Anthony Kam & Associates Ltd | Hong Kong Tax Budget

Guide on year 2009-10 proposed Hong Kong’s Financial Budget

The information contained in this letter is intended to provide readers with an overview of the significant changes under the proposed 2009/2010 Hong Kong’s tax regime. No liability can be accepted for any actions taken as a result of reading the contents without our consultation having regard to all relevant factors. Additional copies may be obtained by writing to the Firm of the address at the letterhead.

Anthony Kam & Co. Certified Public Accountants February 2009

Introduction

On 25 February 2009, the Financial Secretary, the Hon John C Tsang delivered his 2009-2010 Budget Speech. The details of the budget are summarised as follows:

Economic prospects for 2009

Consolidated budget deficit is forecast at $-39.9 billion in 2009/10 (2008/09 : deficit $-4.9 billion).
Gross Domestic Product (in real terms) is forecast to be between -2% to -3% in 2009/10 (2008/09 : +2.5%).
Composite Consumer Price Index is forecast at 1.6% in 2009/10 (2008/09 : 4.3%).
Public expenditure as a percentage of GDP is forecast at 19.4% in 2009/10 (2008/09 : 19.9%).

Tax relief

To offer a one-off tax reduction of 50% of salaries tax and tax under personal assessment for 2008/09, subject to a ceiling of $6,000.
To waive rates for the first two quarters of 2009/10, subject to a ceiling of $1,500 per quarter for each rateable tenement.
To provide a 20% rental reduction for most government properties and short term tenancies of government land for three months.
To freeze the government fees and charges related to people’s livelihood until 31 March 2010.

Tax increment

• Duty on tobacco is proposed to increase by 50%. The duty on each pack (20 sticks) of cigarette will be increased from $16 to $24.

1. Profits tax

No changes have been proposed for profits tax rates in 2009/10. The respective tax rates are summarised below.

	Proposed	Actual
	2009/10	2008/09
Corporate; Corporate partner in unincorporated business	16.5%	16.5%
Unincorporated business	15%	15%

2. Salaries tax

No changes have been proposed for salaries tax rates and/or allowances in 2009/10. The respective tax rates are summarised below.

			Proposed		Actual
			2009/10		2008/09
Standard rate			15.0%		15.0%

Progressive rate		HK$		HK$
First		40,000	2%	40,000	2%
Second		40,000	7%	40,000	7%
Third		40,000	12%	40,000	12%
		Remainder	17%	Remainder	17%

Personal allowance			108,000		108,000
Married allowance			216,000		216,000
Single parent allowance			108,000		108,000
1-9 child (each)	year of birth		100,000		100,000
	other years		50,000		50,000
Dependent parent/grandparent
Basic (aged 60 or above)			30,000		30,000
Additional for residing with taxpayer			30,000		30,000
Basic (aged 55-59)			15,000		15,000
Additional for residing with taxpayer			15,000		15,000
Dependent brother/sister			30,000		30,000
Disabled dependent			60,000		60,000
Deductions:
Self-education expenses			60,000		60,000
Home loan interest (10 years)			100,000		100,000
Elderly residential care expenses			60,000		60,000
Contribution to recognized retirement schemes			12,000		12,000
Charitable donations as a percentage of income			35%		35%

3. Property tax

No changes have been proposed for property tax rate in 2009/10. The respective tax rates are summarised below.

			Proposed		Actual
			2009/10		2008/09
			15%		15%

4. Stamp duty

No changes have been proposed for stamp duty rates in 2009/10. The respective tax rates are summarised below.

Stock transactions

The rates of stamp on stock transactions are charged at 0.1% of the amount of the consideration or its value on every sold and bought note (ie 0.2% on the buyer and the seller combined).

Property transactions

Property	Proposed	Actual
Consideration	20009/10	2008/09
HK$	Rate levied*	Rate levied*
Up to 1,000,000	HK$100	HK$100
1,000,001 to 2,000,000	HK$100	HK$100
2,000,001 to 3,000,000	1.50%	1.50%
3,000,001 to 4,000,000	2.25%	2.25%
4,000,001 to 6,000,000	3.00%	3.00%
6,000,001 and above	3.75%	3.75%
	*subject to marginal relief

5. Rates

Rates charge in 2009/10 remains unchanged at 5%. However, it is proposed to waive rates of the first two quarters of 2009/10, subject to a ceiling of HK$1,500 per quarter.

Preserving jobs

To make a provision of $1.6 billion in total to create 62,000 jobs and internship opportunities in the next three years.
To earmark $400 million non-recurrent funding to enhance a series of employment programmes, and to provide $13 million additional funding for the Labour Department.
To earmark $140 million to launch an “Internship Programme for University Graduates”.
To earmark $700 million for the “Operation Building Bright” campaign to help maintain 1,000 dilapidated buildings.
To earmark $100 million to assist organizers to host more events to attract tourists.
To allocate $78 million for organizing activities relating to the 2009 East Asian Games and the 60^thanniversary of the founding of the People’s Republic of China.
To earmark $63 million to conduct an education programme for Internet users.
To allocate an additional $130 million to enhance energy efficiency in government buildings and public facilities.

Promoting sustainable economic development

To enchance Hong Kong/Guangdong/Taiwan/Macao co-operation and co-operation with emerging market. To promote bond market development and to issue government bonds.
To promote Hong Kong as an Asian wine and gourmet centre. To promote conventions, exhibitions and tourism industries.
To commence the construction work of the Kai Tak cruise terminal. To promote technology-based economy and the feasibility of Science Park Phase 3.
To promote green economy, the use of electric vehicles and extend exemption of First Registration Tax. To enchance energy efficiency in buildings.
To earmark $7.5 billion to implement the “334” new senior secondary academic structure.
To expense $39.3 billion on capital expenditure. To speed up ten major infrastructure projects and to earmark $300 million to support creative industries.

Building a caring community

To increase the recurrent subvention for the Hospital Authority by $870 million a year over the next three years and to earmark $840 million to strengthen medical services.
To provide additional $37 million for elderly homes, $55 million for residential care places, $20 million to encourage more women to pursue continuous learning.
To provide $19 million to the disabilities, $7.7 million for Rehabuses, $25 million to victims of domestic violence.