Hong Kong (SAR), China

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.

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

Click here to see a comprehensive summary of jurisdictional tax measures and government reliefs in response to COVID-19.

Monetary Policy:

• On 15 March, following moves by the Fed, the Hong Kong Monetary Authority lowered its countercyclical capital buffer imposed on banks to 1% from 2%, and reduced its base rate by 64 basis points to 0.86%.This freed up HKD 500 billion in capital.

Fiscal policy:

• Hong Kong in early March launched a fiscal stimulus of approximately USD 1300 for each of Hong Kong's 7 million residents, as well as targeted income tax cuts and rent suspension for a portion of the population, for a total of around USD 15 billion. Hong Kong will run its first budget deficit in years, and is projected to continue to run this deficit for the coming five years at least.

Third stimulus package—overview

• 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 The MTR Corporation will also reduce fares by 20% for six months commencing from 1 July 2020.
• 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)
  

Proposals on providing relief to hard-hit sectors

• Provide HK$20,000 Million one-off relief to 16 sectors including:
• To provide a one-off relief grant of $40,000 to private schools offering non-formal curriculum registered under the Education Ordinance (tutorial schools); expect to benefit 3 000 tutorial schools.
• To provide a one-off relief grant to service providers and suppliers for schools and post-secondary education institutions.
  • Catering outlets (namely, tuck shops, canteens and restaurants): relief grant of $80,000; expect to benefit 900 operators
  • Lunchbox providers: relief grant of $10,000 (per school); expect to benefit the providers of 1 000 schools
  • School bus drivers, school private light bus drivers and nannies: relief grant of $10,000 (per driver/per school bus for nannies); expect to benefit the drivers of 5 300 school buses/school private light buses and 5 300 nannies
  • Instructors, coaches, trainers and operators of interests classes engaged by schools: relief grant of $7,500 for each eligible individual; expect to benefit 27 000 operators/individuals
• To provide a one-off relief grant of $7,500 to each registered coach under National Sports Associations and Sports Organisations who has proven coaching record in the past year; expect to benefit 17 000 registered coaches.
• To provide a one-off relief grant of $7,500 to each instructor of interests classes for organisations subvented by the Social Welfare Department; expect to benefit 8 200 individuals.
• To provide a one-off relief grant of $8,000 to each private refuse collector; expect to benefit 700 collectors.
• To provide a one-off relief grant of $10,000 to each local primary producer; expect to benefit 7 600 producers.
• To provide a one-off relief grant to exchange participants and Securities and Futures Commission (SFC) licensed individuals:
  • A subsidy of $50,000 to each of the some 790 Category B and Category C exchange participants (i.e. brokers ranked 15th onwards by market turnover); and
  • A subsidy of $2,000 to each SFC licensed individuals, expect to benefit 44 000 licencees

