Click here to download this document in pdf: 2018-19 Budget.pdf

Guide on year 2018-19 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. No liabilities can be accepted for any actions taken as a result of reading the contents without our consultation having regard to all relevant factors.

Anthony Kam & Associates Limited
Certified Public Accountants
February 2018

Introduction

On 28 February 2018, the Financial Secretary, the Hon Paul MP Chan delivered his 2018-19 Budget Speech. The details of the budget are summarized as follows:

Economic prospects for 2018-19

  • Consolidated budget is forecast at surplus $46.6 billion in 2018-19 (2017-18: surplus $138.0 billion).
  • Gross Domestic Product growth is forecast to be 3% ~ 4% in 2018-19 (2017-18: 3.8%).
  • Underlying inflation is forecast at 2.5% in 2018-19 (2017-18: 1.7%).
  • Government expenditure is forecast at $557.9 billion in 2018-19 (2017-18: $474.4 billion).

Tax relief, Caring and Sharing

  • Reduce salaries tax and tax under personal assessment for 2017-18 by 75%, subject to a ceiling of $30,000. Reduce profits tax for 2017-18 by 75%, subject to a ceiling of $30,000. Waive rates for 4 quarters of 2018-19 subject to a ceiling of $2,500.
  • Provide an extra allowance to recipients to CSSA, Old Age Allowance, Old Age Living Allowance or Disability Allowance, equal to 2 month of the standard rate; similar arrangements will apply to Low-income Working Family Allowance and Work Incentive Transport Subsidy.
  • Provide a one-off grant of $2,000 to each student in need. Pay the examination fees for candidates sitting for the 2019 Hong Kong DSE Examination.
  • To set aside $15B to effect the abolition of the MPF “offsetting” arrangement. Allocate a total of about $220M to strengthen care for children and disadvantaged youths. Earmark $500M to strengthen support for ethnic minorities. Allocate an additional $660M to improve rehabilitation services. Implement measures on elderly services, involving recurrent provision of about $1,263M and non-recurrent expenditure of about $2,229M. Allocate about $500M from the Lotteries Fund to provide social work services.
    1. Profits tax (no changes)

Corporate; Corporate partner in unincorporated business

 

16.5%

 

 

Unincorporated business

 

15%

 

 

    2. Salaries tax (changes are printed in bold)

 

 

        

Proposed

 

Present

 

 

 

 

2018/19

 

2017/18

 

 

 

 

($)

 

($)

Standard rate

 

 

 

 

 

15%

 

 

 

 

 

 

 

Progressive rates

 

 

 

 

 

 

First Proposed $50,000 (Present $45,000)

 

 

2%

 

2%

Next Proposed $50,000 (Present $45,000)

 

 

 

6%

 

7%

Next Proposed $50,000 (Present $45,000)

 

 

10%

 

12%

Next Proposed $50,000 (Present $45,000)

 

 

14%

 

17%

Porposed remainder

 

 

 

17%

 

 

 

 

 

 

 

 

 

Allowances

 

 

 

 

Basic

 

 

 

 

132,000

Married

 

 

 

 

264,000

Single parent

 

 

 

 

132,000

Disabled

 

 

 

75,000

 

-

1-9 child (each)

year of birth

 

 

 

240,000

 

200,000

 

other years

 

 

 

120,000

 

100,000

Dependent parent/grandparent

 

 

 

 

Basic (aged 60 or above)

 

50,000

 

46,000

Additional for residing with taxpayer

50,000

 

46,000

 Basic (aged 55-59)

 

25,000

 

23,000

 Additional for residing with taxpayer

 

25,000

 

23,000

Dependent brother/sister

 

 

 

37,500

Disabled dependent

 

 

 

7,5000

 

 

 

 

 

 

 

Deductions ceiling:

 

 

 

 

 

 

Self-education expenses

 

 

 

 

 

100,000

Home loan interest

 

 

 

 

 

100,000

(number of years of deduction)   (20 years)

Charitable donations (% of income)

 

 

35%

Elderly residential care expenses

100,000

 

92,000

Contributions to recognized retirement schemes

 

 

18,000

Voluntary health insurance scheme

8,000

 

-

 

    3. Property tax (no changes)

Property tax

 

 

15%

    4. Stamp duty

 

Stamp duty - On sale or transfer of immovable property in Hong Kong

A Ad valorem stamp duty (AVD)

 

 

Consideration($)

 

Scale 1*

 

Scale 2*

 

 

2 million (M)<

 

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.

 

 

(i) AVD scale 1 applies to all non-residential properties.
(ii) AVD scale 2 applies to all residential properties where the purchaser is a permanent resident (HKPR) who does not own any other residential property in Hong Kong at the time of acquisition.
(iii) AVD is charged at 15% to other residential properties transactions.

