Intra-group LLPs excluded from Stamp Duty Exemption
Internal group restructuring often involves transfer of shares between associated entities. The Stamp Duty Ordinance (Cap 117) (“SDO”) mitigates the costs of restructuring transactions through s.45 of the SDO, which exempts certain instruments from stamp duty in respect of transfers of Hong Kong stock from one “associated body corporate” to another, where the “association” is beneficial ownership of “not less than 90 percent of the issued share capital” [5].
In the current global landscape, however, new forms of business entities have developed in other jurisdictions, and as a result, an intra-group transfer may involve entities that are recognised abroad but not domestically as body corporates, and the holding of one entity by another within the group may not follow conventional forms of corporate shareholding.
The recent decision of the Court of Final Appeal in John Wiley & Sons UK2 LLP v Collector of Stamp Revenue [2025] HKCFA 11 has clarified that the exemption from stamp duty under s.45 of the SDO applies only to transfers between bodies corporate that possess “issued share capital” in the conventional company law sense.
The Court rejected the argument that the term “issued share capital” could be interpreted to include analogous interests such as those held by UK limited liability partnerships (“LLPs”) which have forms of economic participation said to be analogous to share capital [32]. As a result, the Court refused to extend the reach of the SDO exemption, and made clear that only legislative, not judicial, action could extend the scope of the exemption in the manner sought by the Appellants [36].
Background
John Wiley & Sons UK2 LLP (“First Appellant”), an LLP, transferred its entire shareholding in its Hong Kong subsidiary to Wiley International LLC (“Second Appellant”), which indirectly owned 100% of the First Appellant through another LLP.
The Collector of Stamp Revenue (“Respondent”) assessed stamp duty as being payable on this transfer. The Appellants contested this and applied for an exemption under Section 45 of the Stamp Duty Ordinance. The Respondent denied relief to the Appellants on the basis that the Second Appellant did not beneficially own at least 90% of the First Appellant’s “issued share capital” within the meaning of s 45 SDO. The provision provides relevantly as follows:
“… this section applies to any instrument as respects which it is shown to the satisfaction of the Collector that the effect thereof is to convey a beneficial interest in immovable property, or to transfer a beneficial interest in Hong Kong stock, from one associated body corporate to another, … , where in each case the bodies are associated, that is to say, one is beneficial owner of not less than 90 per cent of the issued share capital of the other, or a third such body is beneficial owner of not less than 90 per cent of the issued share capital of each.”
The Appeal
The Appellants brought an appeal before the Court of Final Appeal, arguing that the share transfer was exempt from stamp duty under s 45 SDO for the following reasons [18]:
1. The Second Appellant, a UK-registered LLP, should be considered a “body corporate” within the meaning of s 45 SDO. The term “body corporate” constitutes an “open-ended class of foreign corporations” that does not explicitly exclude LLPs.
2. “Issued share capital” should be interpreted as denoting a “taxonomic class” that includes features of an LLP which are “materially analogous” to “share capital”.
The Court of Final Appeal rejected both arguments, and the focus of the appeal ultimately centred on the meaning of “issued share capital” [25].
The Court held that “issued share capital” under s.45 should be given its ordinary and natural meaning, essentially being its well-established definition under company law. The Court defined it as “the total monetary value of the consideration paid or agreed to be paid by shareholders in return for shares of a company as have been issued.” [28]
The Court rejected the Appellants’ definition of “share capital” as a “taxonomic class” looking to features of an LLP “materially analogous” to “share capital”. The Appellants relied on the reasoning that “a ‘share’ in the capital of an LLP is in proportion to the relevant capital contribution made by a member and economic participation in the LLP is proportionate to the share of the member”. 1 The Court rejected such definition for vagueness, uncertainty, and inconsistency with the historical context of s.45 of the SDO [34].
The Court further clarified that “issued share capital” is to be read in the same way regardless of whether foreign corporations are involved. Whether s.45 of the SDO should be rectified is a matter for the legislature [36].
