Hong Kong SAR Budget 2020/2021

Analysis

Hong Kong SAR Budget 2020/2021

Media Coverage

Deloitte: consolidate HK's position as an international financial center with more attractive tax incentives
5 March 2020, HKET

Roy Phan, Tax Director; Nathan Wan, Tax Manager

Due to the absence of explicit instructions on the definition and treatment of carried interest (classification as investment income or service fee/service income), the tax exemption proposed in the latest HK budget will make the treatment of carried interest much clearer. This is good news for the private equity sector. The authors welcome the government's response to concerns about uncertainties in the tax treatment of carried interest. They suggest the government learn from international practices and consider suggestions from professionals during the consultation process, to develop competitive, feasible tax incentives.

Deloitte: consolidate HK's position as an international financial center with more attractive tax incentives
5 March 2020, HKET

Roy Phan, Tax Director; Nathan Wan, Tax Manager

Due to the absence of explicit instructions on the definition and treatment of carried interest (classification as investment income or service fee/service income), the tax exemption proposed in the latest HK budget will make the treatment of carried interest much clearer. This is good news for the private equity sector. The authors welcome the government's response to concerns about uncertainties in the tax treatment of carried interest. They suggest the government learn from international practices and consider suggestions from professionals during the consultation process, to develop competitive, feasible tax incentives.

Deloitte: consolidate HK's position as an international financial center with more attractive tax incentives
5 March 2020, HKET

Roy Phan, Tax Director; Nathan Wan, Tax Manager

Due to the absence of explicit instructions on the definition and treatment of carried interest (classification as investment income or service fee/service income), the tax exemption proposed in the latest HK budget will make the treatment of carried interest much clearer. This is good news for the private equity sector. The authors welcome the government's response to concerns about uncertainties in the tax treatment of carried interest. They suggest the government learn from international practices and consider suggestions from professionals during the consultation process, to develop competitive, feasible tax incentives.

Tide over during difficulties together through a multi-pronged approach
5 March 2020, Ming Pao Daily

Alfred Chan, Tax Director; Jackie Wong, Senior Tax Manager

The budget proposed a series of counter-cyclical measures taking a multi-pronged approach, including concessionary low-interest loans, cash payouts, and reductions in profit tax and salaries tax, etc. In view of the likely continuous deficit in the coming years, the government still took an expansionary fiscal stance, showing its determination to tide over enterprises and citizens during short-term difficulties. Alfred and Jackie expect expeditious implementation of these measures to help Hong Kong get out of its current dilemmas, improve livelihoods, revitalize the economy and realize long-term, stable development.

Deloitte: multiple tax measures to help consolidate HK's position as international maritime hub
27 February 2020, ETNet

Sarah Chan, Tax Partner; Christine Sung, Senior Tax Manager

"The Government will provide tax concessions for ship leasing businesses as soon as possible and explore other tax measures to attract more global shipping operators and commercial principals to set up business in Hong Kong. It will bring Hong Kong closer to the goal of becoming a ship leasing center," Sarah and Christine say. As an international financial center, Hong Kong has unique advantages in providing shipping-related financial services. In the face of fierce competition from other global maritime centers, Hong Kong must further develop ship leasing business to maintain and improve its competitive advantages and achieve sustained growth in the maritime sector."

Automated electronic tax filing
27 February 2020, HKEJ

Doris Chik, Tax Director;  Kiwi Fung, Senior Tax Consultant

Deloitte China Tax Director Doris Chik and Senior Tax Consultant Kiwi Fung wrote an article about the automated electronic tax filing for corporations in Hong Kong.

Please click here to view this article (Chinese version only) to learn more about their thoughts.