• To provide a one-off cash subsidy to licensed individuals of the estate agency sector. The amount is equal to the 24-month licence fee of the relevant licences; expect to benefit about 40 000 individuals.
• To support passenger transport sector
  • Taxi and red minibus (RMB) drivers
    • To provide a monthly subsidy of $6,000 for a period of 6 months to each eligible active taxi and RMB driver;
    • To provide a one-off subsidy of $7,500 for taxi and RMB drivers who cannot meet all the eligibility requirements of an active driver but can fulfill certain conditions; expect to benefit 59 000 taxi drivers and 2 500 RMB drivers;
  • To provide a one-off subsidy of $30,000 for the registered owner of each taxi and RMB; expect to benefit the registered owners of 18 163 taxis and 1 030 RMBs;
  • To provide a one-off subsidy of $30,000 to the registered owner of each non-franchised bus (NFB), school private light bus (SPLB) and hire car; expect to benefit the registered owners of about 7 400 NFBs, 2 200 SPLBs and 1 300 hire cars; and
  • Reimburse 100% of the actual regular repair and maintenance costs and insurance premium for 6 months for the five franchised bus companies, nine franchised/licensed ferry operators and Hong Kong Tramways Limited
• To support the following creative industries
  • Cinemas Subsidy Scheme: To provide a subsidy of $100,000 per screen to each cinema licensed as a place of public entertainment with commercial operation in March. The maximum subsidy for a cinema circuit is $3 million;
  • PMQ and its tenants: To provide a subsidy of $25 million for upkeeping PMQ’s operation and waiver of its tenants’ rental; and
  • Local printing and publishing sector: To meet all the participation fees of eligible participants in the next Hong Kong Book Fair. The maximum amount of subsidy for each participant is $100,000.
• To support tourism industry
  • To provide each of the licensed travel agents with cash subsidy ranging from $20,000 to $200,000. Expect to benefit about 1 730 agents;
  • To provide each travel agents’ staff and active freelance tourist guides and tour escorts holding a valid pass a monthly subsidy of $5,000 for six months.
  • Expect to benefit about 26 000 individuals;
  • To provide each licensed hotel with cash subsidy of $300,000/$400,000. Expect to benefit about 300 hotels;
  • To provide each coach driver who mainly provides transport services for tourists with a one-off subsidy of $10,000. Expect to benefit about 9 300 drivers;
  • To waive the monthly fixed rent and management fees of the operator of Kai Tak Cruise Terminal for six months; and
  • To provide subsidy to cruise lines by offering refund of berth deposits for cancelled ship calls during the suspension of immigration service when they schedule a prospective ship call
• To support construction sector
  • To provide a subsidy of $7,500 to each eligible Registered Construction Worker;
  • To offer a subsidy of $20,000 to each eligible contractor, specialist contractor and supplier, and company member of major construction-related trade associations; and
  • To offer a subsidy of $10,000 to each eligible Registered Minor Works Contractor, Registered Electrical Contractor, Registered Gas Contractor, Registered Lift / Escalator Contractor, Registered Contractor under Builders’ Lifts and Tower Working Platforms (Safety) Ordinance, Registered Fire Service Installation Contractor and each eligible supplier of construction-related machineries and equipment rental
  • To provide a one-off subsidy of $3 million to the non-profit-making organisations (NPOs) running the projects under the Revitalising Historic Buildings Through Partnership Scheme, PMQ and the Fly the Flyover Operation. Expect to benefit 12 NPOs. The measure can be implemented as soon as funding approval is obtained.
• To support aviation sector
  • To provide one-off subsidy to the aviation sector which is hardly hit by the complete shutdown of international traffic:
    • To provide one-off subsidy of $1 million per large aircraft registered in Hong Kong and $200,000 per small aircraft registered in Hong Kong. Expect to benefit about 270 aircraft
    • Aviation support services and cargo facilities operators: One-off subsidy of up to $3 million (with 100 employees or above) / $1 million (with less than 100 employees) to each operator. Expect to benefit about 40 operators
• To support the sectors which are completely or partly closed due to the measures for safeguarding public health imposed by the Government: To provide one-off subsidy to businesses which have been ordered to close or put in place specified precautionary measures pursuant to the Prevention and Control of Disease (Requirements and Directions) (Business and Premises) Regulation (Cap. 599F)
• operator of amusement game centre: $100,000. Expect to benefit about 240 amusement game centres
• holder of commercial bathhouse licence: $100,000. Expect to benefit about 50 bathhouses
• operator of fitness centre: $100,000. Expect to benefit about 1 660 fitness centres
• operator of place of amusement (billiard establishments, public bowling-alleys and public skating): $100,000. Expect to benefit about 59 establishments
• holder of a Place of Public Entertainment Licence (PPEL) (except cinema): $100,000. Expect to benefit about 180 establishments; holder of a Temporary PPEL: $20,000. Expect to benefit about 300 establishments
• holder of Mahjong / Tin Kau Licence: $100,000. Expected to benefit about 66 establishments
• operator of club-house with a Certificate of Compliance (CoC): $100,000. Expected to benefit about 580 establishments beauty parlour operator: $30,000 to $100,000 depending on the size of the premises, subject to a cap of $3 million for each beauty parlour chain. Expected to benefit about 7 000 beauty parlours
• operator of massage establishment: $30,000 to $100,000 depending on the size of the premises, subject to a cap of $3 million for each massage establishment chain. Expected to benefit about 1 400 massage establishments
• non-governmental operator of sports and recreational facilities on Government sites: $100,000 for facilities provided on each Government site. Expected to benefit about 80 Establishments

