Hong Kong is to lessen the tax burden on small businesses by slashing the corporate tax rate applicable to the first HK$2m (£194k, US$256k) of company profits to 8.25%, or half the standard rate, Hong Kong’s chief executive has said.
The chief executive, Carrie Lam, pictured left, detailed her blueprint for growth for the jurisdiction in her first major policy speech since taking up office in March 2017, a report of which has been posted on the Hong Kong government’s website.
The new rate for small businesses is being seen as a major fillip to small businesses, if not something of a U-turn in that it is a lower amount than she had proposed earlier this year.
The rate on profits above HK$2m will remain at 16.5%, Lam said in a policy address last week.
To ensure the tax benefits target small and medium enterprises, Mrs Lam said the Government will impose restrictions. Each group of enterprises can only nominate one enterprise to benefit from the lower tax rate.
Hong Kong is anxious to market itself as a low-tax jurisdiction but in fact, until the new rates are brought in, the situation is not hugely different from the UK, where small businesses are liable to pay 20% on profits under £300,000 and 21% on those over that amount.
In her speech, Lam also proposed a carrot aimed at encouraging businesses to invest in research and development, with a plan to ensure that the first HK$2m spent on eligible R&D will enjoy a 300% tax deduction, with the remainder at 200%.
A bill to that would begin the legislative process of implementing the two initiatives proposed by Lam is to be submitted to the Legislative Council imminently, the Hong Kong authorities said.
To read more about Lam’s plans for Hong Kong in a report on the website of the Inland Revenue Department of the Hong Kong Special Administrative Region, click here.