2020-21 Budget headlines - Hong Kong
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2020-21
Budget headlines
Hong Kong
In the midst of social incidents and outbreak of novel Netting out the effects of the Government’s one-off relief
coronavirus disease, the Hong Kong Financial Secretary (“FS”), measures, the underlying inflation rate in 2019 was 3% and he
Mr. Paul Chan, delivered his budget for the fiscal year 2020-21 forecasts the underlying inflation rate will ease to 2.5% in 2020.
on 26 February 2020.
On the other hand, the latest unemployment rate is increased
In preparing the 2020-21 Budget, the FS put the focus on to 3.4%, the highest in more than three years.
“supporting enterprises, safeguarding jobs, stimulating the
economy and relieving people’s burden”. Although the FS was Given the enormous challenges from external factors as
well aware that the financial resources alone are not enough well as internally from the spread of novel coronavirus and
to tackle the challenges that Hong Kong is facing, he decided social unrest, having regard to the stimulus effect of the fiscal
to implement various counter-cyclical measures to support measures, the FS forecasted the Hong Kong economy will grow
enterprises and relieve people’s hardship. by -1.5% to 0.5% in 2020.
Mainly because of the lower-than-expected revenues due to the
economic condition and the establishment of the Anti-epidemic
Fund, the FS forecasted a deficit of HK$37.8 billion for 2019-20.
The fiscal reserves are expected to be HK$1,133.1 billion by 31
March 2020.
To enhance Hong Kong’s competitiveness in the Exchange encourage the recipients of the HK$10,000 to spend the money
Traded Fund (“ETF”) listing platform, the FS proposed waiving in Hong Kong to help stimulate the domestic economy. We
stamp duty on stock transfers paid by ETF market makers. Tax would also like to ask the FS to pay more attention to the
measures will also be introduced to provide tax incentives to “N-nothing” people who may not be able to benefit fully from
the marine sector. the relief measures and this group of people may also have
been badly hit by the recent economic downturn.
The FS considered that with ample fiscal reserves, the
Government has to increase public expenditure amid an It is however disappointing that the FS did not propose any
economic downturn to stimulate the economy and to ride out increase of personal allowances nor widening of tax bands
the difficult times with the community. under salaries tax and tax under Personal Assessment. The
FS also did not propose any change of profits tax rates and
Similar to last year, the FS proposed to make a 100% reduction property tax rates.
in profits tax, salaries tax and tax under Personal Assessment
for 2019-20, subject to a maximum reduction ceiling of Looking forward, the FS pointed out that Hong Kong may need
HK$20,000 for each case. Various kinds of government levies to consider seeking new revenue source or revising tax rates
such as rates and business registration fees will be waived. as he is forecasting a deficit in the coming few years as well.
Subsidies for electricity charges will be granted to non- The one-off relief measures may also have to be progressively
domestic household accounts. reduced. In addition, the Government will keep a closer watch
on new developments in the international tax arena in order
To relieve people’s financial burden, the FS also proposed a to ensure that Hong Kong’s tax regime is not only in line with
cash payout of HK$10,000 to each Hong Kong permanent these new developments but also maintaining Hong Kong’s
resident aged 18 or above as well as a one-off special business environment and competitiveness.
allowance to eligible low-income households. We would
2 2020-21 Budget headlines
SUMMARY
Tax regime 2020-21
Profits Tax Property Tax
The normal profits tax rates for 2020- Property Tax rate will remain at 15% for 2020-21.
21 will remain unchanged at 16.5%
for corporations and 15% for sole Salaries Tax and Tax under Personal Assessment
proprietorships and partnerships. The FS did not propose any change to the marginal bands for progressive rates and
However, one entity among connected standard rate of salaries tax and tax under Personal Assessment for 2020-21. Salaries
entities is eligible to elect for its first tax and tax under Personal Assessment will continue to be calculated on the basis of
HK$2 million taxable profits to be taxed the lower of the standard rate (15% without personal allowances) and progressive
at half of the normal rates (i.e. 8.25% rates (after personal allowances). The marginal tax bands for progressive rates for
for corporations and 7.5% for sole 2020-21 will be as follows:-
proprietorships and partnerships). Tax
HK$
First $50,000 @ 2% 1,000
Next $50,000 @ 6% 3,000
Next $50,000 @ 10% 5,000
Next $50,000 @ 14% 7,000
Balance @ 17%
Personal allowances
There is no increase of basic allowance as well as other personal allowances for
2020-21.
