Hong Kong 2024-25 Budget – Tax Highlights

  • 100% rebate on first HK$3,000 of tax payable for individuals and businesses
  • Deductions for expenses incurred in reinstating leased premises
  • Proposed further enhancement of preferential tax regimes for single family offices
  • 10% increase in annual Business Registration Fee to HK$2,200 from 1st April

Wednesday 28th February 2024: In a prudent budget speech with few give-aways, Hong Kong Financial Secretary Paul Chan today announced that businesses and individuals will both benefit from a proposed 100% rebate on the first HK$3,000 of tax payable (decreased from HK$6,000 for 2022/23) for salaries tax, tax under personal assessment and profits tax. The rebates will be applied to tax levied for the current fiscal year, 2023/24. They will be deducted from the final tax assessment after 2023/24 Individual Income Tax Returns and Profits Tax Returns are filed.

The otherwise cautious budgetary statement carried a small but welcome change with the proposed introduction of profits tax measures granting deductions for expenses incurred in reinstating leased premises to their original condition and the removal of time limits for claiming allowances on industrial buildings and structures as well as commercial buildings and structures.

In the face of pressure on public finances, the Government is seeking to increase fiscal revenues as a matter of urgency. Despite the relatively narrow tax base, we welcome the Government’s decision to hold profits tax rates steady to help Hong Kong maintain its long-standing taxation advantages.

But it is disappointing to note that – as last year - the Government is not taking the opportunity to enhance the City’s competitiveness with fresh tax incentives such as profits tax concessions for qualifying regional headquarters and company set-up expenses, or tax credits for start-up companies, allowances for leased plant and machineries used within Great Bay Area (GBA), or enhanced R&D deductions for R&D activities carried out in GBA, among possible concessions.

The highlights of the Budget are as follows:

I. Salaries Tax / Personal Assessment

2023/24
Net income

Standard Rate

Any amount

15%

2024/25 proposed
Net income

Standard Rate

First HK$5,000,000
Remainder

15%
16%

Allowances

2023/24
HK$

2024/25
HK$

Basic Allowance

132,000

132,000

Married Person Allowance

264,000

264,000

Single Parent Allowance

132,000

132,000

Child Allowance

130,000

130,000

For each child born during the year

130,000

130,000

Dependent Brother or Dependent Sister Allowance

37,500

37,500

Dependant Parent and Dependant Grandparent Allowance

    
  • for aged 60 or above or eligible to claim allowance under the Disability Allowance Scheme

50,000

50,000

  • for those aged 55 to 59

25,000

25,000

Additional Dependant Parent and Dependant Grandparent Allowance

    

  • for aged 60 or above or eligible to claim allowance under the Disability Allowance Scheme

50,000

50,000
  • for those aged 55 to 59

25,000

25,000

Disabled Dependant Allowance

75,000

75,000

Personal disability allowance

75,000

75,000

Expenses of self-education

100,000

100,000

MPF Contribution

18,000

18,000

Home Loan Interest

100,000; 20 Years

100,000; 20 Years

Elderly Residential Care

100,000

100,000

Approved Charitable Donations

35% of income after deductions

35% of income after deductions

Voluntary Health Insurance Scheme

8,000

8,000

Annuity Premiums and MPF Voluntary Contributions

60,000

60,000

Domestic rental expenses

100,000

100,000

  • From the year of assessment 2024/25, two tiered standard rates regime for salaries tax and tax under personal assessment will be implemented.

  • No change is proposed for the allowance and deductions. A summary of the allowances and deductions for 2023/24 and 2024/25 is shown as below:

II. Marginal bands for salaries tax

TAXABLE Income
HK$

Progressive tax rate

Progressive tax applicable to the band
HK$

0-50,000

2%

1,000

50,001-100,000

6%

3,000

100,001-150,000

10%

5,000

150,001-200,000

14%

7,000

200,001 and over

17%

  

  • No change is proposed. Tax Bands for salaries tax from year of assessment 2024/25 onwards are as follows:

III. One-Off Tax Reduction

  • A one-off 100% tax rebate or HK$3,000 (whichever is lower) on 2023/24 Salaries Tax, Personal Assessment and Profits Tax is proposed. The rebate will be deducted from the 2023/24 final tax (i.e. after the 2023/24 Individual Income Tax Returns and Profits Tax Returns are filed).

