2015/16 Hong Kong Budget – Salient Highlights

According the 2015/16 Hong Kong Budget announced on 25 February 2015, the surplus for 2014/15 is HK$63.8bn, 6 times higher than originally projected. The 2014/15 surplus would have reached the even more staggering level of HK$91.3bn had not HK$27.5bn been set aside for the Housing Reserve Fund set up in December 2014. For 2015/16, it is estimated that the surplus amounts to HK$36.8bn, boosting fiscal reserves to HK$856.3bn (grown continuously since 2003). (1.) 2015/16 Budget – Summary Tax rebate- Proposing a number of tax measures, including granting rebate 75% of Profits Tax and Salaries Tax, subject to a ceiling of HK$20,000 (see point no. 2 below) One-off measures- Introducing various one-off relief measures to stimulate consumption to counter global economic uncertainty(see point no. 3 below) Strengthen financial hub status- Strengthening the competitiveness of Hong Kong’s financial services industry by a series of proposed measures (see point no. 4 below) Enhance logistics hub status- Supporting the development of a three-runway system - Considering the provision of one-stop customs clearance service through a “Single Window” - Exploring the feasibility of promoting the use of electronic letters of credit to reduce cost Promote business & professional services- Promoting trade in services between Hong Kong and Guangdong Diversify economy by promoting various industry sectors- Allocating HK$80 million to polish Hong Kong's global image and diversify the tourism sector away from its heavy reliance on mainland visitors - Injecting HK$1.5 billion into funds that support SMEs' marketing and development - Pumping HK$500 million into the fashion industry to launch an incubation programme for start-ups and to step up promotion of local brands - Allocating HK$200 million into the Film Development Fund, which supports the production of small-to-medium-budget films - Launching a HK$300 million pilot scheme under which the government will match private-sector donations and sponsorship secured by local arts groups - Allocating HK$100m for a 3-year pilot scheme for insurance and wealth management services, under which activities and internship opportunities will be provided to allow the community to have a better understanding of the nature and career prospects of different jobs in the two sectors Commercial/ business sites- Allocating 4 commercial/ business sites to go on sale providing 180,000m2 of floor area (2.) Proposed Tax Measures (2.1) Granting tax rebate A one-off tax rebate was proposed to reduce of profits tax, salaries tax and tax under personal assessment for the year of assessment 2014/15 by 75%, subject to a ceiling of $20,000 per case (Cap of HK$10,000 last year). (2.2) Increasing child allowances The Financial Secretary proposed to increase the child allowance and the additional child allowance in the year of birth from the current $70,000 to $100,000 for each child effective from the year of assessment 2015/16. After the increase, the total allowance for a child born in 2015/16 will be $200,000 for the year. (2.3) Providing tax concessions to corporate treasury centres On profits tax, the Financial Secretary proposed to allow, under specified conditions, interest deductions under profits tax for corporate treasury centres and reducing profits tax for specified treasury activities by 50 per cent. This measure will be effected by amending the Inland Revenue Ordinance. (2.4) Allowing offshore funds tax exemption for private equity funds The Government plans to table a bill in the Legislative Council later to allow private equity funds to enjoy profits tax exemption available to offshore funds. (2.5) Exploring the feasibility of broadening the Hong Kong tax base The Financial Secretary proposed to explore again the feasibility of broadening the tax base in due course with the aim of stabilising government revenue and creating room for direct tax concessions. (2.6) Considering tax deduction for capital expenditure incurred on the purchase of intellectual property rights The Financial Secretary indicated that he would consider extending the scope of tax deduction for capital expenditure incurred on the purchase of intellectual property rights to cover more types of intellectual property rights as appropriate. (2.7) Considering tax concession for subscribers to regulated health/medical insurance products The Financial Secretary proposed to provide tax concession for subscribers to regulated health/medical insurance products. (3.) Proposed One-off Measures l Waive rates for the first two quarters of 2015/16, subject to a ceiling of HK$2,500 per quarter for each rateable property (Cap of HK$1,500 last year) l Pay one month’s rent for the lower income tenants of public housing, excluding certain wealthier tenants and non-elderly tenants (Included all tenants last year) l Provide two additional months of Comprehensive Social Security Assistance (CSSA) payment, Old Age Allowance, Old Age Living Allowance and Disability Allowance (1 month of additional payment/ allowance was provided last year) l Waive the licence fees for travel agents, hotels and guesthouses, restaurants, hawkers and operators with restricted food permits for six months l Waive vehicle examination fee once for the renewal of vehicle licences of taxis, light buses, franchised and non-franchised buses, goods vehicles, trailers and special purpose vehicles within a year (4.) Proposed Financial Services Industry Measures l Discuss with the relevant authorities of the Central Government the launch of the Shenzhen-Hong Kong Stock Connect and enhancement of the Shanghai-Hong Kong Stock Connect l Commit to further develop Hong Kong’s position as a global hub for offshore RMB business by working with the Chinese authorities to increase the investment quota for the RMB Qualified Foreign Institutional Investors (RQFII) Scheme l Set up a steering committee to plan how to develop Hong Kong into a financial technology hub l Plan to table a bill to allow private equity funds to enjoy profit tax exemption available to offshore funds l Formulate legislative proposals to provide the legal framework for introducing an open-ended fund company structure l Explore possible measures to promote aerospace financing business in Hong Kong l Start exchanging specified financial account information with other jurisdictions on a regular basis by the end of 2018 Disclaimer: The publication contains information in summary form and is therefore intended for general guidance only. 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