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Hodgson Impey Cheng Taxation Services Limited is a division of the HLB Hodgson Impey Cheng Limited group. HLB Hodgson Impey Cheng Limited is a firm of Chartered Accountants and Certified Public Accountants, and a member of HLB International, a worldwide network of independent professional accounting firms and business advisers. The firm was formed in 1983 but can trace its origins back 60 years in Hong Kong, and over 200 years in the United Kingdom.

Hong Kong 2021/22
Financial Budget Summary


The Financial Secretary, Mr. Paul Chan Mo-po, has presented his fifth budget for the year 2021/22 to the Legislative Council on 24 February 2021. The budget proposals will need approval by the Legislative Council before taking effect. The proposals do not become law until their enactment.

Economic Performance and Outlook

Gross domestic product (“GDP”) in real terms dropped by 6.1% in 2020. Growth rate of per capita GDP in real terms is -5.8% in 2020. The Government forecasts real GDP growth of 3.5 – 5.5% and nominal GDP growth of 4.5 – 6.5% in 2021.

The headline inflation rate for 2020 as a whole was 0.3% while the underlying inflation rate was 1.3% in 2020. The Government forecasts that the headline inflation rate for 2021 to be 1.6% with an underlying inflation rate at 1.0%.

The economic indicators are summarized as follows:

 

2020

2021 (Forecast)

2022-2025 Medium range forecast

GDP Growth in real terms

-6.1%

3.5 - 5.5%

3.3% per annum

Underlying inflation rate

1.3%

1.0%

2% per annum


The average unemployment rate in year 2020 has increased to 5.9% for the year as a whole.

The 2020/21 revised estimate on government revenue is HK$543.5 billion, being 5.1% or HK$29 billion lower than the original estimate. This is due mainly to the lower-than-expected revenues from land premium. As for government expenditure, the Government forecasts a revised estimate of HK$820.4 billion, being 12.2% or HK$89.3 billion higher than the original estimate, due to injections into the Anti-epidemic Fund and other helping measures. For 2020/21, the Government now forecasts a deficit of HK$257.6 billion, and by 31 March 2021, fiscal reserves are expected to reach HK$902.7 billion.

Total government revenue for 2021/22 is estimated to be HK$591.1 billion. The government estimates that overall expenditure for 2021/22 will be HK$727.8 billion, and recurrent expenditure accounts for HK$517.6 billion. The government forecasts a deficit in the Consolidated Account of HK$101.6 billion and fiscal reserves are estimated to be HK$801.1 billion by end of March 2022. It is also expected that the Consolidated Account will record a deficit for four consecutive years.

We summarize the 2021/22 budget highlights as follows:-

Highlights of the Budget

In the 2021/22 budget, the following are proposed:

Salaries tax and tax under personal assessment

Salaries tax and tax under personal assessment for 2020/21 will be reduced by 100%, subject to a ceiling of HK$10,000 (compared to HK$20,000 for 2019/20). The reduction will be reflected in the final tax payable for the year of assessment 2020/21.

Salaries tax rates

An individual’s income from employment less allowable deductions, charitable donations and personal allowances, will be chargeable to salaries tax at the following progressive tax rates:

Tax Band

Net chargeable income

First HK$50,000 at

2%

Next HK$50,000 at

6%

Next HK$50,000 at

10%

Next HK$50,000 at

14%

On the remainder at

17%


However, the maximum tax payable is limited to tax at the standard rate of 15% on the individual’s income from employment less allowable deductions and charitable donations but without taking into account the personal allowances.

Per the Budget, there is no change in the standard tax rate, progressive tax rates and marginal tax band. For completeness, salaries tax payable is calculated at (a) progressive rates on a taxpayer’s net chargeable income or (b) at standard rate on his/her net income (before deduction of the allowances), whichever is lower.

The personal allowances and deductions for the 2021/22 year of assessment (and the current personal allowances and deductions) are summarized in the below table.

Allowances and Deductions

2020/21
(Existing)
HK$

2021/22
(Proposed)
HK$

Personal allowances:

 

 

Single

132,000

132,000

Married

264,000

264,000

Single parent

132,000

132,000

Disabled

75,000

75,000

Child

 

 

1st to 9th child (each)

 

 

  • Year of birth

240,000

240,000

  • Other years

120,000

120,000

Dependent parent/grandparent
(for each dependant)

 

 

Aged 60 or above or is eligible to claim an allowance under the Government’s Disability Allowance Scheme

 

 

  • not residing with taxpayer OR

50,000

50,000

  • residing with taxpayer throughout the year

100,000

100,000

Aged 55 to 59

 

 

  • not residing with taxpayer OR

25,000

25,000

  • residing with taxpayer throughout the year

50,000

50,000

Disabled dependent

75,000

75,000

Dependent brother/sister

37,500

37,500

 

