Click here to download this document in pdf: 2019-20 Budget.pdf

Guide on year 2019-20 proposed Hong Kong’s Financial Budget

The information contained in this letter is intended to provide readers with an overview of the significant tax changes. We do not accept any liabilities for any actions taken as a result of reading the contents without consulting us. 

Anthony Kam & Associates Limited
Certified Public Accountants
February 2019

Introduction

On 27 February 2019, the Financial Secretary, the Hon Paul MP Chan delivered his 2019-20 Budget Speech.  The details of the budget are summarized as follows:

Economic prospects for 2019-20

  • Consolidated budget surplus $16.8B in 2019-20 (2018-19: surplus $58.7B).
  • GDP growth 2 ~3% in 2019-20 (2018-19: 3.0%).
  • Underlying inflation 2.5% in 2019-20 (2018-19: 2.6%).
  • Government expenditure $607.8B in 2019-20 (2018-19: $537.8B).

Tax relief and enterprises support

  • Reduce salaries tax, tax under personal assessment and profits tax for 2018-19 by 75%, subject to a ceiling of $20,000.
  • Waive rates for 4 quarters of 2019-20 subject to a ceiling of $1,500 per quarter. Waive the business registration fees for 2019-20.
  • Provide an extra 1 month allowance to recipients to CSSA, Old Age Allowance, Old Age Living Allowance or Disability Allowance; similar arrangements will apply to Working Family Allowance and Work Incentive Transport Subsidy.
  • Provide a one-off additional $1,000 Elderly Health Care Vouchers, and increase the accumulation limit of vouchers to $8,000. Provide a one-off grant of $2,500 to each student in need. Pay the examination fee for school candidates sitting for 2020 Hong Kong DSE Examination.
  • Regularise the Technology Voucher Programme and double the funding ceiling for enterprises to $400,000. Inject $1B into the Dedicated Fund for enterprises.
    1. Profits tax (changes are printed in bold)

 

 

Corporate

 

Unincorporate

After first $2M profit

 

16.5%

 

15%

First $2M profit

 

8.25%

 

7.5%

    2. Salaries tax (changes are printed in bold)

 

 

        

Proposed

 

Present

 

 

 

 

2019-20

 

2018/19

 

 

 

 

($)

 

($)

Standard rate

 

 

 

 

 

15%

 

 

 

 

 

 

 

Progressive rates

 

 

 

 

 

 

First $50,000

 

 

 

 

2%

Next $50,000

 

 

 

 

 

6%

Next $50,000

 

 

 

 

10%

Next $50,000

 

 

 

 

14%

Remainder

 

 

 

 

 

17%

 

 

 

 

 

 

 

Allowances

 

 

 

 

Basic

 

 

 

 

132,000

Married

 

 

 

 

264,000

Single parent

 

 

 

 

132,000

Disabled

 

 

 

 

 

75,000

1-9 child

year of birth

 

 

 

 

 

240,000

 

other years

 

 

 

 

 

120,000

Dependent parent/grandparent

 

 

 

 

Basic (aged 60 or above)

 

 

 

50,000

Additional for residing with taxpayer

 

 

50,000

 Basic (aged 55-59)

 

 

 

25,000

 Additional for residing with taxpayer

 

 

 

25,000

Dependent brother/sister

 

 

 

37,500

Disabled dependent

 

 

 

75,000

 

 

 

 

 

 

 

Deductions ceiling:

 

 

 

 

 

 

Self-education expenses

 

 

 

 

 

100,000

Home loan interest (20 years)

 

 

 

 

 

100,000

Charitable donations (% of income)

 

 

35%

Elderly residential care expenses

 

 

100,000

Contributions to recognized retirement schemes

 

 

18,000

Voluntary health insurance scheme

8,000

 

-

Annuity Premiums and MPF Voluntary Contribution

60,000

 

-

 

    3. Property tax (no changes)

Property tax

 

 

15%

    4. Stamp duty 

 

Consideration($)

 

Scale 1*

 

Scale 2*

 

 

2M <

 

1.50%

 

$100

 

 

2M to 3M

 

3.00%

 

1.50%

 

 

3M to 4M

 

4.50%

 

2.25%

 

 

4M to 6M

 

6.00%

 

3.00%

 

 

6M to 20M

 

7.50%

 

3.75%

 

 

>20M

 

8.50%

 

4.25%

 

 

  * subject to marginal relief.

 

 

Non-residential properties - on sale or transfer

  • Ad valorem stamp duty (AVD) - Scale 1 applies.

    Residential properties - on sale or transfer

    A AVD

  • Scale 2 applies to a permanent resident (HKPR) who does not own any residential property in Hong Kong at the time of acquisition.
  • 15% in all other circumstances.

