Tax Insights

Hong Kong 2020-21 Budget – Tax Highlights

  • Business Registration Fees waived for 2020-21
  • Annual Return Fees waived for two years
  • Concessionary low-interest, Government-guaranteed loans for eligible SMEs
  • Planned tax or rental concessions for eligible private equity funds, shipping and marine insurance businesses, and cruise operators
  • Commitment to maintain tax competitiveness in line with tightened OECD objectives
  • One-off 100% tax rebate up to HK$20,000 on 2019-20 Salaries Tax

Wednesday 26th February 2020: New personal and corporate tax incentives are among the measures announced in the Annual Budget issued by Financial Secretary Mr. Paul Chan earlier today.

They come in the form of a proposed one-off tax rebate of 100% or HK$20,000, whichever is lower, for salaries tax, tax under personal assessment and profits tax. The rebates will be applied to tax levied for the current financial year, 2019-20.

Mr. Chan proposed a waiver on Business Registration fees for 2020/21, benefitting 1.5 million Hong Kong-registered businesses currently facing an annual cost of HK$2,250. Further, registration fees for all annual returns (except for late delivery) charged by the Companies Registry will be waived for two years, benefitting about 1.4 million companies.

The Financial Secretary said the Budget placed emphasis on supporting enterprises, safeguarding jobs, stimulating the economy and relieving people's burden.

The highlights of the Budget are as follows:

I. Profits Tax

  • No change to the Profits Tax rate was proposed. A summary of the profits tax rates for 2019/20 onwards is shown as below:

    Tax Rates 2019/20 onwards
    Corporations
    • first HK$2 million
    • beyond the first HK$2 million
     

    8.25%*
    16.5%

    Unincorporated businesses
    • first HK$2 million
    • beyond the first HK$2 million
     

    7.5%*
    15%

    * Only one entity among “connected entities” will be eligible for the reduced tax rate.


II. Salaries Tax / Personal Assessment

  • No change to allowances and deductions was proposed. A summary of the allowances and deductions for 2019/20 onwards is shown as below:

    Allowances 2019/20 onwards
    HK$
    Basic Allowance 132,000
    Married Person Allowance 264,000
    Single Parent Allowance 132,000
    Child Allowance 120,000
    For each child born during the year 120,000
    Dependent Brother or Dependent Sister Allowance 37,500
    Dependant Parent and Dependant Grandparent Allowance
    • for aged 60 or above or eligible to claim allowance under the Disability Allowance Scheme
    • for those aged 55 to 59


    50,000

    25,000
    Additional Dependant Parent and Dependant Grandparent Allowance
    • for aged 60 or above or eligible to claim allowance under the Disability Allowance Scheme
    • for those aged 55 to 59


    50,000

    25,000
    Disabled Dependant Allowance 75,000
    Personal disability allowance 75,000

    Deductions 2019/20 onwards
    HK$
    Expenses of self-education 100,000
    MPF Contribution 18,000
    Home Loan Interest 100,000; 20 Years
    Elderly Residential Care 100,000
    Approved Charitable Donations 35% of income after deductions
    Voluntary Health Insurance Scheme 8,000
    Annuity Premiums and MPF Voluntary Contributions 60,000

III. Marginal bands for salaries tax

  • No change is proposed. Tax Bands for salaries tax from year of assessment 2019/20 onwards are as follows:

    Income
    HK$
    Progressive tax rate Progressive tax applicable to the band HK$
    0-50,000 2% 1,000
    50,001-100,000 6% 3,000
    100,001-150,000 10% 5,000
    150,001-200,000 14% 7,000
    200,001 and over 17%

IV. One-Off Tax Rebate

  • An one-off 100% tax rebate or HK$20,000 (whichever is lower) on 2019/20 Salaries Tax, Personal Assessment and Profits Tax has been proposed. The rebate will be deducted from the 2019/20 final tax (i.e. after the 2019/20 Individual Income Tax Returns and Profits Tax Returns are filed).

