Guide on year 2011-12 proposed Hong Kong’s Financial Budget

The information contained in this letter is intended to provide readers with an overview of the significant tax changes. 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.

Anthony Kam & Associates Limited
Certified Public Accountants
February 2011

Introduction

 

On 23 February 2011, the Financial Secretary, Mr John C Tsang delivered his 2011/2012 Budget Speech. The details of the budget are summarised as follows:

Economic prospects for 2011

1. Consolidated budget surplus is forecast at $3.9 billion in 2011/12 (2010/11 : surplus $71.3 billion).
2. Change of Gross Domestic Product (in real terms) is forecast to be between 4% and 5% in 2011/12 (2010/11 : 6.8%).
3. Change of Composite Consumer Price Index is forecast at 4.5% in 2011/12 (2010/11 : 2.4%).
4. Government expenditure for 2011/12 is forecast at $371.1 billion. (2010/11 : $303.5 billion)
5. Capital expenditure is forecast at $73.1 billion in 2011/12 (2010/11 : $62.7 billion).

 

Tax relief, subsidies and others

1. Waive rates for 2011/12; electricity subsidy of $1,800 per residential account. Pay two months’ rent for public housing tenants; provide one more month of CSSA payment, Old Age and Disability Allowance.
2. Raise Child and Parents Allowance by 20%. Injection of $6,000 into MPF accounts. Reserve $100 million for food assistance services.
3. Issue $5 billion to $10 billion worth of Hong Kong dollar bonds.

 

Tax increment

1. Increase tobacco duty by 50 cents per stick and increase private cars First Registration Tax by 15%.

Stabilise the property market

1. Put up 5 additional residential sites for construction of about 3,000 small and medium-sized flats. A total of 52 residential sites will be available for sale in 2011/12. Housing land will provide a total of 30,000 to 40,000 private residential flats.
2. Public rental housing flat production forecast for 2011/12 and 2012/13 will be 11,200 and 16,700 respectively.

 

1. Profits tax

No changes have been proposed for profits tax rates in 2011/12. The respective tax rates are summarised below.

			Proposed		Actual
			2011/12		2010/11
Corporate; Corporate partner in unincorporated business			16.5%		16.5%
Unincorporated business			15%		15%

1. Salaries tax

 

The child allowance, dependent parent/grandparent allowance and deduction ceiling for elderly residential care expenses have been proposed to raise by 20%. The respective tax rates, allowances and deductions are summarised below.

							Proposed		Actual
							2011/12		2010/11
Standard rate							15%		15%
Progressive rates						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%
Basic							108,000		108,000
Married							216,000		216,000
Single parent							108,000		108,000
1-9 child (each)	year of birth						120,000		100,000
	other years						60,000		50,000
Dependent parent/grandparent allowance
Basic (aged 60 or above)							36,000		30,000
Additional for residing with taxpayer							36,000		30,000
Basic (aged 55-59)							18,000		15,000
Additional for residing with taxpayer							18,000		15,000
Dependent brother/sister allowance							30,000		30,000
Disabled dependent allowance							60,000		60,000
Deductions ceiling:
Self-education expenses							60,000		60,000
Home loan interest (10 years)							100,000		100,000
Charitable donations(% of income)							35%		35%
Elderly residential care expenses							72,000		60,000
Contributions to recognized retirement schemes							12,000		12,000

 

 

1. Property tax

No changes have been proposed in 2011/12. Property tax are charged at 15%.

1. Stamp duty

No changes have been proposed for stamp duty rates in 2011/12.

Stock transactions

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

Property transactions

	Property		Proposed		Actual
	Consideration		2011/12		2010/11
	HK$		Rate levied*		Rate levied*
	Up 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 to 20,000,000		3.75%		3.75%
	20,000,001 and above		4.25%		3.75%
			*subject to marginal relief

Any residential property acquired on or after 20 November 2010 and resold within 24 months will be subject to special stamp duty charged on the value of the property:
i. 15% if the vendor has held the property for 6 months or less

ii. 10% if the vendor has held the property for more than 6 months but for 12 months or less

iii. 5% if the vendor has held the property for more than 12 months but for 24 months or less

1. Rates

No changes have been proposed in 2011/12. Rates are charged at 5% of the rental value of a
property. However, it is proposed to waive rates for 2011/12, subject to a ceiling of $1,500
per quarter for each rateable property.

1. Duty on tobacco and alcoholic beverages

Tobacco duty will be increased by 50 cents per stick of cigarette. Duties on other tobacco
products will be increased by the same rate.

1. First registration tax for private cars

This has been proposed to increase by about 15%.

			Proposed		Actual
	Tax bands		2011/12		2010/11
	On the first $150,000		40%		35%
	On the first $150,000		75%		65%
	On the first $200,000		100%		85%
	On the remainder (over $500,000)		115%		100%

Invest in the future

1. Capital work expenditure for 2011/12 will reach $58 billion and will exceed $60 billion for each of the next few years. Land available in 2011/12 will provide a floor area of 600,000 square metres for commercial/business use. Kai Tak will be developed into another premier office node.
2. Continue to enhance the competitiveness of the four traditional pillar industries. Promote the six industries where we enjoy clear advantages, wine trading and explore new opportunities. Strengthen co-operation with Guangdong Province, Macao, Taiwan and other regions.
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3. Increase small and medium enterprises Loan Guarantee Scheme substantially to $30 billion.

 

Education

1. Set up a Self-financing Post-secondary Education Fund of $2.5 billion. Inject $250 million into Government Scholarship Fund to benefit students.
2. Provision of $300 million a year for the full level of student financial assistance. Provision of $140 million a year for financial assistance for post-secondary students. Provision of $48 million a year for providing additional grants for post-secondary students.
3. Reserve $110 million to provide after-school tutorial services for primary students. Allocate $100 million for mainland experience scheme for tertiary students.

 

Social welfare

1. Allocate $1 billion to extend the Elderly Health Care Voucher Pilot Scheme. Spend $590 million to raise the rates of Community Living Supplement under CSSA. Spend $328 million to raise the CSSA standard rates for disabled /ill health recipients.
2. Spend $200 million a year for additional 1,300 subsidised residential cares places and 1,700 community care services. Spend $148 million to implement the Integrated Discharged Support Programme for elderly patients.
3. Spend $45 million to subsidised residential care homes for elderly. Spend $40 million to raise the purchase price for the EA1 places under the Enhanced Bought Place Scheme for elderly.

 

Health care

1. Provide an additional $2.74 billion to the Hospital Authority to meet increasing demand. Reserve $1 billion for the Health and Medical Research Fund. Allocate $31 million to strengthen the regulation of drugs. Allocate $26 million to strengthen tobacco control.

 

Community building

1. Allocate $1 billion for Operation Building Bright to improve building safety. Reserve an additional $500 million to subsidise more revitalisation projects. Set up a $7 billion Elite Athletes Development Fund.
2. Allocate $2.8 billion for the development of art and cultural software. Reserve $150 million for the Enhancing Self-Reliance Through District Partnership Programme.