Written by May Tung, Tax Advisory Services, CW CPA
On 27 February 2019, the Financial Secretary of the Hong Kong Special Administrative Region, Mr. Paul Chan Mo-po, delivered the 2019-20 Budget Speech. The 2019-20 Budget carries 6 main objectives:
1. Relieve people’s burden;
2. Support Enterprises;
3. Land and Housing;
4. Diversified Economy;
5. A Liveable City;
6. A Caring Society and Nurture Talent.
Faced with the global political and economic uncertainties, the Financial Secretary’s 2019-20 budget is health-conscious with reduced ceiling of the salaries and profits tax rebates.
Instead of counting on the traditional “four-pillar” service industries, the Financial Secretary intends to diversify Hong Kong’s economy by putting more resources on the eco-system of innovation and technology, high-end manufacturing industries, upstream activities of the four pillar service industries, and creative industries.
CW also welcome the move of the Tax Policy Unit from the Financial Services and Treasury Bureau to directly under the Financial Secretary’s office, that would expedite the development of new tax measures under the new economy.
2019-20 Budget Highlights
We summarize the 2019-20 budget’s key highlights relating to salaries tax, profits tax, measurement to support enterprises and achieving diversified economy as follows:
1. Salaries Tax, tax under personal assessment and Profits Tax
Salaries Tax, tax under personal assessment and Profits Tax for 2018-19 will be reduced by 75%, subject to a ceiling of HK$20,000 (2017-18: HK$30,000). The reduction will be reflected in the final tax payable for the year of assessment 2018-19.
2. Support Enterprises
- Waive the business registration fees for 2019-20;
- Regularize the “Technology Voucher Programme” and double the funding ceiling for enterprises to HK$400,000;
- Inject another HK$1 billion into the Dedicated Fund on Branding, Upgrading and Domestic Sales (“BUD Fund”), extending its geographical scope to economies which have entered into Free Trade Agreement (“FTA”) with Hong Kong, and increasing the funding ceiling for enterprises to HK$1 million for the Mainland market and HK$2 million for other FTA markets;
- Extend the application period of the special concessionary measures under the SME Financing Guarantee Scheme to 30 June 2020;
- Extend the networks of FTA, Investment Promotion and Protection Agreement and Comprehensive Avoidance of Double Taxation Agreement;
- Expand the Economic and Trade Office network to strengthen external promotion and assist Hong Kong enterprises in exploring new business opportunities.
3. Achieving diversified economy
- Issue the first batch of government green bonds to promote the development of green finance;
- Consider establishing a limited partnership regime and introducing tax arrangement to attract private equity funds to set up and operate in Hong Kong
- Promote mutual recognition of funds with other jurisdictions to broaden the distribution network of local fund products;
- Provide tax concessions for marine insurance and underwriting of specialty risks, and facilitate them to issue insurance-linked securities;
- Set aside HK$5.5 billion for the development of Cyberport phase 5 to accommodate more technology companies and start-ups;
- Launch the HK$2 billion Re-industrialization Funding Scheme in 2019;
- Inject HK$1 billion into the Film Development Fund;
- Allocate HK$150 million to support the development of an online international dispute resolution platform by NGOs;
- Consider introducing tax and related measures to attract ship finance companies to develop ship leasing business in Hong Kong;
- Provide a 50% profits tax concession to marine insurance businesses;
- Provide a HK$400 million seed capital for the Financial Reporting Council and enable it to waive levy in the first two years under the new regulatory regime.
Proposed Budget and Summary of Hong Kong Taxes 2019-20
*For 2018-19, the profits tax is proposed to be reduced by 75%, subject to a ceiling of HK$20,000. (2017-18: HK$30,000)
- Salaries tax is charged at the lower of net chargeable income (Total Income – Deductions – Allowances) at progressive rates or net total income (Assessable Income – Deductions) at standard rate.
- Standard rate remains the same at 15%.
- Progressive rates are as follows:
*For 2018-19, the salaries tax and tax under personal assessment are proposed to be reduced by 75%, subject to a ceiling of HK$20,000. (2017-18: HK$30,000)
# Subject to passage of the relevant legislation
The standard rate (for non-corporate owners) remains at 15% for 2019-20.