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2018/19 Hong Kong Government Budget Highlights

Date:  2 Mar 2018

2018/19 Hong Kong Government Budget Highlights

Financial Secretary Mr. Paul Chan Mo-po delivered the year 2018/19 budget speech on 28 February 2018. The budget proposals will need approval by the Legislative Council before taking effect.

Profits Tax

  • The profits tax rates for companies (16.5%) and unincorporated businesses (15%) remain unchanged.
  • Subject to legislative approval, two-tiered profits tax rates regime will be introduced effective from the year of assessment 2018/19.The first HK$2 million of profits earned by a company within the same group will be subject to a lower Profits Tax rate at 8.25%, i.e. half of the current Profits Tax rate 16.5%. The standard profits tax rate of 16.5% would remain unchanged for profits beyond HK$2 million.
  • As regards the proposed super tax deductions for expenditure on qualifying R&D activities, the Government aims to submit the draft legislation to the Legislative Council as soon as possible, with a view to implementing the proposal in 2018. Under the proposal, the first HK$2 million of eligible R&D expenditure will enjoy a 300% tax deduction and the remainder a deduction at 200%.
  • Extend the coverage of profits tax concession to specified treasury services provided by qualifying corporate treasury centres to all their onshore associated corporations.
Salaries Tax
  • Adjust the tax bands and marginal tax rates to widen the width of tax bands from $45,000 to $50,000 and to increase the number of tax bands from 4 to 5 with marginal tax rates of 2%, 6%, 10%, 14% and 17% commencing from the year of assessment 2018/19.  
 of Assessment
(From 2018/19 onwards#)
  Net Chargeable Income
(Tax band)
Rate Net Chargeable Income
(Tax band)
On the first  45,000  2%  50,000  2%
On the next  45,000  7%  50,000  6%
On the next  45,000 12%  50,000 10%
On the next ______    50,000 14%
  135,000   200,000  
Remainder   17%   17%
  • Increase the basic and additional child allowance in the year of birth from HK$100,000 to HK$120,000 each. After the increase, the total allowance for a child born in 2018/19will be HK$240,000 for the year.
  • Increase dependent parent/grandparent allowances:

- From HK$46,000 to HK$50,000 (for each parent/grandparent aged 60 or above and not residing with the taxpayer).
- From HK$92,000 to HK$100,000 (for each parent/grandparent aged 60 or above and residing with the taxpayer).
- From HK$23,000 to HK$25,000 (for each parent/grandparent aged 55 to 59 and not residing with the taxpayer).
- From HK$46,000 to HK$50,000 (for each parent/grandparent aged 55 to 59 and residing with the taxpayer).

  • Increase the deduction ceiling for elderly residential care expenses from HK$92,000 to HK$100,000.
  • Introduce personal disability allowance of HK$75,000.
  • Relax the requirement for election of Personal Assessment by married persons by allowing married persons the option to elect personal assessment separately.
  • Introducing a tax deduction of qualified premium for eligible health insurance products under the Voluntary Health Insurance Scheme. The annual tax ceiling of premium for tax deduction is $8,000 per insured person.
One-off Measures
  • Reduce profits tax for 2017/18 by 75% subject to a ceiling of HK$30,000.
  • Reduce salaries tax and tax under personal assessment for 2017/18 by 75%, capped at $30,000.
  • Waive government rates for 2018/19, subject to a ceiling of HK$2,500 per quarter for each rateable property.
  • Provide two additional months of Comprehensive Social Security Assistance (CSSA) payment, Old Age Allowance, Old Age Living Allowance and Disability Allowance.
Other Points of Interest 
  • Issue Silver Bonds in 2018 and 2019, targeting Hong Kong residents aged 65 or above.
  • Waive in full the first registration tax (FRT) for electric commercial vehicles, electric motor cycles and electric motor tricycles until 31 March 2021.
  • Wavie FRT for electric private car of up to $97,500 and 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 $250,000. 
  • Amend the qualifying debt instrument scheme by increasing the types of qualified instruments.  In addition to instruments lodged and cleared by the Central Money markets Unit of the HKMA, debt securities listed on the SEHK will also become eligible.  To extend scope of tax exemption from debt instruments with an original maturity of not less than seven years to instruments of any duration.  Under the enhanced scheme, Hong Kong investors will enjoy tax concession for interest income and trading profits derived from a more diverse range of debt instruments.
  • Launch a 3 year Pilot Bond Grant Scheme to attract local, Mainland and overseas enterprises to issue bonds in Hong Kong for the first time. The amount of grant for each bond issuance is equivalent to half of the issue expenses, capped at HK$2.5 million.  Each enterprise can apply for a grant for two bond issuances at most. 
  • It is expected that the regime for open-ended fund companies to be used as a fund vehicle and the relevant tax exemption arrangements can commence operation later this year. Besides, the Government will review the existing tax concession arrangements applicable to the fund industry with regard to international requirements on tax co-operationand will also examine the feasibility of introducing a limited partnership regime for private equity funds and the related tax arrangements.