Since LLPs cannot issue share capital, and with the Court’s refusal to expand the meaning of “issued share capital” beyond the ordinary and natural meaning, the Appellants failed to satisfy the “association” criterion required by s.45 SDO and could not benefit from the exemption [31].
Implications
A Matter for the Legislature – The Court’s explicit suggestion that this is a matter for the legislature leaves the door open for legislative intervention to modernise the stamp duty exemption regime. In Singapore, for example, by s 3 of the Stamp Duties (Amendment) Act 2008 (Act 36 of 2008) ad valorem relief was extended to LLPs, whether formed or incorporated in or outside Singapore [15].
Clarity (and costs) for similar transactions – The ruling is likely to affect a number of pending and future applications for stamp duty relief involving LLPs and other less typical types of business entities. The judgment observed that the evidence that was before the Court indicated there are a significant number of applications for relief on similar grounds as the present case [35].
Appearance of New Business Structures: Certainty over Interpretive Expansion – This case hinged on the application of key statutory terms in an evolved business landscape. Here, an entity in the group was a UK-registered LLP, which is a body corporate under UK law, but not under Hong Kong law, due to legislative developments in the UK creating new types “corporate” entities [11]-[13]. The result of the present case, whilst preserving certainty in tax law interpretation in Hong Kong, relies on legislative reform for future adaptation to the evolved landscape. This will have implications in terms of higher costs of international restructuring in Hong Kong for certain groups.
Authors: Wilson Hui, Isabel Tam.
Wilson Hui
Wilson Hui’s practice covers a wide range of civil and commercial matters including the areas of tax, charity, contracts, mergers and acquisitions, medical and professional negligence, personal injuries and matrimonial disputes.
Wilson has an extensive client portfolio that includes leading global and local companies, international accounting and advisory firms, investment companies, business leaders, charitable organisations, philanthropists, legal and medical professionals, insurers, and government entities.
One of Wilson’s key strengths lies in providing tailored legal advice and opinions on complex tax and compliance matters. His track record includes rendering opinions on tax issues involving a set of transactions exceeding HK$2 billion. He has also assisted a prominent charity in Hong Kong, and a group of companies with significant assets in navigating intricate tax and compliance challenges. Wilson’s experience extends to representing clients in tax disputes, having received instructions from the Commissioner of Inland Revenue and taxpayers.
Please visit Wilson’s profile here for further details.
Isabel Tam
“Isabel is strong in analysis and research.”
Legal 500 Asia-Pacific 2025: Administrative and Public Law – Leading Junior
Isabel is a Bar Scholar who graduated with a first-class LLB and with distinction in her LLM.
Called to the Bar in 2013, Isabel’s practice has an emphasis on public law, commercial/regulatory matters and family law. She is a contributor to the current editions of Hong Kong Bullen & Leake and Hong Kong Civil Procedure.
Isabel’s tax and regulatory practice includes involvement in Koo Ming Kown & Anor v The Commissioner of Inland Revenue [2021] 3 HKLRD 642, representing two company directors charged to additional tax (led by Mr Denis Chang SC) This is Hong Kong’s first ever case to deal with the third party’s liability for additional tax by reason of “incorrectness” in the company’s return. Her experience also includes advising on tax treatment of profit share incentives; acting in SFC matters; and advising on listing rules. Her experience in relation to decisions made by public authorities includes: NH v TCAB [2024] 6 HKC 765 on the treatment of the principle of res judicata in administrative decision-making; and cases concerning the treatment of family relations in statute and at common law including NF v R [2023] 5 HKLRD 58 and AA v BB [2021] 2 HKLRD 1225.
Visit Isabel’s profile for more details.
This article was first published on 14 July 2025.
Disclaimer: This article does not constitute legal advice and seeks to set out the general principles of the law. Detailed advice should therefore be sought from a legal professional relating to the individual merits and facts of a particular case. The photographs which appear in this article are included for decorative purposes only and should not be taken as a depiction of any matter to which the case is related. The views and opinions expressed in this article/material are solely those of the members authoring it and do not necessarily reflect the official policy or position of Denis Chang’s Chambers, or of any other member or members of Denis Chang’s Chambers.