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The Hong Kong Budget 2021 includes initiatives in a variety of fields, including innovation and technology, tourism, financial services, and the digital economy. Broadly speaking, the Hong Kong Budget 2021looks to build on last year’s budget to ensure the economy comes out from the pandemic with all cylinders firing.
The Hong Kong economy is expected to return to expansion in 2021, with GDP growth projections of 3.5 per cent to 5.5 percent. From 2022 to 2025, the economy is projected to increase by an annual average of 3.3 per cent. If that is to happen, it will depend on many internal and external considerations, including the local COVID-19 situation, the timing of reopening the borders, and the rate of economic growth in major foreign markets. If Hong Kong’s track record is taken into account, these obstacles should be overcome.
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Despite Hong Kong’s 2020 budget deficit, the Government is still intent on providing incentives across the board to boost the overall economy.
Boost Hong Kong Consumer Spending
The Government will offer HK$5,000 electronic consumer vouchers to each eligible permanent resident in Hong Kong and newcomers 18 years of age and older — this should fuel local demand in local retail operations during the ongoing epidemic. The new "Special 100 per cent loan guarantee for individuals" is yet another incentive to encourage investment and business building.
Stimulate Hong Kong Financial Services
Initiatives are also being taken to grow the financial services sector in this year’s Hong Kong Budget 2021such as grants for expenses relating to insurance-linked securities and the issuance of green bonds. There is also some help for the listing of eligible real estate investment trusts (REITs) in Hong Kong, as well as investment funds set up in or re-domiciled in Hong Kong as an open-ended fund corporation in the form of subsidies.
The Hong Kong Budget 2021 further recommends stamp duty on local stock transfers to be increased from 0.1 per cent to 0.13 per cent for each buyer and seller. This measure would have comparatively less effect on the general population as a way to increase government revenues.
Stimulate Hong Kong Innovation and Technology
As in the budget last year, the Secretary for Finance has allocated money to promote the growth of various sectors. For example, the Hong Kong Tourism Board will be provided with HK$765 million to reinvigorate tourism, and over a span of two years, HK$9.5 billion will be injected into the Innovation and Technology Fund.
Let’s take a look at a summary of the Hong Kong Budget 2021.
Hong Kong Profits Tax
- Two-tier corporate profit tax thresholds (8.25 per cent/16.5 per cent) and unincorporated businesses (7.5 percent/15 percent) are unchanged.
- The Advisory Panel on BEPS 2.0 will provide the Financial Secretary with a report with advice on concrete steps. The response steps are guided as follows:
- To actively adopt, through international consensus, the OECD BEPS 2.0 proposals;
- Minimise the effect on local SMEs where possible and seek to uphold Hong Kong’s fiscal regime’s simplicity, safety, and fairness;
- Minimise the pressure to comply with the taxation rights in Hong Kong on the companies affected;
- Continue efforts to improve the economic climate and competitiveness of Hong Kong in order to encourage multinationals to invest and work in Hong Kong.
- Review of the family office tax arrangements.
Related Read: Hong Kong Profits Tax Exemption 2021 »
Hong Kong Salaries Tax
- The standard tax rate will not change.
- The progressive tax rates and marginal tax bands will not change.
- The amounts of personal allowances will not change.
Hong Kong Stamp Duty
- Proposal to raise Hong Kong stamp duty on stock transfers from 0.1 per cent to 0.13 per cent of the consideration or value of each sale payable by buyers and sellers.
One-off Proposed Measures
- Waive 100 per cent of Hong Kong profits tax in 2020/21, subject to a HK$10,000 limit.
- Waive 100 per cent of salary tax and personal assessment tax for 2020/21, subject to a HK$10,000 limit.
- Residential property rates will be waived for the four quarters of 2021/22, subject to a limit of HK$1,500 per quarter in the first two quarters and HK$1,000 per quarter in the remaining two quarters for each rateable property.
- Non-domestic property rates will be waived for the four quarters of 2021/22, subject to a limit of HK$5,000 per quarter for the first two quarters and HK$2,000 per quarter for the remaining two quarters for each non-domestic rateable property.
- Hong Kong company registration fees will be waived for 2021/22.
- To encourage and promote local spending, issue electronic consumption vouchers in instalments totalling HK$5,000 to each qualifying Hong Kong permanent resident and new arrival aged 18 or above.
- Subsidise each residential energy account by HK$1,000.
- Provide an additional half-month of Comprehensive Social Security Assistance, Old Age Allowance, Old Age Living Allowance, and Disability Allowance benefits. Working Family Allowance and Individual-based Work Incentive Transport Subsidy applicants will see similar arrangements.
- Pay the assessment fees for school students taking the Hong Kong Diploma in Secondary Education Examination in 2022.
- Propose a 15 per cent increase in each tax band for the first registration charge for private cars (including hybrid/electric private cars) and a 30 per cent raise in the vehicle licence fee. These changes will go into effect on the same day.
- Subsidise the establishment of or re-domiciliation of Open-ended Fund Companies in Hong Kong.
- Subsidize the listing of Real Estate Investment Trusts in Hong Kong.
- Extend the filing period for a 100 percent guaranteed low-interest loan for businesses to the end of the year, lift the loan limit to HK$6 million, and extend the maturity period and term of the principal moratorium.
- Set aside HK$200 million to expand the IT Innovation Lab programme to primary schools and to formalise the short-term IT internship programme for university students that was launched last year.
- Allocate HK$6.6 billion for the creation of approximately 30,000 time-limited jobs.
- Put HK$9.5 billion into the Innovation and Technology Fund over a two-year period.
- Inject HK$1.5 billion into the Dedicated Fund for Branding, Upgrading, and Domestic Sales, raise the funding cap per company to HK$6 million, and expand its regional coverage.
- This year, issue at least HK$24 billion in Silver Bonds and HK$15 billion in iBonds. The Silver Bond subscription age will reduce from 65 to 60.
- Issue $175.5 billion in green bonds over the next five years, including plans to issue retail green bonds.
- A budget of HK$1 billion has been set aside to subsidise drainage maintenance work in over 3,000 historic buildings.
- A budget of HK$1 billion should be set aside for the installation of small-scale solar energy systems in government buildings and utilities.
- Set aside HK$500 million to improve infrastructure in country parks.
- The Land Sale Programme for 2021/22 will include 15 residential sites and three industrial sites.
Contact our Team:
- The Hong Kong government’s main objectives are boosting local consumer spending, stimulating Hong Kong financial services sector, and encouraging innovation and technology.
- There are no changes to the Hong Kong Salaries Tax.
- The waivers under the one-off proposed measures include:
- Hong Kong profits tax
- Salary and personal assessment tax
- Residential and non-domestic property rates
- Hong Kong company registration fees
- The extension period is till the end of 2021.