The 2023 - 24 Hong Kong Budget
The Financial Secretary of Hong Kong delivered the first budget of the current-term Government on 22 February 2023, with the theme of “Leaping Forward Steadily, Together We Bolster Prosperity under Our New Vision” (Budget). The Budget covers a wide range of initiatives, both long term policies and short term measures.
We expect that more details will be announced by the Hong Kong Government in due course. In the meantime, we wish to provide you with a snapshot on the key tax initiatives: -
Adjustments to the Computation of Stamp Duty:
Since 2010, no adjustments have been made to the value bands of the ad valorem stamp duty payable for the sale and purchase or transfer of residential and non‑residential properties (Rates at Scale 2). The Hong Kong Government decided to make adjustments in this regard. The said adjustments took immediate effect under a Public Revenue Protection Order published in the Gazette on 22 February 2022. Details of the new rates are set out as follows:
| Amount of value of consideration (whichever is the higher) |
Rates |
|
|---|---|---|
| Present | Proposed | |
| Up to HKD2,000,000 | Up to HKD3,000,000 | HKD100 |
| HKD2,000,001 to HKD3,000,000 | HKD3,000,001 to HKD4,500,000 | 1.5% |
| HKD3,000,001 to HKD4,000,000 | HKD4,500,001 to HKD6,000,000 | 2.25% |
| HKD4,000,001 to HKD6,000,000 | HKD6,000,001 to HKD9,000,000 | 3% |
| HKD6,000,001 to HKD20,000,000 | HKD9,000,001 to HKD20,000,000 | 3.75% |
| HKD20,000,001 and above | HKD20,000,001 and above | 4.25% |
Adopting Global Effective Tax Rate:
In October 2021, the Organization for Economic Cooperation and Development (OECD) announced Base Erosion and Profit Shifting (BEPS 2.0). A global minimum effective tax rate of 15% will be introduced on large multinational enterprise groups (MNE Groups) with global turnover of at least EUR750 million. The Hong Kong Government plans to apply the global minimum effective tax rate on these MNE Groups and implement the domestic minimum top-up tax starting from 2025 onwards.
Disposal of Equity Interests:
During the earlier legislative exercise on the Inland Revenue (Amendment) (Taxation on Specified Foreign-sourced Income) Bill 2022 (the Bill), the Hong Kong Government put forward that it would look into appropriate measures to enhance tax certainty for the onshore gains made from transactions in respect of disposal of equity interests. The Financial Secretary announced in the Budget that the Hong Kong Government will put forward an enhancement proposal in mid‑March 2023 to provide clearer guidelines on whether onshore gains on disposal of equity interests are subject to tax.
Reducing Profits Tax for Year of Assessment 2022/23:
Subject to a ceiling of HKD6,000. The reduction will be reflected in the final tax payable for year of assessment 2022/23.
Profits Tax Exemption for Qualifying Transactions of Family‑Owned Investment Holding Vehicles Managed by Single Family Offices in Hong Kong:
Upon the passage of the proposal by the Legislative Council, the tax concession arrangements will be applicable to any years of assessment on or after 1 April 2022.
Providing Rates Concession for Non‑Domestic Properties for the First Two Quarters of 2023‑24:
Subject to a ceiling of HKD1,000 per quarter for each rateable property.
Enhancing the Aircraft Leasing Preferential Tax Regime:
The Hong Kong Government will enhance the aircraft leasing preferential tax regime, striving to establish Hong Kong as an aircraft leasing and services hub. The Hong Kong Government has conducted a trade consultation on the proposed enhancement measures, which include allowing tax deduction for the acquisition cost of aircraft and expanding the scope of leases and aircraft leasing activities. The Hong Kong Government intends to introduce a bill into the Legislative Council in the fourth quarter of 2023.
Providing "Patent Box" Tax Incentive:
To encourage the intellectual technologies sector to conduct more research and development activities and create more patented inventions with market potential, the Hong Kong Government will introduce a "patent box" tax incentive to provide tax concessions for profits sourced in Hong Kong from qualifying patents generated through research and development activities. The Hong Kong Government targets to submit the legislative amendments to the Legislative Council in the first half of 2023.
Providing Tax Deduction for Spectrum Utilisation Fees:
Tax deduction will be provided for spectrum utilization fees to be paid by telecommunications network operations which bid successfully for radio spectrum. This is to encourage investment in infrastructure by the telecommunications industry.
Imposing Annual Special Football Betting Duty:
Annual special football betting duty of HKD2.4 billion will be imposed on the Hong Kong Jockey Club under the Betting Duty Ordinance for five years starting from 2023‑24. The current betting duty rates will be remained unchanged.
Reducing Salaries Tax and Tax under Personal Assessment for Year of Assessment 2022/23:
Subject to a ceiling of HKD6,000. The reduction will be reflected in the final tax payable for the year of assessment 2022/23.
Increasing Child Allowance:
The Hong Kong Government proposes to increase the basic child allowance and the additional child allowance for each child born during the year of assessment from the current HKD120,000 to HKD130,000, starting from the year of assessment 2023/24.
Increasing the Tax Deduction for MPF Voluntary Contributions:
It is proposed that the tax deduction for MPF voluntary contributions made by employers for employees aged 65 or above be increased from the current 100% to 200% in respect of such expenditure.
We hope that the above initiatives can play a positive role to the recovery of the Hong Kong economy and lead to prosperity and success as the theme of the Budget wishes. In the meantime, taxpayers are strongly encouraged to stay tuned for further announcements by the Hong Kong Government and contact their tax representatives for tax planning once more details of the tax initiatives are known. We will keep a close eye on the development and alert you as soon as we know more.
