The Chief Executive Carrie Lam delivered her maiden Policy Address (i.e. 2017 Policy Address) on 11 October 2017. As eagerly anticipated, the Chief Executive announced in the Policy Address that a two-tier profits tax system will be introduced to lower the tax burden of Hong Kong enterprises and a super tax deduction for qualifying research and development (R&D) expenditure will be granted to boost the development of innovation and technology (I&T) in Hong Kong. These measures are expected to be enacted in 2018.
The operational details of implementing the above two new tax measures have yet to be announced. While we expect that certain restrictions/anti-avoidance measures will be put in place to safeguard against potential abuse of the new tax measures, we urge the HKSAR Government to strike a balance between addressing potential abuse and making the tax measures effective and simple to administer for taxpayers when working out the implementation details. In addition, thorough consultation with stakeholders should be conducted during both the policy formulating and legislation drafting stages.