A BILL

To

Amend the Stamp Duty Ordinance.

Enacted by the Provisional Legislative Council.

1. Short title and commencement

  1. This Ordinance may be cited as the Stamp Duty (Amendment) (No. 2) Ordinance 1998.
  2. This Ordinance shall come into operation on a day to be appointed by the Secretary for the Treasury by notice in the Gazette.

2. Facts and circumstances affecting stamp duty to be set forth

Section 11 of the Stamp Duty Ordinance (Cap. 117) is amended by adding---

"(4) Where any of the facts and circumstances affecting the liability of any instrument to stamp duty, or the amount of the stamp duty chargeable on an instrument, are not fully and truly set forth in the instrument in accordance with subsection (1), the Collector may---

      1. refuse to stamp the instrument; or
      2. stamp the instrument subject to such conditions as he may think fit.".

3. Appeal against assessment

Section 14 is amended---

(a)

in subsection (1), by repealing "may, within a period of 1 month from the date on which the assessment is made and on payment of the stamp duty in conformity therewith, appeal" and substituting---
　

"may

 　
　 　

(a)

within a period of 1 month from the date on which the assessment is made or within such further period as the court may allow under subsection (5B);
　 　

(b)

subject to any order of the court under subsection (1B), on payment of the stamp duty in conformity therewith or, where payment of the stamp duty or any part thereof is allowed to be postponed under subsection (1A), on payment of the part (if any) of the stamp duty the payment of which is not thus allowed to be postponed; and
　 　

(c)

by notice served on the Registrar,
　

appeal";

(b)

by adding---
　

"(1A)Where---
　 　

(a)

an application in writing made for the purposes of this subsection by the person liable for payment of the stamp duty payable under an assessment of the Collector under section 13 is received by the Collector within 14 days from the date on which the assessment is made;
　 　

(b)

the person has stated in the application that he proposes to bring an appeal against the assessment under subsection (1); and
　 　

(c)

security to the satisfaction of the Collector has been given for the payment of the stamp duty that will, by reason of the exercise of the power by the Collector under this subsection, be postponed,
　

the Collector may, by notice in writing served on the person, allow payment of the stamp duty payable under the assessment to be postponed for such period, to such extent and on such terms as the Collector may think fit.
　

(1B) Where the court, on an application made by the person intending to serve a notice under subsection (1), is satisfied that it would impose hardship on the person to require him to pay the stamp duty or the part of the stamp duty, as the case may be, under subsection (1)(b), it may by order allow the appeal to which the notice relates to be brought---
　 　

(a)

without payment of the stamp duty or the part of the stamp duty, as the case may be, under subsection (1)(b), or only on payment of such part of the stamp duty or the part of the stamp duty, as the case may be, as the court may consider reasonable in the circumstances of the case; and
　 　

(b)

on security being given to the satisfaction of the court for the payment of the stamp duty or the part of the stamp duty, as the case may be, that would, apart from this subsection, have then been due for payment.
　

(1C)Where---
　 　

(a)

an appeal is brought under subsection (1) against an assessment made of the stamp duty chargeable on any instrument;
　 　

(b)

(i)

the Collector has under subsection (1A) allowed payment of the stamp duty or any part of the stamp duty payable under the assessment to be postponed; or
　 　 　

(ii)

the court has under subsection (1B) by order allowed an appeal to be brought in the circumstances specified in that subsection; and
　 　

(c)

such part of the stamp duty (if any) as is then due for payment notwithstanding the postponement or the order of the court, as the case may be, has been paid,
　

the Collector shall endorse the instrument to that effect in such manner as he may think fit.";

(c)

in subsection (2), by repealing "thereupon state and sign a" and substituting "upon being required to state and sign a case under subsection (1) state and sign the";

(d)

by adding---
　

"(5B) Where the court, on an application made by a person who is dissatisfied with an assessment of the Collector under section 13, is satisfied that the person was prevented by illness or absence from Hong Kong or other reasonable cause from bringing an appeal within a period of 1 month from the date on which the assessment is made in accordance with subsection (1), the court may by order allow the appeal to be brought within such further period as it may consider appropriate.";

(e)

in subsection (6), by adding after the definition of "court"---
　

""Registrar" (司法常務主任) means the Registrar of the District Court.".

