On 28 February 2024, the Financial Secretary of the Hong Kong Special Administrative Region, the Hon. Paul Chan Mo-po, delivered the 2024-25 Budget Speech.
Mr. Chan expects that Hong Kong would have a deficit of HK$101.6 billion for 2023-2024 and a deficit of HK$48.1 billion for 2024-25, but the estimated fiscal reserves would increase from $685.1 billion at March 2025 to $832.2 billion by March 2029. Whilst the society and the daily lives of our people are back to normal as they have longed for and there has been resumption of outbound travel, visitors are returning, and our economy is regaining positive growth. However, changes in consumption patterns and a shift in inbound visitors’ preferences, along with competition from other economies have weighed down economic confidence. In addition, geopolitical uncertainties and high interest rates have impacted capital flows.
The budget is therefore themed “Advance with Confidence, Seize Opportunities, Strive for High-quality Development”, with focus on economic recovery and bolstering confidence. The Financial Secretary goes for a complete removal of all property cooling measures with immediate effect, and introduces a more targeted tax for the rich, at par with other advanced economies.
2024-25 Budget Highlights
We summarize the 2024-25 budget’s key highlights relating to salaries tax, profits tax, measures to smoothen livelihoods, support enterprises, bolstering confidence and achieve high quality development, as follows:
Smoothen Livelihoods
- Salaries Tax and tax under personal assessment for 2023-24 will be reduced by 100%, subject to a ceiling of $3,000 (2022-23: $6,000). The reduction will be reflected in the final tax payable for the year of assessment 2023-24
- Waive rates for domestic properties for 2024-25 in the first quarter, subject to a ceiling of $1,000 (2023-24: $1,000 per quarter for first two quarters)
Support Enterprises
- Profits Tax for 2023-24 will be reduced by 100%, subject to a ceiling of $3,000 (2022-23: $6,000). The reduction will be reflected in the final tax payable for the year of assessment 2023-24
- Waiver of rates for non-domestic properties for the first quarter of 2024-25, subject to a ceiling of $1,000 (2023-24: $1,000 per first two quarters).
Bolstering Confidence
Hong Kong Investment Corporation Limited
- Implement the first batch of direct and co-investment projects in the first half of this year, covering life technology, green technology, semiconductors, chips, etc.
Property Market
- Cancel Special Stamp Duty, Buyers’ Stamp Duty and New Residential Stamp Duty for residential properties with immediate effect.
- Further relax countercyclical macroprudential measures for property mortgage loans and adjust other supervisory policies for property lending.
Stock Market
- Waive stamp duties payable on transfer of Real Estate Investment Trust (REIT) units and jobbing business of option market-makers.
Assisting Small and Medium Enterprises (“SME”)
- SME Financing Guarantee Scheme: extend application period for 80% and 90% Guarantee Products till end March 2026.
- BUD Fund: inject $500 million with launch of “E-commerce Easy”. Provide up to $1 million per enterprise for implementing e-commerce projects in the Mainland.
- Digital Transformation Support Pilot Programmer: SMEs in the F&B and retail industries to be invited to select ready-to-use solutions starting early this year.
Accelerating High-quality Development
Green Finance
- Assist companies and financial institutions in sustainability reporting and data analysis
- Green and Sustainable Finance Grant Scheme: extended to 2027
- Green and Sustainable Fintech Proof of Concept Subsidy Scheme: to be launched in the first half this year
Digital Economy
- Allocate $300 million to launch business version of “iAM Smart”
- Undertake in-depth study on developing data trading ecosystem
- Launch phase 1 of Project mBridge to settle cross-boundary transactions for corporates
Innovation and Technology (“I & T”)
- AI Supercomputing Centre: First phase facility to operate in 2024 earliest. Allocate $3 billion to support local universities, R&D institutes and enterprises to leverage its computing power, etc
- Establish the Hong Kong Microelectronics Research and Development Institute in 2024 to facilitate research collaboration on third-generation semiconductors
- Launch the New Industrialisation Acceleration Scheme this year and provide enterprises with up to $200 million on a matching basis
- $2 billion to support presence of InnoHK research clusters in Hetao
- $3 billion earmarked to launch a Frontier Technology Research Infrastructure Support Scheme
Finance
- Issue $70 billion worth of retail bonds:
- Silver bonds: $50 billion
- Green bonds and infrastructure bonds: $20 billion
- Promote introduction of block trading, RMB counters under Southbound Stock Connect, and expansion of the mutual access regime to REITs
- Extend the Grant Scheme for Open-ended Fund Companies and REITs for 3 years
- Enhance preferential tax regimes for family office funds, etc.
- $100 million to promote sustainable development of financial services
Trade
- Multinational supply chain management centre:
- Provide consulting services, trade financing and corporate training
- Study the establishment of trade single window to provide one-stop services for enterprises
- Attract Mainland manufacturing enterprises to set up offshore trading management headquarters in Hong Kong
Intellectual Property Trading
- Introduce legislative proposal to implement “patent box” tax incentive. Profit tax rate to be reduced to 5%
Maritime
- Study enhancements to tax concession measures for maritime industry
- Offer block registration incentive to shipowners for extensive registration of ships in Hong Kong
Aviation
- Strengthen aviation services with current major routes and routes along the Belt and Road, in support of “Air Silk Road”
Legal and Dispute Resolution Services
- Headquarters of the “International Organization for Mediation” to be hosted in Hong Kong
CW welcomes the Government’s recent announcement of a comprehensive suite of measures in the 2024-25 Budget. These measures are anticipated to reinforce confidence and inject new momentum into Hong Kong’s economic expansion, further cementing its status as a preeminent international financial hub. Amidst unparalleled global challenges, the pursuit of I&T emerges as a critical pathway for Hong Kong to realign and rejuvenate its economy. It is essential that, alongside efforts to enhance I&T infrastructure and research capabilities, tax policies are harmoniously integrated with the strategies associated with the Hetao initiative. This holistic approach will ensure the effective leveraging of I&T as a cornerstone for future economic development.
