residential properties as of 2025.

Scale 1: Higher Rates for Non-First-Time Buyers and Companies

Scale 1 applies to buyers who are not first-time Hong Kong permanent residents, including existing homeowners, companies, and non-permanent residents. The rates are higher and are designed to cool the property market. The current Scale 1 rates are as follows:

Up to HK$2,000,000: 1.5%
HK$2,000,001 to HK$3,000,000: 3.0%
HK$3,000,001 to HK$4,000,000: 4.5%
HK$4,000,001 to HK$6,000,000: 6.0%
HK$6,000,001 to HK$20,000,000: 7.5%
HK$20,000,001 and above: 8.5%

For example, if a company purchases a residential property valued at HK$8,000,000, the AVD would be calculated at 7.5% of HK$8,000,000, which equals HK$600,000. This is in addition to any Buyer's Stamp Duty (BSD) that may apply to companies.

Scale 2: Lower Rates for First-Time Buyers

Scale 2 provides lower AVD rates for Hong Kong permanent residents who are first-time buyers. These rates are more favourable and are intended to help first-time homeowners enter the market. The current Scale 2 rates are:

Up to HK$2,000,000: HK$100
HK$2,000,001 to HK$3,000,000: 1.5%
HK$3,000,001 to HK$4,000,000: 2.25%
HK$4,000,001 to HK$6,000,000: 3.0%
HK$6,000,001 to HK$9,000,000: 3.75%
HK$9,000,001 to HK$20,000,000: 4.25%
HK$20,000,001 and above: 4.25%

Note that the first band for Scale 2 is a fixed duty of HK$100 for properties valued at or below HK$2,000,000, which is a significant saving compared to Scale 1. For a property worth HK$5,000,000, a first-time buyer would pay 3.0% AVD (HK$150,000), whereas a non-first-time buyer would pay 6.0% (HK$300,000).

Determining Your Buyer Status

To qualify for Scale 2 rates, the buyer must be a Hong Kong permanent resident and must not own any other residential property in Hong Kong at the time of purchase. If you are buying jointly with a spouse, both must meet the criteria. If you are a first-time buyer but your spouse already owns a property, you may not qualify for Scale 2 rates. It is advisable to consult a solicitor or tax professional to confirm your eligibility.

AVD for Non-Residential Properties

For non-residential properties, such as commercial, industrial, and car parking spaces, AVD is charged at a flat rate. As of 2025, the flat rate for non-residential properties is 3.0% of the consideration or market value, whichever is higher. This rate applies regardless of the buyer's status. However, if the buyer is a company or non-permanent resident, additional duties such as Buyer's Stamp Duty may apply.

Non-residential properties have become more popular among investors in recent years, partly due to the lower AVD rate compared to residential properties under Scale 1. However, buyers should be aware of the tax considerations for foreign buyers, which may include BSD and other levies.

Interaction with Other Stamp Duties

AVD is not the only stamp duty you may need to pay. Depending on your buyer profile and the timing of the sale, you may also be subject to Special Stamp Duty (SSD) and Buyer's Stamp Duty (BSD). Understanding how these duties interact is crucial for accurate budgeting.

Special Stamp Duty (SSD)

SSD is imposed on residential properties that are resold within a short period after purchase. The rates are as follows:

Sold within 6 months of purchase: 20%
Sold within 6 to 12 months: 15%
Sold within 12 to 24 months: 10%

SSD is paid by the seller, not the buyer. However, as a buyer, you should be aware that if you purchase a property that the seller acquired recently, the seller may factor the SSD cost into the asking price. For more details on the buying process, see the step by step buying process.

Buyer's Stamp Duty (BSD)

BSD is charged at a flat rate of 7.5% on residential properties purchased by non-permanent residents and companies (unless exempted). BSD is payable on top of AVD. For example, if a non-permanent resident buys a residential property worth HK$10,000,000, they would pay AVD at Scale 1 rates (7.5% = HK$750,000) plus BSD at 7.5% (HK$750,000), for a total stamp duty of HK$1,500,000. This can significantly increase the cost of buying property for foreign buyers.

Certain exemptions apply to BSD, such as for Hong Kong permanent residents buying as first-time buyers. Also, if you are a foreign buyer but become a permanent resident within a certain period, you may be eligible for a refund of the BSD paid. However, the rules are complex and subject to change. It is wise to seek professional advice and read our article on stamp duty categories explained.

How to Calculate AVD: Practical Examples

Calculating AVD accurately is essential to avoid underpayment or overpayment. The calculation depends on the property value and the applicable scale. Below are a few examples to illustrate the process.

Example 1: First-Time Buyer Purchasing a HK$4,500,000 Flat

A Hong Kong permanent resident buying their first residential property for HK$4,500,000 would use Scale 2 rates. The AVD is calculated as follows:

First HK$2,000,000: HK$100 (fixed)
Next HK$1,000,000 (HK$2,000,001 to HK$3,000,000): 1.5% = HK$15,000
Next HK$1,000,000 (HK$3,000,001 to HK$4,000,000): 2.25% = HK$22,500
Remaining HK$500,000 (HK$4,000,001 to HK$4,500,000): 3.0% = HK$15,000
Total AVD: HK$100 + HK$15,000 + HK$22,500 + HK$15,000 = HK$52,600

Note that the calculation uses progressive bands, similar to income tax.