 

 

Deductions:

Maximum
deduction
HK$

Maximum
deduction
HK$

  • Self education

100,000

100,000

  • Home loan interest

100,000
(20 years of assessment)

100,000
(20 years of assessment)

  • Approved charitable donations

35% of
assessable income/profits

35% of
assessable income/profits

  • Elderly residential care expenses

100,000

100,000

  • Contributions to recognised retirement schemes

18,000

18,000

  • Qualifying Voluntary Health Insurance Scheme Policy Premiums

8,000 per insured person

8,000 per insured person

  • Annuity Premiums and MPF Voluntary Contributions

60,000

60,000



Profits Tax

Profits tax for 2020/21 will be reduced by 100% subject to a ceiling of HK$10,000 per case (compared to HK$20,000 for 2019/20). The reduction will be reflected in the final tax payable for the year of assessment 2020/21.

Property Tax

Property tax rate remains unchanged at 15%. The proposed 100% tax reduction of up to a ceiling of HK$10,000 for 2020/21 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.

Stamp Duty

Raise the rate of Stamp Duty on Stock Transfers, from the current 0.1% to 0.13% of the consideration or value of each transaction payable by buyers and sellers respectively.

First registration tax for private cars

Increase the rate of each tax band for the first registration tax for private cars (including electric-private cars) by 15% and the vehicle licence fee by 30%.

Silver Bonds, Green Bond and iBond

  1. Issue green bonds of totalling HK$175.5 billion in next five years.

  2. Issue no less than $24 billion of Silver Bond and no less than $15 billion of iBond. Lower the eligible age for Silver Bond subscription from 65 to 60.

Other new measures

(a) Supporting individuals

  1. Introduce a loan with 100% Government guarantee at an interest rate of 1% per annum for the unemployed, the application period of which will last for 6 months. Maximum loan of $80,000 with repayment period up to 5 years. Moratorium on principal repayment for first 12 months. Offer reimbursement for interest paid after loans are repaid in full as scheduled.

(b) One-off measures:

  1. Waive rates in respect of residential properties for 2021/22, subject to a ceiling of $1,500 per quarter in first two quarters and $1,000 per quarter in remaining two quarters.

  2. Provide an extra half-month of Comprehensive Social Security Assistance payment, Old Age Allowance, Old Age Living Allowance and Disability Allowance (being extra one month in the previous year).

  3. Grant a subsidy of $1,000 to each residential electricity account.

  4. Pay examination fees for school candidates sitting for the 2022 Hong Kong Diploma of Secondary Education Examination.

  5. Issue $5,000 electronic consumption vouchers in instalments to each eligible Hong Kong permanent resident and new arrival aged 18 or above.

(c) Supporting enterprises:

  1. Continue to provide a concessionary low-interest loan with 100% Government guarantee for enterprises, the application period of which will be extended to the end of year 2021; further increase the maximum loan amount from the total amount of employee wages and rents for 12 months to that for 18 months; raise the loan ceiling from $5 million to $6 million; extend the maximum repayment period from 5 years to 8 years; and extend the maximum duration of principal moratorium from 12 months to 18 months.

  2. Waive rates for non-domestic properties for 2021/22, subject to a ceiling of HK$5,000 per quarter in first two quarters; and HK$2,000 per quarter for remaining two quarters.

  3. Waive business registration fees for 2021/22.

  4. Continue to waive 75% of water and sewage charges of non-domestic households for 8 extra months, subject to a monthly cap of HK$20,000 and HK$12,500 respectively.

  5. Continue to grant 75% rental/fee concession for eligible Government properties/short-term tenancies and waivers for 6 months (100% concession for those closed at the Government’s request)

(c) Others:

  1. The Government has outlined the direction of its response measures to the new proposals on base erosion and profit shifting (BEPS 2.0), including the introduction of a global minimum tax rate and a digital tax drawn up by the Organisation for Economic Co-operation and Development (OECD) as follows:

    First, the Government addresses that Hong Kong will actively implement the BEPS 2.0 proposals according to international consensus. Second, the Government will minimize the impact on local SMEs when drawing up the response measures and strive to maintain the simplicity, certainty and fairness of the Hong Kong tax regime. Third, the Government will minimize the compliance burden on affected corporations while safeguarding Hong Kong’s taxing rights. Last but not least, the Government will improve Hong Kong’s business environment and enhance its competitiveness with a view to attracting multinational corporations to invest and operate in Hong Kong.


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This information is of a general nature only and is not intended to be relied upon, nor to be a substitute for, specific professional advice. No responsibility for loss arising from acting on or refraining from action as a result of any of this information can be accepted. No reader should act on the basis of this information without obtaining independent professional advice with regard to their particular circumstances.