[ad_1]
On February 22, 2023, Hong Kong’s Monetary Secretary Paul Chan introduced the Hong Kong 2023-24 Finances that exposed his blueprint to spice up the town’s restoration momentum within the post-COVID period.
That is the primary funds of the current-term authorities and likewise the primary offered since Hong Kong’s emergence from the COVID-19 pandemic and resumption of quarantine-free journey with the Chinese language Mainland and the world.
Chan’s funds launched a number of measures and schemes to encourage consumption, assist enterprises, and entice funding. Greater than 80 % of the federal government’s assets will probably be allotted to the event of small and medium sized enterprises (SMEs). However, the vouchers issuance and earnings tax and salaries tax discount will probably be on a smaller scale, as the town plans to dial down fiscal spending.
On this article, we focus on Hong Kong’s financial scenario in 2023 and summarize key factors for companies from Finances 2023-24.
Hong Kong financial scenario in 2022 and outlook for 2023
Hong Kong’s financial system was confronted with sturdy headwinds in 2022. The exterior atmosphere deteriorated markedly with superior economies dragged by surging vitality and commodity costs and rampant international inflation. The Chinese language mainland’s financial development additionally slowed attributable to sluggish abroad demand and recurring COVID-19 outbreaks. Regionally, the fifth wave of the COVID in early 2022 and tightened monetary circumstances closely dampened Hong Kong’s market consumption. With each exterior dealing with and home segments of the financial system hit laborious, Hong Kong’s total GDP contracted by 3.5 % in 2022.
Amongst others, Hong Kong’s complete items exports posted a notable decline of 13.9 % in actual phrases in 2022. As for commerce in companies, Hong Kong’s complete service exports declined by 0.9 %, regardless of exports of journey companies recording a surge with Hong Kong progressively enjoyable its quarantine requirement for guests. Furthermore, the general funding expenditure fell by 8.5 % attributable to a subdued financial outlook and rising borrowing prices.
In 2023, the additional weakening of development momentum in superior economies brought on by tightening financial insurance policies and heightened geopolitical tensions will proceed to problem Hong Kong’s items exports. However the accelerated development of the Chinese language mainland is predicted to alleviate a part of the strain. Furthermore, Hong Kong expects guests and personal consumption to rebound in tandem with enhancements in total financial sentiment, which will probably be conducive to mounted asset funding.
Taking these elements into consideration, it’s forecast that Hong Kong’s financial system will obtain development of three.5 to five.5 % in 2023. Additionally it is forecast that Hong Kong’s financial system will develop by a mean of three.7 % every year in actual phrases from 2024 to 2027, increased than the expansion pattern of two.8 % in the course of the decade earlier than the pandemic.
Tax measures proposed to assist and entice people and enterprises
To alleviate individuals’s hardship and ease working pressures on companies, the Hong Kong Finances 2023-24 proposes to proceed to scale back earnings tax, salaries tax, and tax underneath private evaluation for the yr of evaluation 2022-23, however with a decrease cap as in comparison with final yr’s Finances. In the meantime, Finances 2023-24 proposes that earnings tax and salaries tax charges ought to stay unchanged this yr.
Apart from, to deal with Hong Kong’s demographic challenges of low beginning fee and growing old workforce, Finances 2023-24 proposes to extend baby allowance and enhance tax deduction for voluntary contributions made by employers to the Obligatory Provident Fund (MPF) for workers aged 65 or above.
Furthermore, another tax associated measures are proposed, reminiscent of offering tax deduction for spectrum utilization charges to encourage funding in telecommunication infrastructure; adjusting the worth bands of advert valorem stamp obligation at Scale 2 charges to ease burden on households of buying their first residential properties; and imposing particular soccer betting obligation to extend authorities income. The Finances 2023-24 additionally guarantees to offer clearer pointers on whether or not onshore good points on disposal of fairness pursuits are topic to tax.
