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LPA-CGR: July Smart News - Hong Kong

Reducing salaries tax for the year of assessment 2017/18 and 2018/2019

Salaries tax for the year of assessment 2017/18 is reduced by 75%, subject to a ceiling of HKD 30,000 per taxpayer.  In addition, the width of tax bands is widened from HKD 45,000 to HKD 50,000 and the number of tax bands is increased from 4 to 5 with marginal tax rates of 2%, 6%, 10%, 14% and 17% commencing from the year of assessment 2018/19. The allowances (which reduce the taxable income) are also increased (for example, the child allowance is increased from HKD 100,000 to 120,000 per child) and a personal disability allowance is introduced commencing from the year of assessment 2018/19.

Proposal to abolish MPF off-setting mechanism

The Mandatory Provident Fund (MPF) is a pension scheme set up by the government to help generate retirement savings. All employed individuals must partake in a mandatory subscription where both employers and employees collectively make mandatory monthly contributions through private MPF providers. Under current legislations, employers are entitled to use the benefits attributable to their contributions to offset an employee’s statutory severance or long service payments. This has been the subject of complaints from unions for many years. Chief Executive Carrie Lam emphasized in her 2017 policy address that the offsetting of severance payments or long-service payments with MPF contributions will be abolished. The government hopes the proposed bill will pass by 2020 and come into effect by 2022.

Foreign same-sex marriages recognised for visas

After a three-year legal battle against the immigration policy, the Hong Kong Court of Final Appeal (the Court) ruled on 4 July in favour of a lesbian expatriate which in effect would make dependant visas normally granted  to  heterosexual  married  couples  also available to same-sex couples who are married in other foreign jurisdiction (see Director of Immigration v. QT [2018] HKCFA 28).  The ruling sets the city apart from its usual competitors such as Singapore, mainland China and Japan and make Hong Kong a more  competitive  city  attracting  new  talents. The Court however confirmed that its ruling does not have any legal effect on the definition of marriage under Hong Kong’s Marriage Ordinance which does not recognise  a marriage between  persons of different sex. Institution of marriage under Basic Law remains intact.

Expert point of view
France-China bilateral social security agreement

Since January 2017, the ratification of the France-China bilateral social security agreement, signed on October 10, 2016, is pending before the French Parliament. The date of ratification is still not known even though many companies, both in France and in China, are waiting for its enforcement.