    B Buyer’s stamp duty (BSD)

    Non-HKPR buyer

    15%

     

     

    C Special stamp duty (SSD)

    Property holding period

     

     

     

    < 6 months

     

    20%

     

    > 6 months < 12 months

     

    15%

     

    > 12 months < 36 months

     

    10%

     

    On lease of immovable property in Hong Kong

    Term

    Yearly average rent

     

     

    Not defined or < 1 year

    0.25%

     

     

    1-3years

    0.5%

     

     

    > 3years

    1%

     

     

    Key money, construction fee etc. mentioned in the lease (if rent is payable)

    4.25%

     

     

    On transfer of stock

    Value on every sold and bought note (0.2% combined)

    0.1%

     

     

      5. Rates
    Rental value of a property

    5%

     

     

      6. Duty on tobacco and alcoholic beverages

    For each 1000 cigarettes

    $1906

     

     

    Cigars

    $2,455/kg

     

     

    Liquor with an alcoholic strength of more than 30% by volume

    100%

     

     

      7. First registration tax (FRT) on private cars (PCs)

     

    Tax bands($)

     

     

     

     

     

     

    First 150,000

     

     

     

    40%

     

     

    Next 150,000

     

     

     

    75%

     

     

    Next 200,000

     

     

     

    100%

     

     

    Remainder

     

     

     

    115%

     

    (i) Up to 31 March 2021, electric private cars (e-PCs) and electric commercial vehicles, electric motor cycles and electric motor tricycles their FRT will be waived up to $97,500 and in full respectively.

    (ii) Up to 31 March 2021, PC owners who arrange to scrap and deregister their old PC and then first register a new e-PC enjoy a FRT concession up to $250,000.

    1. Land and Housing

    • Public housing supply in the next 5 years is about 100,400 units.
    • Private housing supply for the next 3-4 years is about 93,000 units. Annual production in the next 5 years is about 18,800 units. 2019-20 supply is about 15,500 units.
    • Commercial/hotel sites land sale in 2019-20 is capable of providing 814,600m² floor area.
    • Set aside $2B to support NGOs in constructing transitional housing. Set aside $22B for the first batch of government projects under the “single site, multiple use” initiative.

    2. Diversified Economy

    Financial Services Industry - Provide a $400M seed capital for the Financial Reporting Council.
    Tourism - Allocate $353M for Hong Kong’s Tourism Industry.
    Innovation and Technology
    • Set aside $5.5B for the development of Cyberport 5. Set aside $16B for universities to refurbish campus facilities. Launch the $2B Re-industrialisation Funding Scheme.
    • Expand the Corporate Venture Fund of the Science Park to $200M.
    • Allocate $800M to support R&D work by universities, laboratories and research centres.
    • Double the annual funding ceiling for each university under the Start-Up Support Scheme to $8M.
    Creative Industries - Inject $1B into the Film Development Fund.
    Professional Services - Allocate $150M to develop an online international dispute resolution platform by NGOs.
    Construction Industry - Earmark $40M for the Centre of Excellence for Major Project Leaders.

    3. A liveable city
    Healthcare - Earmark $10B as a Public Healthcare Stabilisation Fund. Earmark $5B to upgrade and acquire medical equipment. Provide $400M to expand the scope of the Drug Formulary. Provide additional $700M for the Hospital Authority to retain talents. Allocate $1.2B to establish the Hong Kong Genome Institute.

    Arts and Culture - Provide $176M for hosting large-scale world-class arts programmes; allocate $20M to support the digital conversion of film copies; provide additional recurrent funding of $54M to support the operation of art groups

    Sports - Inject $250M into the Hong Kong athletes Fund; allocate $100M to support the operation of 60 national sports associations.

    Building the City - Earmark $6B for the enhancement of waterfront; allocate $600M to refurbish 240 public toilets; set up a $200M Urban Forestry Support Fund.

    Environmental protection - Allocate $120M to extend the public charging network of electric vehicles; provide $1B for government departments to install renewable energy facilities.

    Smart City - Earmark $300M to develop a geospatial data sharing platform and 3D digital maps.

    4. A Caring Society

    • Allocate $20B to purchase 60 properties for providing over 130 welfare facilities; allocate $200M to Lotteries Fund to provide Wi-Fi service to welfare facilities.
    • Allocate $1.36B to provide 500 residential care places and 300 subsidised day care places; allocate $290M funding to strengthen rehabilitation services.
    • Allocate $1.3B to enhance services to toddlers, children and youths; inject $150M into the Enhancing Self-Reliance Through District Partnership Programme.

    5. Nurture Talent

    • Allocate $500M to implement the IT Innovation Lab; allocate $200M to expand the Apprenticeship Scheme for the construction industry.