Income tax
The Monetary Secretary has proposed a one-off discount of earnings tax for the yr of evaluation 2022-23 by 100%, topic to a ceiling of HK$6,000 per case, which is decrease than the cap (HK$10,000) set for the earlier Finances. This measure will profit 134,000 companies and cut back authorities income by HK$720 million.
| Impact of the Proposed One-off Income Tax Discount | |||
| Assessable earnings | No. of companies* | Common quantity of tax discount | Common % of tax diminished |
| HK$100,000 and beneath | 43,100 | HK$4,060 | 100% |
| HK$100,001 to HK$200,000 | 17,200 | HK$6,000 | 37% |
| HK$200,001 to HK$300,000 | 10,100 | HK$6,000 | 22% |
| HK$300,001 to HK$400,000 | 7,000 | HK$6,000 | 16% |
| HK$400,001 to HK$600,000 | 9,800 | HK$6,000 | 11% |
| HK$600,001 to HK$900,000 | 8,800 | HK$6,000 | 8% |
| Above HK$900,000 | 37,500 | HK$10,000 | 0.2% |
| Whole | 133,500 | — | — |
| Supply: Hong Kong’s 2023-24 Finances Plan
* Notice: As of December 31, 2022, there have been about 1.27 million firms and 295,000 unincorporated companies in Hong Kong. No. of Enterprise right here embrace 100,300 firms and 33,200 unincorporated companies.
|
|||
The Inland Income Division (IRD) of the HKSAR additional supplemented the funds announcement with the next factors of knowledge:
- The tax discount ceiling will probably be utilized to every enterprise.
- The proposed discount will probably be mirrored within the remaining tax payable for the yr of evaluation 2022-23, however to not the provisional tax of the identical yr. Due to this fact, taxpayers are nonetheless required to pay their provisional tax on time regardless of the proposed discount measure.
- Earlier than the enactment of the related laws, related taxpayers ought to file their earnings tax returns for the yr of evaluation 2022-23 as normal. Upon enactment of the related laws, the IRD will calculate the discount within the remaining evaluation. For any remaining evaluation for 2022-23 issued earlier than the enactment of the regulation, the IRD will make a reassessment after the enactment. Taxpayers are usually not required to make any purposes or enquiries to the IRD.
Along with the above proposed discount of earnings tax, the 2023-24 Finances mentions that Hong Kong launched legislative amendments into LegCo in December 2022 to offer earnings tax exemption for qualifying transactions of family-owned funding holding automobiles managed by single household places of work in Hong Kong. Upon LegCo’s passage of the proposal, the tax concession preparations will probably be relevant to any years of evaluation on or after April 1, 2022.
No modifications are proposed to tax charges of the earnings tax within the 2023-24 Finances. That’s to say, the usual earnings tax charges for the yr of evaluation 2022-23 will nonetheless be at 16.5 % for firms and 15 % for included companies. And the two-tiered earnings tax charges will nonetheless be as proven within the beneath desk:
| Two-Tiered Income Tax Charges in Hong Kong | ||
| Assessable earnings | Companies | Unincorporated companies |
| First HK$2 million | 8.25% | 7.5% |
| Over HK$2 million | 16.5% | 15% |
Salaries tax and tax underneath private evaluation
To offer assist for people who’ve been affected by the epidemic, the 2023-24 Finances proposes a one-off discount of salaries tax and tax underneath private evaluation for the yr of evaluation 2022-23 by 100%, topic to a ceiling of HK$6,000, which is decrease than the cap (HK$10,000) set within the earlier Finances. This measure will profit 1.9 million taxpayers and cut back authorities income by HK$8.5 billion.
| Impact of the Proposed One-off Discount of Salaries Tax and Tax underneath Private Evaluation | |||
| Assessable earnings | No. of taxpayers | Common quantity of tax discount | Common % of tax diminished |
| HK$200,000 and beneath | 181,000 | HK$850 | 100% |
| HK$200,001 to HK$300,000 | 391,000 | HK$3,380 | 99% |
| HK$300,001 to HK$400,000 | 346,000 | HK$4,490 | 66% |
| HK$400,001 to HK$600,000 | 417,000 | HK$5,280 | 39% |
| HK$600,001 to HK$900,000 | 298,000 | HK$5,680 | 19% |
| Above HK$900,000 | 267,000 | HK$5,880 | 4% |
| Whole | 1,900,000 | — | — |
| Supply: Hong Kong’s 2023-24 Finances Plan
Notice: As of December 31, 2022, Hong Kong had a working inhabitants of three.67 million. |
|||
Much like the proposed earnings tax discount measures, the IRD additional supplemented that:
- For salaries tax, the ceiling is utilized to every particular person taxpayer. For married {couples} who’re collectively assessed, the ceiling is utilized to every married couple (that’s, capped at HK$6,000 in complete). For private evaluation, the ceiling is utilized to every single taxpayer or married one who elects for private evaluation individually from his/her partner. If a taxpayer elects for private evaluation collectively along with his/her partner, the tax discount is capped at HK$6,000 for the married couple.
