www.pkf-hk.com 2018-19 HKSAR Budget Summary
2018-19 HKSAR Budget Summary The Financial Secretary of the Hong Kong SAR Government, the Honourable Mr. Paul Chan Mo-po delivered the 2018-19 Budget Speech in the Legislative Council on 28 February 2018. Economic performance of Hong Kong in 2017 In terms of economic performance, the Gross Domestic Product grew by 3.8% year-on-year in real terms, higher than the average trend growth for the past 10 years. The unemployment rate averaged at a low level of 3.1% for 2017 as a whole, while the average headline inflation for 2017 was 1.5% as measured by the Composite Consumer Price Index. Estimates for 2018-19 The Financial Secretary estimates the operating expenditure for 2018-19 to be HK$441.5 billion and capital expenditure to be HK$116.4 billion. The total Government expenditure for 2018-19 is estimated to be HK$557.9 billion, an increase of 17.6% over the revised estimate for 2017-18. The total Government revenue for 2018-19 is expected to be HK$604.5 billion. The Financial Secretary forecasts a surplus of HK$46.6 billion in the Consolidated Account in the coming year. The fiscal reserves are estimated to be HK$1,138.6 billion by the end of March 2019. Potential tax-related developments Propose to extend the scope of tax exemption from debt instruments with an original maturity of not less than 7 years to instruments of any duration. Review the existing tax concession arrangements applicable to the fund industry with regard to international requirements on tax co-operation. 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. Plan to introduce tax concession to (i) contributions made to deferred annuity products and (ii) voluntary contributions made to the Mandatory Provident Fund. Propose to provide a tax deduction for people who purchase eligible health insurance products for themselves or dependents under the Voluntary Health Insurance Scheme introduced by the Food and Health Bureau. Propose to enhance tax concessions for capital expenditure incurred by enterprises in procuring eligible energy efficient building installations and renewable energy devices by allowing tax deduction to be claimed in full in 1 year instead of the current time frame of 5 years. Highlights Profits Tax A one-off tax reduction of 75% of profits tax for 2017-18, subject to a ceiling of HK$30,000 Confirm the introduction of a two-tiered profits tax rates regime (Click here for details) Confirm the implementation of a tax deduction for R&D expenditure from 100% to up to 300% (i.e. the first HK$ 2 million of qualifying R&D expenditure would enjoy a 300% tax deduction with the remainder at 200%) Salaries Tax A one-off tax reduction of 75% of salaries tax and tax under personal assessment for 2017-18, subject to a ceiling of HK$30,000 Widen the tax bands for salaries tax from HK$45,000 to HK$50,000 Increase the number of tax bands from four to five and marginal tax rates are adjusted to 2%, 6%, 10%, 14% and 17% The following allowances / deduction have been increased:- - Basic and additional child allowance - Basic and additional dependent parent / grandparent allowances - Deduction ceiling for elderly residential care expenses Introduce personal disability allowance Relax the requirement for making election jointly of personal assessment if both husband and wife have income assessable to tax Other Levies Rates for 2018-19 to be waived for the four quarters, subject to a ceiling of HK$2,500 per quarter for each rateable tenement Decide to continue waiving in full the first registration tax (FRT) for electric commercial vehicles, electric motor cycles and electric motor tricycles until 31 March 2021. Launch a "one-for-one replacement" scheme 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 $HK250,000 with immediate effect.
1. Salaries Tax Personal tax allowances and deductions: Basic allowances : Single person s allowance Married person s allowance Additional allowances : Child - Basic - Additional (in the year of birth) Dependent parent / grandparent: a. Aged 55 to 59 - Basic - Additional (1) b. Aged 60 or above - Basic - Additional (1) Dependent brother / sister (2) Single parent Disabled dependent Personal disability allowance Additional deductions : Self-education expenses (3) Home loan interest (4) Elderly residential care expenses Contributions to retirement schemes Approved charitable donations (5) Notes: 2017-18 HK$ 132,000 264,000 23,000 23,000 46,000 46,000 37,500 132,000 75,000-92,000 18,000 35% 2018-19 HK$ 132,000 264,000 120,000 120,000 25,000 25,000 50,000 50,000 37,500 132,000 75,000 75,000 18,000 35% (1) For dependent living with taxpayer. (2) For whom no child allowance is being claimed. (3) The maximum amount that can be claimed as deductible expense for training courses attended at approved institutions. (4) The entitlement period for tax deduction is 20 years. (5) The maximum deduction allowable is restricted to 35% of the taxpayer s assessable income after deduction of allowable expenses and depreciation allowance.
