Hong Kong Budget 2022:
How it affects your business
5 minute read
Finance Secretary Paul Chan delivered the 2022 Hong Kong budget on Wednesday, 23 February, amidst a backdrop of new measures introduced to fight the latest wave of Covid-19. His address to the nation began with plans to inject a HKD 64 billion Covid-19 relief package into the economy.
He then unearthed the government’s plans to allocate funds to the other 3 distinct areas of action: relief for citizens and SMEs, support for the economy amid downturn, and investment into the future through medium and long-term economic development.
We’ve collected all the most important budget updates for your business. Read on to see how the 2022-2023 Hong Kong budget may affect you.
Changes for businesses to know
Hong Kong’s economy experienced a growth of 6.4% in 2021, which reversed the declining trend of the past two years. Although the Finance Secretary expects a dip in the first half of 2022, the below measures will be put into place to mitigate the negative effects of Covid-19.
New international tax standard
Hong Kong pledged to implement the international tax reform proposals drafted by the Organisation for Economic Cooperation and Development (OECD). As a refresher, this reform ensures that international firms pay their fair share of tax wherever they operate and generate profits. Chan reaffirmed that the Hong Kong government would preserve the advantages of Hong Kong’s tax regime in terms of its simplicity, certainty and transparency.
The government plans to submit a proposal to the Legislative Council in the second half of 2022 to implement the global minimum tax rate. This will follow the international framework that 137 countries agreed to in October 2021. The Hong Kong government will also plan to implement a domestic minimum top up tax on multinational enterprises (MNEs), starting from the year of assessment 2024-25. This will ensure that their tax rates reach the global minimum effective tax rate of 15%, which will bring in HKD 15 billion in revenues a year.
Additional Tax Cuts
The government will reduce profits tax, salaries tax, and tax under personal assessment for the year of assessment 2021-22 by as much as 100%, subject to a ceiling of HKD 10,000 per case. If you are separately chargeable to salaries tax and profits tax, you can enjoy tax reduction under each of the tax types.
Business Registration Fees Waived
Business registration fees will be waived for one year, starting from 1 April 2022 to 31 March 2023. The government has yet to make the necessary legislative amendments to the Legislative Council, but will do so as soon as possible.
Businesses that have already paid the registration fees for the Waiver Period (such as those that hold a 3-year registration certificate) will be refunded the relevant registration fees.
SME loan scheme extended
The existing Special 100% Loan Guarantee Scheme will be extended until June 2023. Eligible companies will be allowed to borrow up to HK$9 million, instead of HK$6 million, and repay the interest (not the principal sum) for a maximum of 10 years, instead of eight.
SME tenants cannot be penalized for late rent
The government has proposed a measure to allow SME tenants renting under Hong Kong’s property developers to delay payments for up to six months. This is subject to Legislative Council approval. Once approved, developers will not be allowed to chase tenants for rent.
HKD 10 billion for Hong Kong tech firms
The Hong Kong Growth Portfolio, will invest HKD 10 billion in both Hong Kong-listed and non-listed tech firms and start-ups. HKD 5 billion will be used to set up the Strategic Tech Fund for local start-ups, and the other half on an investment fund that will hone in on opportunities in the Greater Bay Area.
Changes to the economy
Consumption vouchers for permanent residents
The Hong Kong government will issue a new round of consumption vouchers to permanent residents and new arrivals aged 18+. Each eligible person will receive their consumption vouchers in two electronic installments, totaling HKD 10,000. The scheme is expected to benefit about 6.6 million people. You can collect the vouchers via these Stored Value Facilities: AlipayHK, Tap&Go, WeChat Pay, and Octopus.
You must successfully register at this website in order to receive the first consumption voucher disbursement in April, worth HKD 5,000.
You will get the remaining vouchers by installments in the middle of the year.
Loan guarantees extended and increased
Individuals can enjoy pandemic-relief personal loan guarantee scheme, as it will be extended through April 2023. The maximum amount guaranteed per applicant will increase to nine times the applicant’s monthly income. The overall cap will also be raised to HKD 100,000.
Help for the tourism sector
The government will set aside HKD 1.26 billion for longer-term development of the tourism industry. HKD 600 million of the latest spending will be used to launch a three-year program to create tourism products with local cultural and heritage aspects.
Focus on sustainability
HKD 1.5 billion will be allocated for an electric vehicle charging scheme. The scheme will support installing electric vehicle charging infrastructure for around 140,000 parking spaces in 700 existing private residential buildings. This covers about half of the eligible parking slots in Hong Kong.
The Finance Secretary rounded up his longest budget speech to date on a hopeful note, with a surplus of HKD 18.8 billion expected at the end of the financial year. He forecasted that the economic growth rate will be 3% per annum from 2023-24 to 2026-27.
As you sit back and process all the budgetary information for the year, you may find yourself in planning mode for your business. Sign up to our newsletter below to learn of the deadlines as they arise.