Hong Kong: Tax relief, economic stimulus (COVID-19)
Hong Kong: Tax relief, economic stimulus (COVID-19)
The Hong Kong government on 8 April 2020 unveiled a new stimulus package to support businesses and individuals in response to the coronavirus (COVID-19) pandemic.
Review of tax relief
Various administrative measures announced by the Inland Revenue Department to assist taxpayers experiencing financial difficulties as a result of the COVID-19 outbreak include:
- Delaying by one month, the issuance of profits tax returns to 4 May 2020 and salaries tax returns to 1 June 2020 for the year of assessment for 2019/20
- Extending the deadlines for filing (lodgement) to 4 May 2020 of objections and holdover applications as well as for filing due date of tax returns that fall between 23 March 2020 and 2 May 2020
- Extending to 1 June 2020 the date for filing country-by-country reporting notification for entities with accounting periods ended between 31 December 2019 and 29 February 2020
- Deferring by three months the deadline for remitting payments of profits tax, salaries tax and tax under personal assessment for the year of assessment 2018/19 due in April, May and June 2020
- Extending to 30 June 2020 the tax filing deadline for N-code taxpayers (with year-end falling between 1 April and 30 November) represented by tax representatives (from 3 June 2020)
Third stimulus package—overview
The most recent stimulus package represents approximately 5% of Hong Kong’s gross domestic product and covers a broad range of issues and sectors, and the provisions are intended to help businesses stay afloat, alleviate some of the financial burden suffered by individuals and businesses, and ultimately assist the Hong Kong economy in recovering after the COVID-19 crisis passes. This latest round of stimulus builds on a relief package announced in the 2020-21 Hong Kong budget and also the anti-epidemic fund approved by Legislative Council on 21 February 2020.
The key measures announced in the latest economic stimulus announced by the government have four key components:
Job retention, job creation, and job advancement—in general, a wage subsidy for eligible private sector employers (in general, at 50% of an employee’s monthly wage, subject to a cap) for six months, provided that employers retain their employees and there are no employee redundancies
Sector-specific relief for 16 hard-hit sectors (including industries, construction-related enterprises, education, and aviation industries)
Government rental concessions, fee waivers, provision of loans, and loan-repayment deferrals to assist small and medium-sized enterprises (concessionary interest rates of up to 3% provided for one year, for loans under 80% and 90% guarantees)—other measures include providing tenants of government properties a 75% rent concession for six months, waiving registration fees for medical workers for three years, and deferring payment of salaries tax, personal assessment and profits tax due for payment in April, May, and June 2020 by three months
Other relief through government facilitation (such as support for aviation industry, support enabling banks to lend and to provide individual banking clients with a moratorium on principal, and support for insurance companies providing a grace period from 30 days to 180 days for premium payments)
From a tax perspective, it is unclear whether the subsidies being provided under this relief package are taxable. Ordinarily, grants or subsidies in connection with trade, profession or business would be taxable under Section 15(1)(c) of the Inland Revenue Ordinance unless the sums were specifically used to fund capital expenditures. It therefore remains to be seen whether the Inland Revenue Department will issue a guidance addressing whether the grants or subsidies received as part of a financial aid are taxable or whether the government will provide a specific exemption for this relief.
All businesses need to carefully consider their eligibility for the grants and other relief measures, and consider the impact, if any, that measures already taken to save costs may have on eligibility for the employment support scheme. Until the details of the scheme are available, employers need to act with caution on taking other cost-saving measures.
For more information, contact KPMG’s Global Head of International Tax:
Rodney Lawrence | +1 (312) 665 5137 | email@example.com
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