HK economic community views on new budget: foresighted, able to support enterprises and stimulate the economy
27 February 2020, hkcna.hk

Alfred Chan, Tax Director

Alfred Chan believes tax incentives for traditional high-profit industries, especially the investment and wealth management sectors, will help vitalize these industries and enhance Hong Kong's competency in financial services. He also suggests that reforming the limited partnership regime to attract more overseas fund managers to do businesses in Hong Kong could help grow its economy. According to the new budget, the Organisation for Economic Co-operation and Development (OECD) is actively exploring proposals to impose a global minimum tax rate. Alfred says a consensus on the minimum tax rate has not yet been reached, but notes that a low tax rate is one of Hong Kong's advantages. Changes in the international situation will have a substantial impact on Hong Kong, so the new budget is foresighted on related issues, he adds

Deloitte's views on new budget: government should enhance tax system and broaden tax base to revitalize the economy
26-27 February 2020, Apple Daily, SCMP, Now TV news, Hong Kong Commercial Daily, aastocks.com, Quamnet.com, HKEJ

Sarah Chan, Tax Partner; Sitao Xu, Chief Economist

"One of the key challenges confronted by most economies is how to generate economic growth amid record-low interest rates. This is also true for Hong Kong. The HKSAR government should not be constrained by a 'fiscal straitjacket' in 2020. The urgency of fiscal expansion is also heightened by the knock-on effect of the coronavirus," says Sitao Xu, "Mitigating losses in the retail and hospitality industries should top the policy agenda. Hong Kong could also regain some of its comparative advantages in financial services through more favourable tax policies."

"It is time for the Government to re-think how it can best make use of its fiscal reserves, as well as to review and enhance the tax system to broaden the tax base and help revive Hong Kong economy as a regional financial center," adds Sarah Chan.

New budget to support enterprises, safeguard jobs and relieve people’s burden
26 February 2020, HK Commercial Daily

Before publishing the new budget, Paul Chan Mo-po predicted a record-high deficit this year. Several accounting firms expect the HKSAR government to have a huge deficit in 2019/20. The Hong Kong Institute of Certified Public Accountants gives the most conservative deficit figure: HKD18.1 billion; PwC estimates HKD38.3 billion; Deloitte forecasts HKD47.5 billion, KPMG anticipates HKD47.7 billion and EY gives the "boldest" figure: HKD70 billion.

Deloitte: cash payout only a short-term expense; new budget can safeguard jobs
26 February 2020, HK01, Hong Kong Economic Times

Ellen Tong, Tax Director

According to Ellen Tong, disbursing HKD10,000 to Hong Kong permanent residents will only cause short-term expense, while favourable measures designed for the insurance industry and private funds will attract investment by overseas companies and bring long-term income for the government. With relief measures and new stimulus policies, she believes the new budget can support enterprises and safeguard jobs. Moreover, Ellen thinks the HKD18.3 billion in relief for small-and-medium-sized enterprises (SMEs) can help them become more agile and open up room for growth. Although the most job cuts are being made by large companies, she believes this relief money could stabilize the employment situation in Hong Kong.

Deloitte: economic recession increases government expenditure, deficit will last until at least the next fiscal year
26 February 2020, TVB News

Roy Phan, Tax Director

Deloitte says Hong Kong's economic recession will inevitably increase government expenditure and the deficit will last until at least the next fiscal year. "Capital expenditure or one-off expenses will be provided to support SMEs or improve livelihoods, and will be increased in tough times. Whether Hong Kong can turn its deficit into a surplus within 2 or 3 years will largely depend on the Mainland economy, social climate and whether businesses can recover quickly after the [coronavirus] epidemic," adds Roy Phan.

HK economy needs stimulus amid epidemic
24 February 2020, HK Commercial Daily

Sarah Chan, Tax Partner

Deloitte expects the HKSAR government to face a surplus of HKD47.5 billion in 2019/20, an economic contraction in Q1-Q2, and no growth or a 1 percent decline in annual GDP. To ease the public's financial burden, Sarah Chan suggests the government reduce salaries tax and tax under personal assessment for 2019/20 by 100 percent, subject to a ceiling of HKD30,000. To support small-and-medium-sized enterprises, she proposes 100% profit tax exemptions for 2019/20 in certain industries, including hospitality, restaurants, tourism and retailing. 

Vision for Workforce
19 February 2020, HKEJ

Ellen Tong, Tax Director; Carol Chung, Senior Tax Manager

Deloitte China Tax Director Ellen Tong and Senior Tax Manager Carol Chung wrote an article about proposed tax measures to relieve people's burden in Hong Kong people.