- The proposed tax discount just isn’t relevant to property tax. People with rental earnings, if eligible for private evaluation, might be able to get pleasure from such discount underneath private evaluation.
- A taxpayer who’s individually chargeable to salaries tax and earnings tax can get pleasure from tax discount underneath every of the tax varieties.
- Taxpayers ought to file their earnings tax returns and tax returns for people for the yr of evaluation 2022-23 as normal.
- The proposed tax discount will solely be relevant to the ultimate tax for the yr of evaluation 2022-23 and the provisional tax for the yr of evaluation 2023-24, however to not the provisional tax of the identical yr. Due to this fact, taxpayers are nonetheless required to pay their provisional tax on time regardless of the proposed discount measure.
Growing baby allowance and tax deduction for voluntary MPF contributions made by employer to growing old workers
To encourage beginning giving, the Finances 2023-24 proposes to extend the essential baby allowance and the extra baby allowance for every baby born in the course of the yr of evaluation from the present HK$120,000 to HK$130,000 ranging from the yr of evaluation 2023-24. After the rise, the whole allowance for a kid born in the course of the yr of evaluation will probably be $260,000, and the allowance for every subsequent yr will probably be HK$130,000.
Furthermore, to cope with a shrinking workforce, the Finances 2023-24 encourages employers to proceed to rent mature workers by rising the tax deduction for the MPF voluntary contributions made by employers for his or her workers aged 65 or above, from the present 100% to 200 % in respect of such expenditure. On the time of writing, there was no additional particulars concerning the progress of this proposal.
Tax points concerning disposal of fairness pursuits
The Finances 2023-24 mentions that the Hong Kong Authorities will put ahead an enhancement proposal in mid-March 2023 to offer clearer pointers on whether or not onshore good points on disposal of fairness pursuits are topic to tax.
The initiative is not going to solely facilitate enterprise growth and restructuring by means of disposal of fairness pursuits, but additionally improve tax transparency, decrease the compliance value of companies, enhance the competitiveness of Hong Kong’s tax regime, and improve the attractiveness of Hong Kong as a global funding and enterprise hub.
Different enterprise assist insurance policies
Attracting international firms to re-domicile in Hong Kong
Hong Kong is famend for being a extremely aggressive vacation spot for multinational enterprises (MNEs) and headquarters. To broaden market alternatives and entice international firms, the federal government plans to introduce a facilitation mechanism geared toward encouraging firms with a concentrate on the Asia-Pacific area to re-domicile in Hong Kong.
This initiative is meant to permit these firms to capitalize on the favorable enterprise atmosphere {and professional} companies that Hong Kong has to supply. The federal government will maintain consultations and submit legislative proposals in 2023-24 to assist this measure.
As well as, the federal government will allocate HK$100 million to InvestHK over the subsequent three years for attracting extra household places of work to Hong Kong.
Giving Hong Kong Funding Company Restricted a extra lively function
Through the 2022 Coverage Handle, the Chief Govt proposed the creation of the Hong Kong Funding Company Restricted (HKIC). The HKIC will use fiscal reserves to advertise financial and industrial development, attracting funding and firms, whereas additionally selling cooperation between Hong Kong and sister cities within the GBA.
The HKIC is already operational and is at the moment figuring out high-quality companions for strategic investments that may be made in a well timed method. A board of recent administrators was simply introduced on February 15, 2023.
Supporting SMEs and Begin-ups
The Finances 2023-24 proposes to increase the appliance interval of all assure merchandise underneath SME Financing Assure Scheme (SFGS) from end-June 2023 to end-March 2024, to present SMEs extra room to regulate and safe a agency footing.
Beneath the SFGS, people or organizations searching for loans, together with current debtors submitting top-up purposes, should contact the lenders straight to use for a mortgage or credit score facility. The lenders will make the most of their skilled experience, judgment, and diligence to judge every utility and confirm the eligibility of every mortgage applicant earlier than submitting the assure purposes and supporting paperwork to the HKMCI for evaluation and approval.
people and companies can entry the complete checklist of lenders right here.