4.Non-admissibility etc. of instruments not duly stamped

Section 15 is amended---

(a)

in subsection (1)---

　

(i)

by repealing "No" and substituting "Subject to subsection (1A), no";

　

(ii)

by repealing the proviso;

(b)

in subsection (2), by adding "or is endorsed by the Collector under section 14(1C)" after "duly stamped";

(c)

by adding---

　

　

"(1A) Notwithstanding anything in subsection (1), an instrument which is not duly stamped may be received in evidence in civil proceedings before a court if---

　

　

　

(a)

the court so orders upon the personal undertaking of a solicitor to cause---

　

　

　

　

(i)

such instrument to be stamped in respect of the stamp duty chargeable thereon; and

　

　

　

　

(ii)

any penalty payable under section 9 in respect thereof to be paid; or

　

　

　

(b)

the instrument is endorsed by the Collector under section 14(1C).".

5.Section added

The following is added---

"18A. Fraction of $1 reckoned as $1

Where any monies payable to the Collector or the Government under this Ordinance, whether by way of stamp duty, additional stamp duty, penalty, interest or otherwise, fall to be calculated under this Ordinance, any fraction of $1 included in such monies shall be reckoned as $1.".

6.Contract notes, etc. in respect of sale and purchase of Hong Kong stock

Section 19 is amended---

(a)

by adding---

　

"(1D)

(a)

Subsection (1) shall not apply to any sale or purchase of Hong Kong stock specified as an exempted transaction in the Fourth Schedule.

　

　

(b)

Any transfer made for the purpose of effectuating any sale or purchase of Hong Kong stock specified as an exempted transaction in the Fourth Schedule shall not be chargeable with stamp duty under head 2(4) in the First Schedule.";

(b)

by adding---

　

"(1E)

(a)

In the case of a transaction whereby the beneficial interest in Hong Kong stock passes otherwise than on sale and purchase, where the transaction---

　

　

　

(i)

is not effectuated by way of an instrument of transfer, but is effectuated by any other means, whether by electronic means or by means of an entry in any recording or book keeping system or otherwise; and

　

　

　

(ii)

is effectuated whether under or through a recognized clearing house or any other person or organization,

　

　

　

the transaction shall, for the purposes of this Ordinance, be deemed to be a sale and purchase of Hong Kong stock.

　

　

(b)

For the purposes of this section and head 2(1) in the First Schedule, in a transaction which is deemed to be a sale and purchase of Hong Kong stock under paragraph (a)---

　

　

　

(i)

the person disposing of the stock in the transaction shall be deemed to be the person effecting the sale in the sale and purchase;

　

　

　

(ii)

the person acquiring the stock in the transaction shall be deemed to be the person effecting the purchase in the sale and purchase;

　

　

　

(iii)

where the person maintaining the record of the transaction is not the principal effecting the sale and purchase, the person shall, save in the case of a recognized clearing house, be deemed to be the agent effecting the sale and purchase; and

　

　

　

(iv)

the value of the stock in the transaction shall be deemed to be the amount or value of the consideration for the sale and purchase.";

(c)

in subsection (12A), by adding "under which any stock borrowing and stock return are provided for" before "shall";

(d)

in subsection (13), by adding "under a stock borrowing and lending agreement, an executed copy of which has been provided to the Collector in accordance with subsection (12A)," after "any stock borrowings";

(e)

in subsection (16)---

　

(i)

in the definition of "borrower", by repealing "obtains" and substituting "is eligible to obtain";

　

(ii)

in the definition of "lender", by repealing "lends" and substituting "is eligible to lend";

　

(iii)

in the definition of "specified purpose"---

　

　

(A)

by repealing "to a stock borrowing" and substituting "to the borrowing of stock by any person";

　

　

(B)

in paragraphs (a), (b) and (c), by repealing "a borrower" and substituting "the person";

　

　

(C)

in paragraph (b), by repealing "stock" before "borrowing";