Example 2: Existing Owner Buying a HK$8,000,000 Flat

If the buyer already owns a residential property and is purchasing a second home for HK$8,000,000, Scale 1 rates apply. The AVD is 7.5% of HK$8,000,000 = HK$600,000. No BSD applies if the buyer is a Hong Kong permanent resident.

Example 3: Company Buying a Residential Property for HK$15,000,000

A company purchasing a residential property for HK$15,000,000 would pay AVD at Scale 1 rates (7.5% = HK$1,125,000) plus BSD at 7.5% (HK$1,125,000), for a total stamp duty of HK$2,250,000. This illustrates the heavy tax burden on corporate buyers.

For a more detailed breakdown of transaction costs, refer to our transaction costs overview.

Exemptions and Reliefs from AVD

Certain transactions may be exempt from AVD or qualify for relief. Common exemptions include:

Transfer between spouses: Transfers of property between married couples are generally exempt from AVD, provided certain conditions are met.
Inheritance: Property inherited from a deceased person is not subject to AVD.
Corporate restructuring: Certain intra-group transfers may qualify for stamp duty relief under specific provisions.
First-time buyer relief: As noted, first-time buyers benefit from lower Scale 2 rates, which is a form of relief.

It is important to note that exemptions are not automatic; you must apply to the IRD and provide supporting documentation. Your solicitor can assist with the application process. For more information on the legal aspects, see role of solicitors.

Payment of AVD and Deadlines

AVD must be paid to the IRD within 30 days of the signing of the agreement for sale and purchase (or the assignment, whichever is earlier). Late payment incurs penalties, which can be substantial. The penalty is calculated as follows:

If paid within 1 month of the due date: 2% of the unpaid duty
If paid within 2 months: 4%
If paid after 2 months: 10%

To avoid penalties, ensure that your solicitor arranges for timely payment. Typically, the buyer's solicitor will handle the stamping and payment as part of the conveyancing process. The IRD accepts payment by cash, cheque, or electronic funds transfer. Once the duty is paid, the IRD stamps the document, which is necessary for registration at the Land Registry.

For a complete overview of the buying timeline, read our complete guide to buying property in Hong Kong.

Impact of AVD on Property Investment Decisions

AVD can significantly affect the overall cost of a property purchase and influence investment decisions. For investors, the high rates under Scale 1 and the additional BSD for non-permanent residents and companies may reduce potential returns. As a result, many investors focus on non-residential properties, which have a lower flat rate of 3.0% and no BSD (unless the buyer is a company or non-permanent resident, in which case BSD may still apply).

First-time buyers, on the other hand, benefit from the lower Scale 2 rates, which can save tens of thousands of dollars. However, the property market in Hong Kong is known for its high prices, and even with lower rates, the absolute amount of stamp duty can be substantial. For example, a first-time buyer purchasing a HK$6,000,000 flat would pay AVD of HK$180,000 (3.0% under Scale 2).

Market trends also affect AVD revenue. When property prices rise, the government may adjust AVD rates or introduce new cooling measures. For instance, in 2023, the government raised the AVD rates for non-residential properties from 1.5% to 3.0%. Keeping an eye on market trends and cycles can help you time your purchase to minimise tax liability.

Common Mistakes and How to Avoid Them

Many buyers make errors when calculating or paying AVD. Here are some common pitfalls and how to avoid them:

Using the wrong scale: Some buyers mistakenly use Scale 2 when they do not qualify, leading to underpayment and penalties. Always verify your buyer status with a professional.
Ignoring BSD: Non-permanent residents and companies sometimes forget that BSD applies on top of AVD. This can result in a significant shortfall.
Late payment: Missing the 30-day deadline can result in penalties of up to 10% of the duty. Ensure your solicitor handles the payment promptly.
Not applying for exemptions: If you qualify for an exemption, such as a transfer between spouses, you must apply to the IRD. Failure to do so means you will have to pay the duty.

To avoid these mistakes, work with an experienced solicitor who specialises in property transactions. For more tips, see our article on making an offer and negotiation.

Recent Changes and Future Outlook

The Hong Kong government periodically adjusts stamp duty rates to manage the property market. In recent years, the government has introduced cooling measures, such as raising AVD rates for non-residential properties and increasing BSD. As of 2025, there are no announced changes, but buyers should stay informed. The government may also introduce relief measures for certain groups, such as first-time buyers or families, in response to economic conditions.

For the latest updates, refer to the IRD website or consult a property professional. You can also read our how Hong Kong property market works article for a broader understanding of market dynamics.

Conclusion

Ad Valorem Stamp Duty is a major cost in any Hong Kong property transaction. Whether you are a first-time buyer, an existing homeowner, or a company, understanding the applicable rates and how they interact with other duties is essential. Always verify your buyer status, calculate the duty accurately, and ensure timely payment to avoid penalties. By staying informed and seeking professional advice, you can navigate the stamp duty landscape with confidence.

For further reading, explore our related articles below.

The Complete Guide to Buying Property in Hong Kong
Stamp Duty Categories Explained
Tax Considerations for Foreign Buyers
Transaction Costs Overview
Market Trends and Cycles
Step by Step Buying Process

Ad Valorem Stamp Duty (AVD) in Hong Kong: A Complete Guide