Author: Anna Chan, Partner
With a forecast budget surplus of HK$92.8 billion for 2016-2017 attributed mainly by land sales and stamp duty, Financial Secretary Paul Chan Mo-po has followed his predecessor’s path to hand out “candies” totaling HK$35.1 billion. But are you getting any of them? Please check out the list below:-
- Reduction on profits tax, salaries tax and tax under personal assessment by 75% for 2016-2017 subject to a cap of HK$20,000.
- Widening of the marginal bands for salaries tax from the current HK$40,000 to HK$45,000.
- Raising of the disabled dependent allowance from the current HK$66,000 to HK$75,000.
- Raising of the dependent brother/sister allowance from the current HK$33,000 to HK$37,500.
- Extension of the entitlement period for the tax reduction for home loan interest from 15 years of assessment to 20 years.
- Raising of the deduction ceiling for self-education expenses from the current HK$80,000 to HK$100,000.
- Waiving of government rates for four quarters of 2017-2018 subject to a cap of HK$1,000 per quarter.
Support for Small and Medium Enterprises (“SME”)
- Continuation of the Dedicated Fund on Branding, Upgrading and Domestic Sales in furthering business development in the Mainland.
- Continuation of the special concessionary measures under the SME Financing Guarantee Scheme to help enterprises tide over their liquidity needs.
- Strengthening of the underwriting capacity of the Hong Kog Export Credit Insurance Corporation (“ECIC”) to provide Hong Kong exporters with insurance protection against non-payment risks by raising the cap on the contingent liability of ECIC under contracts of insurance from HK$40 billion to HK$55 billion.
- Continuation of the Technology Voucher Programme to provide each eligible SME with funding of up to HK$200,000 to promote the effective use of technological services and solutions among SMEs for better operation efficiency.
With the aim to enhance Hong Kong’s overall competitiveness, new measures will also be introduced to nurture certain emerging industries:-
Aircraft Leasing Business
A dedicated tax regime has been proposed [Note: not the law yet] which would result in an effective tax rate of 1.65% (i.e., 20% x 8.25%) [as opposed to the 16.5% general tax rate] for qualifying transactions in order to attract aircraft financing and leasing business to Hong Kong. Details are as follows:-
- Qualifying aircraft lessors and qualifying aircraft leasing managers for offshore aircraft leasing transactions in Hong Kong (with non-Hong Kong aircraft operators as lessees) can enjoy half payment of the prevailing HK corporate income tax rate of 16.5% (i.e. 8.25%); and
- For qualifying aircraft lessors, only 20% of the profits (excluding tax depreciation) generated from the leasing of an aircraft to a non-Hong Kong aircraft operator will be regarded as HK source and subject to Hong Kong tax.
To facilitate Hong Kong’s development into a full-fledged fund service centre, the Government proposes to extend the profits tax exemption for qualifying offshore funds and offshore private equity funds to onshore privately-offered open-ended fund companies.
Other measures include:-
- The First Registration Tax exemption for electric vehicles which was introduced to promote a wider use of electric vehicles to replace diesel and petrol vehicles will be revised and the First Registration Tax waiver for electric private cars will be capped at HK$97,500 from 1 April 2017.
- The Government will issue a second batch of Silver Bond in 2017-2018 which targets at Hong Kong residents aged 65 or above who are looking for investment products with steady returns.
- Waiving the licence fees for tourism-related industries including restaurants and hawkers and fees for restricted food permits for one year.
For a deeper discussion or any enquiry, please contact one of our members of the Tax Advisory team.