Hong Kong Budget Highlights for 2021-2022
Hong Kong Financial Secretary Paul Chan recently delivered his budget for 2021-2022, outlining the Government’s plan for the economy and proposals for taxation developments. We set out the key points so you may know how the budget will affect you and your business.
Key Measures of the Budget for SMEs
Many businesses were required to completely close during the four lockdowns Hong Kong has undergone since last years’ budget. Recognizing the financial burden caused by this situation, in support of enterprises, Paul Chan announced the implementation of measures involving a total of about $9.5 billion:
The two-tier profits tax rates for companies (8.25%/16.5%) and unincorporated businesses (7.5%/15%) will remain unchanged.
Per 2021-22 Budget, 100% of the 2020/21 profits tax is waived subject to a ceiling of $10,000 per case.
Special 100% Guarantee Product (up to $6m) extended in time and flexibility).
Pre-Approved Principal Payment Holiday Scheme extended.
Business registration fees waived for 2021/22.
Stimulate the Economy
The Government has had to implement restrictions on travel and public gatherings due to the spread of COVID-19. Accordingly, relief measures to encourage tourism and local spending were also mentioned in the budget, including:
Distribution of $5,000 e-vouchers for eligible Hong Kong permanent residents.
Investment of $375 million for HKTDC to enhance its capability to organize online activities and proceed with digitalization.
Allocation of $934 million to support and improve tourism resources.
Injection $1.5 billion into the Dedicated Fund on Branding, Upgrading and Domestic Sales (a.ka. BUD fund). There will be an increase in the funding ceiling for each enterprise from $4 million to $6 million to support exploration into more diversified markets by fully utilizing the better protection offered by the IPPAs.
Innovation and Technology
In the last three years, the Government has continued to support I&T development allocating over $100 billion in this sector. Hong Kong has seen the rise of eight unicorns making the region comparable to other larger economies. Convinced by this positive trend and considering the long-term development of Hong Kong, Paul Chan revealed measures to continue promoting I&T such as:
Investing $200 million to roll out the “Knowing More About IT” Programme.
Injecting a total of $9.5 billion for Innovation and Technology Fund by two yearly instalments.
The Government expects Hong Kong’s economy to return to growth in 2021, with GDP forecast to increase by 3.5-5.5%. The economy is expected to grow by an average of 3.3% per annum from 2022 to 2025. Note this is very much an assumption. Whether this can be achieved will depend on several internal and external factors, such as Covid-19, the timeline for reopening the border to business, and the steps of economic recovery in overseas markets.
As always, note that the budget measures are subject to final approval by the legislative council.
For the full details of the above and other measures set out in the budget this year, check out the link here.