CW CPA welcomes Hong Kong budget for Fiscal Year 2018-19
On 28 February 2018, the first budget under the new government led by HKSAR Chief Executive Carrie Lam was delivered by the Financial Secretary Paul MP Chan. The 2018-19 budget carries three main objectives: achieving diversified economy, investing for the future, and caring and sharing. “While addressing the pressing needs, I must also be proactive, innovative and bold in investing for the future of Hong Kong.”, said the Financial Secretary.
We summarize the 2018/19 budget highlights relating to salaries tax, profits tax, new measures to support SMEs and innovation and technology as follows:
Salaries tax and tax under personal assessment
Salaries tax and tax under personal assessment for 2017/18 will be reduced by 75%, subject to a ceiling of HK$30,000 (compared to the one-off tax reduction ceiling of HK$20,000 in the previous year). The reduction will be reflected in the final tax payable for the year of assessment 2017/18.
Salaries tax rates
An individual’s income from employment less allowable deductions, charitable donations and personal allowances, will be chargeable to salaries tax at the following progressive tax rates:
However, the maximum tax payable is limited to tax at the standard rate of 15% on the individual’s income from employment less allowable deductions and charitable donations but without taking into account the personal allowances. Whilst there are some minor increase in such personal allowance as child allowance, dependent parent/ grandparent allowance and elderly residential care expenses, the Government proposes to introduce a personal disability allowance at HK$75,000.
Profits tax for 2017/18 will be reduced by 75% subject to a ceiling of HK$30,000 per case (compared to the one-off tax reduction ceiling of HK$20,000 in the previous year). The reduction will be reflected in the final tax payable for the year of assessment 2017/18.
New measures to support small and medium enterprises (“SMEs”)
The measures catering for the SMEs include the following:
(a) Inject HK$1.5 billion into the Dedicated Fund on Branding, Upgrading and Domestic Sales (BUD Fund).
(b) Inject HK$1 billion into the SME Export Marketing and Development Funds.
(c) Extend the geographical scope of the Enterprise Support Programme under the BUD Fund from the Mainland to include the ASEAN countries. The respective cumulative funding ceiling for enterprises undertaking projects in the Mainland and ASEAN markets will be HK$1 million.
(d) Increase the cumulative funding ceiling for enterprises under the SME Export Marketing Fund from HK$200,000 to HK$400,000, and removing the existing condition on the use of the last HK$50,000 of grants.
(e) Extend the application period for the special concessionary measures under the SME Financing Guarantee Scheme to 28 February 2019.
(f) In the five financial years from 2018/19, provide a total of HK$250 million additional funding to the Hong Kong Trade Development Council for assisting local enterprises (SMEs in particular) in seizing opportunities arising from the Belt and Road Initiative (“BRI”) and the Greater Bay Area (“GBA”) development, promoting the development of e-commerce, and enhancing Hong Kong’s role as a premier international convention, exhibition and sourcing center.
Innovation and technology
Regarding the area of innovation and technology, the Government will
(a) set aside HK$20 billion for the first phase of the Hong Kong-Shenzhen Innovation and Technology Park in the Lok Ma Chau Loop;
(b) inject HK$10 billion into the Innovation and Technology Fund to support applied research and development;
(c) inject HK$10 billion for the establishment of two research clusters on healthcare technologies and on artificial intelligence and robotics technologies; and
(d) allocate HK$10 billion to upgrade facilities of the Science Park and enhance support for enterprises in the Science Park; as well as allocate HK$200 million to Cyberport to enhance support for start-ups, and another HK$100 million to develop e-sports.
CW CPA welcomes the budget proposal that is a concrete suite of measures not only to address a wide range of economic and welfare measures, but to underpin Hong Kong’s future amid a changing demographic. We are also pleased to see such a significant investment from the Hong Kong SAR government into the innovation and technology ecosystem, and we welcome the government’s pledging of financial assistance to SMEs to enable them to seize opportunities from the Belt and Road and the Greater Bay Area initiatives.
Note: The budget proposals will need approval by the Legislative Council before taking effect. The proposals do not become law until their enactment.