The Chief Executive of Hong Kong, Carrie Lam, delivered her maiden policy address on 11 October 2017. Addressing a range of topical issues in Hong Kong, Lam pledged new initiatives in key areas, such as housing to help ease the pressure on public housing, public transport to provide for a monthly travel subsidy scheme for commuters and education to widen access to training for aspiring young civil servants.
In particular, Lam called for the implementation of two significant tax measures to greatly enhance Hong Kong’s competitiveness in the global arena.
– Two-tier profits tax system to reduce tax burden on SMEs
Under the proposed plan, the profits tax rate for the first HK$2 million of profits of enterprises will drop to 8.25% or will be half of the standard profits tax rate. Profits beyond that threshold will continue to be subject to the standard profits tax rate of 16.5%. Restrictions will be introduced such that each group of companies may only nominate one entity to beneifit from the reduced tax rate.
– Huge tax reduction for qualifying R&D
To promote Hong Kong’s role as an innovation and technology hub, Lam put forward a considerable 300% tax deduction on the first HK$2 million qualifying research and development expenditure with the remainder at 200%.
These pivotal reforms will render Hong Kong more attractive for local as well as international budding entrepreneurs wishing to launch their start-ups here.
Subject to the passage of legislation, the proposed tax reforms are to be implemented in 2018.
To find out what implications the proposed tax legislation will have on your operations, please contact Rosanna Choi at firstname.lastname@example.org.