Hong Kong: Tax measures in budget 2021-2022

Hong Kong: Tax measures in budget 2021-2022

No new taxes were introduced in the budget for 2021-2022, but the government proposed to increase the rate of the stamp tax (duty) on stock transfers.

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The following provides an overview of the tax measures that were proposed in the budget.

Profits tax

    

Tax rates
Corporations Unincorporated businesses
Standard tax rate* 16.5% 15%
Two-tiered profits tax regime
Qualifying taxpayers may be taxed at the following reduced rates:
  • First HKD 2 million of assessable profits
  • Remaining balance


  • 8.25%
  • 16.5%


  • 7.5%
  • 15%

Note: Only one entity within a group can benefit from the above reduced rates.

*Concessionary regimes are available for certain specified industries or business activities.

Capital allowances

 

Capital allowances
Depreciation allowances for plant and machinery
  • Initial allowance
  • Annual allowance

  • 60%
  • 10%, 20% or 30%
Industrial building allowances
  • Initial allowance
  • Annual allowance

  • 20%
  • 4%
Commercial building allowance 4%
Building refurbishment 20% deduction for five years
Expenditure on computer hardware and software 100% deduction
Expenditure on environmentally friendly machinery and equipment 100% deduction
Enhanced tax deduction for qualifying research and development expenditure 300% (for the first HKD 2 million)
200% (for the remaining balance)

Profits tax on royalties paid to non-residents

When a royalty payment is made to a non-resident associated person and the underlying intellectual property was once owned by any Hong Kong taxpayer, the assessable profits of the non-resident associated person are deemed to be 100% of the payment (i.e., the effective tax rate is 16.5%). In other cases, the assessable profits of the non-resident person are generally deemed to be 30% of the payment (i.e., the effective tax rate is 4.95%). The effective tax rate may be reduced under the terms of the applicable double taxation agreement or election of the two-tiered profits tax rate.

No changes are proposed in the tax rates for 2021-2022.

Salaries tax

No changes are proposed to tax rates and allowances for individuals.

A reduction of 100% in salaries tax payable for 2020-2021, subject to a ceiling of HKD 10,000, is proposed.

Tax rates

The tax charge for salaries tax is the lower of the:

  • Net assessable income less charitable donations and allowable deductions at the standard rate (15%); or
  • Net assessable income less charitable donations, allowable deductions and personal allowances, charged at progressive rates.

Property tax, rates and stamp tax

  • Stamp tax: The proposal would increase the rate of the stamp tax (duty) on stock transfers from 0.1% to 0.13% (aggregate 0.26%).
  • Property tax: No changes were proposed.
    • Rates (domestic property): Rates waiver for each domestic property for all four quarters of 2021-2022, subject to a ceiling of HKD 1,500 per quarter in the first two quarters and HKD 1,000 per quarter in remaining two quarters
    • Rates (non-domestic property): Rates waiver for each non-domestic property for all four quarters of 2021-2022, subject to a ceiling of HKD 5,000 per quarter in the first two quarters and HKD 2,000 per quarter in the remaining two quarters
  • Sale and purchase of Hong Kong stock: A rate of 0.26% of the consideration or the market value of the stock as at the transfer date (whichever is greater)

 

For more information, contact a KPMG tax professional:

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

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