Proposals on easing the cash flow and burden of businesses and individuals

1. Enhancing the SME Financing Guarantee Scheme
   1. To introduce enhancements to the 80%, 90% and Special 100% Guarantee
   2. Products under the SME Financing Guarantee Scheme
   3. Estimated additional expenditure of around $11.69 billion
   4. Additional guarantee commitment of $30 billion
   5. About 20 000 to 50 000 enterprises will benefit
   6. HKMC Insurance Limited (HKMCI) will immediately liaise with banks on the implementation details, with a view to rolling out the new measures as soon as possible
2. Rental and Fee Concessions for Government Premises
   1. To increase rental concessions for eligible businesses/organisations operating in government premises from 50% to 75% from April to September 2020. Businesses which have completely ceased operation (such as cross-border ferry piers and tuck shops in government schools) will receive a full rental waiver. About 18 000 hires/tenants will benefit. The Government urges public bodies such as the Housing Authority, the Housing Society, the Urban Renewal Authority and the Airport Authority to provide their commercial tenants with rental concessions and appeal to landlords in the private sector to reduce rental
   2. To increase the rental or fee concessions from 50% to 75% in respect of eligible short-term tenancies and waivers administered by the Lands Department (LandsD) from April to September 2020. About 5 000 tenants/waiver holders will benefit
   3. To expand the scope of the above rental concessions and waiver fee concessions to more businesses/organisations not covered by previous rounds of helping measures, such as depots, driving schools, regulators’ offices for public transport operators and advertising signboards. Shortterm tenancies and waiver holders which are ordered to close or have chosen to close due to Government’s closure orders or other restrictions for safeguarding public health under Cap. 599F may apply for full concession. About 1 300 tenants/ waiver holders/ hirers will benefit
   4. To extend the 75% waiver of water and sewage charges payable by non-domestic accounts for another four months from August to November 2020, subject to a monthly cap of $20,000 and $12,500 respectively per account. This waiver is an extension of the eight months’ waivers already offered. About 250 000 non-domestic accounts will benefit
   5. To waive the registration/enrolment fees for some 125 000 healthcare professionals for three years starting from July 2020 as a token to recognise the contribution of healthcare professionals in the fight against the epidemic
      
      Total estimated revenue forgone arising from the above measures is around $1.3 billion. The Government will implement the measures above administratively or by way of subsidiary legislation as soon as possible
3. MTRCL Fare Reduction
   1. MTRCL to provide a 20% fare reduction for a time-limited period of six months between 1 July 2020 and 1 January 2021
   2. The Government will provide financial assistance to the MTRCL on a 50:50 matching basis. Estimated additional expenditure is around $800 million
   3. More than 5 million passenger trips will benefit from this measure (subject to patronage)
4. Expense threshold of Public Transport Fare Subsidy Scheme (PTFSS)
   1. To temporarily relax the monthly public transport expense threshold of the PTFSS from $400 to $200 for a time-limited period of six months between July 2020 and December 2020
   2. Relevant additional expenditure will be financed by the provision in 2020-21. No additional funding will be sought
   3. The temporary enhancement of PTFSS will be implemented in July 2020, so that the beneficiaries could collect the enhanced subsidy from mid-August onwards
   4. Around 3.8 million of commuters will benefit
5. To grant one-off interest-free deferral of loan repayment for two years to self-financing post-secondary
   1. institutions under the Start-up Loan Scheme, non-profit-making international schools and students receiving loans from the Working Family and Student Financial Assistance Agency (WFSFAA)
   2. Total Government revenue forgone is about $463 million. 13 borrowing self-financing post-secondary institutions, three non-profit-making international schools and about 200 000 student loan repayers will benefit
   3. The Education Bureau (EDB) will invite all borrowing institutions and the three international schools to indicate, within a month’s time, whether they wish to accept the two-year loan repayment holiday
   4. WFSFAA will issue notification letters to student loan repayers concerned to inform them of the two-year loan repayment holiday
6. Deadline for payment of tax for year of assessment 2018/19 that will be falling due will be automatically extended for three months, with details to be announced by the Inland Revenue Department

