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The general tax information on the above content is provided for your ease reference and is not intended to replace any tax advice or other professional advice. Clients should clearly acknowledge and confirm that final decision is reserved by Hong Kong Inland Revenue Department through its tax assessment process. In the event of any inconsistency between the English and Chinese versions of this content, the English version shall prevail.

Economic Outlooks for 2021

Source : The 2021-22 Budget (https://www.budget.gov.hk/2021/eng/io.html)

  • Forecast GDP growth in real terms at 3.5% to 5.5%
  • Forecast headline inflation is 1.6% and underlying inflation is 1.0%.

Major Proposed Measures

Tax Concessions

Support Enterprise and Safeguard Jobs

Profits Tax

  • Reduce profits tax for the Year of Assessment (“YOA”) 2020/21 by 100%, subject to a ceiling of HKD 10,000.

Rate

  • Waive rates for non-domestic properties for FOUR quarters of the YOA 2021/22, 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 non-domestic property.

Business Registration Fees

  • Waive the business registration fees for the YOA 2021/20.

Relieve People’s Burden

Salaries Tax

  • Reduce salaries tax and tax under personal assessment for the YOA 2020/21 by 100%, subject to a ceiling of HKD 10,000.

Rate

  • Waive rates for residential properties for FOUR quarters of the YOA 2020/21, subject to a ceiling of HKD 1,500 per quarter for the first two quarters and a ceiling of HKD 1,000 per quarter for the remaining two quarters for each rateable property.

Issue Consumption Voucher

  • Issue electronic consumption vouchers in instalments with a total value of HKD 5,000 to each eligible Hong Kong permanent resident and new arrival aged 18 or above.

Others

For Enterprise

  • Extend the application period of the Special 100% Guarantee Product regarding the low-interest loan or interest subsidies under the SME Financing Guarantee Scheme to the end of 2021.
  • Further increase the maximum loan amount per enterprise from the total amount of employee ways and rents for 12 month to that for 18 months and raise the loan celling from 5 million to 6 million. Extend the maximum repayment period from 5 years to 8 years and extend the maximum duration of principal moratorium from 12 months to 18 months.
  • Further to launch the Pre-approved Principal Payment Holiday Scheme.
  • Continue to waive 75% of water and sewage charges payable by non-domestic households for 8 months commencing from April 2021, subject to a monthly cap of HKD 20,000 and HKD 12,500 respectively per household.
  • Continue to grant 75% or fee concession for 6 months commencing from April 2021 for the eligible tenants of government properties and eligible short-term tenancies and waivers under the Lands Department.

For People

  • Grant a subsidy of HKD 1,000 to each residential electricity account.
  • Provide an allowance to eligible social security recipients, equal to one half month of the standard rate Comprehensive Social Security Assistance payments, Old Age Allowance, Old Age Living Allowance or Disability Allowance. Similar arrangements will apply to recipients of the Working Family Allowance and Individual-based Work Incentive Transport Subsidy.
  • Pay the examination fees for school candidates sitting for the 2022 Hong Kong Diploma of Secondary Education Examination.
  • Proposed to relax working hours requirements under the Working Family Allowance Scheme, the basic working hour requirement of not fewer than 144 hours per month for non-single parent households will be reduced by half for one year.
  • Suggest to set-up a Special 100% Loan Guarantee for Individuals Scheme as a supplementary measure so as to provide an extra financing option for the unemployed. The HKSAR will offer a guarantee for loans provided under the Scheme, the maximum loan amount per applicant is set at 6 times of his/her average monthly incoming during employment, capped at HKD 80,000. The principal will be moratorium for the first 12 months. Thereafter, the principal and interest can be repaid over a period of up to 5 years with an interest rate fixed at 1 per cent per year. Applicants who have repaid loans in full as scheduled will be offered full reimbursement for the interest paid. Freelancers who provide proof of loss of income may also apply for the loan. The HKSAR will provide a total guarantee commitment of 15 billion. The application period will last for six months.
  • Earmark HKD 1 billion to provide subsidies for owners of more than 3,000 old building with relatively low retable values to carry out drainage repair or enhancement works.

Support Employment

  • Launch the 4th tranche of the Love Upgrading Special Scheme in July 2021 lasting for 6 months until the end of 2021 which will benefit 20,000 trainees. The ERB will continue providing more training options under the Scheme and more online courses for trainees to engage in distance learning during the epidemic.
  • HKSAR plant to expand the scope of Continuing Education Fund to include online course to provide learners with more diversified methods of continuing learnig.

Reviving the Economy after the Epidemic

Digital Economy

  • Allocated additional funding of HKD 1 billion for the Distance Business Programme in order to support the enterprise adopting information technology solutions and cover the expenses for providing the related training to employees.
  • Allocate HKD 375 million to the Hong Kong Trade Development Council (“TDC”) in 3 years commencing from 2021/22 in order to develop virtual platforms enhancing its capacity to organize online activities and to proceed with digitalization.
  • By mid-2022, unless there are legal or operational constraints, all government forms and licence applications can be submitted electronically. E-payment options including Faster Payment System will be available for making payments regarding most of the government bills and license commencing from mid-2022.
  • The Hong Kong Monetary Authority (“HKMA”) is working with the office of the Government Chief Information Officer to develop version of “iAM Smart” digital authentication platform, it can be used to authenticate the identity of enterprise through an electronic channel.

Support Tourism

  • Further earmark a total of HKD 934 million to enhance tourism resources in which HKD 169 million will be used to continue to take forward local culture, heritage and creative tourism projects.
  • Earmark HKD 765 million to support the Hong Kong Tourism Board in reviving the tourism industry.