Along with this, the Hong Kong Commerce Growth Council (HKTDC) will proceed to supply help by means of varied initiatives, together with:
- The Transformation Sandbox (T-box), a program designed to offer Hong Kong-based SMEs with assist in areas reminiscent of branding, e-commerce, manufacturing and provide chain options, and new markets.
- The Guangdong-Hong Kong-Macao Better Bay Space (GoGBA), a one-stop platform, which helps traders navigate enterprise alternatives between the SAR and the GBA.
- Begin-up Categorical, the HKTDC’s start-up growth program, which targets tech-oriented start-ups, in addition to these prepared to broaden in worldwide markets.
Lastly, the Hong Kong Science and Know-how Parks Company (HKSTPC) plans to:
- Add HK$400 million to its Company Enterprise Fund; and
- Merge its present Acceleration Program with a further funding of HK$110 million to create the Co-acceleration Program, with a view to assist high-potential know-how start-ups develop into regional or international companies.
Bettering IP safety
To align with Hong Kong’s innovation and know-how (I&T) growth, the federal government will proceed to speculate assets in selling and growing the “authentic grant patent” system.
To realize this, the Mental Property Division will obtain a further funding of HK$10 million within the subsequent two years to recruit and prepare patent examiners, construct a expertise pool, and obtain institutional autonomy in conducting substantive patent examination by 2030.
Furthermore, Finances 2023-24 mentions that Hong Kong will introduce a “patent field” tax incentive to offer tax concessions for earnings sourced in Hong Kong from qualifying patents generated by means of R&D actions. The legislative amendments are anticipated to be subjected to the LegCo within the first half of 2024
Issuing consumption vouchers
To spice up the market sentiment, stimulate native consumption, and velocity up financial restoration, the 2023-24 Finances proposes a brand new spherical of consumption voucher scheme, underneath which eligible Hong Kong everlasting residents and new arrivals who’re 18 years outdated or above will obtain a complete of HK$5,000 in two separate installments.
To expedite the disbursement of the consumption vouchers, the federal government will first distribute vouchers valued at HK$3,000 in April of this yr utilizing registration information from final yr’s program. The remaining vouchers will probably be distributed along with the vouchers for brand spanking new eligible individuals in the course of the yr.
That is half the quantity issued in 2022 (HK$10,000) as Hong Kong is not shackled by stringent COVID measures and the Monetary Secretary makes an attempt to dial down fiscal spending of the town.
Boosting commerce
Hong Kong will proceed to capitalize on its place as a significant regional buying and selling port to drive its financial system within the coming years. To broaden its buying and selling trade, the Finances 2023-24 affords a number of methods for growing commerce with abroad markets, specifically rising markets.
One such technique is to additional broaden its community of free commerce agreements (FTAs) and funding agreements (IAs) to embody extra rising markets. In his speech, the monetary secretary additionally mentioned that Hong Kong will actively work to affix the Regional Complete Financial Partnership (RCEP), a commerce pact of 15 Asia-Pacific nations, together with the ten ASEAN member nations.
The funds additionally pledged the next to assist increase commerce in 2023 and 2024:
- Offering a further funding of HK$550 million to the Hong Kong Commerce Growth Council to help enterprises in opening up markets;
- Injecting HK$500 million into the Devoted Fund on Branding, Upgrading and Home Gross sales (BUD Fund) and expediting the appliance course of; and
- Allocating HK$100 million to the Hong Kong Productiveness Council to strengthen help for SMEs in making use of for presidency subsidies.
Pooling abilities
The Hong Kong authorities has already applied a number of insurance policies geared toward attracting and retaining proficient people. One such initiative is the Prime Expertise Move Scheme (TTPS), which goals to recruit distinctive people from world wide to dwell and work in Hong Kong. Moreover, the federal government has established the Hong Kong Expertise Have interaction program, which goals to draw and retain high expertise by making a supportive atmosphere and offering a spread of assets to facilitate their development and growth within the metropolis.
To fulfill the calls for of the SAR’s rising financial system, the Labour and Welfare Bureau (LWB) will conduct a brand new spherical of manpower projections in the course of 2023. These projections will assist the federal government establish areas the place there could also be labor shortages or surpluses, permitting them to formulate applicable methods to deal with total manpower demand.
