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2018-19 Hong Kong Government Budget Highlights

2018-19 Hong Kong Government Budget  – Tax Measures

In his 2018-19 Budget, the Financial Secretary proposed a number of tax measures, all of which require legislative amendments before implementation.

Highlights of the measures and implementation details are set out in the following paragraphs. Answers to frequently asked questions (FAQ) and illustrative examples showing how the proposed measures would reduce taxpayers’ salaries tax and tax under personal assessment are also provided.

You may use the tax computation program provided by GovHK to calculate your salaries tax and tax under personal assessment if the above proposals are implemented.

Reducing profits tax, salaries tax and tax under personal assessment for the year of assessment 2017/18

The Financial Secretary proposed a one-off reduction of profits tax, salaries tax and tax under personal assessment for the year of assessment 2017/18 by 75%, subject to a ceiling of $30,000 per case.  This measure will be effected by amending the Inland Revenue Ordinance.

For profits tax, the ceiling of the tax reduction is applied to each business.  For salaries tax, the ceiling is applied to each individual taxpayer; but for couples jointly assessed, the ceiling is applied to each couple.  For personal assessment, single taxpayers will each be subject to the ceiling. Married couples must make their personal assessment election together and the ceiling will therefore apply to each couple.

The proposed tax reduction is not applicable to property tax.  Individuals with rental income, if eligible for personal assessment, may be able to enjoy such reduction under personal assessment.

A taxpayer who is separately chargeable to salaries tax and profits tax can enjoy tax reduction under each of the tax types.  For a taxpayer having business profits or rental income and electing for personal assessment, the reduction will be based on the tax payable under personal assessment.  It might be different from the amount of tax reduction he would get if he was not assessed under personal assessment.  The exact position will need to be evaluated case by case.  The Inland Revenue Department will check if the election will reduce the amount of tax payable in each case, and assess each taxpayer in the way most advantageous to him.

To apply for personal assessment, if eligible, the taxpayer should complete Part 6 of his tax return for individuals (BIR60) for the year of assessment 2017/18.  Individuals having salaries income only, but no business profits and rental income, need not elect for personal assessment.

The proposed reduction will reduce the amount of tax payable by taxpayers for the year of assessment 2017/18.  Taxpayers should file their profits tax returns and tax returns for individuals for the year of assessment 2017/18, to be issued in coming April and May respectively, as usual. Upon enactment of the relevant legislation, the Inland Revenue Department will effect the reduction in the final assessment.  For any final assessment for 2017/18 issued before the enactment of the law, the Inland Revenue Department will make a reassessment after the enactment.  It is expected that the revised assessments, with the reduction duly reflected, will be issued starting from late July 2018. Taxpayers are not required to make any applications or enquiries to the Department.

The proposed tax reduction will only be applicable to the final tax for the year of assessment 2017/18, but not to the provisional tax of the same year.  Therefore, taxpayers are still required to pay their provisional tax on time despite the proposed reduction.  The provisional tax paid will be applied to pay the final tax for the year of assessment 2017/18 and the provisional tax for the year of assessment 2018/19.  Excess balance, if any, will be refunded.

Adjusting the tax bands and marginal tax rates 

The Financial Secretary proposed to widen the width of tax bands from $45,000 to $50,000 and to increase the number of tax bands from 4 to 5 with marginal tax rates of 2%, 6%, 10%, 14% and 17% commencing from the year of assessment 2018/19.  The present and the proposed tax bands and marginal tax rates are shown in the table below:

#Until superseded

Increasing allowances and introducing a personal disability allowance

The Financial Secretary proposed to increase allowances and introduce a personal disability allowance commencing from the year of assessment 2018/19 with details as follows:

#until superseded

Raising the deduction ceiling for elderly residential care expenses

The Financial Secretary proposed to raise the deduction ceiling for elderly residential care expenses from $92,000 to $100,000 effective from the year of assessment 2018/19.

Relaxing the requirement for election of Personal Assessment by married persons 

The Financial Secretary proposed to relax the requirement for the election of Personal Assessment commencing from the year of assessment 2018/19 by allowing married persons the option to elect personal assessment separately.

Introducing a tax deduction of qualified premium for eligible health insurance products under the Voluntary Health Insurance Scheme

The Financial Secretary proposed to introduce a tax deduction of qualified premium for eligible health insurance products under the Voluntary Health Insurance Scheme.  The annual tax ceiling of premium for tax deduction is $8,000 per insured person.  This measure will be implemented from the year of assessment following the passage of the relevant legislative amendments.

Implementation details relating to changes of tax bands and marginal tax rates, increasing allowances, raising deduction ceiling and introducing personal disability allowance for the year of assessment 2018/19

After enactment of the relevant legislation, the Inland Revenue Department will automatically apply the new level of allowances and the new tax bands and marginal tax rates in calculating the 2018/19 provisional salaries tax. Taxpayers are only required to complete their tax returns for the year 2017/18 and they do not need to make separate applications.  As for the raised deduction ceiling for elderly residential care expenses, please refer to FAQ 9 and 10 and Example 3 for the arrangement.  As for the newly introduced personal disability allowance, please refer to FAQ 14 and 15 and Example 2 for the arrangement.

