What Small Businesses Need To Know About The 2023 Hong Kong Budget

To aid Hong Kong's recovery momentum in a post-COVID era, the Hong Kong Budget 2023 was announced by Hong Kong’s Financial Secretary Paul Chan on 22 February 2023. It unveiled a raft of initiatives including multiple schemes and measures to support enterprises.

In fact, over 80 percent of the Hong Kong government's resources were allocated to develop small and medium sized enterprises (SMEs). Additionally, voucher issuance, salaries tax and profits tax reduction will be on a small scale as Hong Kong plans to cut back on fiscal spending.

Read on to find out how your business will be affected by these new measures.

Extension to SME Financing Guarantee Scheme (SFGS)

Under the SME Financing Guarantee Scheme (SFGS), the Hong Kong Budget 2023 proposes to extend the guarantee products' application period from the end of June 2023 to the end of March 2024.

Under the SFGS, organisations or individuals trying to obtain loans, including existing borrowers submitting top-up applications, will have to directly contact the lenders to apply for a credit facility or a loan. The lenders will exercise their professional expertise and judgment to assess every application and authenticate the eligibility of every loan applicant prior to submitting the guarantee applications and supporting documents to the Hong Kong Mortgage Corporation Limited (HKMCI) for evaluation and approval.

This extension helps SMEs to adjust better and secure a firm footing.

Hong Kong Trade Development Council (HKTDC)’s Continued Assistance

The Hong Kong Trade Development Council (HKTDC) will continue to provide assistance through several initiatives, such as:

• A one-stop platform named Guangdong-Hong Kong-Macao Greater Bay Area (GoGBA), to assist investors in navigating business opportunities between the Special Administrative Regions (SAR) and the Greater Bay Area (GBA).
• The Transformation Sandbox (T-box), designed to render Hong Kong-based SMEs with support in aspects including ecommerce, branding, supply chain solutions, manufacturing, and new markets.
• The HKTDC’s start-up development program’s Start-up Express, which is targeted at tech-oriented start-ups, and enterprises that are willing to expand to international markets.

Hong Kong Science and Technology Parks Corporation’s (HKSTPC) Plans To Establish a Vibrant and Diverse I&T Ecosystem

To make further contributions to Hong Kong’s innovation and technology industry, the Hong Kong Science and Technology Parks Corporation (HKSTPC) intends to:

• Help high potential technology start-ups expand into regional or global businesses by merging its current Acceleration Program with an extra HK$110 million investment to create a Co-acceleration Program.
• Inject HK$400 million into its Corporate Venture Fund.

Improve Intellectual Property Protection

To keep pace with Hong Kong's innovation and technology (I&T) development, the government will continue to allocate resources in developing the "original grant patent" system by investing additional HK$10 million funding in the Intellectual Property Department in the next two years. This is to employ and train patent examiners, create a talent pool, and establish institutional autonomy in conducting substantive patent examination by the year 2030.

HK$5,000 Worth Of Consumption Vouchers To Be Given Out

To aid economic recovery, another round of consumption vouchers will be given out to eligible Hong Kong permanent residents aged 18 years old and above. This will be given out in two separate installments totalling HK$5,000 – half the amount of that issued in 2022 (HK$10,000), since Hong Kong is no longer bound by rigid COVID measures.  

To speed up the consumption vouchers’ payment, the Hong Kong government will first give out vouchers valued at HK$3,000 in April 2023 with registration data from 2022’s program. The remaining consumption vouchers will be given out along with the vouchers for new eligible persons in the middle of the year.

Supporting Enterprises

To further relieve the operating pressure on enterprises, the Hong Kong government has announced a slew of initiatives including:

1. Reduced profits tax for the assessment year 2022/23

This will be reduced by 100 percent, subject to a HK$6,000 ceiling. By doing so, 134,000 businesses can expect to benefit – though the government revenue will be reduced by HK$720 million.

2. Rates concession for non-domestic properties

The government will provide rates concession for non-domestic properties for the first two quarters of 2023/24, subject to a HK$1000 per quarter ceiling for each rateable property. This is estimated to benefit 430,000 non-domestic properties, although it will affect government revenue negatively by approximately HK$740 million.

3. 50 percent rental or fee concession to eligible tenants

From July 2023, eligible tenants of government premises and eligible short-term tenancies and waivers under the Lands Department will be granted 50 percent rental or fee concession for six months, until the end of 2023. This measure will set the government revenue back by an estimated HK$1 billion.

Profits Tax

The current profits tax rate for corporations in Hong Kong remains at 8.25% on the first HKD $2 million, and 16.25% for profits over HKD $2 million. The profits tax rate for unincorporated businesses also remains unchanged at 7.5% on the first HKD $2 million, and 15% for profits over HKD $2 million.

However, there will be a 100 percent one-off reduction of profits tax for the year of assessment 2022/23, subject to a HK$6,000 ceiling per case – this is lower than the HK$10,000 ceiling set in the Hong Kong Budget 2022. In total, this measure is estimated to benefit 134,000 businesses, but reduce government revenue by HK$720 million.

Salaries Tax

The salaries tax rates will remain unchanged this year. However, to help individuals affected by the COVID-19 pandemic, the Hong Kong 2023 Budget will grant a one-off 100 percent reduction of salaries tax and tax under personal assessment for the year of assessment 2022/23. This is capped at HK$6,000, lower than the previous Budget’s HK$10,000 ceiling. This measure is estimated to benefit 1.9 million taxpayers, but reduce government revenue by HK$8.5 billion.

Child Allowance

From the 2023/24 assessment year, the basic child allowance and the additional child allowance for each child born during the year of assessment will be increased from HK$120,000 to HK$130,000. After the adjustment, the total allowance for a child born during the year of assessment will be HK$260,000, and the allowance for each subsequent year will be HK$130,000.

Annual Business Registration Fees To Return

From 1 April 2023 onwards, the annual business registration fees will return to HK$2,000, along with the existing Government Levy of HK$150. The annual business registration fees are currently completely waived.

Global Minimum Effective Tax Rate

To safeguard Hong Kong’s tax regimes and their competitiveness, Hong Kong will implement the global minimum effective tax rate of 15% on multinational enterprise (MNE) groups with global turnovers of at least EUR 750 million and implement the domestic minimum top-up tax starting in 2025. However, to allow MNE groups to make early preparation, a consultation exercise will be conducted by the government.

Legislative Amendments Into LegCo

In the fourth quarter of 2023, the government will introduce a bill into the Legislative Council of the Hong Kong Special Administrative Region (LegCo) to enhance the current aircraft leasing preferential tax regime. This includes the expansion of the scope of leases and aircraft leasing activities and the allowance of tax deduction for the acquisition cost of aircraft. Upon LegCo’s passage of the proposal, these tax concessions will be applicable to any years of assessment on or after 1 April 2022.