Hong Kong 2025-26 Budget: Important updates for HR leaders and employers

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This year’s Budget outlines measures for talent attraction and development, tax support, as well as a reinforced fiscal consolidation programme, which includes reducing the civil service establishment and implementing a pay freeze.

Hong Kong's Financial Secretary Paul Chan presented the 2025-26 Budget today, 26 February 2025 (Wednesday).

The colour of this year's Budget cover is lake blue, symbolising “a vast ocean of opportunities as we ride the waves of high-quality economic development”, as Chan elaborated in his blog on Sunday (23 February 2025).

In response to the government's fiscal deficits, this year’s Budget proposes a "reinforced version" of the fiscal consolidation programme that focuses on:

• Maintaining and improving public services while rigorously controlling public expenditures;
• Increasing revenue while having regard to Hong Kong's competitiveness and the "user-pays" principle;
• Leveraging other public resources and market forces to accelerate development and invest in the future.

The following are key policies and development that businesses and HR leaders should take note of.

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All-out efforts to trawl for talents

Chan said the HKSAR Government makes every effort to trawl for talents, and will shortly invite top and leading talents to come to Hong Kong for development under the Quality Migrant Admission Scheme.

Additionally, the Admission Scheme for Mainland Talents and Professionals and the General Employment Policy will also be enhanced by allowing young non‑degree talents with professional and technical qualifications and experience to come to Hong Kong to join skilled trades facing manpower shortage.

Measures to trawl for talents include:

• The Hong Kong Talent Engage (HKTE) provides one stop support to incoming talents, promotes globally Hong Kong's advantages, and attracts talents.
• The HKTE plans to organise the second "Global Talent Summit • Hong Kong" early next year to reinforce Hong Kong's status as an international hub for high calibre talent.
• The Government will continue to attract more students, especially those from ASEAN and other Belt and Road (B&R) countries, to study in Hong Kong through various measures, including the B&R Scholarship.
• A series of enhancement measures will be launched shortly to provide greater flexibility under the New Capital Investment Entrant Scheme.

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All-out efforts to nurture talents

Chan said the Government will also strive to nurture talents.

To stimulate primary and secondary school students' interest in innovation and technology (I&T), the Government has invited the Hong Kong Investment Corporation (HKIC), Hong Kong Science and Technology Parks Corporation (HKSTP), and Cyberport to coordinate the efforts of more than 100 technology enterprises under their purview to engage in interactions and exchanges with students through organising product display in schools, site visits, etc., in the coming year.

The Government is also encouraging technology enterprises in Hong Kong to provide resources, technical guidance and practice scenarios for technology education such as coding and AI learning in schools, with a view to further enhancing young people's interest and capability in I&T application through integrating theoretical learning and practical application.

Support for youth

The Labour Department has since this year relaxed the requirements of joining the Greater Bay Area (GBA) Youth Employment Scheme to young people aged 29 or below with sub-degree or higher qualifications, and increased the limit of allowance for enterprises to HK$12,000 per month per person for up to 18 months.

The Government has just raised the upper age limit for participants of the Youth Employment and Training Programme to 29 and introduced workplace attachment opportunities in the GBA to help young people enhance their employability. The estimated expenditure for the Programme next year is around HK$100mn.

Chan indicated that in the coming year, the Government plans to offer around 4,000 short term internship placements in bureaux and departments and public organisations for tertiary students who aspire to pursue a career in public service.

Healthcare professionals

Chan said the number of medical training places will increase to 650 in the 2025/26 academic year. Meanwhile, the Hospital Authority (HA), through various talent exchange programmes, invites healthcare professionals, including those from the Mainland especially the GBA, for professional and clinical exchange with local healthcare personnel to foster mutual professional enhancement and, in the long run, establish a regional healthcare talent pool.

The public healthcare sector will also leverage the revised legislative framework to admit non-locally trained healthcare professionals.

Green-finance talent

Chan mentioned that development of green industries is a major international trend and key to addressing global climate change. To continuously support local green-finance talent training, the Pilot Green and Sustainable Finance Capacity Building Support Scheme will be extended to 2028.

Construction professionals

Chan has set aside HK$15mn for the work of the Centre of Excellence for Major Project Leaders over the next two years to enhance the professionalism, innovation capabilities, and cost-effectiveness management of the construction industry.

To attract more young people to join the construction industry, the Government and the Construction Industry Council (CIC) will jointly allocate funding totalling about HK$95mn to continue the provision of on-the-job training subsidies to trainees enrolling in part-time construction-related degree programmes over the next two academic years. This is anticipated to benefit about 1,000 trainees.