Along with these initiatives, the federal government plans to introduce a brand new Capital Funding Entrant Scheme. This scheme will permit candidates to make a sure stage of funding within the native asset market, excluding property, and upon approval, they are going to be granted the correct to reside and pursue growth in Hong Kong. The scheme is geared toward attracting high-net-worth people and inspiring them to spend money on Hong Kong’s financial system, additional selling the town as a hub for enterprise and funding.
The federal government has additionally taken decisive motion to advertise abilities growth and employment alternatives for abilities in varied fields, together with:
- Fintech internship scheme for post-secondary college students: A scheme to offer subsidies to college students in Hong Kong and the GBA who take part in Fintech internships within the area. This initiative is geared toward serving to college students achieve sensible work expertise in Fintech firms and improve their employability on this rising sector.
- Pilot Program to Improve Expertise Coaching for the Insurance coverage Sector and Asset and Wealth Administration Sector: This system gives coaching alternatives for insurance coverage and asset administration professionals and goals to draw extra expertise to those sectors. The federal government is now extending it for 3 extra years, with the aim to nurture the expertise and competency within the sector.
- Maritime and Aviation Coaching Fund (MATF): The federal government is injecting HK$200 million into the MATF to assist manpower coaching of the logistics trade, promote the event of high-end, excessive value-added and good logistics, and encourage collaboration between the trade and tertiary establishments {and professional} organizations, attracting extra younger professionals within the enterprise.
- GBA Youth Aviation Business Internship Program: The federal government is rising the first-year coaching locations of this program from 300 to 450.
- First-hire-then-train subsidy scheme: The federal government is earmarking US$7 million to companion with the Hong Kong Institute of Development to launch a two-year subsidy scheme to offer on-the-job coaching allowance to trainees who’ve chosen to enroll in Development Security Officer programs. This initiative seeks to advertise the event {of professional} abilities within the building trade and supply employment alternatives for trainees.
New worldwide tax requirements
In 2021, Hong Kong, along with greater than 130 jurisdictions throughout the globe, pledged to implement the worldwide tax reform proposals drawn up by the Group for Financial Cooperation and Growth (OECD) to deal with base erosion and revenue shifting (abbreviated as BEPS 2.0). Within the Finances Plan speech, the Monetary Secretary mentioned that the Hong Kong will implement the worldwide minimal efficient tax fee in accordance with worldwide consensus in order to safeguard the Hong Kong’s taxing rights and keep the competitiveness of the town’s tax regime.
As to the brand new tax guidelines for the adoption of the BEPS 2.0, the Monetary Secretary talked about that Hong Kong plans to use the worldwide minimal efficient tax fee on these massive MNE teams and implement the home minimal top-up tax ranging from 2025 onwards. He additionally promised that Hong Kong will launch a session train to permit MNE teams to make early preparation.
Creating key and rising industries
Know-how and digital industries
Two areas of focus within the Finances 2023-24 are the digital financial system and infrastructure. In his speech, Chan acknowledged that the digital financial system “performs an important function in the midst of attaining high-quality growth”, and the federal government is thus launching tasks and funds to discover and develop key digital industries.
The federal government has additionally introduced particular tasks and allotted funds for the digital financial system in 2023 and 2024, reminiscent of earmarking HK$500 million to launch a Digital Transformation Assist Pilot Programme to help small and medium-sized enterprises (SMEs) in making use of ready-to-use primary digital options.
As well as, to capitalize on the “big potential” of Web3 (the third-generation web), the federal government will allocate HK$50 million to expedite growth of the Web3 ecosystem by means of measures, reminiscent of organizing main worldwide seminars, selling cross-sectoral enterprise cooperation, and arranging workshops for younger individuals.
In his speech, Chan additionally careworn the significance of constructing Hong Kong’s capabilities as a global innovation and know-how heart, drawing upon its strategic place within the Better Bay Space (GBA) in addition to strengths in academia, analysis, trade, and expertise.
Furthermore, the Finances 2023-24 pledges to determine a Microelectronics Analysis and Growth Institute to reinforce collaboration amongst universities, R&D facilities, and trade gamers, and conduct a feasibility examine on establishing a second Superior Manufacturing Centre (AMC), the primary of which was unveiled in April 2022.
