Hong Kong’s finance chief on 22th February, 2022 unveiled a costly HK$170 billion ($21.79 billion) budget. Including tax breaks and consumer spending vouchers, as the city reels under its worst coronavirus outbreak to date.
The budget will direct more resources to relieve people’s hardship and provide SMEs with some breathing space so as to stabilize the economy and maintain public confidence. Estimated deficit for 2022-2023 is $56.3 billion. Thus, the budget will continue to adopt an expansionary fiscal policy with initiatives mainly focusing on 4 areas:
- supporting an all-out effort to win the fight against the epidemic;
- relieving the hardship of our people and SMEs;
- rendering support to the struggling economy and fostering post-epidemic economic revival; and
- investing for the future by planning ahead for the medium- and long-term development of our economy.
Relieve people’s hardship
- Issue $10,000 electronic consumption vouchers to each eligible Hong Kong permanent resident and new arrival aged 18 or above.
- Introduce tax deduction for domestic rental expenses for taxpayers liable to salaries tax and tax under personal assessment. Subject to a deduction ceiling of $100,000 per year of assessment from 2022-2023. The deduction will not apply to a taxpayer who is the owner of the domestic property or an associate of the landlord of the rented property (eg, spouse, parent, child, brother/sister or partner of the taxpayer, or a corporation controlled by the taxpayer) or where the taxpayer receives a rent refund from the employer.
- Provide an extra half-month allowance of standard Social Security Assistance (CSSA) payments, Old Age Allowance, Old Age Living Allowance or Disability Allowance. Similar arrangements will apply to Working Family Allowance.
- Extend the 100% Personal Loan Guarantee Scheme for one year until the end of April 2023. And the ceiling will increase from $80,000 to $100,000. The maximum repayment period will extend to ten years.
- Introduce Rental Enforcement Moratorium for tenants of specific sectors through legislation.
- Further extend the application period of 100% guarantee low-interest loan for enterprises to the end of June 202. And raise loan ceiling to $9 million, extend repayment period and duration of principal moratorium.
- Extend the waivers/concessions of the existing 34 groups of government fees and charges for 12 months.
- Continue to grant the 75% rental/fee concession to eligible tenants of government premises/short-term tenancies and waivers for six months (100% concession for those closed at the Government’s request).
Enhance Economic Resilience and Enrich Industrial Development
- Provide tax concessions for the eligible family investment management entities managed by single-family offices with effect from 2022-2023.
- Provide half-tax concession to attract more maritime enterprises to establish a presence in Hong Kong.
- Issue no less than $15 billion of inflation-linked retail bonds, no less than $35 billion of Silver Bond and no less than $10 billion of retail green bonds in the next financial year.
- Set up a ‘Digital Economy Development Committee’ to accelerate the progress of digital economy.
- Allow stocks traded via the Southbound Trading of Stock Connect to be denominated in RMB. And roll out supporting measures such as waiving the stamp duty on stock transfers paid by market makers in their transactions to increase the liquidity of RMB-denominated stocks.
- Continue to proactively expand Hong Kong’s Comprehensive Avoidance of Double Taxation Agreements (CDTAs) network. At present, Hong Kong has signed 45 CDTAs and is in negotiations with 14 tax jurisdictions. With a view to minimising the risk of double taxation borne by foreign enterprises doing business in Hong Kong.
Rates Concession and Rating System
- Propose to limit future rates concession for domestic properties to one domestic property for each eligible owner who is a natural person starting from 2023-2024.
- Introduce from 2024-2025 progressive rating system for domestic properties. For domestic properties with annual rateable value of $550,000 or below. It is proposed that rates will continue to be charged at the present level of 5% of the rateable value. For domestic properties with rateable value over $550,000, it is proposed that rates be charged at 5% of the rateable value on the first $550,000 and at 8% of the rateable value on the next $250,000, and then at 12% on rateable value exceeding $800,000.
New International Tax Standards
- Plan to submit a legislative proposal to the LegCo in the second half of this year to implement the global minimum tax rate and other relevant requirements in accordance with the Organisation for Economic Co-operation and Development (OECD) Base Erosion and Profit Shifting (BEPS) 2.0 framework targeting multinational enterprises (MNEs) with consolidated group revenue exceeding Euro 750 million.
- Consider introducing a domestic minimum top-up tax with regard to the aforesaid MNEs starting from the year of assessment 2024/25 to ensure that their effective tax rates reach the global minimum effective tax rate of 15 per cent so as to safeguard Hong Kong’s taxing rights.
- Reaffirm the Government’s stand to preserve the advantages of Hong Kong’s tax regime in terms of its simplicity, certainty and transparency, maintain the territorial source principle of taxation as well as minimise the compliance burden on MNEs when implementing BEPS 2.0.
Still, this is the proposal and subject to final approval from the Legislative Council.
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You may want to read: THE 2021-2022 BUDGET TARGETS ON REVIVING THE ECONOMY