On the other hand, the CIC will allocate around HK$150mn to subsidise the construction industry to provide on the job training for about 2,500 graduates of degree programmes in engineering, architecture, surveying, planning, and landscape architecture.

Women's development

Chan emphasised that the Government is committed to women's development and launched the Women Empowerment Fund in June 2023 with an annual funding of HK$20mn to support women's groups and non governmental organisations for launching projects, empowering women to excel.

This year, a two year pilot mentorship programme will be launched, pairing female university students with women leader mentors to promote women's workplace development.

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Strengthening Hong Kong’s position as an international trade centre

As an international trade centre, Chan said Hong Kong capitalises on unique advantages and reinforces connectivity, and serves as a bridge linking the Mainland and global markets.

Hong Kong Trade Development Council (HKTDC) and InvestHK jointly encourage Mainland enterprises to establish a foothold in Hong Kong and set up international or regional headquarters for managing offshore trading and supply chain. HKTDC will provide them with one-stop professional consulting services to help them establish market connections and understand laws and regulations in overseas markets.

To expand Hong Kong’s trade network and attract more inward investment and enterprises from the Global South markets to the SAR, Chan said the Government is following up actively with the governments of Malaysia and Saudi Arabia on the establishment of Economic and Trade Offices in these two countries.

In addition, InvestHK has established consultant offices in Cairo, Egypt and Izmir, Türkiye. HKTDC has also set up a consultant office in Cambodia.

The Government is also exploring the signing of investment agreements with Saudi Arabia, Bangladesh, Egypt and Peru, and conducting negotiations with 17 countries on Comprehensive Avoidance of Double Taxation Agreements.

Hong Kong will continue to utilise its role as a functional platform for the B&R Initiative, and, together with business and professional services sectors, will continue to further cultivate the ASEAN and Middle East markets, and explore opportunities in Central Asia, South Asia and North Africa. HKTDC will strengthen B&R project matching, particularly on green development and I&T.

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Supporting local enterprises

To support the development of local enterprises and help them go global, Chan said the Government will inject HK$1.5bn in total into the Dedicated Fund on Branding, Upgrading and Domestic Sales and the Export Marketing and Trade and Industrial Organisation Support Fund, and streamline application arrangements. Commerce and Economic Development Bureau (CEDB) will announce details later.

The Government relaunched the principal moratorium arrangement under the SME Financing Guarantee Scheme in November last year for one year, allowing enterprises to apply for principal moratorium for up to 12 months.

In addition, many banks have joined the Taskforce on SME Lending jointly established by Hong Kong Monetary Authority (HKMA) and the Hong Kong Association of Banks, committing to making flexible arrangements as far as practicable to ease the cash flow burden on SMEs.

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Accelerating artificial intelligence development

Chan stated that the vigorous development of AI is reshaping the medium- to long- term global economic landscape. In particular, its development is no longer confined to a single technology domain, but penetrating into each and every industry in the form of AI+.

AI is at the core of developing new quality productive forces. Hong Kong will leverage the edge of "One Country, Two Systems" and its internationalised characteristics to develop into an international exchange and co-operation hub for the AI industry, and develop AI as a core industry and empower traditional industries in their upgrading and transformation.

Relevant measures include:

• Setting aside HK$1bn for the establishment of the Hong Kong AI Research and Development Institute.
• HKIC will be hosting the first International Young Scientist Forum and the first International Conference on Embodied AI Robot.
• The Hong Kong Exchanges and Clearing Limited (HKEX) is actively taking forward the establishment of a dedicated "technology enterprises channel" (TECH) to facilitate specialist technology and biotechnology companies in preparing for listing applications.
• Review the relevant tax deduction arrangements for purchasing intellectual property (IP) rights.
• Launch the two-year Pilot Manufacturing and Production Line Upgrade Support Scheme (Manufacturing+) this year. The Government will provide funding of up to HK$250,000 each on a one-to-two matching basis to enterprises operating production lines in Hong Kong, benefitting some 400 enterprises.
• Draw up a medium- to long term development plan for new industrialisation in Hong Kong, and will set up a HK$10bn Innovation and Technology Industry Oriented Fund to channel more market capital to invest in emerging and future industries of strategic importance.
• Launch the HK$180mn I&T Accelerator Pilot Scheme. The Government will provide up to HK$30mn in funding, on a one-to-two matching basis.