Retail Sector Subsidy Scheme (5,6 Billion HKD)

• One-off subsidy of HK$80,000 will be provided to each eligible retail store with business commenced before 1 January 2020 and is still in operation at the time of application. The maximum amount of subsidy for a parent company that operates retail groups or chain stores under the same business registration is HK$3 million

Electricity charges subsidy to non-residential account (5,2 Billion HKD)

• Subsidy to each eligible non-residential account holder to cover 75% of their monthly electricity charges for 8 months, subject to a cap of HK$5,000 per month

Food Licence Holders Subsidy Scheme (3,73 Billion HKD)

• Subsidy of HK$200,000 to each eligible holder of i) general restaurant licence; ii) marine restaurant licence; (iii) factory canteen licence
• Subsidy of HK$80,000 to each eligible holder of i) light refreshment restaurant licence; ii) food factory licence; iii) bakery licence; iv) fresh provision shop licence; and v) siu mei and lo mei shop licence

Subsidy for the transport sector (3,23 Billion HKD)

• HK$1 discount (1/3 discount) per litre of LPG for 12 months for LPG taxi and public light buses
• Reimburse 1/3 of actual fuel/electricity cost of franchised bus, ferry and tram companies
• One-off subsidy of HK$10,000 for each specified vehicles (e.g. school bus, goods vehicles, hire cars)
• One-off subsidy of HK$1 million for each cross-boundary ferry

Enhancements to Dedicated Fund on Branding, Upgrading and Domestic Sales and SME Export Marketing Fund (2 Billion HKD)

• Injection of HK$1,000 million to each fund to better support enterprises in exploring business opportunities, promoting sales and participating in business missions organised by the Government and related organisations for market development

Waiver of government fees and charges (1,6 Billion HKD)

• Waive 27 groups of government fees and charges for 12 months covering various sectors including maritime, logistics, retail, catering, tourism, construction, agriculture and fisheries

Convention & Exhibition Industry Subsidy Scheme (1,02 Billion HKD)

• All participants of HKTDC's exhibition and major conventions (i.e., over 400 participants) will be subsidised 50% of their participation fee per participation in HKTDC’s exhibitions, subject to a cap of HK$10,000, for a period of 12 months from the time when HKTDC is holding event again
• Subsidises all organisers of exhibitions and international conventions/conferences (i.e. conventions/conferences with over 400 participants and at least 50% of which are non-local participants) at HKCEC and AWE 100% of the venue rental for one year

Reduce the rental for tenancies of government land for community and business use (873 Million HKD)

• Reduce the rental for tenancies of government land for community and business use under the Lands Department, public market stalls leased by the Food and Environmental Hygiene Department, catering establishments and retail stores leased by the Government Property Agency, public cargo working areas leased by the Marine Department and stalls/facilities in the four wholesale markets managed by the Agriculture, Fisheries and Conservation Department by 50% for 12 months

Rental waivers for tenants at the Science Park, industrial estates and Cyberport (380million HKD)