Stimulating the Economy

Financial Services

Bond Connect Development

  • Target to expand Bond Connect to cover both Southbound and Northbound Trading. The HKMA and the People’s Bank of China have set up a working group to drive the initiative of Southbound Trading of Bond Connect and target to launch it within 2021.

Retail Bond Market

  • The HKSAR plans to issue no less than HKD 24 billion of Silver Bond and no less than HKD 15 billion of iBond in 2021.
  • Proposed to increase the borrowing limit of the Government Bond Programme from HKD 200 billion to HKD 300 billion to allow enough room for bond issuances.
  • The eligible age for subscribing Sliver Bonds will be reduced from the aged 65 to the aged 60.

Insurance and International Risk Management Centre

  • Undertaking a chain of legislative work to provide half-rate profits tax concessions to eligible insurance business including marine insurance and specialty insurance.
  • Proposed to launch a two-year Pilot Insurance-linked Securities Grant Scheme to attack insurance enterprise to issue insurance-linked securities (“ILS”) in Hong Kong. The amount of grant for each issuance will be capped at HKD 12 million depending on the maturity of ILS. Further announcement will be provided by Insurance Authority.

Asset and Wealth Management

  • The HKSAR will provide subsidies to cover 70% of the expensed paid to local professional services providers for setting up an Open-ended Fung Company (“OFC”) in or re-domiciled to Hong Kong in the coming 3 years subject to a ceiling of HKD 1 million per OFC.
  • Strive to secure the LegCo’s passage of the amendment bill to provide tax concessions for carried interested issued by the private equity funds operating in Hong Kong within the current session so as to apply the tax concession staring from 2020/21.

Innovation and Technology

Innovation and Technology Infrastructure

  • The HKSAR will continue to support the development of 5G networks and applications; release more 5G spectrum in different frequency bands; facilitate the setting up of radio base stations by operators at suitable government venues and public facilities; assist in the relocation of the Tai Po satellite earth stations; and provide land at Chung Hom Kok Teleport for the development of infrastructure to connect with external telecommunications facilities.

Financial Technology

  • The Hong Kong Science and Technology Parks (“HKSTPC”) and Cyberport will collaborate with the HKMA to attract more financial, technology or research institutes to set up laboratories in Hong Kong focusing on the areas such as regulatory technology and cyber security.
  • The HKMA is considering enhancing its Fintech Supervisory Sandbox by providing "through-train" vetting and funding arrangements for those promising Fintech solutions to reduce the time for the launch of innovative financial products in the market.

Infrastructure Investment and Construction Industry

Train Talent

  • Earmarked HKD 6 million for provision of systematic training to the professional skills of mid-tier managers in the Government in the next 3 years so as to enhance their professional skills ensuring the public resources can be used more effectively.

Enhance Effectiveness

  • The HKSAR promotes the Modular Integrated Construction (MiC) method and the Constructions Innovation and Technology Fund has granted over HKD 75 million to the construction industry to support their adoption of the MiC method and the Buildings Department has approved 31 pre-accepted MiC system to facilitate their adoption by the private building developers.

Green City

Promote New Energy Transportation

  • The HKSAR promotes “One-for-One Replacement” Scheme provides the owners who buy a new electric private cars (“e-PC”) and scrap their eligible fuel-propelled private car with a higher first registration tax concession, subject to a ceiling of HKD 250,000.
  • The HKD 2 billion electric vehicle-charging at Home Subsidy Scheme was launched in 2020, it is expected that about 60,000 parking spaces in existing private residential buildings will be provided with electric vehicle-charging infrastructure under the scheme in 3 years.
  • The Environment Bureau will announce the Hong Kong's first roadmap next month on the popularisation of electric vehicles setting out long-term policy objectives and plans on the use of electric vehicles and their associated supporting facilities. The key measures include ceasing the new registration of fuel-propelled private cars in 2035 or earlier, expanding the electric vehicles charging network and promoting its marketisation, training of electric vehicles technical and maintenance practitioners, and formulating a Producer Responsibility Scheme for retired electric vehicles batteries.

Improve Air Quality

  • The HKSAR implemented an ex-gratia payment scheme of HKD 7.1 billion to phase out about 40,000 Euro IV diesel commercial vehicles the end-2027 in order to further improve air quality.

Relieve Traffic Congestion

  • Proposed increasing the rate of each tax band for the first registration tax for private cars including electric vehicles by 15% and the vehicle licence fee by 30% which have been gazetted for taking effect on 24 February 2021.
  • The Transport Department will continue the studies on Congestion Charging" and the Electronic Road Pricing Pilot Scheme in Central with the aim of optimising the use of road space and relieving traffic congestion.

Decarbonise and Reduce Waste

  • Set aside an extra HKD 1 billion for more than 80 projects to install additional small-scale renewable energy system at government buildings and infrastructure.
  • Set aside HKD 150 million to conduct energy audits and install energy-saving appliances for Non-Government Organizations subvented by the Social Welfare Department free of charge.
  • The HKSAR will inject an additional funding of HKD 1 billion to the Recycle Fund and extend the application period to 2027 in order to render support to the trade.

Public Finance

Increase Revenue

  • Introduce a bill to raise the Stamp Duty on Stock Transfer from 0.1 % to 0.13% of the consideration or value of each transaction payable by buyers and sellers respectively.

Detailed version of our summary

Please visit [ pdf version ] for detailed version of our summary on the Hong Kong 2021-22 Budget.

Further Information

The above information is mainly extracted from the website of the “The Hong Kong 2021-22 Budget”. Please visit https://www.budget.gov.hk/2021/eng/speech.html or contact our Tax Service Department (email: tax@atrixbiz.com) for further details.

Reference

The Hong Kong 2021-22 Budget
[ 24th February 2021 ]

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