Please click here to view this article (Chinese version only) to learn more about their thoughts.

Paul Chan Mo-po: HK may have a record-high deficit due to more relief measures and government expenditure
17 February 2020, Ming Pao Daily

In advance of the new budget on 26 February, the Financial Secretary of the HKSAR Government Paul Chan Mo-Po forecasted that Hong Kong will post a record-high deficit in the new fiscal year. Deloitte predicted earlier this month that HK will record an HKD47.5 billion deficit in the 2020-21 fiscal year, mainly due to a drop in revenue from land sales, salaries tax and stamp duty—a total loss of HKD63 billion—and a rise in government expenditure. Deloitte also estimates that the deficit for the next fiscal year will expand to HKD60 billion.

Deloitte: allowances are makeshift, government should provide targeted relief measures
13-14 February, 2020, HK01, Apple Daily, aastocks.com, Hong Kong Commercial Daily, TVB, 881903, NOW news, on.cc, RTHK, Metro Radio, ET Net, Quamnet.com, Think HK, guandian.cn, OrangeNews, Ta Kung Pao, Lion Rock Daily, am730, Hong Kong Commercial Daily, Sing Tao Daily, The Standard, HKEJ

Sarah Chan, Tax Partner; Alfred Chan, Tax Director

According to Alfred Chan, due to the impact of the novel coronavirus and other events, Hong Kong's GDP growth in Q1 2020 is likely to range between 1 percent and zero, and in the following two to three fiscal years, deficits are likely to be recorded. Sarah Chan suggests distributing allowances is just a makeshift measure. She expects more targeted relief measures to help companies pull through and stimulate the Hong Kong economy. For salaries tax, she suggests the basic allowance and married person's allowances be raised by 13.6 percent to HKD150,000 and HKD300,000 respectively, and an 8.3 percent child allowance increase to HKD130,000 per child. She also recommended rent allowances for residential homes up to an annual limit of HKD150,000.  

Deloitte: more tax incentives to support Hong Kong middle class
31 January 2020, i-Cable News

Ellen Tong, Tax Director

In a media interview, Ellen Tong opined that the expected budget deficit is primarily caused by several unpredictable factors, and Hong Kong's financial situation is still robust in the long term. She also recommended tax incentives in the upcoming Hong Kong Budget to support the middle class in Hong Kong.

Tax measures to help Hong Kong people cope with economic downturn
21 December 2019, Phoenix TV

Roy Phan, Tax Director

Roy Phan was invited onto a current affairs program in Hong Kong to share Deloitte's recommendations on tax measures to support the middle class and promote businesses in Hong Kong. Roy explained how tax measures and incentives could support businesses and individuals, as well as reinforce Hong Kong's status as a financial, trading and management hub. He also raised the need for a comprehensive review of Hong Kong's tax policy in view of the challenges from international tax standards and opportunities in the Greater Bay Area.

Relief Measures a Drop in the Bucket, Companies Say
6 December 2019, SCMP

Ellen Tong, Tax Director

Financial Secretary Paul Chan Mo-po revealed a fourth round of measures aimed at helping to ease the cash-flow burden on taxpayers and small and medium-sized enterprises (SMEs). Ellen Tong said instalments would effectively help individual or company taxpayers relieve their cash flow pressure. She says, "To further support individuals and corporates, we propose the Government in its next budget waive provisional tax for all taxpayers in 2019-20 and 2020-21.

Deloitte suggests tax exemptions for the middle class
29 November, 2019, Hong Kong Economic Times, HK01, Sky Post, Sing Tao Daily, ETnet, Bastille Post, Headline Finance

Sarah Chan, Tax Partner

The Deloitte Hong Kong Budget Team suggests the Government introduce more tax exemptions for the middle class, as citizens and businesses face economic difficulties. For businesses, Sarah Chan suggests the government consider waiving provisional tax for all taxpayers and providing allowances for eligible SMEs, especially those in the hotel and catering industries. For individuals, she suggests increasing the tax exemptions for eligible individual taxpayers and providing rent allowances for residential homes, with a limit of HKD150,000 per year.

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