• 6 months rental waiver for tenants and start-ups
• Subsidies for live marine fish wholesale traders and fishing vessels with Mainland deckhands
• A subsidy of HK$200,000 to the operator of each live marine fish wholesale stall in the Fish Marketing Organization markets;
• A subsidy to the owner of each fishing vessel and fish collector vessel with Mainland deckhands
  • HK$200,000 for each vessel of 25 meters or above in length; and
  • HK$80,000 for each vessel of less than 25 meters in length

Support to children care centres (220 million HKD)

• Special grant of HK$21 million per month to 258 aided CCCs for 4 months
• Special grant of HK$34 million per month to 299 non-aided CCCs for 4 months
  

Arts and Culture Sector Subsidy Scheme (150 million HKD)

• Disburse funding to arts and culturalorganisations to support staff especially freelance artists as well as workers doing menial and other supportive tasks

Licensed Guesthouses Subsidy Scheme (150 million HKD)

• Subsidy of HK$80,000 per licensed guesthouse

Travel Agents Subsidy Scheme (140 million HKD)

• Subsidy of HK$80,000 per licensed travel agents

Enhancement the SME Financing Guarantee Scheme (“SFGS”) (117 million HKD)

• Introduce enhancements to the 80%, 90% and Special 100% Guarantee Products under the SGFS
• Additional guarantee commitment of HK$30 billion

Support to training bodies (90 million HKD)

• Special grant to appointed training bodies

Licensed Hawkers Subsidy Scheme (30 million HKD)

• Subsidy of HK$5,000 to each hawker licence
  

Implementing the Employment Support Scheme ($80 billion):

• The Government will provide wage subsidy to eligible employers to retain the latter’s employees. Employers have to undertake that they cannot implement redundancy.
• All employers who have been making Mandatory Provident Fund (MPF) contributions for employees are eligible not just those in particularly hit industries, except those on the exclusion list (employees of the HKSARG, statutory bodies and Government subvented organizations)
• The wage subsidy to be provided by the Government is calculated based on 50% of the monthly salary, which is capped at HKD18,000 (i.e. the median monthly wage in Q2 2019), for a period of six months. A maximum monthly subsidy of HKD9,000 per employee
• Employers would be given the flexibility to designate one of the months between January and April to be the basis on which the subsidy for that business will be calculated
• To be disbursed to employers in two payments, with the first not later than June 2020. Expect to benefit 1.5 million employees
• Employers in other sectors such as catering, construction and transport (mainly taxi and red mini-bus drivers) which are not fully covered by the MPF scheme will be assisted in the sector-specific schemes
• A one-off lump sum subsidy will be provided to self-employed persons who have made MPF contributions

Supporting the unemployed:

• To temporarily relax the asset limits of Comprehensive Social Security Assistance (CSSA) Scheme: To provide a timelimited unemployment support scheme through CSSA Scheme. The asset limits for an able-bodied applicant will be increased by 100% for a period of 6 months. It is roughly estimated that the support scheme would benefit 40 000 households.

Job creation:

• To invest $6 billion to create around 30 000 time-limited jobs (up to 12 months) in the public and private sectors in the coming two years for people of different skill sets and academic qualifications, benefitting professionals and technicians, fresh graduates, middle level and grassroots workers.
  

Six measures to encourage staff in various professions to learn new skills and help enterprises to apply technology:

• LAWTECH Fund: To assist some SME law firms/ barristers’ chambers to procure / upgrade their information technology system and arrange relevant LAWTECH training for their staff to support the development of remote hearings. About 700 SME law firms/ barristers’ chambers and related persons will benefit (about $40 million)
• COVID-19 Online Dispute Resolution (ODR) Scheme: To provide ODR services for disputes related to or arising from COVID-19 (about $70 million)
• Encouraging Deployment of 5G: To subsidise the public and private sectors 50% of project costs for projects deploying 5G technologies, subject to a cap of $500,000 for each project. Expect to subsidise 100 projects (about $60 million)
• Distance Business Programme: To implement a programme under the Innovation and Technology Bureau to support enterprises to continue business with technology adoption and related training. Expect to benefit over 3 000 enterprises and 40 000 individuals (about $500 million)
• Training Subsidies for the Construction Sector: To provide training subsidies to some 600 consulting firms through the Construction Industry Council. The subsidy for each company will be $50,000 (about $30 million)
• Matching Grants for Skills Upgrading: To provide matching grants for training programmes for staff in the public and private sectors ($100 million)

Sector-specific relief

• Additional funding of approximately HKD21 billion is to be provided to 16 specific hard-hit sectors including SME Exchange participants and SFC licensees, travel industries, construction-related enterprises, education, school bus operators and the aviation industry.

