Hong Kong Budget 2021-22: Stabilising the economy and supporting expansion into the bay area
As people and companies prepare to operate in a post-COVID world, Financial Secretary Paul Chan Mo-po announced on 24 February the 2021/22 Hong Kong Budget, outlining the Hong Kong SAR Government’s plan for the economy and the proposals for taxation developments.
Find out from us how the budget will affect you, your business and the Hong Kong’s economy and read about the key take-ways for enterprises based in, or planning to enter, the Hong Kong market.
With the epidemic still lingering, the economy is yet to come out of recession and Hong Kong is now experiencing a record high fiscal deficit. In his address Mr Chan announced counter-cyclical measures costing more than $120 billion to alleviate the pressure cause by the economic downturn and the epidemic.
Deficit is forecasted for four consecutive years, mainly due to rises in government expenditure outpacing increases in government revenue. At the same time, with the rollout of a vaccination programme in various places around the world, the global economy may see significant improvements starting from the latter half of 2021 and the Hong Kong economy is forecasted to grow by 3.5 per cent to 5.5 per cent this year and an average of 3.3 per cent each year from 2022 to 2025.
The Government will also work out arrangements regarding Air Travel Bubble with places that have close economic and trade relations with Hong Kong and where the epidemic situation is relatively stable.
Enterprises will benefit from a package of measures worth $9.5 billion which includes:
- Reduce profits tax for the year of assessment 2020-21 by 100%, subject to a ceiling of $10,000.
- Waive business registration fees for 2021-22
- Extend the application period of 100% guarantee low-interest loan for enterprises to the end of 2021, raise loan ceiling from $5 million to $6 million, extend repayment period from 5 to 8 years.
- Allocate $6.6 billion to create around 30 000 time-limited jobs.
- Provide rates concession for non-domestic properties in 2021-22, subject to a ceiling of $5,000 per quarter in first two quarters and $2,000 per quarter in remaining two quarters.
- Allocate $375 million to Hong Kong Trade Development Council (HKTDC) to enhance its capability to organise online activities and to proceed with digitalisation.
For businesses looking to expand in new markets (BUD Fund):
- The Government has announced a new injection of $1.5 billion into the Dedicated Fund on Branding, Upgrading and Domestic Sales.
- Funding ceiling will increase from $4 million to $6 million per each enterprise.
- The geographical scope will be extended to 37 markets (up from 20) with which Hong Kong has signed Free Trade Agreements/Investment Promotion and Protection Agreements.
Read more about BUD Fund.
- Reduction of salaries tax and tax under personal assessment for 2020-21 assessment year by 100%, subject to a $10,000 ceiling.
- Electronic Consumption Voucher of $5,000 to be issued in instalments to each eligible Hong Kong permanent resident and new arrival aged 18 or above.
- Provide rates concession for domestic properties in 2021-22, subject to a ceiling of $1,500 per quarter in first two quarters and $1,000 per quarter in remaining two quarters.
- Grant a subsidy of $1,000 to each residential electricity account.
- Provide an extra financing option for the unemployed by setting up a special 100% Loan Guarantee for Individuals with a loan ceiling of $80,000 and an application period of 6 months. The interest rate is fixed at 1% per annum with a maximum repayment period of 5 years. There will be also reimbursement for interest paid after loans are repaid in full as scheduled.
A particular attention has been given to sustainable development:
- Issue green bonds totalling $175.5 billion within the next 5 years, and plan to issue retail green bonds.
- Roll out Green and Sustainable Finance Grant Scheme to subsidise expenses on bond issuance and external review services.
- Inject $1 billion into Recycling Fund and extend the application period to 2027.
- Hong Kong's first roadmap on the popularisation of electric vehicles, measures include ceasing the new registration of fuel-propelled private cars in 2035 or earlier.
- Complete updated Clean Air Plan for Hong Kong by mid-2021.
- Earmark $1 billion to install small-scale renewable energy systems at government buildings and infrastructure.
- Inject an additional $1 billion into the CreateSmart Initiative.
- Earmark $765 million to support Hong Kong Tourism Board (HKTB) in reviving the tourism industry.
Innovation and technology
- Inject $9.5 billion into the Innovation and Technology Fund by two yearly instalments.
- Press ahead with the development of the Hong Kong-Shenzhen Innovation and Technology Park in the Lok Ma Chau Loop.
- Continue to implement the Science Park expansion and Cyberport 5 development.
- Support the development of 5G networks and applications.
- Commence progressively the operation of the first batch of about 20 R&D laboratories under the “InnoHK Research Clusters” in the first quarter of this year.
- Earmark HK$200m to extend the IT Innovation Lab programme to primary schools and regularise the short-term IT related internship scheme for university students.
Mr Chan also announced a raise of the Stamp Duty on Stock Transfers, from the current 0.1% to 0.13% of the consideration or value of each transaction payable by buyers and sellers respectively. However, at this moment, the Government considers not appropriate to revise rates of profits tax and salaries tax nor to introduce new taxes. The Government will carry out related research and make preparation for discussion and consensus-building at a suitable time.
Further information on the Hong Kong Budget 2021 will be provided as they are made available in the coming days. Meanwhile, for any enquiries on how the Budget may affect your business, please feel free to reach out to our team of experts.
For full details on the budget, please visit the Hong Kong Budget website.
Are you planning to incorporate or register a company in Hong Kong? Read more about Hong Kong company incorporation.