By Steven Kwan
On 28 February 2018, Mr. Paul Chan, Financial Secretary, delivered his second budget speech. He forecasts economic growth of 3 to 4% in 2018. He projects a surplus of HKD138 billion in the Consolidated Account for 2017/18.
In preparing this Budget, the Financial Secretary has ensured that adequate resources are provided to implement the various policy initiatives put forth in the Policy Address. These measures include the following:
1. Profits tax
• Reducing profits tax by 75% for 2017/18, subject to a ceiling of HKD30,000, effectively giving companies with profits tax payable of HKD40,000 or more a HKD30,000 rebate.
2. Salaries tax and tax under personal assessment
• Reducing 75% of salaries tax and tax under personal assessment for 2017/18, subject to a ceiling of HKD30,000, effectively giving salaries tax payers with a salaries tax payable of HKD40,000 or above a HKD30,000 rebate.
• Widening the marginal bands for salaries tax from the current HKD45,000 to HKD50,000.
• Increasing the number of tax bands from four to five, and adjusting the marginal tax rates to 2%, 6%, 10%, 14% and 17% respectively.
3. Rates
• Waiving rates for four quarters of 2018/19, subject to a ceiling of HKD2,500 per quarter for each rateable property.
4. Child allowance
• Increasing the basic and additional child allowance from the present HKD100,000 to HKD120,000.
5. Dependent parent or grandparent allowance
• Increasing the allowance for maintaining a dependent parent or grandparent aged between 55 and 59 from HKD23,000 to HKD25,000.
• Increasing the allowance for maintaining a dependent parent or grandparent aged 60 or above from HKD46,000 to HKD50,000. • Raising the deduction ceiling for elderly residential care expenses from HKD92,000 to HKD100,000.
6. Personal disability allowance
• Introducing a personal disability allowance at a rate of HKD75,000.
7. Personal Assessment of Husband and Wife
• Relaxing the requirement of jointly election by allowing husband and wife the option to decide whether to elect for personal assessment independently.
8. Voluntary Health Insurance Scheme
• Proposing annual tax deduction of maximum HKD8,000 per insured person for people who purchase eligible health insurance products.
9. Other relief measures
• Providing a one-off grant of HKD2,000 to each student in need to support learning.
• Paying the examination fees for candidates sitting for the 2019 Hong Kong Diploma of Secondary Education Examination.
• Providing two months' extra allowance to recipients of CSSA, Old Age Allowance, Old Age Living Allowance, Disability Allowance, Low-income Working Family Allowance and Work Incentive Transport Subsidy.
10. Government Bond Programme
• Issuing Silver Bonds to Hong Kong residents aged 65 or above in 2018 and 2019.
11. First Registration Tax for Electric Vehicles
• Waiving First Registration Tax for electric commercial vehicles, electric motor cycles and electric motor tricycles until 31 March 2021.
12. Research and development (“R&D”)
• Provision of additional tax deduction for domestic expenditure on R&D incurred by enterprises, i.e. a 300% tax deduction for the first HKD 2 million qualifying R&D expenditure and a 200% deduction for the remainder.
13. Qualifying Debt Instrument Scheme
• Extending the scope of tax exemption from debt instruments with an original maturity of not less than 7 years to instruments of any duration.
14. Corporate Treasury Centres
• Extending the coverage of profits tax concession to specified treasury services provided by qualifying corporate treasury centres to all their onshore associated corporations.