On 26 February 2020, the Financial Secretary of the Hong Kong Special Administrative Region, Mr. Paul Chan Mo-po, delivered the 2020-21 Budget Speech.

Faced with the Sino-US trade conflict, other external factors and unexpected outbreak of the novel coronavirus, the Financial Secretary’s 2020-21 budget is focused on supporting enterprises, safeguarding jobs, stimulating the economy and relieving people’s burden.

2020-21 Budget Highlights

We summarize the 2020-21 budget’s key highlights relating to salaries tax, profits tax, measures to smoothen livelihoods, support enterprises and achieve diversified economy, as follows:

Smoothen livelihoods

a) HK$10,000 cash payout to Hong Kong permanent residents aged 18 or above

b) Salaries Tax and tax under personal assessment for 2019-20 will be reduced by 100%, subject to a ceiling of HK$20,000 (2018-19: HK$20,000). The reduction will be reflected in the final tax payable for the year of assessment 2019-20

Support Enterprises

a) Profits Tax for 2019-20 will be reduced by 100%, subject to a ceiling of HK$20,000 (2018-19: HK$20,000). The reduction will be reflected in the final tax payable for the year of assessment 2019-20

b) Concessionary low-interest loan

c) Waive rates for non-domestic properties for 2020-21, subject to a ceiling of HK$5,000 per quarter in first two quarters and HK$1,500 per quarter for remaining two quarters

d) Waive the business registration fees for 2020-21

e) Waive registration fees for company annual returns for 2 years

Continue to implement relief measures announced last year

f) Electricity charges for non-residential account: subsidise 75% of charges for 4 extra months, subject to a monthly cap of HK$5,000

g) Water and sewage charges of non-domestic households: waive 75% of charges for 4 extra months, subject to a monthly cap of HK$20,000 and HK$12,500 respectively

Achieve diversified economy, Innovation and technology

a) Issue inflation-linked retail bonds and Silver Bonds totalling not less than HK$13 billion

b) Issue green bonds totalling HK$66 billion in next 5 years

c) Waive stamp duty on stock transfers paid by the Exchange Traded Fund (ETF) market makers when creating and redeeming ETF units listed in Hong Kong

d) Establish a limited partnership regime and provide tax concession for carried interest issued by private equity funds to attract them to domicile and operate in Hong Kong

e) Earmark HK$3 billion to take forward Phase 2 of the Science Park Expansion Programme

f) Increase the grant ceiling under the Technology Voucher Programme to HK$600,000 and raise the Government’s funding ratio to 75%

g) Inject HK$345 million for a pilot subsidy scheme to encourage the logistics industry to enhance productivity through the application of technology

h) Additional funding of HK$150 million for the Hong Kong Trade Development Council to assist Hong Kong enterprises in exploring business opportunities

Hong Kong expects a record deficit of HK$139 billion for 2020-2021 that is mainly due to the one-off relief measures of around HK$120 billion. However, the forecast of deficits over the next 5 years, ranging from HK$7 billion to HK$17 billion, means that a holistic review of Hong Kong taxation system is a top priority for the Hong Kong Government to attain Hong Kong’s fiscal health.

Written by May Tung, Tax Advisory Services, CW CPA

 

Appendix

Proposed Budget and Summary of Hong Kong Taxes 2020-21

 

PROFITS TAX

*For 2019-20, the profits tax is proposed to be reduced by 100%, subject to a ceiling of HK$20,000. (2018-19: HK$20,000)

SALARIES TAX

  • 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 2019-20, the salaries tax and tax under personal assessment are proposed to be reduced by 100%, subject to a ceiling of HK$20,000. (2018-19: HK$20,000)

Allowances

Deductions

PROPERTY TAX

The standard rate (for non-corporate owners) remains at 15% for 2020-21.

© 2018 CW CPA. All rights reserved.