　

　

(D)

in paragraph (d)---

　

　

　

(I)

by repealing "borrowed stock" and substituting "stock borrowed";

　

　

　

(II)

by repealing "borrower" and substituting "person";

　

(iv)

in the definition of "stock borrowing", by repealing the semicolon and substituting---

　

　

", whether the Hong Kong stock is so obtained---

　

　

　

(a)

directly from the lender; or

　

　

　

(b)

indirectly under or through a recognized clearing house and in accordance with the rules of that recognized clearing house which constitute the stock borrowing and lending agreement;";

　

(v)

by repealing the definition of "stock borrowing and lending agreement" and substituting---

　

　

""stock borrowing and lending agreement" (ÃÒ�eacute;�Eacute;�Icirc;�Icirc;�Eacute;出�oacute;Ä� means---

　

　

(a)

an agreement which contains---

　

　

　

(i)

provisions providing for the obtaining of any stock by a person; and

　

　

　

(ii)

provisions requiring the return of the stock by the person; or

　

　

(b)

the rules of a recognized clearing house which---

　

　

　

(i)

contain the following provisions approved by the Collector---

　

　

　

　

(A)

provisions providing for the obtaining of any stock by a participant of the clearing system of the recognized clearing house from any other participant of such clearing system; and

　

　

　

　

(B)

provisions requiring the return of the stock so obtained; and

　

　

　

(ii)

are subscribed to by participants of the clearing system of the recognized clearing house as a precondition for their obtaining of any stock within the meaning of subparagraph (i);";

　

(vi)

in the definition of "stock return", in paragraph (c), by repealing the semicolon and substituting---

　

　

　

",

　

　

　

　

whether or not the borrowed stock is so returned---

　

　

　

(i)

directly to the lender; or

　

　

　

(ii)

indirectly under or through a recognized clearing house and in accordance with the rules of that recognized clearing house which constitute the stock borrowing and lending agreement;".

7.Voluntary dispositions

Section 27(5) is amended---

  1. by repealing "notwithstanding that" and substituting "only if";
  2. by repealing "not".

8.Interpretation and application of Part IIIA

Section 29A is amended by adding---

"(3A) For the purposes of this Part and head 1(1A) in the First Schedule, and subject to Note 5 to head 1(1A) in that Schedule, an agreement for sale, an unwritten sale agreement or a conveyance on sale is made between the same parties as a previous agreement if, but only if---

    1. the names of both of the vendor and the purchaser or, where there is more than one vendor or more than one purchaser or more than one vendor and more than one purchaser, all of them specified as such in the previous agreement are the same as those in the agreement for sale, the unwritten sale agreement or the conveyance on sale, as the case may be; and
    2. where there is more than one purchaser specified as such in the previous agreement, the property or interest to be acquired by a person as one of the purchasers under the previous agreement is the same as that to be acquired by that person under the agreement for sale, the unwritten sale agreement or the conveyance on sale, as the case may be.".

9.Voluntary chargeable agreements for sale

Section 29F(4) is amended---

  1. by repealing "notwithstanding that" and substituting "only if";
  2. by repealing "not".

10.Regulations

Section 63(c) is amended by repealing "Schedule" and substituting "and the Fourth Schedules".

11.First Schedule amended

The First Schedule is amended---

    1. in Head 1(1) and (1A), by repealing Note 6;
    2. in Head 2(3), by repealing "purchase and sale" and substituting "sale and purchase".

12.Schedule added

The following is added---

"FOURTH SCHEDULE [ss. 19(1D) & 63(c)]

Exempted Transaction Specified for the Purposes of

Section 19(1D) of this Ordinance

1. An exempted transaction specified for the purposes of section 19(1D) of this Ordinance shall be the sale or purchase of any specified derivative effected by a broker through the Unified Exchange in the ordinary course of his business as a broker, whether as principal or agent.

2.For the purposes of this Schedule, the Unified Exchange may, by notice in the Gazette, specify any regional stock exchange as an approved regional stock exchange.