Inexperienced financial system and know-how
The Finances 2023-24 units out methods through which Hong Kong can capitalize on China’s “twin carbon” targets (reaching peak carbon emissions by 2030 and carbon neutrality by 2060), by turning the town into “a global heart for inexperienced know-how and finance”. The funds doesn’t define particular coverage measures to realize this however does suggest to construct a inexperienced know-how ecosystem to draw enterprises or start-ups to arrange their operations and facilitate inexperienced tasks to acquire capital extra conveniently and flexibly by means of monetary improvements other than conventional financing channels.
Monetary trade
The Finances 2023-24 outlines various methods to capitalize on Hong Kong’s place as a regional monetary hub and main offshore RMB hub to draw funding and develop core industries. These vary from increasing the issuance of bonds to develop inexperienced infrastructure, allocating extra funds to draw funding, and increasing mutual market entry with the mainland.
Particular plans and funds embrace:
- Allocating at the very least HK$50 billion in Silver Bonds (three-year bonds with curiosity funds linked to common annual inflation fee) and HK$15 billion in retail inexperienced bonds within the subsequent monetary yr;
- Offering HK$100 million to InvestHK to draw extra household places of work to Hong Kong;
- Earmarking a sure proportion of the long run issuances of presidency inexperienced bonds and infrastructure bonds for precedence funding by Obligatory Provident Fund (MPF) funds;
- Extending the Pilot Insurance coverage-linked Securities Grant Scheme for 2 extra years; and
- Introducing a list regime for superior know-how firms within the first quarter of 2023.
The Hong Kong Inventory Trade (HKEX) has additionally pledged to offer particular reform suggestions by the tip of the yr for the Development Enterprise Market (GEM), a board that caters to SMEs, which can contemplate the financing wants of SMEs.
Tourism trade
The lifting of COVID-19 restrictions in Hong Kong and mainland China will see the return of worldwide vacationers to the town. Tourism stays an essential trade for Hong Kong’s financial system, and the Finances 2023-24 displays the significance of the sector by setting out insurance policies to assist it get well and rebound within the subsequent two years.
The federal government will:
- Prolong the Journey Brokers Incentive Scheme by three months, which was attributable to expire by finish‑March 2023; and
- Inject HK$30 million into the Info Know-how Growth Matching Fund Scheme for Journey Brokers, with the goal of encouraging the trade to endure improve and transformation by making use of know-how.
As well as, Finances 2023-24 proposes to supply assist for key subsectors inside the tourism sector, reminiscent of passenger transport. This contains launching a brand new scheme to supply absolutely assured loans value a complete of round HK$2.7 billion for passenger transport operators and journey businesses. This scheme is predicted to be launched in April of this yr.
Artistic industries
Following the success of the CreateSmart Initiative (CSI), an initiative first launched in 2009 to sponsor the inventive sector, the Finances 2023-24 pledges to allocate a further HK$500 million to spice up the sector.
As well as, the federal government will allocate greater than HK$150 million to assist Hong Kong artists in collaborating in performances and productions within the GBA, and to arrange the GBA Tradition and Arts Pageant in 2024.
What subsequent?
The proposed actions outlined within the Finances 2023-24 can’t be put in force till the required legislative processes are accomplished, sometimes in April. The Finances’s proposed bills, that are consolidated within the Estimates of Expenditure, will endure a radical examination by the Finance Committee of the Legislative Council after being referred by the LegCo President, and eventually be authorized after a 3rd spherical of revisions.
Therefore, it’s advisable that people and companies observe up carefully developments within the coming months.
China Briefing is written and produced by Dezan Shira & Associates. The follow assists international traders into China and has finished so since 1992 by means of places of work in Beijing, Tianjin, Dalian, Qingdao, Shanghai, Hangzhou, Ningbo, Suzhou, Guangzhou, Dongguan, Zhongshan, Shenzhen, and Hong Kong. Please contact the agency for help in China at china@dezshira.com.
Dezan Shira & Associates has places of work in Vietnam, Indonesia, Singapore, United States, Germany, Italy, India, and Russia, along with our commerce analysis services alongside the Belt & Street Initiative. We even have companion corporations helping international traders in The Philippines, Malaysia, Thailand, Bangladesh.
[ad_2]
Source link
