I created this web page to cut through the confusion I have found in Lantau about Ad Valorem Stamp Duty (AVD) and a single residential property, specifically "two residential units that became a single unit" on ground floor of a village house.

After reading relevant sections of Inland Revenue Department's website, I understand the only requirement is authorised person's validation that separating walls have been physically demolished. I have simply marked up extracts to show how I arrived at this conclusion.

Questions and answers reproduced from www.ird.gov.hk/eng/faq/avd.htm

3 Q: Under what circumstances will AVD be payable at 15% (Part 1 of Scale 1)?
A: Unless specifically exempted or otherwise provided, AVD is payable at the rate under Part 1 of Scale 1, i.e., a flat rate of 15%, on an agreement for sale for the acquisition of any residential property executed on or after 5 November 2016. Part 1 of Scale 1 also applies to a conveyance on sale of such a property executed on or after that date (unless the related agreement for sale was executed before 5 November 2016).
However, Part 1 of Scale 1 does not apply to an agreement /conveyance for a residential property where the purchaser/transferee is a Hong Kong permanent resident (HKPR) (or he is a tenant or an authorized occupant of the Housing Authority who acquires the residential property under the Tenants Purchase Scheme) acting on his own behalf and he does not own any other residential property in Hong Kong at the time of acquisition of the subject property irrespective of whether the purchaser/transferee is acquiring a residential property for the first time; only the lower rates (Scale 2) will apply to such agreement/conveyance. See also Question 19 below.
However, instruments executed on or after 12 April 2017 for the sale and purchase or transfer of more than a single residential property, unless specifically exempted or otherwise provided in the law, will be subject to AVD at the flat rate of 15%. Thus, a HKPR who acquires more than a single residential property under an instrument will be liable to pay AVD at a flat rate of 15%, irrespective of whether or not he/she is a beneficial owner of any other residential property in Hong Kong on the date of acquisition of the subject properties.
For the meaning of "single residential property", see Questions 12 to 16.
12 Q: What is the meaning of "single residential property"?
A: The Stamp Duty Ordinance has not exhaustively defined the term "single residential property. However, it provides that a "single residential property" includes:
  1. a unit and a roof situated in the same building;
  2. a unit and an adjacent flat roof situated in the same building
  3. a unit and an adjacent garden;
  4. two residential units that became a single unit as shown by the following documents that the walls or the floor, or any part of the walls or the floor separating the two units has been demolished and the two units have become one single residential unit -
    1. a building plan and a letter issued by the Building Authority acknowledging receipt of a certificate of completion of the building works relating to the demolition as required under the Building (Administration) Regulations; or
    2. a plan signed by an authorized person after the completion of the building works relating to the demolition. Sketch
13 Q: What documents will the Stamp Office base on to determine whether the subject property is a single residential property?
A: In general, the Stamp Office will refer to the building plans approved by the Building Authority, the deed of mutual covenant, the occupation permit and other documents, such as the developer's sale brochures, (as well as signed plan - possibly previous sales and purchase agreements, previous stamp certifcates, new single postal address, single water and electrical connections and bills and single rateable valuations) to determine whether the subject property under an instrument is a single residential property.

Questions and answer reproduced from www.ird.gov.hk/eng/faq/avdexample.htm

21 Q: Mr Yip is a HKPR. On 12 April 2017, when he did not own any residential property in Hong Kong, Mr Yip entered into a provisional agreement for sale and purchase ("PASP") to acquire 2 residential properties at the purchase price of $20M from a vendor who is not a close relative of Mr Yip. What is the amount of AVD payable for the acquisition of the 2 properties?
22 Q: Same as Example 21, but the 2 residential properties are 2 adjacent residential properties. At the time of entering into the PASP, the partition wall dividing the 2 units had been demolished by the vendor and the two units were combined as one unit. The plan for alterations works had been approved by the Building Authority. (or building plan signed by an authorized person as answer to question 12 above and question 22 below). What is the amount of AVD payable?
A: If Mr Yip is acting on his own behalf in acquiring the properties, AVD at Scale 2 rates will apply. The AVD payable is $750,000 ($20M x 3.75%).
23 Q: Same as Example 22, but no approval has been given by the Building Authority. Nor is there any building plan signed by an authorized person for the alterations works. What is the amount of AVD payable?

28th April 2018