Economic Outlooks for 2018
Source : The 2018-19 Budget (https://www.budget.gov.hk/2018/eng/io.html)
- Forecast GDP growth in real terms at 3% to 4%
- Forecast headline inflation is 2.2% and underlying inflation is 2.5%.
Major Proposed Measures
Tax Concessions and One-off Measures
- Reduce profits tax for the Year of Assessment (“YOA”) 2017/18 by 75%, subject to a ceiling of HKD 30,000;
- Reduce salaries tax and tax under personal assessment for the YOA 2017/18 by 75%, subject to a ceiling of HKD 30,000;
- Increase the width of marginal tax bands from HKD 45,000 to HKD 50,000; increasing the number of tax bands from four to five, and adjusting the marginal tax rates to 2%, 6%, 10%, 14% and 17% respectively;
- Increase basic and additional child allowances from the current HKD 100,000 to HKD 120,000;
- Increase the allowance for maintaining a dependent parent or grandparent aged 60 or above from the current HKD 46,000 to HKD 50,000. The same increase applies to the additional allowance for taxpayers residing with parents or grandparents continuously throughout the year;
- Increase the allowance for maintaining a dependent parent or grandparent aged between 55 and 59 from the current HKD 23,000 to HKD 25,000. The same increase applies to the additional allowance for taxpayers residing with parents or grandparents continuously throughout the year;
- Raise the deduction ceiling for elderly residential care expenses from the current HKD 92,000 to HKD 100,000 for taxpayers whose parents or grandparents are admitted to residential care homes;
- Introduce a personal disability allowance for eligible taxpayers, at a rate on par with the current disabled dependent allowance of HKD 75,000; and
- Propose to allow the husband and wife the option to decide whether to elect for personal assessment starting from the year of assessment 2018-19.
- Waive rates for the FOUR quarters of the YOA 2018/19, subject to a ceiling of HKD 2,500 per quarter, for each ratable property.
- Provide an extra allowance to social security recipients, equal to two months of the standard rate Comprehensive Social Security Assistance payments, Old Age Allowance, Old Age Living Allowance or Disability Allowance. Similar arrangements will apply to Low-income Working Family Allowance and Work Incentive Transport Subsidy;
- Pay the examination fees for candidates sitting for the 2019 Hong Kong Diploma of Secondary Education Examination, involving an expenditure of about 0 million.
Working towards the implementation of the two-tiered profits tax rates system.
Innovation and Technology
- HKD 20 billion will be used on the first phase of the Hong Kong-Shenzhen Innovation and Technology Park in the Lok Ma Chau Loop for, inter alia, site formation, infrastructure, superstructure and initial operation. The estimated project cost will eventually cost far more than HKD 20 billion;
- Inject HKD 10 billion into the Innovation and Technology Fund ("ITF"). The ITF will continue to support applied R&D work in Hong Kong with the additional resources;
- Earmark HKD 10 billion to support the establishment of two research clusters on healthcare technologies and on artificial intelligence and robotics technologies, to attract the world’s top scientific research institutions and technology enterprises to Hong Kong for conducting more midstream and downstream R&D projects in collaboration with local universities and scientific research institutions; and
- Allocate HKD 10 billion to Hong Kong Science and Technology Parks Corporation ("HKSTPC") so as to reinforce the role of the Science Park as Hong Kong flagship technology infrastructure.
Financial Services Industry
- Hong Kong Montary Authority ("HKMA") will make plans to set up an academy of finance in collaboration with the Financial Services Development Council, the financial sector, tertiary institutions, professional training bodies and regulators for promoting cross-sector expertise sharing and collaboration in applied research.
Pilot Bond Grant Scheme
- Proposed to launch a three-year Pilot Grant Scheme to attract local, Mainland and overseas enterprises to issue bonds in Hong Kong. The amount of grant for each bond issuance is equivalent to half of the issue expenses, capped at HKD 2.5 million. Each enterprise can apply for a grant for two bond issuance at most. The HKMA will announce the details in due course.
Qualifying Debt Instrument Scheme
- Proposed to amend the qualifying debt instrument scheme by increasing the types of qualified instruments
- In addition to instruments lodged and cleared by the Central Moneymarkets Unit of the HKMA, debt securities listed on the Stock Exchange of Hong Kong Limited will also become eligible.
- Extended the scope of tax exemption from debt instruments with an original maturity of not less than seven years to instruments of any duration.
Asset and Wealth Management
- The regime for open-ended fund companies to be used as a fund vehicle and the relevant tax exemption arrangements can commence operation later in the year of 2018; and
- Review the existing tax concession arrangements applicable to the fund industry with regard to international requirements on tax co-operation.
Corporate Treasury Centres
- The Government will further amend the Inland Revenue Ordinance to extend the coverage of profits tax concession to specified treasury services provided by qualifying corporate treasury centres to all their onshore associated corporations.
