Friday, 28 April 2017 07:15

2017/18 Hong Kong Budget Highlights

hong kong grunge flag by think0

On 22 February 2017, the Financial Secretary delivered the 2017/18 Hong Kong Budget. The Budget is generally in line with the principles of financial prudence and sustainability in a volatile economic environment. The estimated budget surplus for 2016/17 is HK$92.8 billion. The forecast surplus for 2017/18 is HK$16.3 billion with the fiscal reserves hitting a new high at HK$952 billion by the end of March 2018, representing 37% of GDP.

In order to ensure the competitiveness of Hong Kong’s simple and stable tax regime, the Budget did not propose any major changes to our tax regime and tax rates. Rather, the Budget proposed to form a tax policy unit to consider broadening our tax base as well as designing tax incentive policies for developing new industries.

Set out below are the salient highlights of the Budget (Note: tax measures require legislative amendments before implementation):

One-time measures

• Reduce profits tax, salaries tax and tax under personal assessment for the year of assessment 2016/17 by 75%, subject to a ceiling of HK$20,000 per case. This measure will cost the Government HK$18.3 billion,benefitting about 1.97 million taxpayers
• Waive license fees for 1,800 travel agents for a year; waive license fees for 2,000 hotels and guesthouses for one year; and waive the license fees for 27,000 restaurants, hawkers and operators with restricted food permits for one year
• Waive rates for four quarters of 2017-18, subject to a ceiling of HK$1,000 per quarter for each rateable property
• Provide one month extra allowance to recipients of Comprehensive Social Security Allowance, Old Age Allowance, Old Age Living Allowance and Disability Allowance (similar arrangements will apply to Low-Income Working Family Allowance and Work Incentive Transport Subsidy)
• Continue to fully waive the first registration tax of electric commercial vehicles, motor cycles and motor tricycles up until 31 March 2018, with a cap of HK$97,500 for electric private cars from 1 April 2017

Recurring tax measures

• Increase the width of marginal bands for salaries tax rates from HK$40,000 to HK$45,000 commencing from the year of assessment 2017/18
• Increase the dependent brother or dependent sister allowance from HK$33,000 to HK$37,500 effective from 2017/18
• Increase the disabled dependent allowance from HK$66,000 to HK$75,000 effective from 2017/18
• Extend the entitlement period for home loan interest deduction from 15 to 20 years of assessment commencing from 2017/18, while maintaining the current deduction ceiling of $100,000 a year
• Raise the deduction ceiling for self-education expenses from HK$80,000 to HK$100,000 effective from 2017/18

Other highlights

• Expand commercial and trading network through trade and investment agreements
• Participate in the Asian Infrastructure Investment Bank
• Introduce tax concession to promote aircraft leasing and financing
• Extend profits tax exemption to attract more funds to domicile in Hong Kong
• Explore enhanced tax deductions for innovation and technology expenditure
• Examine to provide tax deduction for the purchase of regulated health insurance products