Tax Insights

Hong Kong 2021-22 Budget – Tax Highlights

Wednesday 24th February 2021: 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$10,000, 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, 2020-21. IT WILL BE deducted from the 2020/21 final tax assessment after 2020/21 Individual Income Tax Returns and Profits Tax Returns are filed.

Mr. Chan proposed a waiver on Business Registration fees for 2021-2022, benefitting 1.5 million Hong Kong-registered business currently facing an annual cost of HK$2,250.

The Financial Secretary said the Budget placed emphasis on riding out the storm arisen from epidemic by supporting enterprises and employment, stimulating the economy, relieving people's hardship and building a liveable city.

The Financial Secretary addressed several tax related measures in the Budget including raising the rate of Stamp Duty on Stock Transfers. While the Financial Secretary stated that the Government revenue is susceptible to changes in the economic environment due to the relatively narrow tax base, he reiterated that it is neither the appropriate time to revise rates of profits tax and salaries tax nor the appropriate time to introduce new taxes. We expect that the Government will continue reviewing the tax rates and carrying out research on new taxes and make preparation for discussion and consensus-building at a suitable time.

The highlights of the Budget are as follows:

I. Salaries Tax / Personal Assessment

  • No change to allowances and deductions was proposed.

    A summary of the allowances and deductions for 2020/21 and 2021/22 is shown as below:

    Allowances 2020/21
    HK$
    2011/22
    HK$
    Basic Allowance 132,000 132,000
    Married Person Allowance 264,000 264,000
    Single Parent Allowance 132,000 132,000
    Child Allowance 120,000 120,000
    For each child born during the year 120,000 120,000
    Dependent Brother or Dependent Sister Allowance 37,500 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


    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


    50,000

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

    Deductions 2020/21
    HK$
    2021/22
    HK$
    Expenses of self-education 100,000 100,000
    MPF Contribution 18,000 18,000
    Home Loan Interest 100,000; 20 Years 100,000; 20 Years
    Elderly Residential Care 100,000 100,000
    Approved Charitable Donations 35% of income after deductions 35% of income after deductions
    Voluntary Health Insurance Scheme 8,000 8,000
    Annuity Premiums and MPF Voluntary Contributions 60,000 60,000

II. Marginal bands for salaries tax

  • No change is proposed. Tax Bands for salaries tax from year of assessment 2021/22 onwards are as follows:

    TAXABLE 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%

III. One-Off Tax Rebate

  • An one-off 100% tax rebate or HK$10,000 (whichever is lower) on 2020/21 Salaries Tax, Personal Assessment and Profits Tax has been proposed. The rebate will be deducted from the 2020/21 final tax (i.e. after the 2020/21 Individual Income Tax Returns and Profits Tax Returns are filed).

IV. Other tax concessions

The Financial Secretary also noted the following:

  • Hong Kong should further expand its tax agreement networks.
  • The Government is currently undertaking a series of legislative work to provide for half-rate profits tax concessions to eligible insurance businesses including marine insurance and specialty insurance.
  • The Government has introduced an amendment bill to provide tax concessions for carried interest issued by private equity funds operating in Hong Kong and would strive to secure the passage of the bill within the current session for the tax concession arrangements to apply starting from 2020/21.
  • The Government will review the tax arrangements to enhance Hong Kong’s attractiveness as a hub for family office.
  • The Organisation for Economic Co-operation and Development (OECD) is drawing up new proposals to address base erosion and profit shifting (BEPS 2.0), which include the introduction of a global minimum tax rate and a digital tax. In mid-2020, the Advisory Panel on BEPS 2.0 commenced work on assessing the impact of the proposals on Hong Kong and the Government has been collecting views from stakeholders in the business sector. Taking into account the preliminary views of the Advisory Panel, the Government targets to:-
    1. actively implement the BEPS 2.0 proposals according to international consensus;
    2. minimise the impact on local SMEs where possible and strive to maintain the simplicity, certainty and fairness of Hong Kong tax regime;
    3. minimise the compliance burden on affected corporations;
    4. keep up our efforts in improving Hong Kong’s business environment and enhancing its competitiveness, with a view to attracting multinational corporations to invest and operate in Hong Kong.
  • The Government will introduce a bill to raise the rate of Stamp Duty on Stock Transfers, from the current 0.1 per cent to 0.13 per cent of the consideration or value of each transaction payable by buyers and sellers respectively.

V. Property Owners

  • Although there will be no tax concession on property tax, property owners will enjoy waiver of rates for all four quarters in 2021/22, subject to a ceiling of HK$1,500 per quarter in the first two quarters and a ceiling of HK$1,000 per quarter in the remaining two quarters for each rateable property.

VI. Miscellaneous measures for supporting enterprises

  • The Government extends the application period of 100% guarantee low-interest loan for enterprises to the end of this year, raises loan ceiling to HK$6 million, extends repayment period and duration of principal moratorium.
  • Rates for non-domestic properties will be waived for four quarters of 2021/22, subject to a ceiling of HK$5,000 per quarter in the first two quarters and a ceiling of HK$2,000 per quarter in the remaining two quarters for each rateable non-domestic property.
  • The business registration fees for 2021/22 will be waived.
  • 75% of water and sewage charges payable by non-domestic households will continue to be waived for eight months, subject to a monthly cap of HK$20,000 and HK$12,500 respectively.
  • 75% of the rental/fee concession will continue to be granted for eligible Government properties/short-term tenancies and waivers will be granted for 6 months (100% concession for those closed at the Government’s request).

VII. Miscellaneous measures for relieving people’s burden

  • A subsidy of HK$1,000 will be granted to each residential electricity account.
  • An extra half-month allowance of standard Comprehensive Social Security Assistance payment, Old Age Allowance, Old Age Living Allowance or Disability Allowance will be provided.
  • The examination fees will be paid for school candidates sitting for the 2022 Hong Kong Diploma of Secondary Education Examination.
  • HK$1 billion will be earmarked to subsidise drainage repair works in over 3 000 old buildings.
  • A special 100% Loan Guarantee for Individuals will be set up to provide an extra financing option for the unemployed. Suggested terms of the loan are as follows:-
    1. Loan ceiling at HK$80,000
    2. Application period of six months
    3. Interest rate fixed at 1 per cent per annum
    4. Maximum repayment period of five years
    5. Principal moratorium for the first twelve months
    6. Offer reimbursement for interest paid after loans are repaid in full as scheduled

VIII. Others measures

  • HK$5,000 electronic consumption vouchers will be issued in instalments to each eligible Hong Kong permanent resident and new arrival aged 18 or above.
  • The rate of each tax band for the first registration tax for private cars (including electric private cars) would be increased by 15% and the vehicle licence fee would be increased by 30%.
  • Subsidies will be provided to cover 70% of the expenses paid to local professional service providers for Open-ended Fund Companies (OPC) set up in or re-domiciled to Hong Kong in the coming three years, subject to a cap of HK$1 million per OPC.
  • Subsidies will be provided to cover 70% of the expenses paid to local professional service providers for real estate investment trusts (REIT) authorised by the SFC and listed in Hong Kong in the coming three years, subject to a cap of HK$8 million per REIT.

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].