- Allocate an additional HKD 396 million to the tourism industry in the new financial year, of which HKD 226 million will be provided for the Hong Kong Tourism Board ("HKTB") to implement the Development Blueprint for Hong Kong's Tourism Industry released by the Tourism Commission in the year 2017;
- The Development Blueprint sets out four development strategies, they are
- to develop a diversified portfolio of visitor source markets for Hong Kong, with a focus on attracting high value-added overnight visitors;
- to nurture and develop tourism products and initiatives with local and international characteristics;
- to develop smart tourism; and
- to upgrade the service quality of our tourism industry; and
- Allocate a total of HKD 310 million in the next few years to support the Ocean Park in developing education and tourism projects. For the benefits of local students, the Ocean Park will distribute 10,000 complimentary admission tickets to primary and secondary school students in the coming year.
Support for Small and Medium Enterprises (“SME”)
- Inject HKD 1.5 billlion into Dedicated Fund on Branding, Upgrading and Domestic Sales (BUD Fund);
- Inject HKD 1 billion into the SME Export Marketing and Development Funds; and
- Extend the geographical scope of the Enterprise Support Programme under the BUD Fund from the Mainland to include the Association of Southeast Asian Nations ("ASEAN") countries. The respective cumulative funding ceiling for enterprises undertaking projects in the Mainland and ASEAN markets will be HKD 1 million;
- Intend to inject another HKD 1 billion into the CreateSmart Initiative to strengthen support for the development of the creative industries, especially in nurturing youths and helping start-ups, and also to enable the Hong Kong Design Centre to implement initiatives to enhance public understanding of the value of creativity and design.
First Registration Tax ("FRT") for Electric Vehicles
- Apart from continuing with the current FRT concession of up to HKD 97,500, the Government will also launch a "one-for-one replacement" scheme from today to allow eligible private car owners who buy a new electric private car and scrap an eligible private car they own to enjoy a higher FRT concession of up to 0,000. The above concessions will remain in force until 31 March 2021. The Environmental Protection Department and Transport Department will announce the details later.
Sharing Fruits of Success
- Provide a one-off grant of HKD 2,000 to each student in need to support learning
Major Tax Rates for The Years 2017/18 and 2018/19
i. Personal tax allowances and deductions
| 2017/18 |
| 2018/19 |
| Basic allowances |
| Single person’s allowance || 132,000 || 132,000 |
| Married person’s allowance || 264,000 || 264,000 |
| Additional allowances |
| Child |
| Basic || 100,000 || 120,000 |
| Additional (in the year of birth) || 100,000 || 120,000 |
| Dependent parent / grandparent |
| a. Aged 55 to 59 |
| Basic || 23,000 || 25,000 |
| Additional || 23,000 || 25,000 |
| b. Aged 60 or above |
| Basic || 46,000 || 50,000 |
| Additional || 46,000 || 50,000 |
| Dependent brother / sister || 37,500 || 37,500 |
| Single parent || 132,000 || 132,000 |
| Disabled dependent || 75,000 || 75,000 |
| Personal disability || - || 75,000 |
| Additional deductions |
| Self-education expenses || 100,000 || 100,000 |
| Home loan interest || 100,000 || 100,000 |
| Elderly residential care expenses || 92,000 || 100,000 |
| Contributions to retirement schemes || 18,000 || 18,000 |
| Approved charitable donations || 35% || 35% |
| Notes |
| For dependent living with taxpayer. |
| For whom no child allowance is being claimed. |
| The maximum amount that can be claimed as deductible expense for training courses attended at approved institutions. |
| The entitlement period for tax deduction is 15 years. |
| The maximum deduction allowable is restricted to 35% of the taxpayer’s assessable income after deduction of allowable expenses and depreciation allowance. |
ii. Standard salaries tax rates
| 2017/18 and 2018/19 |
| Standard tax rates || 15% |
iii. Progressive salaries tax rates
| Net Chargeable Income || 2017/18 |
| First || HKD 45,000 || 2% |
| Next || HKD 45,000 || 7% |
| Next || HKD 45,000 || 12% |
| Remainder || 17% |
| Net Chargeable Income || 2018/19 and onwards |
| First || HKD 50,000 || 2% |
| Next || HKD 50,000 || 6% |
| Next || HKD 50,000 || 10% |
| Next || HKD 50,000 || 14% |
| Remainder || 17% |
| Business Category || 2017/18 and 2018/19 |
| Unincorporated Business || 15% |
| Corporation || 16.5% |
| Taxpayer || 2017/18 and 2018/19 |
| Property Owner || 15% |
i. Shares transactions
| Particular || 2016/17 and 2017/18 |
| Contract Note for sale or purchase of any Hong Kong stock || 0.1% of the amount of the consideration or of its value on every sold note and every bought note |
