On 23 February 2022, the Financial Secretary of Hong Kong announced the Budget for the fiscal year 2022-23. The forecast is that for the fiscal year 2021-22, there will be a surplus of around HKD 18.9 billion, and that the fiscal reserves are expected to be HKD 946.7 billion by 31 March 2022.

This year’s Budget will continue to adopt an expansionary fiscal policy with initiatives mainly focusing on the following four areas:

• supporting an all-out effort to win the fight against the epidemic;
• relieving the hardship of our people and Small and Medium Enterprises;
• rendering support to the struggling economy and fostering post-epidemic economic revival; and
• investing for the future by planning ahead for the medium and long-term development of our economy.

Looking ahead for 2022, the Financial Secretary is of the view that the global economy is shadowed by uncertainty due to several factors, such as the widespread Omicron COVID-19 variant that slowed the pace of global economic recovery recently, the impact of high energy prices and supply bottlenecks, global inflation, tightening of the monetary policies along with the complex and volatile geopolitical situation.

In addition, Hong Kong is experiencing immense pressure in recent months as the rapid worsening of the fifth wave of the epidemic, coupled with further tightening of various restrictive measures, led to a drastic fall in people flow and seriously dampened consumer sentiments.

Nevertheless, it is expected that the Hong Kong economy will put up a better performance in the second half of this year and achieve growth of 2 to 3.5 per cent in real terms for the year as a whole.

Hong Kong Budget 2022-23 key support and relief measures

Same as previous years, the Financial Secretary proposes a number of support and relief measures in his 2022-23 Budget to alleviate the financial burdens of enterprises and individuals. The major measures relevant for enterprises as well as middle-class and upper-class individuals include the following:

Enterprises

1. Reduction of profits tax for the year of assessment 2021-22 by 100%, subject to a ceiling of HKD 10,000 per case;
   
2. Waiver of business registration fees for the fiscal year 2022-23; and
   
3. Provision of financial supports by means of:
   • Reduced rates for non-domestic properties for all four quarters of 2022-23, subject to a ceiling of HKD 5,000 per quarter in the first two quarters and a ceiling of HKD 2,000 per quarter in the remaining two quarters for each rateable property;
   • Extension of a 75% reduction of water and sewage charges payable by non-domestic households for eight months starting until 30 November 2022, subject to a monthly cap of HKD 20,000 and HKD 12,500 respectively per household;
   • Extension of a 75% rental or fee concession for eligible tenants of government properties and eligible short-term tenancies and waivers under the Lands Department for six months starting until 30 September 2022; and
   • Extension of a 100% guarantee low-interest loan for enterprises, raise the loan ceiling from HKD 6 million to HKD 9 million, extending the repayment period from eight to ten years.

Individuals

1. Reduction of salaries tax and tax under personal assessment for the year of assessment 2021-22 by 100%, subject to a ceiling of HKD 10,000 per case;
   
2. Provide tax reduction for domestic rental expenses starting from the year of assessment 2022-23, subject to a deduction ceiling of HKD 100,000 per case; and
   
3. Provide rates concession for domestic properties for four quarters of 2022-23, subject to a ceiling of HKD 1,500 per quarter in the first two quarters and a ceiling of HKD 1,000 per quarter in the remaining two quarters for each rateable property.

Please note that most of the above-mentioned measures are subject to enactment of legislation before effective.

Other major tax-related issues in the Hong Kong Budget 2022-23

Global minimum tax rate

The Organisation for Economic Co-operation and Development (OECD) continues to work on imposing a global minimum tax rate. Under the proposal, if the tax paid by a multinational corporation in Hong Kong is lower than the new global minimum tax rate, its parent company will be subject to additional taxes or defensive measures imposed by the jurisdictions where they are located. However, this will only target large multinational enterprise groups with global turnover of at least EUR 750 million.

In the view of maintaining Hong Kong’s competitiveness as a global financial and business hub, the Hong Kong government has stated that:

• they will safeguard Hong Kong’s taxing right by implementing the global minimum tax rate and other relevant requirements in accordance with the international consensus;

• to introduce a domestic minimum top-up tax with regard to the large multinational enterprise groups starting from 2024-25; and

• the Hong Kong government will keep up the efforts in improving Hong Kong’s business environment and enhancing its competitiveness.

Family office business

To enhance Hong Kong’s attractiveness as a hub for family offices, the Hong Kong government proposes to provide tax concessions for eligible family investment management entities managed by single-family offices.

To that effect, the Hong Kong government will consult the sector on the detailed proposal as soon as possible and aim to submit the legislative amendments within the current legislative session. Therefore, it is expected that the relevant tax concessions will come into effect in 2022-23.

Rating system

To introduce a progressive element to the rating system and that for providing rates concession to owner-occupied properties on a regular basis.

HKWJ can help

Although Hong Kong is currently experiencing its hardest time in the fight against the epidemic and is facing enormous challenges, the support and relief measures proposed in the budget will help Hong Kong overcome these challenges and make the recovery process faster.

Should you have any questions about the impact of the HK Budget proposals on your company or personal tax situation, please don’t hesitate to reach out to us via the form below.