Hong Kong SAR Budget 2018/2019

Major Proposals

Tax Relief

• 75% rebate, capped at HK$30,000 of 2017/18 final profits tax payable
• 75% rebate, capped at HK$30,000 of 2017/18 final salaries tax payable and tax under personal assessment
• Widen the tax bands for salaries tax from the current HK$45,000 to HK$50,000, increase the number of tax bands from four to five, and adjust the marginal tax rates to 2%, 6%, 10%, 14% and 17% respectively
• Increase the basic and additional child allowances from HK$100,000 to HK$120,000
• Increase the dependent parent or grandparent aged 60 or above from HK$46,000 to HK$50,000. The same increase applies to the additional allowance for taxpayers residing with parents or grandparents continuously throughout the year
• Increase the dependent parent or grandparent aged between 55 and 59 from HK$23,000 to HK$25,000. The same increase applies to the additional allowance for taxpayers residing with parents or grandparents continuously throughout the year
• Raise the deduction ceiling for elderly residential care expenses from HK$92,000 to HK$100,000
• Introduce a personal disability allowance for eligible taxpayers, at HK$75,000 
• Allow married persons the option to elect personal assessment separately, starting from the year of assessment 2018/19
• Provide a tax deduction of qualified premium for taxpayers who purchase eligible health insurance products for themselves or their dependants under the Voluntary Health Insurance Scheme, at the ceiling of HK$8,000 per insured person
• Allow tax deduction for voluntary contributions made to the Mandatory Provident Fund (MPF) and contributions made to deferred annuity products under the Life Annuity Scheme

Measures to support business growth and industry development

• To encourage Research and Development ("R&D"), enterprises will enjoy a 300% tax deduction for the first $2 million qualifying expenditure on R&D, and a 200% deduction for the remainder
• To widen the scope of qualifying debt instruments eligible for tax exemption by including debt securities listed on the Hong Kong Stock Exchange and extending to debt instruments with an original maturity of not less than seven years to instruments of any duration
• To review the existing tax concession arrangements applicable to the fund industry with regard to international requirements on tax co-operation, and to examine the feasibility of introducing a limited partnership regime for private equity funds and the related tax arrangements

International Tax Co-operation

• To actively seek to sign Free Trade Agreements (FTAs), Investment Promotion and Protection Agreements (IPPAs) and Comprehensive Avoidance of Double Taxation Agreements (CDTAs) with other economies, including those along the Belt and Road, to fortify Hong Kong's position as an international trade and investment hub

Measures to support environment protection

• To allow one-off tax deduction for capital expenditure incurred by enterprises in procuring eligible energy efficient building installations and renewable energy devices
• To continue to waive in full the first registration tax (FRT) for electric commercial vehicles, electric motor cycles and electric motor tricycles until 31 March 2021
  
  Apart from the continuation of the current FRT concession of up to HK$97,500, a "one-for-one replacement" scheme is introduced today to allow eligible private car owners who buy a new electric private car and scrap an eligible private car they own to enjoy a higher FRT concession of up to HK$250,000, until 31 March 2021

Other relief measures

• Provide two-month extra allowance to recipients of Comprehensive Social Security Assistance (CSSA), Old Age Allowance, Old Age Living Allowance and Disability Allowance
• Similar arrangements will apply to Low-income Working Family Allowance (LIFA) and Work Incentive Transport Subsidy
• Provide a one-off grant of HK$2,000 to each student in need to support learning
• Pay examination fees for candidates sitting for the 2019 Hong Kong Diploma of Secondary Education Examination
• Continue the issuance of Silver Bonds in 2018 and 2019, targeting Hong Kong residents aged 65 or above
• Waive rates for four quarters of 2018/19, subject to a ceiling of HK$2,500 per quarter for each rateable tenement

Salaries Tax

Progressive Tax Rates

Standard Rate (Remain unchanged)

Allowances and Deductions

Profits Tax (Remain unchanged)

Property Tax (Remain unchanged)

Notes:

1. Legislative amendments are required.
2. Under the two-tiered profits tax rates regime proposed by the Chief Executive, the first HK$2 million of assessable profits for corporations and unincorporated businesses (including sole proprietorships and partnerships) will be taxed at half of the current tax rate, i.e. 8.25% and 7.5% respectively.  The relevant Inland Revenue (Amendment) (No.7) Bill 2017 was gazetted on 29 December 2017 and was introduced to the Legislative Council on 10 January 2018. 

Related Link

• Hong Kong SAR Budget 2018/2019