Financial Secretary charts new fiscal course with tax cuts and bold property measures

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Paul Chan

28th February 2024 – (Hong Kong) Today marked a significant shift in Hong Kong’s fiscal policy as Financial Secretary Paul Chan delivered a budget replete with tax reductions and property regulation reforms aimed at invigorating the economy.

In a major announcement, Mr. Chan unveiled a plan to implement a sweeping one-off tax reduction for the 2023/24 assessment year. The cut, which will provide 100 per cent relief up to a ceiling of $3,000, is projected to inject $5.5 billion back into the pockets of 2.06 million individual taxpayers and 160,000 corporations. This bold move arrives as a boon for a broad spectrum of the tax-paying populace and the business community, signalling the government’s resolve to stimulate economic activity.

The reduction is set to affect the final tax payments for the year in question, leaving provisional tax payments for the same period untouched. Taxpayers are thus encouraged to adhere to their existing payment schedules as detailed in previously issued demand notes. The Inland Revenue Department will administer the reductions post-legislative ratification, with any surplus from provisional taxes to be credited against future liabilities or refunded as appropriate.

Mr. Chan’s budget does not extend the relief to property tax; however, individuals who derive rental income may avail themselves of the reduction under personal assessment. A key feature of the tax landscape for the coming year is the proposed two-tiered standard rate regime for salaries and personal assessment taxes. Set to commence from the 2024/25 year of assessment, this regime introduces a 16 percent rate for net incomes exceeding $5 million, above the continuing standard rate of 15 percent for the first $5 million.

In a move to further support businesses, the budget outlines tax deductions for expenses incurred to restore leased premises. Additionally, the time limit for industrial and commercial building allowance claims will be removed from 2024/25.

The business registration fee will see a modest increase to $2,200 starting 1st April, 2024, counterbalanced by a two-year waiver of the business registration levy. The hospitality sector should prepare for the reintroduction of a 3 percent hotel accommodation tax from 1st January, 2025.

In a radical change to the property market landscape, Mr. Chan announced the immediate cessation of all demand-side management measures. This includes the Special Stamp Duty, Buyer’s Stamp Duty, and an Ad Valorem Stamp Duty rate of 7.5 percent under Part 1 of Scale 1. The Public Revenue Protection (Stamp Duty) Order 2024 has been enacted by the Chief Executive, ensuring that residential property transactions made on or after today’s date are exempt from these charges, pending the passage of the Stamp Duty (Amendment) Bill 2024.