B Special stamp duty (SSD) – residential property only

 

 

Acquired Period

 

Property holding period

>27 October 2012

>20 November 2010 <26 October 2012

 

< 6 months

20%

15%

 

> 6 months < 12 months

15%

10%

 

> 12 months < 24 months

10%

5%

 

> 24 months < 36 months

10%

0%

 

C Buyer’s stamp duty (BSD)– residential property only

Non-HKPR buyer

15%

 

 

Stamp duty - 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

4.25%

if rent is also payable

 

Stamp duty - On transfer of Hong Kong stock


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

0.1%

 

 

    5. Rates (no changes)

Rental value of a property

5%

 

 

    6. Duty on tobacco and alcoholic beverages (no changes)

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($)

 

 

 

 

 

 

On the first 150,000

 

 

 

40%

 

 

On the next 150,000

 

 

 

75%

 

 

On the next 200,000

 

 

 

100%

 

 

On the remainder

 

 

 

115%

 

(i) Up to 31 March 2021, electric private cars (e-PCs) and electric commercial vehicles, electric motor cycles and electric motor tircycles their FRT will be waived up to $97,500 and 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 of up to $250,000.

1. Diversified Economy
Innovation and Technology and Financial Services Industry

  • Focus on 4 areas: biotechnology, artificial intelligence, smart city and financial technologies Set aside $20B for Hong Kong Shenzhen Innovation and Technology Park. Inject $10B into innovation and Technology Fund. Earmark $10B for the establishment of two research clusters. Allocate $10B to upgrade facilities of the Science Park. Allocate $200M to Cyberport and another $100M to develop e-sports.
  • Set aside a dedicated provision of $500M to develop financial services industry

Tourism and Trading and Logistics Industry

  • Allocate $226M for the Hong Kong Tourism Board. Allocate $310M to support Ocean Park development. Allocate $30M for enhancing the Pilot Information Technology Development Matching Fund Scheme.
  • Set aside $5B for redeveloping the Air Mail Centre at the Hong Kong International Airport.

Construction and Creative Industries

  • Set up $1B Construction Innovation and Technology Fund. Inject $1B into the CreateSmart Initiative to support development of the creative industries.

Business and Professional Services

  • Inject $1.5B into the Dedicated Fund on Branding, Upgrading and Domestic Sales. Provide $250M to the Hong Kong Trade Development Council.

2. Enhancing Liveability

Healthcare

  • Allocate additional recurrent funding of nearly $6B to Hospital Authority. Allocate $200M to enhance the healthcare professional training. Set aside $300B to support the second 10-year hospital development plan. Provide a one-off additional $1,000 worth of elderly health care vouchers, involving an expenditure of $796M. Extend the Colorectal Cancer Screening Programme for a total expenditure of $940M over the coming 5 years. Establish a $500M fund to promote development of Chinese medicine. Set aside $500M to support the improvement of patient’s co-payment mechanism for purchasing drugs.

Art and Culture

  • Set aside $20B for improvement and development of cultural facilities; and allocate $500M for acquisition of museum collections. Inject an additional $500M into the Art Development Matching Grants Pilots Scheme; and allocate a total of about $370M to support arts groups and artists. Allocate $300M to strengthen promotion of Intangible Cultural Heritage.

District Facilities and Sports

  • Set aside $8B to be coordinated by the Home Affairs Bureau, for improving facilities in 18 districts. Earmark $2B for implementing a Market Modernization Programme. Inject another $5B into the Elite Athletes Development Fund. Inject $1B into the sports portion of the Arts and Sports Development Fund. Allocate $500M for a Major Sports Events Matching Grant Scheme. Allocate $100M to launch a District Sports Programmes Funding Scheme.

3. Nurturing Talent

  • Provide additional $2B recurrent expenditure to strengthen support for teachers, kindergartens, integrated education and life-wide learning. Allocate $2.5B for the Matching Grant Scheme to support 10 publicly-funded post-secondary institutions. Provide $2B to expedite installation of lifts in public sector schools. Inject $800M into both the Gifted Education Fund and the HKSAR Government Scholarship Fund. Earmark $2.5B to set up a Student Activities Support Fund. Further inject an additional $8.5B into the Continuing Education Fund. Set aside $1B to support the work of the Youth Development Commission.

4. Land Resources

  • Public Housing estimated production for the next 5 years is about 100,000 units. Private housing projected supply in the next 3 to 4 years is about 97,000 units. Potential land supply for private housing in 2018-19 is about 25,500 units. 2018-19 Land Sale Programme includes 4 commercial/hotel sites, capable of providing about 530,000 square meters floor area. Set aside $1B to subsidise eligible projects.