3.In this Schedule---

"approved basket stock" (認可一Äx子ÃÒ�eacute;) means any stock forming part of a basket of stocks, where---

(a)

the basket of stocks comprises---

　

(i)

stocks listed on one or more approved regional stock exchanges; and

　

(ii)

stocks listed on the Unified Exchange; and

(b)

the aggregate value of the stocks referred to in paragraph (a)(ii) does not exceed 40% of the aggregate value of all of the stocks which the basket of stocks comprises;

"approved regional stock" (認可地�Iuml;�Ecirc;ÃÒ�eacute;) means any stock which is listed on an approved regional stock exchange;

"approved regional stock exchange" (認可地�Iuml;�Ecirc;ÃÒ�eacute;�aelig;�ouml;�Ograve;) means a regional stock exchange specified as such by the Unified Exchange under section 2;

"previous closing price" (�yacute;前收市�ugrave;�aelig;)---

(a)

in relation to any stock listed on an approved regional stock exchange, means---

　

(i)

subject to subparagraph (ii), the previous closing price of the stock as determined in accordance with the rules and practices of the exchange; or

　

(ii)

where the previous closing price of the stock cannot be determined under subparagraph (i), the closing price of the stock last quoted in the exchange;

(b)

in relation to any stock listed on the Unified Exchange, means the previous closing price of the stock as determined in accordance with the rules and practices of the Unified Exchange;

"purchase" (ÁÊ買), "sale" (�acirc;�aelig;) and "sale or purchase" (�acirc;�aelig;�Icirc;ÁÊ買) have the meanings respectively assigned to them in section 19 of this Ordinance;

"rules" (規則), in relation to an approved regional stock exchange or the Unified Exchange, means the rules governing the operation and management of the approved regional stock exchange or the Unified Exchange, as the case may be, or the conduct of its members, by whatever name called and wherever contained;

"specified derivative" (�uuml;�uacute;衍�Iacute;工�atilde;) means any Hong Kong stock---

  1. the sale and purchase of which in Hong Kong are subject to the rules and practices of the Unified Exchange; and
  2. which is---
    1. an option which gives its holder the right, but not the obligation, to acquire or dispose of at a pre-determined price a pre-determined number of approved regional stocks or approved basket stocks, or to receive a payment in cash in lieu thereof, on or before a pre-determined date; or
    2. a convertible bond or note which gives its holder the right, but not the obligation, to convert such bond or note into stocks of the issuer of such bond or note, being either approved regional stocks or approved basket stocks, on or before a pre-determined date;

"value" (�ugrave;�Egrave;), in relation to any stock listed on an approved regional stock exchange or on the Unified Exchange, means the closing price of the stock as quoted in the approved regional stock exchange or the Unified Exchange, as the case may be, on the launch date of the specified derivative to which the stock relates or, if there is no such closing price, the previous closing price of the stock by reference to that launch date.".

Explanatory Memorandum

The purpose of this Bill is to amend the Stamp Duty Ordinance (Cap. 117) to give effect to the proposals in the 1998--99 Budget, and other proposals to streamline the operation of the stamp duty scheme under the principal Ordinance.

2.The Bill---

  1. makes more specific provisions in respect of an appeal to the District Court against an assessment of stamp duty made by the Collector of Stamp Revenue, so that pending an appeal, payment of stamp duty may be postponed in appropriate circumstances (clause 3);
  2. provides for a specific exemption for transactions in regional derivative options and convertible bonds or notes, in place of the less direct remission arrangements previously made under the principal Ordinance (clauses 6(a) and 12);
  3. provides that a transfer of beneficial interest in Hong Kong stock otherwise than by way of sale and purchase shall be chargeable with stamp duty, and required to be treated for the purposes of the principal Ordinance, as if it were a sale and purchase of the stock (clause 6(b));
  4. expands the scope of the defined meanings of "stock borrowing", "stock borrowing and lending agreement" and "stock return", so as to provide for stock borrowing and lending under an automated and mechanized system to be established by the Hong Kong Securities Clearing Company Limited (clause 6(c));
  5. introduces other miscellaneous amendments to streamline the operation of the stamp duty scheme.