Hong Kong Budget 2022-23: All You Need to Know

Hong Kong 2022-23 Budget (2022-23 Budget) announces pending plans worth over HK$170 billion to boost the economy and maintain public confidence.

To be more specific, the Budget will continue to adopt an expansionary fiscal policy with initiatives mainly focusing on four areas:

Supporting an all-out effort to win the fight against the epidemicRelieving the hardship of Hong Kong people and SMEsRendering support to the struggling economy and fostering post-epidemic economic revival

Investing for the future by planning ahead for the medium- and long-term development of the Hong Kong economy

Here we list the preferemtial policy that undertrakes in 2022-23.

Tax measures proposed to support individuals and enterprises

To relieve people’s hardship and preserve the vitality of the economy, and in particular the survival of small to medium-sized enterprises (SMEs), Budget 2022-23 proposes a series of counter-cyclical measures, some of which are related to taxes, including:Reducing profits tax, salaries tax, and tax under personal assessment for the year of assessment 2021-22 (that is, from April 1, 2021 to March 31, 2022)Waiving business registration fees for 2022-23

Introducing a tax deduction for domestic rental expenses

Profits tax

The Financial Secretary proposed a one-off reduction of profits tax for the year of assessment 2021-22 by 100 percent, subject to a ceiling of HK$10,000 per case. This measure will benefit 151,000 businesses and reduce government revenue by HK$1.2 billion.

The Inland Revenue Department (IRD) of the HKSAR further supplemented with the following points of information:The tax reduction ceiling will be applied to each business.The proposed reduction will be reflected in the final tax payable for the year of assessment 2021-22, but not to the provisional tax of the same year. Therefore, taxpayers are still required to pay their provisional tax on time despite the proposed reduction measure.

Before the enactment of the relevant legislation, relevant taxpayers should file their profits tax returns for the year of assessment 2021-22 as usual. Upon enactment of the relevant legislation, the IRD will calculate the reduction in the final assessment. For any final assessment for 2021-22 issued before the enactment of the law, the IRD will make a reassessment after the enactment. Taxpayers are not required to make any applications or enquiries to the IRD.

In addition to the above proposed reduction of profits tax, the 2022-23 Budget proposes to provide tax concessions for eligible family investment management entities managed by single-family offices. No further details are available at the time of writing this article. The Financial Secretary said they will consult the sector on the detailed proposal as soon as possible and aim to submit legislative amendments to the Legal Council (LegCo) within the current legislative session.No changes are proposed to tax rates of the profits tax in the 2022-23 Budget.That is to say, the standard profits tax rates for the year of assessment 2021-22 will still be at 16 percent for corporations and 15 percent for incorporated businesses. And the two-tiered profits tax rates will still be as shown in the below table:

Salaries tax and tax under personal assessment

To provide support for individuals who have been affected by the epidemic, the 2022-23 Budget proposes a one-off reduction of salaries tax and tax under personal assessment for the year of assessment 2021-22 by 100 percent, subject to a ceiling of HK$10,000. The reduction will be reflected in the final tax payable for the year of assessment 2021-22. This measure will benefit 2.01 million taxpayers and reduce government revenue by HK$13.1 billion.

Similar to the proposed profits tax reduction measures, the IRD further supplemented that:For salaries tax, the ceiling is applied to each individual taxpayer. For married couples who are jointly assessed, the ceiling is applied to each married couple (that is, capped at HK$10,000 in total). For personal assessment, the ceiling is applied to each single taxpayer or married person who elects for personal assessment separately from his/her spouse. If a taxpayer elects for personal assessment jointly with his/her spouse, the tax reduction is capped at HK$10,000 for the married couple.The proposed tax reduction is not applicable to property tax. Individuals with rental income, if eligible for personal assessment, may be able to enjoy such reduction under personal assessment.

A taxpayer who is separately chargeable to salaries tax and profits tax can enjoy tax reduction under each of the tax types.

Taxpayers should file their profits tax returns and tax returns for individuals for the year of assessment 2021/22 as usual.

Before the enactment of the relevant legislation, taxpayers should file their profits tax returns for the year of assessment 2021-22 as usual.

The proposed tax reduction will only be applicable to the final tax for the year of assessment 2021/22, but not to the provisional tax of the same year. Therefore, taxpayers are still required to pay their provisional tax on time despite the proposed reduction measure.

