Hong Kong Budget 2024/2025

Fidinam Hong Kong News Tax Consultancy

On 28 February 2024, Hong Kong's Financial Secretary unveiled the 2024/25 Budget with the theme “Advance with Confidence. Seize Opportunities. Strive for High-quality Development”. An anticipated deficit of HK$101.6 billion for the year 2023/24 was disclosed, with fiscal reserves projected to hit HK$733.2 billion by 31 March 2024.

Looking into 2024, the Financial Secretary predicts that global economic conditions will remain uncertain, influenced by factors including geopolitical tensions and subdued economic growth rates in both the United States and Europe. However, a steady growth is forecasted for mainland China's economy this year.

An uptick in Hong Kong's export of travel services and related sectors is expected, as a result of governmental efforts to promote major events and enhance operational capacities, especially in terms of air travel.

Additionally, an increase in the general public’s earnings is expected to fuel private spending. As a result, the Hong Kong economy is poised for further growth, with projections ranging from 2.5% to 3.5% for the entire year.

Corporate tax

Profits tax relief: Reduce profits tax for the year of assessment 2023/24 by 100%, subject to a ceiling of HK$3,000.

The two-tiered profits tax rates for corporations (8.25%/16.5%) and unincorporated businesses (7.5%/15%) remain unchanged.

Proposing to introduce the following enhancement measures for deduction of expenses under profits tax, both taking effect from the year of assessment 2024/25:

  1. time limit for claiming the allowances for industrial buildings and structures as well as commercial buildings and structures for new owners will be removed;
  2. profits taxpayers will be granted tax deduction for the expenses incurred in reinstating leased premises to their original condition.

Individual tax

Salaries tax/tax under personal assessment relief: reduce salaries tax and tax under personal assessment for the year of assessment 2023/24 by 100%, subject to a ceiling of HK$3,000.

Two-tiered standard rates regime: implement a two-tiered standard rates regime for salaries tax and tax under personal assessment starting from the year of assessment 2024/25. This will only affect taxpayers with over HK$5 million of net income and whose tax payable is calculated at standard rate. Taxpayers on progressive rates will not be affected.

  • The first HK$5 million of net income will continue to be subject to standard rate of 15%
  • The portion exceeding HK$5million will be subject to standard rate of 16%.

Economic stimulus measures

Property market: Cancellation of Special Stamp Duty, Buyers’ Stamp Duty and New Residential Stamp Duty for any residential property transactions with immediate effect.

Stock market: Waive stamp duties payable on transfer of Real Estate Investment Trust (REIT) units and jobbing business of option market-markers.

Promotion of international asset and wealth management center:

  • The Government has implemented a number of preferential tax regimes for funds and family offices, and the Government will continue to further enhance the preferential tax regimes for funds, single family offices and carried interest, including reviewing the scope of the tax concession regimes, increasing the types of qualifying transactions and enhancing flexibility in handling incidental transactions.
  • Extend the Grant Scheme for Open-ended Fund Companies and Real Estate Investment Trusts for three years

SME support

SME Financing Guarantee Scheme: extend the application period of the 80% and 90% Guarantee Products of the SME Financing Guarantee Scheme to the end of March 2026.

BUD Fund: inject HK$500 million with launch of “E-commerce Easy". Provide up to HK$1 million per enterprise for implementing e-commerce projects in mainland China.

Stimulus measures for inbound investments

Re-domiciliation of overseas company to Hong Kong: to introduce a mechanism to provide facilitation for companies domiciled overseas for re-domiciliation to Hong Kong, with a view to attract more MNEs to establish a business presence in Hong Kong.

Capital Investment Entrant Scheme: Following the introduction of the Capital Investment Entrant Scheme (CIES) in the 2023/24 Budget, the program is set to open for application submissions shortly. In summary, investors who allocate a minimum of HK$27 million into approved assets and contribute HK$3 million towards a newly established CIES investment portfolio will be eligible to apply for residency and seek opportunities for growth in Hong Kong.

Others

Global minimum tax rate: Hong Kong is moving forward with the implementation of a 15% global minimum tax and Hong Kong minimum top-up tax for MNEs with annual consolidated group revenue of EUR 750 million, as outlined in the OECD’s initiative to combat base erosion and profit shifting (BEPS 2.0 Pillar Two), starting from 2025. Consultations are currently underway, with plans to present a legislative proposal to the Legislative Council in the second half of 2024.

IP Trading: The Government plans to put forward a legislative proposal aimed at instituting the "patent box" tax incentive by amending the Inland Revenue Ordinance in the first half of 2024. This initiative proposes a significant reduction in the profits tax rate to 5% for earnings generated from qualifying intellectual property (IP). The goal is to incentivize businesses to increase their investment in research and development (R&D) and engage in commercialization activities that leverage patents and other forms of IP protection.

Hotel Accommodation Tax: The Government proposes to resume the collection of the Hotel Accommodation Tax (HAT) at a rate of 3%, which will take effect from 1 January 2025. The HAT has been reduced to 0% since 1 July 2008.

Rates measures: Provide rates concession for domestic and non-domestic properties held by corporates or individuals for the first quarter of 2024/25, subject to a HK$1,000 ceiling for each ratable property. Additionally, introduce a progressive rating system (only affecting domestic properties with ratable value over HK$550,000) from the fourth quarter of 2024/25.

Increasing business registration fees and waiver of business registration levy for 2 years: Proposal to increase business registration fees by HK$200 to HK$2,200, starting from 1 April 2024. The business registration levy of HK$150 is proposed to be waived for 2 years.

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