Hong Kong’s Chief Executive on 25 October 2023 delivered the 2023 Policy Address, which included a number of proposed tax measures, discussed below. These measures can only be implemented after completion of the relevant legislative process.
Tax incentives for individuals
To support families with newborns and create a child-friendly environment, the Chief Executive proposed raising the deduction ceiling for home loan interest or domestic rents from the current HKD 100,000 to HKD 120,000, an increase of 20%, for taxpayers who live with their first child born on or after 25 October 2023 until the child reaches the age of 18. This measure would enter into effect from the year of assessment 2024/25.
The Chief Executive also proposed providing a deduction for expenses incurred on assisted reproductive services under salaries tax and personal assessment, subject to a ceiling of HKD 100,000 per year.
Profits tax
Another proposal involves the introduction of a bill in the Legislative Council in the first half of 2024 to reduce the profits tax rate for qualifying profits derived from patents from the current 16.5% to 5%, with a view to encouraging more R&D activities, as well as the commercialisation of patented inventions.
Stamp duty
The tax proposals include several measures involving the stamp duty:
- The Legislative Council passed the Stamp Duty (Amendment) (Stock Transfers) Bill 2023 implementing the reduced stamp duty rate on 15 November 2023, with an amendment ordinance that entered into effect on 17 November. Thus, transfers of Hong Kong stock executed on or after 17 November 2023 will be subject to a stamp duty payable by both the buyer and seller at a rate of 0.1% of the consideration paid or the market value of the stock transferred, whichever is higher.
- Shorten the applicable period of the Special Stamp Duty (SSD) from three years to two years. In other words, if a property owner disposes of his/her property two years after acquisition, the owner will no longer need to pay the SSD, which amounts to 10% of the property price.
- Reduce the rate of the Buyer's Stamp Duty and the New Residential Stamp Duty from 15% to 7.5%. This arrangement will help alleviate the financial burden on Hong Kong permanent residents who already own residential properties and wish to acquire another residential property. It will also reduce the cost to non-Hong Kong permanent residents to acquire residential properties.
- Introduce a stamp duty suspension arrangement on the acquisition of residential property by incoming talent. The payment of stamp duty is suspended at the time of the property acquisition, but the talent is required to pay the relevant amount if he/she is subsequently unable to become a Hong Kong permanent resident.
Celestine Yeung
BDO in Hong Kong