In addition to the above proposed reduction measures, the 2022-23 Budget also proposes to provide a tax reduction for domestic rental expenses starting from the year of assessment 2022-23, subject to a ceiling of HK$100,000 for a year of assessment. This is to ease the burden of renting a private property on taxpayers liable to salaries tax and tax under personal assessment who are not owners of domestic properties. Further information supplemented by the IRD is noted in the table below.

Waiver of business registration fees for one year

The Financial Secretary proposed to waive business registration fees for one year from April 1, 2022 to March 31, 2023 (Waiver Period). This measure will benefit 1.5 million business operators and reduce government revenue by HK$3 billion.The Hong Kong Government will introduce the relevant legislative amendment into the LegCo as soon as possible to implement the measure.

The IRD has provided more details on the implementation of this proposed measure:In respect of local companies registered under the one-stop company incorporation and business registration regime (“One-stop Registration”), the fees payable under section 5A(1)(a) of the Business Registration Ordinance (Cap. 310) will be reduced by a sum of HK$2,000 if the related incorporation submissions are made within the Waiver Period. For other cases, the fees payable in respect of business registration certificates and branch registration certificates with commencement date falling within the Waiver Period will be reduced by a sum of HK$2,000 and HK$73, respectively.Businesses are still required to pay the levy for the Protection of Wages on Insolvency Fund.

Businesses that have paid the registration fees for the Waiver Period but are not required to renew their certificates in the Waiver Period can also benefit from the concessionary measure by getting a refund of the relevant amount of business registration fees paid in respect of the Waiver Period.

No application is required. The IRD will directly send refund cheques to eligible businesses for the business registration fees paid in respect of the Waiver Period. The refund arrangement will be announced after the relevant legislative amendment is passed by the LegCo.

Other fiscal measures to support enterprises

In addition to the tax measures, the 2022-23 Budget also provided the below rates concession and waiver of fees and charges to businesses affected by the pandemic:Providing rates concession for non‑domestic properties for four quarters of 2022‑23, subject to a ceiling of HK$5,000 per quarter in the first two quarters and a ceiling of HK$2,000 per quarter in the remaining two quarters for each ratable property.Waiving the business registration fees for 2022

Continuing to waive 75 percent of water and sewage charges payable by non‑domestic households for eight months until November 30, 2022, subject to a monthly ceiling of HK$20,000 and HK$12,500, respectively, per household.

Extending the waivers/concessions of the existing 34 groups of government fees and charges for 12 months starting from October this year. This measure will benefit a wide range of sectors, such as aviation, maritime, logistics, retail, catering, agriculture and fisheries, construction, tourism, and entertainment.

Continuing to grant the 75 percent rental or fee concession currently applicable to eligible tenants of government premises and eligible short‑term tenancies and waivers under the Lands Department for six months until September 30, 2022. During the period, tenants who have to close their properties at the request of the Government will continue to receive full rental waiver for the duration of the closure.

Issuing consumption vouchers

To boost the market sentiment, stimulate local consumption, and speed up economic recovery, the 2022-23 Budget proposes a new round of consumption voucher scheme, under which electronic consumption vouchers with a total value of HK$10,000 will be disbursed by instalment to each eligible Hong Kong permanent resident and new arrival aged 18 or above through suitable stored value facilities. The scheme is expected to benefit about 6.6 million people.To be more specific, consumption vouchers valued at HK$5,000 will be disbursed in April to over 6.3 million successful registrants first by making use of the registration data collected through last year’s consumption voucher scheme. They will get the remaining vouchers by instalments together with the new eligible persons in the middle of the year.

Enhancing economic resilience and enriching industrial development

As to long-term economic policies, the 2022-23 Budget proposes enriched industrial development, and a move towards high-quality and inclusive economic growth, thereby creating more high-quality and diverse employment opportunities.

In addition to making good use of the national policies and Hong Kong’s unique advantages and continuing to play its bridging and platform role between mainland China and the international market, the 2022-23 Budget proposes to allocate more resources to support innovation and technology as well as the digital economy:To support start-ups and technology investments, the 2022-23 Budget proposes to increase the funding allocated to the Hong Kong Growth Portfolio under the Future Fund by HK$10 billion, of which HK$5 billion will be used to set up a new investment fund, namely the Strategic Tech Fund.To help universities realize their R&D outcomes, start-ups of universities with private investments (on a matching basis of one to one) may receive an annual subsidy of up to HK$1.5 million for a maximum of three years.

To further promote the development of life and health technology in Hong Kong, the 2022-23 Budget proposes to earmark HK$10 billion to provide more comprehensive support to relevant enterprises and set up the InnoLife Healthtech Hub in the Hong Kong‑Shenzhen Innovation and Technology Park.

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