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Hawksford on the Hong Kong Budget 2020/2021: What businesses need to know

Financial Secretary Paul Chan Mo-po announced the 2020/21 Hong Kong Budget on 26 February, outlining the Hong Kong SAR Government’s plan for the economy and shared their proposals for taxation developments.

Hong Kong SAR Government demonstrates a commitment to improve the business environment through various measures to enhance the city’s competitiveness. Find out from us what the budget means for you, your business and Hong Kong’s economy and read about the key insights for enterprises based or planning to enter Hong Kong market.

See the original article here.

Support for Enterprises

One of the main goals is to support enterprises amidst economic recession. Highlights include:

  • 100% loan guarantee - under the SME Financing Guarantee Scheme, a concessionary loan will be introduced, with 100% Government guarantee for enterprises. The loan will cover 6 months of salary and rental expenditures, with a ceiling of $2 million, and a repayment period of up to 3 years.
  • 100% profits tax cut for 2019-20, capped at $20,000.
  • 50% rental cut on government properties until September 2020.
  • Additional $150 million for the Hong Kong Trade Development Council to help enterprises find business.

One of the major highlights is that there will be HKD10,000 cash payout to each Hong Kong permanent resident aged 18 or above, with a view to encouraging and boosting local consumption and relieving people's financial burden.   The most relevant aspects of the Budget that will take effect from April 1st of 2020 are the following:

Profits Tax

Profits Tax for 2019/20 will be reduced by 100% of the payable amount subject to a ceiling of HKD20,000 per case. This reduction will be reflected in the final tax payable for the year of assessment 2019/20.

The two-tier profits tax rates for companies (8.25%-16.5%) and unincorporated businesses (7.5%-15%) remain unchanged. Read more about Profits tax rates in Hong Kong.

Salaries Tax

Salaries Tax for 2019/20 and tax under personal assessment for the year of assessment 2019/2020 will be reduced by 100% of the payable amount subject to a ceiling of HKD20,000 per case.

Individuals are taxed at a progressive tax rate on their net chargeable income (i.e. assessable income after deductions and allowances) starting at 2% and ending at 17%; or at a standard tax rate of 15%, whichever is lower. Read more about Salaries Tax in Hong Kong.

Business registration Fees

Business registration fees will be waived for 2020-21, benefitting 1.5 million business. Company registry fees for annual returns will be waived for two years to benefit 1.4 million firms. To learn more about setting up a company in Hong Kong, read our article.

Concessionary Low-interest Loan

A concessionary low-interest loan with 100% Government guarantee for enterprises, will be open for application for 6 months. The maximum loan of $2 million will have a repayment period of up to 3 years and have an interest payment only period for the first 6 months.

Rates for Non-domestic Properties

Rates for non-domestic properties for 2020-21 will be waived for up to a ceiling of HK$5,000 per quarter in the first two quarters and a ceiling of $1,500 per quarter in the remaining two quarters for each non-domestic property.

Non-domestic electricity accounts will enjoy a 75 per cent discount with up to a ceiling of HK$5,000 for four months, at a cost of HK$2.9 billion. Likewise, water and sewage costs will be discounted by 75 per cent up to a cap of HK$20,000 and HK$12,500 respectively.

Provide a new round of rental subsidy for 6 months to local recycling enterprises: Local recycling firms will see a rental subsidy for six months, costing HK$100 million.

Innovation and Technology

The Government has been promoting re-industrialisation in Hong Kong through the provision of infrastructural, financial, technological and talent support.  They will inject $2 billion into the ITF (Innovation and Technology Fund) for launching the Re-industrialisation Funding Scheme which aims to provide financial support for manufacturers on a matching basis for setting up new smart production lines in Hong Kong.

Government will also provide the Hong Kong Science and Technology Parks Corporation (HKSTPC) with an additional funding of $2 billion for converting an old factory in the Yuen Long Industrial Estate into a Microelectronics Centre which aims to provide modern manufacturing facilities. Read more about ITF.

The HKSAR Government has also recently announced the setting up of a $30 billion the 'Anti-epidemic Fund' to enhance Hong Kong’s capability in combating the novel coronavirus epidemic and provide relief to enterprises and sectors like retail, food license, tourism and members of the public affected by the current epidemic outbreak.

For full details on the budget, please visit the Hong Kong Budget website

Useful links

Hawksford: China's Greater Bay Area - The next Silicon Valley Hawksford expands Asian presence with acquisition Hawksford: Challenges and opportunities ahead for the Greater Bay Area