SNAPSHOTS OF HONG KONG BUDGET 2020/2021

The Financial Secretary of the Hong Kong Special Administrative Region, Mr. Paul Chan, delivered his fourth budget speech on 26 February 2020.

Amidst the continual uncertain social situation, the US-China trade dispute, slowdown in growth across most economies, a deceleration of China’s economy and the recent outbreak of COVID-19, the Hong Kong economy slowed. The downturn of the Hong Kong economy is expected to continue for the near term. For the first time since 2004, Hong Kong recorded a budget deficit of about HK$37.8 billion for financial year 2019/20.

Notwithstanding these, Mr Chan explained that the broad directions of his budget are directed to invest substantially towards “supporting enterprises, safeguarding jobs, stabilising the economy and strengthening livelihoods”. If the economic challenges continue to intensify, the Government may be faced with the possibility of spending its fiscal reserves. It is therefore necessary to strike a balance between investing for the future and adhering to long-held principle of fiscal prudence.

For individuals, a HK$10,000 cash-pay out to all Hong Kong permanent residents aged 18 and above, and a one-off tax deduction on salaries tax for the year of assessment 2019/2020 were announced to assist families with living expenses in times of uncertainties.

On the business front, Mr Chan continues to offer tax reduction, property rates and business registration waivers targeted at short-term reliefs. Save for these measures, the budget appears to contain limited forward-looking fiscal policies but measures carried forward from prior years’ initiatives.

In view of the anticipated budget deficits over the next 5 years, the Government has suggested that significant changes to the Hong Kong tax regime may be required in order to response to the fiscal needs as well as to align the tax system with OECD’s proposal of setting rules for imposing a global minimum tax rate. It will be interesting to see how the Government will be seeking new revenues sources going forward.

HIGHLIGHTS

Profits Tax

• A one-off tax reduction of 100% of profits tax for 2019/2020, subject to a ceiling of HK$20,000.
• Continue the implementation of the two-tiered profits tax rates regime.
• Proposed tax concession for carried interest paid by private equity funds operating in Hong Kong subject to the fulfilment of certain conditions.
• Proposed tax concession to qualifying ship lessors and a half-rate tax concession to qualifying ship leasing managers.
• Proposed reduction of tax by 50% for eligible insurance businesses, including marine insurance.

Salaries Tax

• A one-off tax reduction of 100% salaries tax for 2019-2020, subject to a ceiling of HK$20,000.

Property Rates and Stamp Duties

• Proposed waiver of stamp duty on stock transfers paid by Exchange Traded Fund (“ETF”) market makers in the course of creating and redeeming ETF units listed in Hong Kong.
• Proposed waiver of rates for non-domestic properties for the 4 quarters of 2020/2021, subject to a ceiling of S$5,000 per quarter in the first 2 quarters and a ceiling of S$1,500 per quarter in the remaining 2 quarters for each rateable non-domestic property.
• Proposed waiver of rates for domestic properties for 4 quarters of 2020/2021, subject to a ceiling of S$1,500 per quarter for each rateable property.

Other Levies

• Proposed waiver of business registration fees for 2020-2021.
• Proposed waiver of registration fees for all annual returns (except for late delivery) charged by the Companies Registry for two years.

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© March 2020.  This article is contributed by Acutus Tax & Corporate Services Limited. All rights reserved