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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 2022/23
Financial Budget Summary


The Financial Secretary, Mr. Paul Chan Mo-po, has presented his sixth budget for the year 2022/23 to the Legislative Council on 23 February 2022. 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 increased by 6.4% in 2021. Growth rate of per capita gross domestic product (“GDP”) in real terms is 7.7% in 2021. The Government forecasts real GDP growth of 2 – 3.5% and nominal GDP growth of 4 – 5.5% in 2022.

The headline inflation rate for 2021 as a whole was 1.6% while the underlying inflation rate was 0.6% in 2021. The Government forecasts that the headline inflation rate for 2022 to be 2.1% with an underlying inflation rate at 2%.

The economic indicators are summarized as follows:

 

2021

2022 (Forecast)

2023-2026 Medium range forecast

Growth Domestic Product (GDP) Growth in real terms

-6.4%

2 - 3.5%

3% per annum

Underlying inflation rate

0.6%

2%

2.5% per annum


The average unemployment rate in year 2021 has increased to 5.2% for the year as a whole.

The 2022/23 revised estimate on government revenue is HK$682.7 billion, being 15.5% or HK$91.8 billion higher than the original estimate. This is due mainly to the higher-than-expected revenues from land premium and profits tax. As for government expenditure, the Government forecasts a revised estimate of HK$699 billion, being 4% or HK$28.8 billion lower than the original estimate, due to the lower-than-expected operating expenditure. For 2022/23, the Government now forecasts a surplus of HK$18.9 billion, and by 31 March 2022, fiscal reserves are expected to reach HK$946.7 billion.

Total government revenue for 2022/23 is estimated to be HK$715.9 billion. The government estimates that overall expenditure for 2022/23 will be HK$807.3 billion, and recurrent expenditure accounts for HK$563.5 billion. The government forecasts a deficit in the Consolidated Account of HK$56.3 billion and fiscal reserves are estimated to be HK$890.3 billion by end of March 2023. It is also expected that the Consolidated Account will record a surplus for four consecutive years.

We summarize the 2022/23 budget highlights as follows:-

Highlights of the Budget

In the 2022/23 budget, the following are proposed:

Salaries tax and tax under personal assessment

Salaries tax and tax under personal assessment for 2021/22 will be reduced by 100%, subject to a ceiling of HK$10,000 (compared to HK$10,000 for 2020/21). The reduction will be reflected in the final tax payable for the year of assessment 2021/22.

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) standard rate on his/her net income (before deduction of the allowances), whichever is lower.

The personal allowances and deductions for the 2022/23 year of assessment (and the current personal allowances and deductions) are summarized in the below table.

Allowances and Deductions

2021/22
(Existing)
HK$

2022/23
(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

  • Domestic Rental Expenses

Not applicable

100,000



Profits Tax

Profits tax for 2021/22 will be reduced by 100% subject to a ceiling of HK$10,000 per case (compared to HK$10,000 for 2020/21). The reduction will be reflected in the final tax payable for the year of assessment 2021/22.

Property Tax

Property tax rate remains unchanged at 15%. The proposed 100% tax reduction of up to a ceiling of HK$10,000 for 2021/22 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.

Rating System

The Government proposes a progressive rating system for domestic properties starting from the year of assessment 2024/25. For domestic properties with rateable value over $550,000, it is proposed that rates be charged at five per cent of the rateable value on the first $550,000 and at eight per cent of the rateable value on the next $250,000, and then at 12 per cent on rateable value exceeding $800,000.

Silver Bonds, Green Bond and iBond

  1. Issue no less than HK$10 billion of Retail Green Bonds.

  2. Issue no less than $35 billion of Silver Bond and no less than $15 billion of iBond.

Other measures

(a) Supporting individuals

  1. Continue to provide 100% Personal Loan Guarantee Scheme for individuals. The application period of which will be extended to the end of April 2023. Increase the maximum loan amount to nine times of the applicant’s average monthly income during employment, and raise the ceiling to $100,000. Extend the maximum repayment period to 10 years, and the maximum duration of principal moratorium to 18 months.

  2. Lower the threshold for the Public Transport Fare Subsidy Scheme from $400 to $200 from May to October 2022. Provide a subsidy amounting to one‑third of the commuters’ actual monthly public transport expenses in excess of $200, subject to a maximum of $500 per month.

  3. Propose to provide a tax deduction, subject to a deduction ceiling of $100,000, to taxpayers who are liable to salaries tax and tax under personal assessment and are not owners of domestic properties, in connection with their domestic rental expenses starting from the year of assessment 2022/23.

  4. Raise the subsidy ceiling of the Continuing Education Fund to $25,000 and remove the upper age limit.

(b) One-off measures:

  1. Waive rates in respect of residential properties for 2022/23, 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.

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

  4. Pay examination fees for school candidates sitting for the 2023 Hong Kong Diploma of Secondary Education Examination.

  5. Issue $10,000 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 June 2023; further increase the maximum loan amount from the total amount of employee wages and rents for 18 months to that for 27 months; raise the loan ceiling from $6 million to $9 million; extend the maximum repayment period from 8 years to 10 years; and offer the option of making partial repayment of principal over a longer period of time.

  2. Waive rates for non-domestic properties for 2022/23, 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 2022/23.

  4. Continue to waive 75% of water and sewage charges of non-domestic households for 8 extra months, subject to monthly caps 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).

  6. Introduce rental enforcement moratorium. Prohibit landlords from terminating the tenancy of or not providing services to tenants of specified sectors for failing to settle rents on schedule, or taking relevant legal actions against them. Valid for three months, and be extended for another three months if necessary, with the legislation automatically lapsing after six months.

  7. Extend the waivers/concessions of the existing 34 groups of government fees and charges for 12 months starting from October 2022.

(d) Others:

  1. Increase the funding allocated to the Hong Kong Growth Portfolio under the Future Fund to set up a $5 billion GBA Investment Fund to focus on investment opportunities in the Guangdong-Hong Kong-Macao Greater Bay Area (“GBA”).

  2. Regarding the new proposals on base erosion and profit shifting (BEPS 2.0), the Government has been exchanging views with the affected multinational enterprises (“MNEs”) on matters relating to the implementation of BEPS 2.0, and reaffirmed that the Government would preserve the advantages of Hong Kong's tax regime in terms of its simplicity, certainty and transparency, maintain the territorial source principle of taxation as well as minimise the compliance burden on MNEs when implementing BEPS 2.0. The Government will maintain communication with relevant MNEs to enable them to familiarise with the new tax rules as soon as possible.

    The Government plans to submit a legislative proposal to the Legislative Council in the second half of this year to implement the global minimum tax rate and other relevant requirements in accordance with the international consensus. At the same time, the Government will consider introducing a domestic minimum top up tax with regard to the aforesaid MNEs starting from the year of assessment 2024-25 to ensure that their effective tax rates reach the global minimum effective tax rate of 15 per cent so as to safeguard Hong Kong's taxing rights.

  3. Hong Kong has signed 45 Comprehensive Avoidance of Double Taxation Agreements (CDTAs) and is in negotiation with 14 tax jurisdictions, with a view to minimising the risk of double taxation borne by foreign enterprises doing business with Hong Kong.

  4. Propose to provide tax concessions for the eligible family investment management entities managed by single-family offices, which are expected to be effective to the year of assessment 2022/23.


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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.