Tax concessions under Profits Tax

On profits tax, the Government will amend the qualifying debt instrument scheme to increase the types of qualified instruments.  In addition to instruments lodged and cleared by the Central Moneymarkets Unit of the Hong Kong Monetary Authority, debt securities listed on the Hong Kong Stock Exchange will also become eligible.  The Government will also extend the scope of tax exemption from debt instruments with an original maturity of not less than seven years to instruments of any duration.  Separately, the Government will enhance tax concessions for capital expenditure incurred by enterprises in procuring eligible efficient building installations and renewable energy devices by allowing tax deduction to be claimed in full in one year instead of the current time frame of five years.  These measures will be effected by amending the Inland Revenue Ordinance.

Source: https://www.ird.gov.hk

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2015-16 Hong Kong Government Budget Highlights

2015/16 Hong Kong Government Budget Highlights

Financial Secretary John Tsang delivered the eighth budget speech of his career on 25 February 2015. In it he announced a revised budget surplus for 2014/15 of HK$63.8 billion and a forecast surplus of HK$36.8 billion for next year. The budget proposals will need approval by the Legislative Council before taking effect.

Profits Tax

  • The profits tax rates for companies (16.5%) and unincorporated businesses (15%) remain unchanged.
  • Amend the tax law to allow, under specified conditions, interest deductions under profits tax for corporate treasury centres and a reduction in the profits tax rate for specified treasury activities of 50%.
  • Consider extending the scope of tax deduction for capital expenditure incurred on the purchase of intellectual property rights to cover more types of intellectual property rights as appropriate.

Salaries Tax

  • No change in the standard tax rate, marginal tax rates and marginal tax bands.
  • Increase the basic and additional child allowance in the year of birth from HK$70,000 to HK$100,000 each. After the increase, the total allowance for a child born in 2015/16 will be HK$200,000 for the year.
  • Provide tax concession for subscribers to regulated health/medical insurance products.

One-off Measures

  • Profits tax for 2014/15 to be reduced by 75% subject to a ceiling of HK$20,000, to be deducted from the taxpayer’s final tax payable for the year.
  • Waive 75% of salaries tax and tax under personal assessment for 2014/15, subject to a ceiling of HK$20,000, to be deducted from the taxpayer’s final tax payable for the year.
  • Waive rates for the first two quarters of 2015/16, subject to a ceiling of HK$2,500 per quarter for each rateable property.
  • Pay one month’s rent for the lower income tenants of public housing, excluding certain wealthier tenants and non-elderly tenants.
  • Provide two additional months of Comprehensive Social Security Assistance (CSSA) payment, Old Age Allowance, Old Age Living Allowance and Disability Allowance.

Others Points of Interest

  • Inject additional $400 million into the CreateSmart Initiative to support different sectors of the creative industries.
  • Earmark $23 million in the coming three years for offering intellectual property consultation, manpower training and other services to SMEs.
  • Having Hong Kong Science and Technology Parks Corporation (HKSTPC) earmark $50 million to set up a corporate venture fund for co-investment, on a matching basis with private funds, for start-ups, subject to certain conditions.
  • Issue “iBond” (i.e. inflation-linked retail bonds) worth up to HK$10 billion.
  • Set aside $50 billion to provide better retirement protection for the elderly in need.
  • Establish a Future Fund to serve as long-term savings. The fund will be placed in long-term investments for higher returns.
  • The 2015/16 Land Sale Programme will include 29 residential sites (of which 16 are new ones), four commercial/business sites and one site for hotel development.

Short-term Targeted Support Measures

  • Waive the licence fees for travel agents, hotels and guesthouses, restaurants, hawkers and operators with restricted food permits for six months.
  • Waive vehicle examination fee once for the renewal of vehicle licences of taxis, light buses, franchised and non-franchised buses, goods vehicles, trailers and special purpose vehicles within a year.

Support for Small and Medium Enterprises

  • Extend the application period for special concessionary measures under SME Financing Guarantee Scheme to 29 February 2016.
  • Inject $1.5 billion into the SME Export Marketing and Development Funds.
  • increase the maximum amount of funding support for each project under the SME Development Fund from $2 million to $5 million; and
  • expand the scope of the SME Export Marketing Fund.

Source: http://www.budget.gov.hk/2015/index.html

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2014-15 Hong Kong Government Budget Highlights

2014-15 Hong Kong Government Budget Highlights

“Social welfare, education and medical services are the major spenders of public resources. In 2013-14, estimated recurrent expenditure in these three areas will approach $170 billion, or 60 per cent of recurrent government expenditure. This is an increase of $55.1 billion, or 50 per cent, compared with 2007-08.”

