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Hong Kong 2015-16 Budget

In his 2015-16 Budget, the Financial Secretary of Hong Kong continues to offer favorable tax measures to companies and individual tax payers, amid a fiscal surplus of HK$63.8 billion. He continues to provide support for Small and Medium Enterprises and start-up companies, though focusing on cultural and creative industries, fashion industry, and film Industry. Moderate growth for Hong Kong is forecasted at 2.3%, while inflation continues to ease and unemployment remained at about 3% in 2014.

Tax Reductions

The Financial Secretary proposed a one-off reduction of Profits Tax for companies for the year of assessment 2014/15 by 75%, subject to a ceiling of $20,000 per case.

The proposed tax reduction is not applicable to property tax. However, individuals with rental income, if eligible for personal assessment, may be able to enjoy such reduction under personal assessment.

On individual taxation front, the Financial Secretary also proposes reduction in salaries tax for the year of assessment 2014/15 by 75%, subject to a ceiling of $20,000 per case (same as Profits Tax). In addition, child allowance is proposed to be increased from the current HK$70,000 to HK$100,000 for each child effective from the year of assessment 2015/16, a near 43% increase.

All of the above proposals by the Financial Secretary require legislative amendments before implementation.

Stamp Duties and property prices

The government is determined to curb property prices in Hong Kong, which has surged 13% in 2014. Buyer Stamp Duty (BSD) at 15% will continue to be effective. The Monetary Authority of Hong Kong announced on 27 February 2015 just 2 days after the Budget announcement that the maximum loan-to-value (LTV) ratio for self-use residential properties with value below HK$7 million will be lowered from the existing range of 60% to 70% to 60% across the board, thereby increasing the burden of down payment for property buyers.

Profits tax exemption for private equity funds

The Government plans to table a bill in the Legislative Council later to allow private equity funds to enjoy profits tax exemption available to offshore funds.


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