Standard salaries tax rates: 2017-18 and 2018-19 Standard tax rates 15% Progressive salaries tax rates: 2017-18 2018-19 Net Chargeable Income Tax rate Net Chargeable Income Tax rate First HK$45,000 2% Next HK$45,000 7% Next HK$45,000 12% Remainder 17% First HK$50,000 2% Next HK$50,000 6% Next HK$50,000 10% Next HK$50,000 14% Remainder 17% 2. Profits Tax Business Category 2017-18 and 2018-19 Unincorporated Business Corporation 15% 16.5% 3. Property Tax Taxpayer 2017-18 and 2018-19 Property Owner 15%
4. Stamp Duty Shares transactions: Nature of Document 2017-18 and 2018-19 Contract Note for sale or purchase of any Hong Kong stock Transfer operating as a voluntary disposition inter vivos Transfer of any other kind 0.1% of the amount of the consideration of its value on every sold note and every bought note HK$5 + 0.2% of the value of the stock HK$5 * Effective from 13 February 2015, stamp duty is waived for the transfer of shares or units of all exchange traded funds. Property transactions: i. Ad Valorem Stamp Duty ( AVD ) Currently, Hong Kong operates two sets of AVD rates, namely Scale 1 rates and Scale 2 rates, which apply to certain instruments of transfer of immovable property in Hong Kong. The Stamp Duty (Amendment) (No. 2) Ordinance 2014 ( 2014 (No. 2) Amendment Ordinance ), which was gazetted on 25 July 2014, provides that AVD payable on certain instruments executed on or after 23 February 2013 in respect of the sale and purchase or transfer of immovable property shall be computed at Scale 1 rates, unless specifically exempted or provided otherwise. The major exception, amongst others, is where the property is a residential property, and the purchaser/transferee is a Hong Kong permanent resident ( HKPR ) who is acting on his/her own behalf and does not own any other residential property in Hong Kong at the time of acquisition. In such case, the instrument will be subject to AVD at Scale 2 rates. Under the Stamp Duty (Amendment) Ordinance 2018 ( 2018 Amendment Ordinance ) which was gazetted on 19 January 2018, AVD Scale 1 rates are divided into Part 1 (i.e. a flat rate of 15%) and Part 2 (i.e. the original Scale 1 rates under the 2014 (No. 2) Amendment Ordinance) with effect from 5 November 2016. The 2018 Amendment Ordinance provides that any instruments of residential property executed on or after 5 November 2016 in respect of the sale and purchase or transfer of residential property, unless specifically exempted or provided otherwise, will be subject to AVD at the rate under Part 1 of Scale 1 rates, i.e. a flat rate of 15% of the consideration or value of the residential property, whichever is the higher. Part 1 of Scale 1, however, does not apply to an instrument of residential property where the purchaser/transferee is a HKPR acting on his/her own behalf and does not own any other residential property in Hong Kong at the time of acquisition of the subject property. In such case, the instrument will be subject to AVD at Scale 2 rates. Unless specifically exempted or otherwise provided, Part 2 of Scale 1 rates is applicable to instruments of residential property executed on or after 23 February 2013 but before 5 November 2016. Furthermore, Part 2 of Scale 1 rates is also applicable to instruments of transfer of non-residential property executed on or after 23 February 2013.
