News & Events

Introduction:

The Financial Secretary has presented the 2010/11 Budget on 24 February 2010 with three main objectives:
(1) Consolidating recovery;
(2) Economic development;
(3) Caring society.

A series of proposals in the areas such as of property markets, infrastructure, human capital, education, building maintenance, culture, sport, public healthcare and employment and other relief measures has been mentioned.

Economic data

Economic outlook is cautiously optimistic. Uncertainties and potential pitfalls remain in the external environment.

GDP forecast to grow 4-5% for 2010. Headline inflation forecast at 2.3%.

Consolidated Account in 2010/11 forecast to incur a $25.2 billion deficit. Deficit expected to decrease gradually in next few years, and achieve balance by 2013/14.

A revised consolidated budget surplus of $13.8 billion is forecast for 2009/10, as compared with the original $39.9 billion deficit forecast this time last year for the same period.

A summary of tax measures:

In 2010/2011 Budget, the Financial Secretary has proposed several tax measures. The highlights and implementation details for each major measure are set out in the following paragraphs.

1. Tax Concession under Salaries Tax and Personal Assessment
   The Financial Secretary proposed a one-off reduction of 75% of the 2009/10 final tax in respect of salaries tax and tax under personal assessment, subject to a ceiling of $6,000 per case.
2. Stamp Duty on Transactions of Property Valuing over $20 Million
   The Financial Secretary proposed that with effect from 1 April 2010, the stamp duty rate on transactions of property valuing over $20 million is increased from 3.75% to 4.25%. Also, deferred payment of stamp duty will not be applicable to a chargeable agreement for sale of residential property valuing over $20 million.
3. Waiver of business registration fees for one year
   The Financial Secretary proposed to extend the waiver of business registration fees by one year, starting from 1 August 2010.
4. Intellectual Property Rights
   Under the existing tax arrangements, capital expenditure by enterprises to purchase patent rights and industrial know-how is deductible under profits tax. To promote the wider application of intellectual property by enterprises and the development of creative industries, the Financial Secretary proposed to extend the deduction to cover registered trademarks, copyrights and registered designs.
5. Other tax measures
   1. Extend the stamp duty concession in the trading of exchange traded funds.
   2. Extend concessionary profits tax rate to cover qualifying debt instruments.
   3. Accelerate the tax deduction for capital expenditure on environment-friendly vehicles.
6. Others measures
   1. Promote development in the four traditional pillar industries and the six Industries.
   2. Various expenditure measures to help the needy.
   3. Continue to invest in infrastructure.
   4. Various measures to ensure a healthy and stable development of the property market.
   5. Pay two months' rent for public housing tenants at a cost of $1.8 billion.
   6. Provide one more month of CSSA payment, Old Age Allowance and Disability Allowance at a cost of $1.8 billion.
   7. Waive rates for 2010-11, capped at $1,500 per quarter.
   8. Provide a $1,000 allowance to students receiving CSSA or student financial assistance. This will cost $570 million.

Comments:

The Financial secretary has already listened to the voice of the professionals in implementing some tax measures:

1. Extend profits tax deductions to cover the purchase of registered trademarks, copyrights and registered designs.
   This is a welcoming act as it can help to enhance the innovation and technology industry.
   However, more can be done as to allow more than 100% deduction to research and development expenditure. Countries like Singapore have already allowed super- deduction for intellectual properties.
2. Extend the stamp duty concession in the trading of exchange traded funds and extend concessionary profits tax rate to cover qualifying debt instruments.
   These involve extension of the stamp duty concession in the trading of exchange traded funds to those consisting of not more than 40% holding in Hong Kong shares, and the extension of the concessionary profits tax rate applicable to qualifying debt instruments. This is generally welcomed by the financial services industry.
3. Increase in Hong Kong's network in double taxation agreement
   This has been mentioned in the last budget and positive act had been done to improve the exchange in tax information with other tax regimes. A bill had been passed on 6 January 2010 in this regard. This is an encouraging act in enhancing Hong Kong’s role as an international financial center.
4. Others
   The professionals also propose other measures such as the introduction of group loss relief, loss carry-back, amendment of law to allow tax payers to claim depreciation allowances in respect of plant and machinery used outside Hong Kong under import processing arrangement, clarification of offshore claims. These have not been mentioned in this budget and we hope that efforts be put in these several aspects in the coming future.
   Overall the budget is regarded as cautiously optimistic and improvements have been seen. However, many comment that more can be done in term of the strength of the measures. In addition, people also comment there is a lack of long term and holistic solution in the budget for some fundamental issues, such as aging population, health care, caring for the poor and so on.

Salaries Tax (2009/10 and 2010/11)

Rates of tax
First HK$40,000	2%
Next HK$40,000	7%
Next HK$40,000	12%
On the remainder	17%
Standard rate	15%

Personal allowances
Basic allowance	HK$108,000
Married person's allowance	HK$216,000
Child allowance
1st to 9th child (each)
Year of birth	HK$100,000
Other years	HK$50,000
Dependent parent / grandparent allowance
Aged 60 or above
not residing with taxpayer	HK$30,000
residing with taxpayer	HK$60,000
Aged 55 to 59
not residing with taxpayer	HK$15,000
residing with taxpayer	HK$30,000
Dependent brother / sister allowance (for whom no child allowance claimed)	HK$30,000
Single parent allowance	HK$108,000
Disabled dependant allowance (in addition to any allowances already granted for the disabled person)	HK$60,000

Deductions (maximum deduction for amount paid for):
Self-education expenses	HK$60,000
Home loan interest	HK$100,000
Elderly residential care expenses	HK$60,000
Contributions to recognised retirement schemes	HK$12,000
Charitable donations	35% of assessable income

Profits Tax (2009/10 and 2010/11)

Rates of tax
Companies	16.5%
Unincorporated businesses	15%

Plant and machinery
Initial allowance	Deduction rate
Prescribed fixed assets	100%
Environment-friendly machinery and equipment	100%
Other qualifying expenditure	60%
Annual allowance	Deduction rate
Depending on the tax written down value	10%, 20% or 30%

Industrial building allowance
	Allowance rate on qualifying expenditure
Initial allowance	20%
Annual allowance	4%

Commercial building allowance
	Allowance rate on qualifying expenditure
Annual allowance	4% until residue is reduced to Nil

Environment-friendly installations ancillary to buildings
	Allowance rate on qualifying expenditure
Annual allowance	20%

Refurbishment allowance
	Allowance rate on qualifying expenditure
Annual allowance	20%

Property Tax (2009/10 and 2010/11)

Property tax is charged on the owner of any land or buildings in Hong Kong at the standard rate (15%) on the net assessable value of such land or buildings.

Stamp duty (2009/10 and 2010/11)
Immovable property: conveyance on sale

Rates of duty on property consideration
Up to HK$2,000,000	HK$100	HK$100
HK$2,000,001 - $3,000,000	1.5%	1.5%
HK$3,000,001 - $4,000,000	2.25%	2.25%
HK$4,000,001 - $6,000,000	3.00%	3.00%
HK$6,000,001 - $20,000,000	3.75%	3.75%
HK$20,000,001 and above	3.75%	4.25%