Hong Kong: Tax measures in budget 2022-2023

Government proposed that a progressive rating system will be introduced in 2024-25

Government proposed that a progressive rating system will be introduced in 2024-25

No new taxes were introduced in the budget for 2022-2023, but it is anticipated that there will be future tax law changes in Hong Kong.

In particular, the government proposed that a progressive rating system will be introduced in 2024-25.

Further, in response to the international tax reform proposals drawn up by the Organisation for Economic Cooperation and Development (OECD), the government is looking to introduce a tax bill within 2022 to implement the OECD’s global minimum tax rate for large multinational enterprise groups with global turnover of at least €750 million. This will include the introduction of a domestic minimum top-up tax for these groups from the year of assessment 2024-25.

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

Profits tax

     

HK

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

    

HK2

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 would be deemed to be 100% of the payment (i.e., the effective tax rate is 15% or 16.5%). In other cases, the assessable profits of the non-resident person would generally be deemed to be 30% of the payment (i.e., the effective tax rate is 4.5% or 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 2022-2023.

Salaries tax

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

A reduction of 100% in salaries tax payable for 2021-2022, subject to a ceiling of HKD 10,000, is proposed.

In addition, a tax deduction for domestic rental expenses, subject to a ceiling of HKD 100,000 is proposed starting from 2022-23.

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

  • Rating system: Proposal to revise the rating system by: (1) granting rates concession in a more targeted manner starting in  2023-24; and (2) introducing a progressive rating system for domestic properties starting in 2024-25.
  • Stamp tax: No changes were proposed.
  • 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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