Hong Kong Budget to boost post-pandemic economy


Hong Kong Financial Secretary Paul Chan delivered the 2023-24 Budget, on 22 February 2023, which set out a number of initiatives to capitalise on Hong Kong’s position as a regional financial hub and leading offshore RMB hub to attract investment and develop core industries.

It was the first budget of the current-term government and the first presented since Hong Kong’s emergence from the COVID-19 pandemic and resumption of quarantine-free travel with the Chinese Mainland and worldwide.

The Financial Secretary has proposed a one-off reduction of profits tax for the year of assessment 2022-23 by 100%, subject to a ceiling of HKD6,000 per case, which is lower than the previous cap of HKD10,000.

He also cited the legislative amendments introduced into LegCo in December 2022 to provide profits tax exemption for qualifying transactions of family-owned investment holding vehicles managed by single family offices in Hong Kong. Upon approval, the tax concession arrangements will apply to any years of assessment on or after 1 April 2022.

Chan said the government would review existing tax concessions applicable to funds and carried interest to further strengthen Hong Kong’s status as Asia’s asset and wealth management hub. In addition, the government is to allocate HKD100 million to InvestHK over the next three years for attracting more family offices to Hong Kong.

To expand market opportunities and attract foreign companies, the government plans to introduce a facilitation mechanism aimed at encouraging companies with a focus on the Asia-Pacific region to re-domicile in Hong Kong. The government will hold consultations and submit legislative proposals in 2023-24 to support this measure.

To encourage more enterprises to conduct research and development (R&D) in Hong Kong, the Budget proposed to introduce a ‘patent box’ tax incentive to provide tax concessions for profits sourced in Hong Kong from qualifying patents generated through R&D. A consultation will be launched this year and the government aims to submit the legislative amendments to the LegCo in the first half of 2024.

The Financial Secretary said Hong Kong would implement the global minimum effective tax rate, in accordance with international new ‘Two Pillar’ tax system, to safeguard the Hong Kong’s taxing rights and maintain the competitiveness of the city’s tax regime.

Hong Kong plans to apply the global minimum effective tax rate to large MNE groups and implement the domestic minimum top-up tax starting from 2025 onwards. A consultation will be launched to allow MNE groups to make early preparation.

The Budget 2023-24 sets out ways in which Hong Kong can capitalise on China’s “dual carbon” goals (reaching peak carbon emissions by 2030 and carbon neutrality by 2060) to accelerate the development of Hong Kong as an international centre for green technology and finance,

To enable “green projects to obtain capital more conveniently and flexibly through financial innovation apart from traditional financing channels”, Chan proposed the issuance of HKD15 billion of retail green bonds in the next financial year, an expansion of the scope of the Green Bond Programme to cover sustainable finance projects, a review of the development potential and prospects of tokenised bond issuance and consideration of policy initiatives to promote wider use of tokenisation technology in Hong Kong’s capital market.

Contact Alan Fong
Get in Touch

Please contact us if you have any questions or queries and your local representative will be in touch with you as soon as possible.