A summary of the AVD rates is as follows:- Scale 1 rates: Part 1 of Scale 1 rates: A flat rate of 15% of the consideration or value of the property (whichever is the higher) (Applicable to instruments of residential property executed on or after 5 November 2016). Part 2 of Scale 1 rates: Sales consideration or value of the property (whichever is the higher) Rate (Applicable to instruments of residential property executed on or after 23 February 2013 but before 5 November 2016 and instruments of non-residential property executed on or after 23 February 2013) Up to HK$2,000,000 HK$2,000,001 to HK$2,176,470 HK$2,176,471 to HK$3,000,000 HK$3,000,001 to HK$3,290,330 HK$3,290,331 to HK$4,000,000 HK$4,000,001 to HK$4,428,580 HK$4,428,581 to HK$6,000,000 HK$6,000,001 to HK$6,720,000 HK$6,720,001 to HK$20,000,000 HK$20,000,001 to HK$21,739,130 Exceeding HK$21,739,130 1.50% HK$30,000 + 20% of excess over HK$2M 3.00% HK$90,000 + 20% of excess over HK$3M 4.50% HK$180,000 + 20% of excess over HK$4M 6.00% HK$360,000 + 20% of excess over HK$6M 7.50% HK$1,500,000 + 20% of excess over HK$20M 8.50% Scale 2 rates: Sales consideration or value of the property (whichever is the higher) Rate (with effect from 1 April 2010) Up to HK$2,000,000 HK$2,000,001 to HK$2,351,760 HK$2,351,761 to HK$3,000,000 HK$3,000,001 to HK$3,290,320 HK$3,290,321 to HK$4,000,000 HK$4,000,001 to HK$4,428,570 HK$4,428,571 to HK$6,000,000 HK$6,000,001 to HK$6,720,000 HK$6,720,001 to HK$20,000,000 HK$20,000,001 to HK$21,739,120 Exceeding HK$21,739,120 HK$100 HK$100 + 10% of excess over HK$2M 1.50% HK$45,000 + 10% of excess over HK$3M 2.25% HK$90,000 + 10% of excess over HK$4M 3.00% HK$180,000 + 10% of excess over HK$6M 3.75% HK$750,000 + 10% of excess over HK$20M 4.25%
ii. Special Stamp Duty ( SSD ) 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 SSD. SSD is calculated by reference to the stated consideration or the market value of the property (whichever is the 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 More than 6 months but for 12 months or less More than 12 months but for 24 months or less More than 24 months but for 36 months or less 15% 10% 5% - 20% 15% 10% 10% iii. Buyer s Stamp Duty ( BSD ) With effect from 27 October 2012, unless specifically exempted, BSD is payable on an agreement for sale or a conveyance on sale executed for the acquisition of any residential property. BSD is charged at 15% on the stated consideration or the market value of the property (whichever is the higher). Leasing transactions: Leasing period 2017-18 and 2018-19 Not defined or is uncertain Specified in the lease as not exceeding 1 year Exceeding 1 year but not exceeding 3 years Exceeding 3 years 0.25% 0.25% 0.50% 1.00%
The above information is mainly extracted from the website of the The Hong Kong 2018-19 Budget. Please visit https://www.budget.gov.hk/2018/eng/index.html or contact our PKF Tax and Business Consultants Limited for further details. Information included in this publication is for general reference only. It is not intended to be used, and cannot be used, for avoiding tax and penalty that may be imposed by any tax authorities. Before conducting business and tax plan, professional advice is always recommended. PKF consists of over 400 offices, operating in 150 countries across five regions. We specialise in providing high quality audit, accounting, tax, and business advisory solutions to international and domestic organisations in all our markets. PKF Tax and Business Advisory provides comprehensive tax and business advisory services in respect of the International, Hong Kong and China tax regime. David Cho Tax Partner davidcho@pkf-hk.com Henry Fung Senior Tax Manager henryfung@pkf-hk.com Candice Ng Tax Manager candiceng@pkf-hk.com linkedin.com/company/pkf-hong-kong/ 2018 PKF Hong Kong Limited All Rights Reserved https://www.facebook.com/pkfhk/ PKF Hong Kong Limited is a member firm of the PKF International Limited family of legally independent firms and does not accept any responsibility or liability for the actions or inactions of any individual member or correspondent firm or firms.