Job advancement (800 million HKD)

• Help enterprises to apply technology and encourage staff in various professions to learn new skills
  

• Most civil servants will gradually return to work from May 4, but the government had not yet decided whether to ease travel and social distancing restrictions that are due to expire w/c 4 May. Looking to ease the way out of a lockdown, outdoor sports facilities, libraries and museums would also reopen from Monday although they would still be subject to a ban on gatherings of more than four people. social distancing and travel curbs would be extended until at least May 7. A key consideration for Lam will be whether to ease cross-border travel restrictions with mainland China. Compulsory quarantine for all visitors to the city would be extended to June 7, although cross-border students and professionals would be exempt.

• One of the worst hit industries during the COVID-19 crisis is the aviation industry with the industry coming to a virtual standstill. Further relief of HKD2 billion will be provided to the Airport Authority, airlines and its immediate supporting operators to ease pressure on their liquidity.
• The Hong Kong Monetary Authority will increase its lending capacity to HKD1 trillion enabling banks to lend and provide individual clients “Principal moratorium” for a specified period to help provide liquidity to businesses, especially the SMEs.
• In addition, all major insurance companies are offering a grace period of premium payment up to 30 to 180 days for holders of individual life, critical illness and medical policies for a specified period.

Flexible Handling of Government Works and Non-works Contracts and Other Development Projects

• Relevant departments will extend the deadline for project completion in accordance with contract mechanism and/or relax the payment schedules of Government works and non-works contracts, as well as extend the Building Covenant (BC) period for development projects by up to six months in land leases. About 1 000 contractors, consultants and land lessees will benefit
• Government departments will work with contractors/ consultants to implement the above measures as soon as possible. On free extension of BC period, LandsD will issue appropriate public notice to promulgate the detailed arrangements for lessees to apply
• For non-works contracts, the Government will encourage procuring departments to provide more frequent payments to contractors, break up milestones in payment schedules into more deliverables to enable more frequent payments, and provide larger sums for upfront/milestone payments. Procuring departments have also been urged to do their best to compress their normal payment cycle from 30 days to around one to two weeks

Measures to ease the lockdown

• Most civil servants will gradually return to work from May 4, but the government had not yet decided whether to ease travel and social distancing restrictions that are due to expire w/c 4 May. Looking to ease the way out of a lockdown, outdoor sports facilities, libraries and museums would also reopen from Monday although they would still be subject to a ban on gatherings of more than four people. social distancing and travel curbs would be extended until at least May 7. A key consideration for Lam will be whether to ease cross-border travel restrictions with mainland China. Compulsory quarantine for all visitors to the city would be extended to June 7, although cross-border students and professionals would be exempt. 

Main sources of information

• Hong Kong: Tax relief measures, response to coronavirus (COVID-19) 
• Hong Kong: Tax relief, economic stimulus (COVID-19)
• Hong Kong: Extended notification deadline, country-by-country reporting (COVID-19)
• Reuters
• Bloomberg
• HK Gov.
• Hong Kong: Subsidy payments, financial assistance grants exempt from tax (COVID-19)

Tax: Curtis Ng – curtis.ng@kpmg.com
Restructuring: Patrick Cowley – patrick.cowley@kpmg.com
Legal: Lachlan Wolfers – lachlan.wolfers@kpmg.com / Shirley Fu – shirley.fu@kpmglegal.com.cn