  • V. Other tax concessions

    The Financial Secretary also noted the following:

    • The Financial Secretary proposed to waive the stamp duty on stock transfers paid by Exchange Traded Fund (ETF) market makers in the course of creating and redeeming ETF units listed in Hong Kong to further reduce the transaction cost of the ETFs listed.
    • The Government plans to provide tax concession for carried interest issued by private equity funds operating in Hong Kong subject to the fulfilment of certain conditions. The relevant arrangement will be applicable starting from 2020/21 upon completion of the legislative exercise.
    • The Government will amend the relevant legislation to provide tax concessions for the ship leasing business, including offering a profits tax exemption to qualifying ship lessors and a half-rate profits tax concession to qualifying ship leasing managers. Besides, profits tax will be halved for eligible insurance businesses including marine insurance. The Government will also explore other tax measures to attract more global shipping business operators and commercial principals to set up business in Hong Kong.
    • The Organisation for Economic Co-operation and Development (OECD) is actively exploring the proposal of setting rules for imposing a global minimum tax rate which may undermine the attractiveness of Hong Kong's low tax policy to multinational corporations and pose challenges to Hong Kong’s territorial-source-based tax regime. The Government will continue to keep a close watch on the developments of the OECD's work, make assessments and devise corresponding measures to ensure that Hong Kong's tax regime is not only in line with new developments in the international tax scene, but also helps us maintain Hong Kong’s premier business environment and competitiveness.

    • VI. Miscellaneous measures for supporting enterprises

      • A concessionary low-interest loan will be introduced under the SME Financing Guarantee Scheme, under which 100% guarantee will be provided by the Government. The maximum amount of loan for eligible enterprises is based on their salary and rental expenditures for six months, subject to a ceiling of HK$2 million.
      • Rates for non-domestic properties will be waived for four quarters of 2020/21, subject to a ceiling of HK$5,000 per quarter in the first two quarters and a ceiling of HK$1,500 per quarter in the remaining two quarters for each rateable non-domestic property.
      • Rates will be waived on residential properties for all four quarters in 2020/21, subject to a ceiling of HK$1,500 per quarter for each rateable tenement.
      • The business registration fees for 2020/21 will be waived.
      • The registration fees for all annual returns (except for late delivery) charged by the Companies Registry will be waived for two years.
      • A subsidy to each eligible non-domestic household accounts will be provided for four extra months to cover 75% of their monthly billed electricity charges, subject to a monthly cap of HK$5,000 per account.
      • 75% of water and sewage charges payable by non-domestic households will be waived for four extra months, subject to a monthly cap of HK$20,000 and HK$12,500 respectively per household.
      • A new round of rental subsidy will be provided for six months to local recycling enterprises.
      • Rental will be reduced by 50% for another six months for eligible tenants of government properties, government land and EcoPark.
      • Rental and fees will be reduced by 50% for another six months for eligible operators of properties covered by short-term waivers.
      • Hirers of civic centres under the Leisure and Cultural Services Department (LCSD) will be provided with a 50% reduction of hire charges for another six months.
      • Another six months of fees and rent reduction for cruise lines and existing tenants of the Cruise Terminal will be offered.

      • VII. Miscellaneous measures for relieving people’s burden

        • Provide an extra allowance to eligible social security recipients, equivalent to one month of the standard rate Comprehensive Social Security Assistance payments, Old Age Allowance, Old Age Living Allowance or Disability Allowance.
        • Pay one month's rent for lower income tenants living in public rental units of the Hong Kong Housing Authority and the Hong Kong Housing Society.
        • Pay the examination fees for school candidates sitting for the 2021 Hong Kong Diploma of Secondary Education Examination.
        • Disburse HK$10,000 to Hong Kong permanent residents aged 18 or above, with a view to encouraging and boosting local consumption on the one hand, and relieving people's financial burden on the other.

        • We trust you will find the above useful information. Should you have any questions, please do not hesitate to contact us on (852) 3705 0095 or [email protected].


          Hong Kong 2019-20 Budget – Tax Highlights