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Hong Kong: Tax proposals in 2020-2021 budget

Hong Kong: Tax proposals in 2020-2021 budget

Hong Kong’s 2020-2021 budget was delivered on 26 February 2020, and while it includes certain relief measures (generally one-off rebates for profits tax and salaries tax and certain waivers), the budget does not propose any changes to the tax rates or tax bands.

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The budget focuses on providing relief to support enterprises and livelihoods, safeguard jobs, and stimulate the economy, and to this end, it includes a HKD 10,000 cash payment to all Hong Kong permanent residents who are age 18 years or above.

Tax proposals concerning profits tax

Tax proposals included in the budget include a reduction of 2019-20 profits tax payable by 100%, subject to a ceiling of HKD 20,000.

The budget also introduces a new limited partnership regime for private equity funds, in order to provide a tax concession for carried interest paid by private equity funds operating in Hong Kong, subject to certain conditions.

The budget also provides a profits tax exemption for qualifying ship lessors and a 50% tax concession to qualifying ship leasing managers and eligible insurance businesses (including marine insurance).

The following table summarizes the profit tax rates.

Hong Kong

Concerning royalties paid to non-residents, when the royalty payment is derived from an associated company and the relevant intellectual property had once been owned by any Hong Kong taxpayer, the assessable profits are deemed to be 100% of the payment (an effective tax rate of 16.5%). In other situations, the assessable profits are generally deemed to be 30% of the payment (an effective tax rate of 4.95%). The effective tax rate may be reduced under the terms of the applicable income tax treaty or election for the two-tiered profits tax rate.

Salaries tax

There are no proposed changes to tax rates or tax allowances for individuals. However, there is a reduction of 100% in salaries tax payable for 2019-20, subject to a ceiling of HKD 20,000.

Indirect tax

The 2020-2021 budget proposes no changes to the property tax. An exemption is proposed regarding the stamp tax (duty) applicable for exchange-traded fund market makers.

Also, the budget includes the following waivers regarding property tax:

  • For each domestic property for all four quarters of 2020-2021, subject to a ceiling of HKD 1,500 per quarter
  • For each nondomestic property for all four quarters of 2020-21, subject to a ceiling of HKD 5,000 per quarter in the first two quarters and HKD 1,500 per quarter in the remaining two quarters

 

For more information, contact a KPMG tax professional:

David Ling | +1 609 874 4381 | davidxling@kpmg.com

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