| Transfer operating as a voluntary disposition inter vivos || HKD 5 + 0.2% of the value of the stock |
| Transfer of any other kind || HKD 5 |
| Leasing period || 2017/18 and 2018/19 |
| Not defined or is uncertain || 0.25% |
| Specified in the lease as not exceeding 1 year || 0.25% |
| Exceeding 1 year but not exceeding 3 years || 0.5% |
| Exceeding 3 years || 1% |
| Key money, construction fee etx. Mentioned in the lease || 4.25% of the consideration if rent is also payable under the lease. Otherwise, same duty as for a sale of immovable property. |
iii. Immovable Property transactions
- Part 1 (applies to instruments of residential property) : A flat rate of 15% of the consideration or value of the property (whichever is higher)
- Part 2 (applies to instruments of non-residential property and certain instrument of residential property executed on or after 23 February 2013 but before 5 November 2016)
| Sales Consideration || Rats at Scale 1 (Part 2) |
| Up to HKD 2,000,000 || 1.5% |
| HKD 2,000,001 to HKD 2,176,470 || HKD 30,000 + 20% of excess over HKD 2M |
| HKD 2,176,471 to HKD 3,000,000 || 3% |
| HKD 3,000,001 to HKD 3,290,330 || HKD 90,000 + 20% of excess over HKD 3M |
| HKD 3,290,331 to HKD 4,000,000 || 4.5% |
| HKD 4,000,001 to HKD 4,428,580 || HKD 180,000 + 20% of excess over HKD 4M |
| HKD 4,428,581 to HKD 6,000,000 || 6% |
| HKD 6,000,001 to HKD 6,720,000 || HKD 360,000 + 20% of excess over HKD 6M |
| HKD 6,720,001 to HKD 20,000,000 || 7.5% |
| HKD 20,000,001 to HKD 21,739,130 || HKD 1,500,000 + 20% of excess over HKD 20M |
| Exceeding HKD 21,739,130 || 8.5% |
| Sales Consideration || Rats at Scale 1 (Part 2) |
| Up to HKD 2,000,000 || HKD 100 |
| HKD 2,000,001 to HKD 2,176,470 || HKD 100 + 10% of excess over HKD 2M |
| HKD 2,176,471 to HKD 3,000,000 || 1.5% |
| HKD 3,000,001 to HKD 3,290,330 || HKD 45,000 + 10% of excess over HKD 3M |
| HKD 3,290,331 to HKD 4,000,000 || 2.25% |
| HKD 4,000,001 to HKD 4,428,580 || HKD 90,000 + 10% of excess over HKD 4M |
| HKD 4,428,581 to HKD 6,000,000 || 3% |
| HKD 6,000,001 to HKD 6,720,000 || HKD 180,000 + 10% of excess over HKD 6M |
| HKD 6,720,001 to HKD 20,000,000 || 3.75% |
| HKD 20,000,001 to HKD 21,739,130 || HKD 750,000 + 10% of excess over HKD 20M |
| Exceeding HKD 21,739,130 || 4.25% |
Starting from 5 November 2016, a flat rate (AVD rate) of 15% applies to residential property transactions, this new measures will continue to adopt the exemptions provided under the existing doubled ad valorem stamp duty (DSD) regime, which include:
- allowing buyers to pay AVD at the basic rates (i.e. AVD rates at Scale 2) if they are Hong Kong permanent residents (HKPRs) and do not own any other residential property in Hong Kong at the time of acquisition of the residential property; and
- setting a six-month time frame for HKPR-buyers having acquired a new residential property to dispose of their original property.
With effect from 20 November 2010, any residential property acquired on or after 20 November 2010, either by an individual or a company (regardless of where it is incorporated), and resold within 24 months (the property was acquired on or after 20 November 2010 and before 27 October 2012) or 36 months (the property was acquired on or after 27 October 2012), will be subject to a Special Stamp Duty (SSD). SSD is calculated by reference to the stated consideration or the market value of the property (whichever is higher), at the following rates for different holding periods of the property by the seller or transferor before disposal:-
| Holding period || The property was acquired on or after 20 November 2010 and before 27 October 2012 || The property was acquired on or after 27 October 2012 |
| 6 months or less || 15% || 20% |
| More than 6 months but for 12 months or less || 10% || 15% |
| More than 12 months but for 24 months or less || 5% || 10% |
| More than 24 months for 36 months or less || - || 10% |
In addition to SSD, a Buyer's Stamp Duty ("BSD") on residential properties acquired by any person (including a company incorporated) except a Hong Kong Permanent Resident is effected from 27 October 2012. BSD is to be charged at a flat rate of 15% on all residential properties, on top of the existing stamp duty and the special stamp duty, if applicable.
The Government had abolished the Estate Duty with effect from 11 February 2006 pursuant to the Revenue (Abolition of Estate Duty) Ordinance 2005.
Detailed Version of Our Smmary
Please visit [ pdf version ] for detailed version of our summary on the Hong Kong 2018-19 Budget.
The above information is mainly extracted from the website of the “The Hong Kong 2017-18 Budget”.
Please visit "The Hong Kong 2018-19 Budget" or contact our Tax Service Department (email: email@example.com) for further details.