Proposed tax measures in Hong Kong's 2024-25 Budget that HR should know

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Hong Kong's Financial Secretary Paul Chan has delivered the 2024-25 Budget, where he has proposed various tax measures, duties and charges as follows.

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Profits tax, salaries tax, and tax under personal assessment, for the year of assessment 2023/24

The Financial Secretary has proposed a one-off reduction of profits tax, salaries tax, and tax under personal assessment for the year of assessment 2023/24 by 100%, subject to a ceiling of HK$3,000 per case.

A taxpayer who is separately chargeable to salaries tax and profits tax can enjoy a tax reduction under each of the tax types.

Taxpayers should file their profits tax returns and tax returns for individuals for the year of assessment 2023/24 as usual. Upon enactment of the relevant legislation, the Inland Revenue Department will effect the reduction in the final assessment.

However, the proposed tax reduction will only be applicable to the final tax for the year of assessment 2023/24, but not to the provisional tax of the same year. Therefore, taxpayers are still required to pay the provisional tax on time as stipulated in the demand notes that have been issued to them. The provisional tax paid will, in accordance with the Inland Revenue Ordinance, be applied in payment of the final tax for the year of assessment 2023/24 and provisional tax for the year of assessment 2024/25. The excess balance, if any, will be refunded.

The proposed tax reduction is not applicable to property tax. Nevertheless, individuals with rental income, if eligible for personal assessment, may be able to enjoy such a reduction under personal assessment.

For a taxpayer having business profits or rental income, he/she may elect for personal assessment in their tax returns for the year of assessment 2023/24. The reduction will be based on the tax payable under personal assessment.

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Salaries tax and tax under personal assessment, for the year of assessment 2024/25

The Financial Secretary has proposed to implement a two-tiered standard rates regime for salaries tax and tax under personal assessment starting from the year of assessment 2024/25.

In calculating the amount of tax for taxpayers whose net income (before deduction of allowances) exceeds HK$5m, and whose salaries tax or tax under personal assessment is to be charged at a standard rate

• The first HK$5mn of their net income will continue to be subject to the standard rate of 15%
• The portion of the net income exceeding HK$5mn will be subject to the standard rate of 16%

After enactment of the relevant legislation, the Inland Revenue Department will apply the two-tiered standard rates in calculating the provisional salaries tax for the year of assessment 2024/25.

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Profits tax, for the year of assessment 2024/25

The Financial Secretary has proposed to provide tax deduction for expenses incurred in reinstating the condition of the leased premises to their original condition.

Meanwhile, the time limit for claiming industrial and commercial building and structure allowances will be removed. The new owner will be allowed to claim allowances for the property after a change of ownership, subject to factors such as the construction cost of the property and the balancing charge of its previous owner.

Both enhancement measures will take effect from the year of assessment 2024/25.

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Business registration fees

The Financial Secretary has proposed to increase business registration fees by HK$200 to HK$2,200 per annum, with effect from 1 April 2024.

To relieve the relevant impact, it is proposed to waive the business registration levy of HK$150 for two years.

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Stamp duties

The Financial Secretary has proposed to waive stamp duties payable on the transfer of real estate investment trust units and the jobbing business of option market-makers.

Regarding stamp duty on property transactions, the Financial Secretary has proposed to cancel all demand-side management measures for residential properties with effect from 28 February 2024. In other words, the following duties will no longer be charged on all residential property transactions from the effective date onwards.

• Special Stamp Duty (SSD)
• Buyer's Stamp Duty (BSD)
• Ad Valorem Stamp Duty (AVD), also known as "New Residential Stamp Duty", at 7.5% under Part 1 of Scale 1

The Government will introduce the Stamp Duty (Amendment) Bill 2024 (the Bill) into the Legislative Council on 13 March 2024 to take forward the initiative.

The Chief Executive has also made the Public Revenue Protection (Stamp Duty) Order 2024 under the Public Revenue Protection Ordinance (Cap. 120) to give full force and effect of law to the Bill before its enactment.

Subject to the eventual enactment of the Bill, any instrument executed on or after 28 February 2024 for the sale and purchase or transfer of residential properties are no longer subject to SSD and BSD.

The AVD rate of 7.5% under Part 1 of Scale 1 is to be amended to the same as those of AVD at Scale 2.

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Rates concession

The Financial Secretary has proposed rates concession for domestic properties, as well as for non‑domestic properties, for the first quarter of 2024/25, subject to a ceiling of HK$1,000 for each rateable property.

In addition, the Government will introduce legislative amendments in the first half of this year to implement the progressive rating system for domestic properties, aiming to bring the system into effect from the fourth quarter of 2024‑25 onwards. The new system will only affect domestic properties with rateable value over HK$550,000.

According to the proposed progressive rating system for domestic tenements:

• For domestic tenements with rateable value of HK$550,000 or below, rates will continue to be charged at 5% of the rateable value.
• For domestic tenements with rateable value over HK$550,000, rates will be charged at 5% of the rateable value on the first HK$550,000, and at 8% of the rateable value on the next HK$250,000, and then at 12% on the portion of rateable value exceeding HK$800,000.

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Hotel accommodation tax (HAT)

The Financial Secretary has proposed to resume the collection of the hotel accommodation tax at a rate of 3%, with effect from 1 January 2025.

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International taxation

The Financial Secretary has proposed to apply the global minimum tax rate of 15% on large multinational enterprise groups with an annual consolidated group revenue of at least EUR 750mn and impose the Hong Kong minimum top‑up tax starting from 2025.

The Government is now conducting consultation on the implementation of the above proposals and expect to submit a legislative proposal to LegCo in the second half of this year. It is estimated that these proposals will take effect from 2027‑28.

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Commenting on the proposed tax measures, The Taxation Institute of Hong Kong (TIHK) welcomes the Government's implementation of a comprehensive fiscal consolidation strategy plan, and suggests that the Financial Secretary may consider increasing various personal allowances (similar to the increment level of the child allowance) in order to relieve the financial burdens of the middle-class individuals.

TIHK said that Hong Kong has not had a comprehensive review of its IRO since 1976. With the changing business environment, new business models and emergence of the new normal economy, the Government needs to conduct a comprehensive review of the current IRO, study the options for broadening Hong Kong's tax base, and ensure that the IRO can maintain the long-term stability of Hong Kong's public finances.

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