On 23 February 2022, Hong Kong’s Financial Secretary, the Hon Paul MP Chan, delivered the 2022-23 Budget Speech.
Mr. Chan expects Hong Kong to have a surplus of HK$18.9 billion for 2021-2022 and a deficit of HK$56.3 billion for 2022-23, but the fiscal reserves will gradually rebound to over HK$1 trillion from 2023-24 to 2026-27. With the impacts of the recent worsening of the COVID-19 pandemic, the 2022-23 budget is focused on relieving people’s hardship, supporting enterprises, development industries, and building capacity.
2022-23 Budget Highlights
We summarize the 2022-23 Budget’s key highlights relating to salaries tax, profits tax, measures to smoothen livelihoods, support enterprises, and achieve a diversified economy, as follows:
- Electronic consumption vouchers with a total value of HK$10,000 will be disbursed by installment to each eligible Hong Kong permanent resident and new arrival aged 18 or above.
- Salaries tax and tax under personal assessment for 2021-22 will be reduced by 100%, subject to a ceiling of HK$10,000 (2020-21: HK$10,000). The reduction will be reflected in the final tax payable for the year of assessment 2021-22.
- For taxpayers liable to salaries tax and tax under personal assessment who are not owners of domestic properties, the rental expenses will be considered as an allowable deduction, subject to a ceiling of HK$$100,000 for a year from the year of assessment 2022/23.
- Profits Tax for 2021-22 will be reduced by 100%, subject to a ceiling of HK$10,000 (2020-21: HK$10,000). The reduction will be reflected in the final tax payable for the year of assessment 2021-22.
- Hong Kong will introduce new legislation to prohibit landlords from terminating the tenancy of or not providing services to tenants of specified sectors for failing to settle rents on schedule or taking relevant legal actions against them. The relief will be valid for three months and be extended for another three months, if necessary, with the legislation automatically lapsing after six months. In addition, banks will exercise flexibility if any landlord’s repayment ability is affected due to a reduction in his rental income.
- The Special 100% Loan Guarantee application period will be extended to the end of June 2023. In addition, the maximum loan amount per enterprise will be increased by totaling the amount of employee wages and rents for up to 27 months, with the loan ceiling raised to $9 million together with offering the option of making partial repayment of principal over a longer period of time.
- Hong Kong Monetary Authority will extend the Pre-approved Principal Payment Holiday Scheme to the end of October 2022, offering enterprises the option of making partial repayment of principal over a more extended period.
- There will be a waiver of rates for non-domestic properties for 2022-23, subject to a ceiling of HK$5,000 per quarter in the first two quarters and HK$2,000 per quarter for the remaining two quarters.
- Continuing to implement relief measures announced last year, the business registration fees will be waived for 2022-23.
- The waive of water and sewage charges of non-domestic households will be continued. 75% of the said charges will be waived for eight months, subject to a monthly cap of HK$20,000 and HK$12,500, respectively.
Achieve Diversified Economy
- The Hong Kong Growth Portfolio under the Future Fund will be increased. Hong Kong will set up a HK$5 billion Strategic Tech Fund to invest in technology enterprises and projects which are of strategic value to Hong Kong.
- HK$10 billion will be designated to provide more support, including hardware, research talent, clinical trials, and data application to enhance institutions’ capacity and capability in developing life and health technology.
- The subsidy under Hong Kong’s Innovation and Technology Fund will be doubled to HK$440 million to strengthen support to the R&D activities of 16 State Key Laboratories and six Hong Kong Branches of Chinese National Engineering Research Centres in Hong Kong.
- The Technology Start-up Support Scheme’s subsidy for universities will be doubled to HK$16 million.
- A Digital Economy Development Committee will be set up to accelerate the progress of the Digital Economy of Hong Kong.
- The funding allocated to the Hong Kong Growth Portfolio under the Future Fund will be increased by HK$ 10 billion, of which HK$ 5 billion will be used to set up a GBA Investment Fund to focus on investment opportunities in the Guangdong-Hong Kong-Macao Greater Bay Area (“GBA”).
- Hong Kong plans to issue no less than HK$15 billion of inflation-linked retail bonds (iBond), no less than HK$35 billion of Silver Bond and no less than HK$10 billion of retail green bonds in the next financial year.
- Enhancement measures for the Cross-boundary Wealth Management Connect Scheme in the GBA will be explored, such as increasing investment quotas gradually, expanding the scope of eligible investment products, inviting more participating organizations, and improving the distribution arrangement.
- Tax concessions for the eligible family investment management entities managed by single-family offices are proposed.
- Hong Kong will continue to issue green bonds totaling about US$4.5 billion or equivalent, and enhance the Green and Sustainable Finance Grant Scheme.
- HK$10 million will be allocated to launching a new round of the Fintech Proof-of-Concept Subsidy Scheme
- HK$135 million will be allocated to the Hong Kong Trade Development Council for the introduction of the Support Scheme for Pursuing Development in the Mainland to facilitate Hong Kong people and entrepreneurs in seizing opportunities in the Mainland.
- Sea-air cargo trans-shipment between the Hong Kong International Airport and the rest of the GBA will continue to be developed.
- Hong Kong will organize a high-level Global Financial Leaders’ Investment Summit, inviting representatives of Mainland and international financial institutions to attend to learn more about the unique advantages and investment environment of Hong Kong.
CW welcomes the Budget’s cautious and targeted measures, which pave the way to mitigate the worsening of the COVID-19 pandemic and betterment of livelihood.