Government Expenditure

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  • Total government expenditure: $440 billion (+15.6% year-on-year)
  • Recurrent expenditure: $291.3 billion (+10.5% year-on-year)

Social Welfare

Poverty Alleviation

  • Inject $15 billion into the Community Care Fund

Elderly Services

  • Allocate $8.3 billion for payment of the Old Age Living Allowance, to benefit more than 400 000 elderly people
  • Allocate $380 million from the Lotteries Fund to launch the first phase of the Pilot Scheme on Community CareService Voucher for the Elderly
  • Increase expenditure by $73 million for the provision of 600 additional subsidised places
  • Allocate an additional $164 million to increase the subvention for 7 000 places with continuum of care by 10 per cent, and to upgrade 7 850 ordinary places in subvented residential care homes for the elderly to places with continuum of care
  • Allocate an additional $160 million to provide 1 200 places under the two-year full-time Enrolled Nurse Training Programmes for the welfare sector

Rehabilitation Services for the Disabled

  • Allocate an additional $35.6 million to provide 145 new places each for residential and day training services
  • Allocate an additional $67.9 million to increase the manpower of residential care homes and day training centres
  • Allocate an additional $203 million to regularise the home care service for persons with severe disabilities

Healthcare

Healthcare

  • Optimise the management of specialist out-patient clinics to shorten the waiting time
  • Add 290 acute patient beds and convalescent beds
  • Use $8 billion to redevelop Kwai Chung Hospital
  • Enhance community support for patients with severe mental illness
  • Allocate $44 million to include in the Drug Formulary two chemotherapeutic drugs and expand the clinical application of two special drugs for treating advanced Parkinson’s disease and cancer

Infrastructure

Land Supply

  • Include in the Land Sale Programme 46 residential sites, of which 28 are new sites
  • Include 9 sites for commercial/business use, providing a total floor area of 330 000 square metres
  • Carry out studies and design work relating to reclamation outside Victoria Harbour on an appropriate scale, opening up of new development area, etc

Infrastructure

  • Capital works expenditure for next year will reach $70 billion, creating about 75 000 job opportunities

Education

Education

  • Inject $5 billion into the Language Fund
  • Inject $480 million to set up scholarships for 20 outstanding students to pursue studies overseas. Awardees must undertake to be teachers upon graduation
  • Inject $40 million to establish scholarships to give recognition to outstanding tertiary students with special education needs
  • Allocate $12 million to the Vocational Training Council to support students with special education needs

Training

  • Inject $15 billion into the Employees Retraining Board
  • Establish a $100 million training fund for maritime and aviation transport to attract young people to enrol in related skills training
  • Set up a task force to study manpower development in the retail industry

Environment

Environment

  • Earmark $10 billion to phase out old diesel commercial vehicles
  • Inject $5 billion into the Environment and Conservation Fund
  • Earmark $500 million to set up waste electrical and electronic equipment processing facilities and five community green stations
  • Take forward organic waste treatment facilities in Siu Ho Wan on Lantau

Government Revenue

Total government revenue: $435.1 billion

“The use of public resources has always been guided by the principle of pragmatism. Resources are allocated in accordance with actualneeds and priorities, taking into account with our fiscal sustainability.”

Economic Outlook

  • There is a modest improvement in our economy this year. Forecast GDP growth is between 1.5% and 3.5%
  • Inflation will be subject to upward pressure. The average rate of headline inflation for the year isestimated at 4.5%, and the underlying inflation is 4.2%

Trading and Logistics Industry

  • Designate 12 hectares of land at Tuen Mun West and Tsing Yi for developing logistics facilities to provide a floor area of more than 300 000 square metres and create 7 500 new jobs

Tourism

  • Offer a $2.3 billion loan to Ocean Park to build an all-weather water world
  • Hong Kong Disneyland to launch a night-time parade and put in place a themed area featuring “Marvel heroes”

Financial Services Industry

  • Expand the size of the Government Bond Programme from $100 billion to $200 billion
  • Issue iBond worth not more than $10 billion
  • Allow private equity funds to enjoy the same tax exemption as offshore funds
  • Reduce profits tax on the offshore insurance business of captive insurance companies to attract more enterprises to form captive insurance companies in Hong Kong

Emerging Industries

  • Provide each of the 6 universities with a subvention of up to $12 million for a period of 3 years to support their technology transfer work
  • Allocate $50 million to acquire local visual artists’ outstanding artworks
  • Convert the club house of the former Royal Hong Kong Yacht Club in Oil Street, North Point, into a visual arts exhibition and activity centre
  • Set up a working group to study the strategy for promoting intellectual property trading

Small and Medium Enterprises

  • Waive business registration fees for 2013-14
  • Reduce profits tax for 2012-13 by 75 per cent, subject to a ceiling of $10,000
  • Extend the application period for the special concessionary measures under the Small and Medium Enterprises (SME) Financing Guarantee Scheme for 1 year
  • Increase the cumulative amount of the grant under the SME Export Marketing Fund from $150,000 to $200,000
  • Introduce a small business policy scheme to be run by the Hong Kong Export Credit Insurance Corporation

 

Source: http://www.budget.gov.hk/2014/index.html

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