As for technology-empowered industry development, Chan said the Government will support local universities to set up life and health technology research institutes through the Subsidy Programme for the Setup of Life and Health Technology Research Institute(s), with a view to fostering cross university/institutional and multi disciplinary collaboration.

The interdepartmental Working Group on Developing Low-altitude Economy, established at the end of last year, is examining the applications for the first batch of Regulatory Sandbox pilot projects and will announce the results soon.

Through the pilot projects, Chan hopes to expand and enrich the scope of low-altitude flying activities, bringing new areas of growth for Hong Kong's economy. The Government is also reviewing civil aviation legislation to enhance the regulatory regime in support of long-term development of the low altitude economy.

In addition, the Government has endeavoured to deliver more efficient public services to citizens through leveraging technology, streamlining processes and driving the digital transformation of public services.

The Digital Policy Office (DPO) is planning to progressively implement a "Digital Corporate Identity" Platform before the end of next year. This will enable Hong Kong enterprises to undergo corporate identity authentication and digital signature process in a secure and convenient manner when using electronic government services or conducting online business transactions.

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Tax support measures

Having regard to the pressure faced by some industries and the people, and the Government's fiscal situation, the Government will introduce the following measures:

• provide rates concession for domestic properties for the first quarter of 2025/26, subject to a ceiling of HK$500 for each rateable property.
• provide rates concession for non domestic properties for the first quarter of 2025/26, subject to a ceiling of HK$500 for each rateable property.
• reduce salaries tax and tax under personal assessment for the year of assessment 2024/25 by 100%, subject to a ceiling of HK$1,500. This measure will benefit 2.14mn taxpayers
• reduce profits tax for the year of assessment 2024/25 by 100%, subject to a ceiling of HK$1,500. This measure will benefit 165,400 businesses.

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Reinforcing fiscal consolidation programme

In response to the government's fiscal deficits, Chan recommended reinforcing the fiscal consolidation programme as put forward in last year's Budget. The key is managing expenditure growth, making good use of the Government's fiscal resources, and identifying new revenue resources.

As such, the Government will step up efforts to contain government operating expenditure. All bureaux and departments have also been instructed to further review their resource allocation and work priorities, and provide public services in a more cost effective manner through consolidating internal resources, streamlining procedures and leveraging technology.

Measures include:

In view of the reduction in expenditure and enhancement in manpower utilisation, the civil service establishment will be reduced by 2% each in 2026-27 and 2027-28. By 1 April 2027, about 10,000 posts are expected to be cut within this term of Government.

The Government puts forward that for 2025-26, the executive authorities, the legislature, the judiciary and members of the District Councils take a pay freeze. This includes:

• the Chief Executive and politically appointed officials;
• the Non-official Members of the Executive Council;
• members of the civil service;
• the President, all Members and Secretariat of the LegCo;
• Chief Justice of the Court of Final Appeal, judges of the courts at all levels and other members of the Judiciary; and
• members of the District Councils.

From June 2025 onwards, the threshold of monthly public transport expenses incurred for receiving the subsidy under the Public Transport Fare Subsidy Scheme (PTFSS) will be raised from HK$400 to HK$500.

As for the Government Public Transport Fare Concession Scheme for the Elderly and Eligible Persons with Disabilities (i.e. the $2 Scheme), the concessionary fare will be changed to "HK$2 flat rate cum 80% discount", which means that beneficiaries will continue to pay HK$2 for trips with fare below or equal to HK$10. The number of concessionary trips will also be limited to 240 per month.

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Increasing revenue

Chan said the Government will uphold the "user pays" and the "affordable users pay" principles as far as practicable whilst increasing revenue. Measure include:

• the rate of air passenger departure tax will be increased from HK$120 to HK$200 per passenger starting from the third quarter of 2025/26. It is anticipated that government revenue will increase by about HK$1.6bn per year.
• an application fee of HK$600 will be charged under various talent and capital investor admission schemes with immediate effect. The visa fees, to be charged based on the duration of limit of stay, will be raised to HK$600 or HK$1,300. It is estimated that government revenue will increase by about HK$620mn per annum.
• a bill to LegCo on the implementation of the global minimum tax proposal drawn up by the Organisation for Economic Co operation and Development has been submitted in January 2025 to address base erosion and profit shifting. This aims to apply the global minimum tax rate of 15% on large multinational enterprise groups with an annual consolidated group revenue of at least EUR750mn and impose the Hong Kong minimum top up tax. Subject to the passage of the bill, the proposal will bring in tax revenue of about HK$15bn for the Government annually starting from 2027/28.

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Images: Financial Secretary's website / 2025-26 Budget Live