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Financial Secretary Paul Chan Mo-po announced the 2021/22 Hong Kong Budget on 24 February, outlining the government’s plan for the economy and proposals for taxation developments. Keep a close eye on Hong Kong’s fiscal health to stay ahead of change. Find out from us how the budget will affect you and your business.
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Budget at a glance
Revised forecast deficit of HK$257.6bn for 2020/21 and forecast deficit HK$101.6bn for 2021/22
Extend the application period of 100% guarantee low-interest loan for enterprises to year-end and raise loan ceiling to HK$6m
Issue HK$5,000 electronic consumption vouchers in instalments to Hong Kong permanent resident and new arrival aged 18 or above
Inject HK$9.5bn into the Innovation and Technology Fund by two yearly instalments
Expansion of the express air cargo terminal, new premium logistics centre and the Three Runway System will increase the annual cargo handling capacity of Hong Kong International Airport to 9 MT in 2024
Earmark HK$200m to extend the IT Innovation Lab programme to primary schools and regularise the short-term IT related internship scheme for university students
Budget highlights
- The two-tier profits tax rates for companies (8.25%/16.5%) and unincorporated businesses (7.5%/15%) remain unchanged.
- Review tax arrangements relevant to family office business.
- The Advisory Panel on BEPS 2.0 will put forth recommendations on specific response measures in a report to the Financial Secretary once the OECD has finalised the proposals. The direction of response measures is as follows:
1. actively implement the OECD’s BEPS 2.0 proposals according to international consensus;
2. minimise the impact on local SMEs where possible and strive to maintain the simplicity, certainty and fairness of Hong Kong’s tax regime;
3. minimise the compliance burden on affected corporations while safeguarding Hong Kong’s taxing rights; and
4. keep up the efforts in improving Hong Kong’s business environment and enhancing the competitiveness, with a view to attracting multinational corporations to invest and operate in Hong Kong.
- No change in the standard tax rate.
- No change in the progressive tax rates and the marginal tax bands.
- No change in the amounts of various personal allowances.
- Propose to raise the rate of stamp duty on stock transfers from 0.1% to 0.13% of the consideration or value of each transaction payable by buyers and sellers respectively. Subject to the completion of the legislative process, the measure will take effect from the date specified in the amendment ordinance.
- Waive 100% of profits tax for 2020/21, subject to a ceiling of HK$10,000.
- Waive 100% of salaries tax and tax under personal assessment for 2020/21, subject to a ceiling of HK$10,000.
- Waive rates for non-domestic properties for the four quarters of 2021/22, subject to a ceiling of HK$5,000 per quarter for the first two quarters and HK$2,000 per quarter for the remaining two quarters for each rateable non-domestic property.
- Waive rates for residential properties for the four quarters of 2021/22, subject to a ceiling of HK$1,500 per quarter in first two quarters and HK$1,000 per quarter in remaining two quarters for each rateable property.
- Waive the business registration fees for 2021/22.
- Issue electronic consumption vouchers in instalments with a total value of HK$5,000 to each eligible Hong Kong permanent resident and new arrival aged 18 or above to facilitate and stimulate local consumption.
- Grant each residential electricity account a subsidy of HK$1,000.
- Provide an extra half-month of Comprehensive Social Security Assistance payments, Old Age Allowance, Old Age Living Allowance and Disability Allowance. Similar arrangements will apply to recipients of the Working Family Allowance and Individual-based Work Incentive Transport Subsidy.
- Pay the examination fees for school candidates sitting for the 2022 Hong Kong Diploma of Secondary Education Examination.
- Propose to increase the rate of each tax band for the first registration tax for private cars (including electric private cars) by 15% and the vehicle licence fee by 30%. These adjustments have been gazetted for taking effect on the same day.
- Provide subsidy for Open-ended Fund Companies to set up in or re-domicile to Hong Kong.
- Provide subsidy for Real Estate Investment Trusts to list in Hong Kong.
- Extend the application period of 100% guarantee low-interest loan for enterprises to the end of this year, raise loan ceiling to HK$6 million, extend repayment period and duration of principal moratorium.
- Introduce a concessionary low-interest loan with 100% Government guarantee for individuals, with maximum loan amount of six times the average monthly income during employment, subject to a ceiling of HK$80,000 and repayment period of up to five years, and moratorium on principal repayment for the first 12 months.
- Allocate HK$6.6 billion for the Government to create around 30,000 time-limited jobs.
- Inject HK$9.5 billion into the Innovation and Technology Fund by two yearly instalments.
- Earmark HK$200 million to extend the IT Innovation Lab programme to primary schools and regularise the short-term IT related internship scheme for university students implemented last year.
- Inject HK$1.5 billion into the Dedicated Fund on Branding, Upgrading and Domestic Sales, increase funding ceiling per enterprise to HK$6 million and extend its geographical coverage in phases.
- Issue no less than HK$24 billion of Silver Bond and no less than HK$15 billion of iBond this year. Lower the eligible age for Silver Bond subscription from 65 to 60.
- Issue green bonds totalling $175.5 billion within the next five years, and plan to issue retail green bonds.
- Earmark HK$1 billion to subsidise drainage repair work in over 3,000 old buildings.
- Earmark HK$1 billion to install small-scale renewable energy systems at government building and infrastructure.
- Earmark HK$500 million to enhance facilities in country parks.
- The 2021/22 Land Sale Programme will include 15 residential sites and three commercial sites.
Commentary and analysis
Effective and timely execution are necessary components for a wide-ranging Hong Kong budget
This year’s Hong Kong budget contains measures touching on a broad range of sectors, including financial services, tourism, innovation and technology, and the digital economy. But while these are expected to support economic recovery, their implementation still needs to be worked out.
The Government expects Hong Kong’s economy to return to growth in 2021, with GDP forecast to increase by 3.5-5.5%. The economy is expected to grow by an average of 3.3% per annum from 2022 to 2025. This is a big assumption. Whether this can be achieved depends on a number of internal and external factors, such as the local epidemic situation, the timeline for reopening the border to business and resumption of free flow of people, and the pace of economic recovery in major overseas markets.
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2021/22 Tax facts and figures
The information in this booklet is based on taxation laws and practices as of 24 February 2021 and incorporates legislative proposals and measures contained in the 2021/22 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.
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