On 28 February 2024, the Financial Secretary of Hong Kong announced the Budget for the fiscal year 2024-25 with the theme ‘Advance with Confidence, Seize Opportunities, Strive for High-quality Development’.

Looking ahead for 2024, the Financial Secretary is of the view that the global economy will still be shadowed by uncertainty due to various factors, such as the geopolitical tensions and the lower economic growth in the United States and Europe. Nevertheless, the Mainland economy is expected to register steady growth this year.

It is also expected that exports of travel and other related services in Hong Kong will increase as a result of the Government’s effort to promote mega events and to continue reviving the handling capacity, in particular in the air passenger capacity.

Furthermore, rising incomes among the general public will continue to support private consumptions. Therefore, it is expected that the Hong Kong economy will expand further with a growth of 2.5% to 3.5% for the year as a whole.

Key support and relief measures

Despite a host of prevailing challenges, Hong Kong will find infinite opportunities ahead. To facilitate these opportunities, the Financial Secretary proposes many supports and measures in his 2024-25 Budget to bolster confidence in Hong Kong. These include, showcasing Hong Kong’s appeal to people from around the world, empowering individuals and enterprises to seize every opportunity and continuing to roll out policies and initiatives on all fronts, drawing in capital, enterprises and talent, expanding Hong Kong’s economic capacity and strengthening its impetus for development.

Meanwhile, the major tax measures relevant for enterprises and individuals in Hong Kong include the following:

Enterprises

• Reduction of profits tax for the year of assessment 2023/24 by 100%, subject to a ceiling of HKD 3,000 per case;

• Proposing to introduce the following two enhancement measures for deduction of expenses under profits tax, which will take effect from the year of assessment 2024/25:
  (i) profits-taxpayers will be granted tax deduction for expenses incurred in reinstating the condition of the leased premises to their original condition; and
  (ii) time limit for claiming allowances for industrial buildings and structures as well as commercial buildings and structures will be removed;

• Granting rates concession for non-domestic properties for the first quarter of 2024/25, subject to a ceiling of HKD 1,000 for each rateable property; and

• Extending the application period of the 80% Guarantee Product and the 90% Guarantee Product of the SME Financing Guarantee Scheme to the end of March 2026.

Individuals

• Reduction of salaries tax and tax under personal assessment for the year of assessment 2023/24 by 100%, subject to a ceiling of HKD 3,000 per case;

• Offering rates concession for domestic properties for the first quarter of 2024/25, subject to a ceiling of HKD 1,000 for each rateable property;

• Removing Special Stamp Duty, Buyer’s Stamp Duty and the New Residential ad valorem Stamp Duty for any residential property transactions with immediate effect; and

• Proposing to implement a two-tiered standard rates regime for salaries tax and tax under personal assessment starting from the year of assessment 2024/25. It is proposed that in calculating the amount of tax for taxpayers whose net assessable income exceeds HKD 5 million, the first HKD 5 million will continue to be subject to the standard rate of 15%, while the portion of their net assessable income exceeding HKD 5 million will be subject to the standard rate of 16%.

Other major tax-related issues

Funds and Family office

The Government has implemented a number of preferential tax regimes for funds and family offices, and the Government will continue to further enhance the preferential tax regimes for funds, single family offices and carried interest, including reviewing the scope of the tax concession regimes, increasing the types of qualifying transactions and enhancing flexibility in handling incidental transactions.

Patent Box tax incentive

The Government will introduce a proposal to amend the Inland Revenue Ordinance with a view of implementing the ‘patent box’ tax incentive into the Legislative Council in the first half of 2024. This will reduce substantially the tax rate for profits derived from qualifying intellectual property (IP) to 5%, aiming to encourage enterprises to devote more resources to R&D and conduct commercialisation transactions making use of patents and other IP protections.

Hotel Accommodation Tax

The Government propose to resume the collection of the Hotel Accommodation Tax at a rate of 3%, which will take effect from 1 January 2025.

Global minimum effective tax rate

Following the international tax reform proposal made by the Organisation for Economic Co-operation and Development (OECD) addressing the Base Erosion and Profit Shifting (BEPS 2.0 Pillar Two), Hong Kong will continue to implement the global minimum effective tax rate of 15% on large multinational enterprise (MNE) groups with global turnover of at least EUR 750 million, which is to safeguard its taxing rights and maintain the competitiveness of its tax regime.

The Government is now conducting consultation on the implementation of the global minimum tax and is expected to submit a legislative proposal to the Legislative Council in the second half of 2024.

Some measures to enhance inbound investments

Re-domiciliation of overseas company to Hong Kong

With a view to attract more MNEs to establish a business presence in Hong Kong, Hong Kong will introduce a mechanism to provide facilitation for companies domiciled overseas for re-domiciliation to Hong Kong. The Government will submit a legislative proposal enabling companies domiciled overseas, especially enterprises with a business focus in the Asia-Pacific region to re-domicile in Hong Kong.

Capital Investment Entrant Scheme

Further to the announcement of the Capital Investment Entrant Scheme (“CIES”) in the 2023/24 Budget, the scheme will soon invite applications. In summary, eligible investors who invest HKD 27 million or more in qualifying assets and place HKD 3 million into a new CIES investment portfolio may apply to reside in and pursue development in Hong Kong.

HKWJ can assist

Should you have any questions about the implications of the Budget on your company or you as an individual, please feel free to contact us through the form below.

We are also here to assist you on any other tax or corporate related questions you may have.