2019-20 2020-21
HK$ HK$
Basic allowance 132,000 132,000
Married person’s allowance 264,000 264,000
Child allowance (each child) 120,000 120,000
Additional allowance for each child born during the year 120,000 120,000
Single parent allowance 132,000 132,000
Dependent parent/grandparent allowance (aged 55 or above, 25,000 25,000
but below 60) (each)
Additional dependent parent/grandparent allowance aged 55 25,000 25,000
or above, but below 60) (each)
Dependent parent/grandparent allowance (aged 60 or above) 50,000 50,000
(each)
Additional dependent parent/grandparent allowance (aged 60 50,000 50,000
or above) (each)
Disabled dependent allowance (each) 75,000 75,000
Dependent brother/sister allowance (each) 37,500 37,500
Personal disability allowance 75,000 75,000
2020-21 Budget headlines 3
SUMMARY Other proposed relief measures New tax incentives 100% tax reduction for 2019-20 • To strengthen the competitiveness of Hong Kong as an The amount of Profits Tax, Salaries Tax and Tax under Personal Exchange Traded Fund (“ETF”) listing platform, stamp duty Assessment payable for 2019-20 will be reduced by 100%, on stock transfers paid by ETF market makers in the course subject to a ceiling of HK$20,000. This will be reflected in the of creating and redeeming ETF units listed in Hong Kong will taxpayer’s final tax payable for 2019-20. be waived. • The Government will provide tax concessions for the ship Waiver of rates for 2020-21 leasing business, including offering a profits tax exemption Rates for four quarters of 2020-21 will be waived. For each non- to qualifying ship lessors and a half-rate profits tax domestic property, the ceiling of the waiver will be HK$5,000 concession to qualifying ship leasing managers. Profits per quarter in the first two quarters and a ceiling of HK$1,500 tax will be halved for eligible insurance business including per quarter in the remaining two quarters. For each residential marine insurance. The Government will also explore other property, the ceiling of the waiver will be HK$1,500 per quarter. tax measures to attract more global shipping business operators and commercial principals to set up business in Other major measures Hong Kong. • Introducing a concessionary low-interest loan under the • In order to avoid undermining Hong Kong’s simple and SME Financing Guarantee Scheme, under which 100% will low tax regime, the FS will keep a close watch, making be provided by the Government in order to cover the salary assessments and devising corresponding measures on and rental expenditures of eligible enterprises for six months, the developments of the OCED’s proposal for imposing a subject to a ceiling of HK$2 million. global minimum tax rate. The FS will also invite scholars, • Waiving the business registration fees for 2020-21. experts and members of the business community who • Waiving the registration fees for all annual returns charged are experienced in international taxation to advise on the by the Companies Registry for two years. matter. 4 2020-21 Budget headlines
• A subsidy to each eligible non-domestic household accounts • Providing a one-off special allowance to eligible low-income
for four extra months to cover 75% of their monthly billed households under the Anti-epidemic Fund.
electricity charges, subject to a monthly cap of HK$5,000 • Providing an extra one-month allowance will be made to
per account. recipients of Comprehensive Social Security Assistance
• Waiving of water and sewage charges payable by non- payments, the Old Age Allowance, Old Age Living Allowance
domestic households for four extra months, subject to a or Disability Allowance.
monthly cap of HK$20,000 and HK$12,500 respectively per • Providing one month’s rental for lower income tenants living
household. in public rental units.
• Providing a new round of rental subsidy for six months to • Paying the examination fees for school candidates sitting
local recycling enterprises. for the 2021 Hong Kong Diploma of Secondary Education
• Reducing 50% rental for another six months for eligible Examination.
tenants of government properties, government land and • Disbursing HK$10,000 to Hong Kong permanent residents
EcoPark. aged 18 or above with a view to encouraging and boosting
• Reducing 50% rental and fees for another six months for local consumption and relieving people’s financial burden.
eligible operators of properties covered by short-term
waivers.
• Providing hirers of civic centres with a 50% reduction of hire
charges for another six months. It is important to note that all the above proposals are subject to
amendment before they are finally enacted.
• Offering fees and rent reductions for cruise lines and
existing tenants of the Cruise Terminal for another six
months.
About Budget headlines
This tax alert is issued in summary from exclusively for
information of clients and staff of Grant Thornton and should
not be used or relied upon as a substitute for detailed advice.
Accordingly Grant Thornton accepts no responsibility for any
loss that occurs to any party who acts on the information
contained herein without further consultation with us.
William Chan Anthony Chan
Partner, Tax services Director, Tax services
T +852 3987 1399 T +852 3987 1368
E William.Chan@hk.gt.com E Anthony.Chan@hk.gt.com
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