hong kong 2023 budget

The Hong Kong government recently unveiled its 2023 Budget in light of persistent economic uncertainty. The Hong Kong 2023 budget includes several initiatives to support the city’s businesses, residents, and economy. It also outlined many strategies to help small and medium-sized enterprises (SMEs), which are pivotal to Hong Kong’s growth. This article will explore the key highlights of the Hong Kong 2023 budget for SMEs and what they mean for the future of business in Hong Kong.

Hong Kong 2023 Budget Includes One-Time Tax Reduction to Support Enterprises and Individuals

As part of the efforts to support individuals and businesses, the Hong Kong 2023 Budget proposes to maintain the reduction of profits and salaries tax for the year of assessment (YA) 2022-2023, but with a lower cap than in the previous year. 

However, the proposed Hong Kong 2023 Budget suggests keeping the current salaries and profits tax rates unchanged this year. These measures are intended to alleviate the financial burden on taxpayers and ease business operating pressures, thus promoting economic growth and stability in Hong Kong.

1. Reduction in Profit Tax to Support Businesses

The Hong Kong 2023 Budget proposes a one-time, 100% reduction in profits tax for YA 2022–2023, subject to a cap of HK$6,000 per case, less than the previous Budget’s cap (HK$10,000). This policy will spare the government HK$720 million in revenue but will help around 134,000 businesses. 

It is important to note that the Hong Kong 2023 Budget does not propose any modifications to the tax rates for the profits tax. Therefore, for YA 2022–2023, corporations’ standard profits tax rates will stay at 16.5% and incorporated firms at 15%.

2. Reduction in Salaries Tax to Boost Individual Support

As part of the Hong Kong 2023 Budget, the government has proposed a one-time reduction in salaries tax and tax assessed under personal assessment for YA 2022–2023 by 100%, with a cap of HK$6,000 per taxpayer. Notably, the cap is lower than the HK$10,000 established in the previous Budget. This action, which will help 1.9 million Hong Kong taxpayers, intends to aid those impacted by the pandemic. However, this action will result in an 8.5 billion Hong Kong dollar decrease in government revenue.

Hong Kong 2023 Budget Offers Additional Support Policies for Enterprises

1. New Re-domiciliation Regime for Foreign Companies

During the Hong Kong 2023 Budget announcement, the Financial Secretary revealed a new initiative aimed at helping non-Hong Kong enterprises. The proposed company re-domiciliation regime will make it easier for overseas companies to transfer their company registration to Hong Kong. 

This regulatory regime simplifies the re-domiciliation process, allowing companies to change their place of incorporation to Hong Kong without needing complicated and costly winding up or court approval. This initiative will further promote its favorable business environment by making Hong Kong an attractive base for multinationals, especially those with a business focus in the Asia Pacific region. The government is set to conduct a consultation and present legislative proposals in 2023-24.

2. Supporting SMEs and Start-ups

In the Hong Kong 2023 Budget, the government has announced an extension of the SME Financing Guarantee Scheme (SFGS) application period to provide better financial support to SMEs during challenging economic conditions. 

The Financial Secretary has shared that the Special 100% Loan Guarantee, the 90% Guarantee Product, and the 80% Guarantee Product under the SFGS will be extended until March 2024. This move aims to give SMEs more time to secure financing and overcome economic uncertainties. The government’s efforts to improve the SFGS will help SMEs continue their operations and remain financially stable, thus contributing to the economy’s growth.

3. Enhancing Trade through New Policies / Strengthening Overseas Economic and Trade Connections

The Hong Kong 2023 Budget also included efforts to pursue investment agreements (IAs) and free trade agreements (FTAs) with other economies. The Hong Kong government aims to prioritize emerging economies to boost trade development efforts and expand its global economic and trade networks. In particular, current efforts are underway to join the Regional Comprehensive Economic Partnership (RCEP) to bolster trade, investment, and regional growth and enhance Hong Kong’s status as a regional trading hub. While it is true that most of the city’s key trading partners have already signed FTAs and IAs, the objective is to create a more extensive supply chain and entice more Hong Kong businesses to invest in RCEP member economies.

4. Adopting New International Tax Standards

In the Hong Kong 2023 Budget, the Financial Secretary confirmed the implementation of the Pillar Two Global Minimum Tax from 2025. This action is in response to base erosion and profit shifting (BEPS 2.0) measures made by the Organization for Economic Co-operation and Development (OECD). 

The Hong Kong government has committed to enforcing the 15% global minimum effective tax rate to protect taxation rights and keep the tax system competitive. Large multinational enterprise (MNE) groups will be subject to the global minimum effective tax rate, and the domestic minimum top-up tax will go into effect in 2025. According to estimates, the adoption will bring in $15 billion in revenue from taxes annually for the government. MNE groups can make early preparations through a consultation process to be launched soon.

How Can We Help – Our Accounting Services & Taxation Services

Premia TNC’s accounting and taxation services are designed to help individuals and businesses navigate the complex and ever-changing landscape of financial regulations and reporting requirements. Whether you are a small business owner or a large corporation, we can help you stay on top of your finances and comply with all relevant tax laws and regulations.

Our experienced accountants and tax professionals will work closely with you to understand your unique needs and develop customized solutions that meet your goals and objectives. From bookkeeping and financial statement preparation to tax planning and compliance, we offer a full range of accounting and taxation services to help you achieve financial success.

Accounting & Taxation Services – Frequently Asked Questions

1. Can Premia TNC assist with my individual tax issue?

Yes, Premia TNC can provide tax consulting services to individuals and act as a tax representative to handle tax issues on their behalf. Our team of experienced tax professionals can help you navigate complex tax regulations and provide tailored solutions to meet your specific needs.

2. What are the benefits of outsourcing accounting and taxation services for my business in Hong Kong?

By outsourcing accounting and taxation services, you can free up time and resources that would otherwise be spent on managing these functions internally. This allows you to focus on core business activities and growth opportunities while ensuring that your financial reporting and compliance obligations are met accurately and on time.

3. How can I choose the right accounting and taxation provider for my business?

Look for a provider with a strong reputation and experience working with businesses of a similar size and industry. Consider their expertise in Hong Kong tax law and regulations and their approach to client communication and collaboration. Ask for references and case studies to understand their track record and capabilities better.