Hong Kong Budget 2022-23 Highlights
The Finance Secretary of Hong Kong, Paul Chan presented the Budget for 2022-23 on February 23, 2022. Hong Kong saw recovery of economy in the year 2021 with a growth of 6.4% and decline in unemployment rate from 7.2% early last year to 3.9% during November 2021 to January 2022. Forecast growth rate for Hong Kong economy for the year 2022 is 2% to 3.5% with inflation rate at around 2%.
The key proposals of the Budget 2022-23 are:
- There are no changes proposed in Corporate Income Tax (Profit Tax) rates, however the Budget proposes reduction of 100% corporate income tax for tax year 2021–22, subject to a ceiling of HKD 10,000. The reduction will be reflected in the final tax payable for the tax year 2021–22. Similar benefit was provided for tax year 2020-21 in the last year’s Budget.
- In light of OECD BEPS 2.0 project developments, the Government plans to submit legislative proposal for introduction of minimum top up tax for large multinational enterprises groups with global turnover of EUR 750 million and above. The proposal would be brought to ensure that the effective tax rate reaches the global minimum effective tax rate of 15% to safeguard taxing rights of Hong Kong. The Government will deliberate and consult MNEs before finalization of the proposal.
- It is also proposed to introduce legislative amendment to provide tax concessions for certain family investment management entities managed by single family offices. Intention is to attract family offices to establish a presence in Hong Kong.
- It is proposed to introduce legislative amendments to provide half-tax concession for attracting maritime enterprises to establish a presence in Hong Kong.
- New legislation will be introduced providing relief measures to tenants of specified sectors on failure to make rental payments on schedule. The measures include prohibiting landlords from terminating the tenancy or not providing services to tenants or taking relevant legal actions against them. The new legislation will be valid for 3 months (extendable for another 3 months) and it will automatically lapse after 6 months.
- It is proposed to strengthen Intellectual Property regime in Hong Kong. It is proposed to introduce a bill to amend Copyright Ordinance in the first half of the year in light to recently concluded consultation exercise.
- The Budget 2022 has extended a waiver of the business registration fees also for the year 2022‑23.
- It is proposed to continue waiver of 75% of water charges and sewage charges payable by non‑domestic households for the period of eight months starting from April 2022 to November 2022, subject to a monthly ceiling of HKD 20,000 and HKD 12,500 respectively per non-domestic household.
- There are no changes proposed in individual tax slabs, rates and personal allowances in the Budget. However, the Budget proposes to provide a 100% reduction of "salaries tax" for the tax year 2021-22, subject to a ceiling of HKD 10,000 per annum. This will be reflected in the final tax payable for the year of assessment 2021-22. Similar reduction was provided in tax year 2020-21 through the last year’s Budget.
- To alleviate the cost of renting a private property for taxpayers subject to "salary tax" and "tax under personal assessment”, a new deduction is proposed for individuals beginning with the tax year 2022–23. Accordingly, a benefit of tax deduction up to a ceiling of HKD 1,00,000 would be provided for renting a domestic property, subject to the condition of not owning any domestic property.
- Certain other proposals for individuals include grant of consumption vouchers, lowering of public transport fare subsidy, personal loan guarantee scheme, residential electricity account subsidy, etc.
- Property tax concessions:
Under the property tax regulations (known as ‘Rating system’), a property tax (‘rate’) is payable at a specified percentage of the assessed rateable value of the property. Government considers, on an annual basis, granting of rates concession based on the prevailing circumstances. The Government has proposed the following measures:
- The rates concessions granted for tax year 2021-22 are extended to tax year 2022-23 for domestic and non-domestic properties (including offices) to offset the rates payable;
- Considering the concessions claimed by the individual owners currently in respect of multiple domestic properties, effective from the tax year 2023‑2024 only eligible natural persons can apply for rates concession in respect of only one domestic property under their name; and
- Effective from the tax year 2024‑2025, introduction of progressive rates concession system for domestic properties (excluding public rental housing), replacing flat rate concession of 5% of rateable value. The progressive rates concessions will be in the range of 5% - 12% based on the annual rateable value of the property.
- The Government will continue to grant the 75% rental or fee concession to eligible tenants of Government properties and eligible short-term tenancies and waivers under the Lands Department for the period of 6 months starting from April 2022 to September 2022.
- The Budget proposes to extend the SME Financing Guarantee Scheme (SFGS) for one year till June 2023. The purpose of this scheme is to reduce the financial strain on small and medium-sized firms (SMEs) that are having difficulty paying employee wages and rental costs or are about to close and lay off staff. Other changes to the scheme are:
- Increase in the maximum loan amount per SMEs to 27 months (earlier 18 months) of employee wages and rents and loan ceiling to HKD 9 million (earlier HKD 6 million); and
- Extension to the maximum repayment period from 8 years to 10 years.