IV. Other tax measures

The Financial Secretary noted the following:

  • The Government aims to cancel all demand-side management measures for residential properties with immediate effect, i.e., no Special Stamp Duty (SSD), Buyer Stamp Duty (BSD) or New Residential Stamp Duty (NRSD) needs to be paid for any residential property transactions.
  • Stamp duties payable on the transfer of real estate investment trust (REIT) units and the jobbing business of option market-makers will be waived.
  • Starting from the year of assessment 2024/25, tax deduction will be granted for expenses incurred in reinstating the condition of the leased premises to their original condition.
  • Starting from the year of assessment 2024/25, the time limit for claiming the allowances of industrial buildings and structures as well as commercial buildings and structures will be removed.
  • The first registration tax (FRT) concessions for electric vehicles will be extended for two years to March 2026, reduced by 40%. Specifically, the maximum FRT concession for electric private cars (e PCs), granted under the "One for One Replacement" Scheme, will be adjusted to HK$172,500, whereas the concession ceiling for general e PCs will be lowered to HK$58,500. At the same time, e PCs valued at over $500,000 before tax will not be entitled to concessions under the "affordable users pay" principle. As for other types of electric vehicles, including electric commercial vehicles, electric motorcycles and electric motor tricycles, the FRT will continue to be waived in full over the next two years.
  • The Government will further enhance the preferential tax regimes for related 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, all to attract more funds and family offices with potential to establish a presence in Hong Kong.
  • Hong Kong has concluded the Investment Promotion and Protection Agreement (IPPA) negotiations with Bahrain and will soon sign a Comprehensive Double Taxation Agreement with it.
  • Hong Kong will host the Conference of Belt and Road Initiative Tax Administration Cooperation Forum, which will provide a platform for attendees to establish connections and exchange ideas, thereby promoting tax administration co operation and capacity building.
  • The Government will introduce into the Legislative Council (LegCo) in the first half of 2024 a proposal to amend the Inland Revenue Ordinance (IRO) with a view to implementing the “patent box” tax incentive, which will reduce substantially the tax rate for profits derived from qualifying IP to 5%.
  • The Government will commence studies on further enhancement on tax concession measures for the maritime industry in the areas of ship leasing, marine insurance, ship agency, ship management, shipbroking within 2024.
  • The Government proposes to increase the duty on cigarettes by 80 cents per stick, with immediate effect. Duties on other tobacco products will be increased by the same proportion.
  • The Government proposes to resume the collection of the Hotel Accommodation Tax (HAT) at a rate of 3% effective from 1 January 2025.
  • The Government will continue to take forward the implementation of the global minimum tax proposal drawn up by the Organisation for Economic Co operation and Development (OECD) to address base erosion and profit shifting, aiming to apply the global minimum tax rate of 15% on large multinational enterprise groups with an annual consolidated group revenue of at least EUR 750 million and impose the Hong Kong minimum top up tax starting from 2025.

V. Property Owners

  • Although there will be no tax concession on property tax, property owners will enjoy waiver of rates for the first quarter in 2024/25, subject to a ceiling of HK$1,000 for each rateable domestic property.
  • The Government will introduce legislative amendments in the first half of this year to implement the progressive rating system for domestic properties, with the aim to bring the system into effect from the fourth quarter of 2024 25 onwards.

VI. Companies

  • The Government extends the application period for 80% and 90% Guarantee Products under the SME Financing Guarantee Scheme (SFGS) till end March 2026.
  • HK$500 million will be injected with launch of “E-commerce Easy”, which will provide up to HK1 million per enterprise for implementing e-commerce projects in the Mainland.
  • Rates for non-domestic properties will be waived for the first quarter of 2024/25, subject to a ceiling of HK$1,000 for each rateable non-domestic property.
  • Business registration fees will increase by HK$200 to HK$2,200 per annum with effect from 1 April 2024.
  • The business registration levy of HK$150 payable to the Protection of Wages on Insolvency Fund will be waived for two years.

VII. Miscellaneous measures for relieving people’s burden

  • An extra half-month allowance of standard Comprehensive Social Security Assistance (CSSA) payments, Old Age Allowance, Old Age Living Allowance or Disability Allowance will be provided. Similar arrangements will apply to Working Family Allowance.

VIII. Other measures

  • HK$65 million will be allocated to concessionary measures for Hong Kong-registered ships that have attained a high rating under international standards of decarbonisation.
  • HK$100 million will be set aside to provide digital training courses and technical support to elderly.
  • HK$3 billion will be allocated to support local universities, R&D institutes and enterprises to leverage their computing power.
  • HK$680 million will be provided to support vocational and professional education.
  • A 3-year pilot scheme will be implemented in 2024 to provide additional subsidy of HK$500 per month for employed disabled recipients of CSSA.
  • The Government will put forward user friendly fund re-domiciliation mechanisms for Open-ended Fund Companies and Limited Partnership Funds. Legislative proposal will be submitted in the first half of 2024 to enable companies domiciled overseas to re-domicile in Hong Kong.

We trust you will find the above useful information. Should you have any questions, please do not hesitate to contact us on (852) 3705 0095 or [email protected].