What it means to you

2017/18 Hong Kong Budget

The Financial Secretary has announced the 2017/18 Budget, outlining the government’s plans for the economy and proposals for changes to taxation. Our subject-matter experts share their insights on how it impacts you as a business, industry and individual.

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Our commentary and analysis

Hear what our PwC subject-matter experts say

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Taking a holistic view of tax measures through the new Tax Policy Unit

Reynold Hung, China South and Hong Kong Tax Leader, PwC China and Hong Kong

 

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What's the best way to help Hong Kong's middle class?

Jeremy Choi, Tax Partner, PwC Hong Kong

 

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PwC believes the Budget encompasses pillar industries, the public sector and a raft of initiatives to support business. 

Agnes Wong, Tax Partner, PwC Hong Kong

 

 

Highlights

 

Economic indicators
       
  2016 2017
Forecast
2018 to 2021
Medium range forecast
Increase in real GDP 1.9% 2% to 3% 3% average annual growth rate
Underlying inflation rate 2.3% 2% 2.5%

 

Consolidated budget forecast
       
2016/17 Original forecast 2016/17 Revised forecast 2017/18 Forecast 2021/22 Forecast
Surplus of 
HK$11.4 billion
Surplus of 
HK$92.8 billion
Surplus of 
HK$16.3 billion
Deficit of 
HK$8.4 billion
2016/17 surplus (HK$92.8 billion) consists of: 2017/18 surplus (HK$16.3 billion) consists of: 2021/22 deficit (HK$8.4 billion) consists of:
 - HK$54.1 billion surplus on operating account  - HK$11.1 billion surplus on operating account  - HK$18.5 billion surplus on operating account
 - HK$38.7 billion surplus on capital account  - HK$5.2 billion surplus on capital account  - HK$26.9 billion deficit on capital account

By the end of 2021/22, the government projects fiscal reserves of approximately HK$942.9 billion (equivalent to 18 months of government expenditure).

 

Operating expenditure forecast
     
2016/17 2017/18 2021/22
HK$354.1 billion HK$384.2 billion HK$482.4 billion

Total public expenditure is 20.4% of GDP for 2017/18, and will be kept at around 20% of the GDP going forward. The operating expenditure for 2018/19 and beyond represents the expenditure requirements for the HKSAR Government, forecast on a broad-brush basis.


Profits tax

  • Profits tax rates for companies (16.5%) and unincorporated businesses (15%) remain unchanged.
  • Introduce profits tax concession to promote aircraft leasing and financing.
  • Extend the profits tax exemption to onshore privately-offered open-ended fund companies.
  • Set up a tax policy unit in the Financial Services and the Treasury Bureau to comprehensively examine the international competitiveness of Hong Kong’s tax regime and address the problem of a narrow tax base e.g. studying ways to foster the development of pillar and emerging industries through tax measures including enhanced deductions for innovation and technology expenditure.

 

 

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Salaries tax

  • No change in the standard tax rate and progressive tax rates.
  • Widen the marginal tax bands from HK$40,000 to HK$45,000.
  • Increase the disabled dependant allowance from HK$66,000 to HK$75,000.
  • Increase the dependent brother/sister allowance from HK$33,000 to HK$37,500.
  • Extend the entitlement period for deduction for home loan interest from 15 to 20 years of assessment, the deduction ceiling of HK$100,000 a year remains unchanged.
  • Increase the deduction ceiling for self-education expenses from HK$80,000 to HK$100,000.
  • Examine to provide tax deduction for the purchase of regulated health insurance products.

 

 

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Government fees

  • Waive the licence fees for travel agents, hotels and guesthouses, restaurants, hawkers and operators with restricted food permits for one year.

 

 

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One-off measures

  • Waive 75% of profits tax for 2016/17 (subject to a HK$20,000 ceiling) to be deducted from the taxpayer’s final tax payable for the year.
  • Waive 75% of salaries tax and tax under personal assessment for 2016/17, subject to a ceiling of HK$20,000, to be deducted from the taxpayer’s final tax payable for the year.
  • Waive rates for the four quarters of 2017/18, subject to a ceiling of HK$1,000 per quarter for each rateable property.
  • Provide one additional month of Comprehensive Social Security Assistance (CSSA) payments, Old Age Allowance, Old Age Living Allowance and Disability Allowance. Similar arrangements will apply to Low-income Working Family Allowance and Work Incentive Transport Subsidy.

 

 

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Others

  • Extend the application period for the special concessionary measures under the SME Financing Guarantee Scheme to 28 February 2018.
  • Propose to strengthen the underwriting capacity of the Hong Kong Export Credit Insurance Corporation by raising the cap on its contingent liability under contracts of insurance from HK$40 billion to HK$55 billion.
  • Set up a new committee on innovation and technology development and re-industrialisation.
  • Reserve HK$10 billion for supporting innovation and technology development in Hong Kong.
  • Earmark HK$30 billion to strengthen elderly services and rehabilitation services for persons with disabilities.
  • Provide HK$700 million to strengthen vocational and professional education and training, facilitate the training and professional development of principals and teachers, and enhance support for local post-secondary students.
  • Allocate HK$300 million in 2017/18 to expand the Multi-faceted Excellence Scholarship and the International Youth Exchange Programme to broaden young people’s horizons.
  • Earmark HK$300 million to allow property owners to participate in the "Smart Tender" Building Rehabilitation Facilitating Services Scheme at a concessionary rate.
  • The 2017/18 Land Sale Programme will include 28 residential sites (of which 20 are new ones), three commercial/business sites and one hotel site.

 

 

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Read the full 2017/18 Budget highlights

Tax facts and figures

The information in this booklet is based on taxation laws and practices as of 22 February 2017 and incorporates legislative proposals and measures contained in the 2017/18 Hong Kong Budget announced on the same date.

Note: Legislative proposals do not become law until their enactment and may be modified by the Legislative Council before being enacted.

Our spokespersons

Reynold Hung

China South and Hong Kong Tax Leader, Hong Kong

+[852] 2289 3604

Email

Agnes Wong

Partner, Hong Kong

+[852] 2289 3816

Email

Jeremy Choi

Partner, Hong Kong

+[852] 2289 3608

Email

KK So

Asia Pacific Real Estate Tax Leader, Hong Kong

+[852] 2289 3789

Email

David Smith

Senior Advisor, Hong Kong

+[852] 2289 5802

Email

Marcellus Wong

Senior Advisor, Hong Kong

+[852] 2289 1822

Email

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