Guide on year 2010-11 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 2010/2011 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 & Associates Limited
Certified Public Accountants
February 2010

Introduction

 

On 24 February 2010, the Financial Secretary, Mr John C Tsang delivered his 2010/2011 Budget Speech.  The details of the budget are summarised as follows:

Economic prospects for 2010

1. Consolidated budget deficit is forecast at $-25.2 billion in 2010/11 (2009/10 : surplus $13.8 billion).
2. Change of Gross Domestic Product (in real terms) is forecast to be between 4% to 5% in 2010/11 (2009/10 : -2.7%).
3. Change of Composite Consumer Price Index is forecast at 2.3% in 2010/11 (2009/10 : 0.5%).
4. Public expenditure as a percentage of GDP is forecast at 19.8% in 2010/11 (2009/10 : 19.0%).
5. Number of completed private residential units will rise to 14,300.  The government will further increase in supply of residential units from MTRC; Urban Renewal Authority and Housing Authority.

 

Tax relief

1. Reduce 75% of salaries tax and tax under personal assessment for 2009/10, capped at $6,000.
2. Waive rates for 2010/11, capped at $1,500 per quarter; and waive the business registration fee for one year.
3. Extend the stamp duty concession in the trading of exchange traded funds and extend concessionary profits tax rate to cover qualifying debt instruments.
4. Update the lists of recognised stock exchanges and futures exchanges to extend the application of tax exemption for offshore funds engaged in futures trading.
5. Raise the grant ceiling for first patent registration and extend profits tax deductions to cover the purchase of registered trademarks, copyrights and registered designs.

 

1. Profits tax

No changes have been proposed for profits tax rates in 2010/11. The respective tax rates are summarised below.

			Proposed		Actual
			2010/11		2009/10
Corporate; Corporate partner in unincorporated business			16.5%		16.5%
Unincorporated business			15%		15%

1. Salaries tax

 

No changes have been proposed for salaries tax rates and/or allowances in 2010/11.  The respective tax rates are summarised below.

							Proposed		Actual
							2010/11		2009/10
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 allowance							108,000		108,000
Married person’s 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 allowance
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 allowance							30,000		30,000
Disabled dependent allowance							60,000		60,000
Deductions – maximum limits:
Self-education expenses							60,000		60,000
Home loan interest (10 years)							100,000		100,000
Elderly residential care expenses							60,000		60,000
Contributions to recognized retirement schemes							12,000		12,000
Charitable donations as a percentage of assessable income							35%		35%

 

 

1. Property tax

No changes have been proposed for property tax rate in 2010/11. The respective tax rates are summarised below.

			Proposed		Actual
			2010/11		2009/10
			15.0%		15.0%

1. Stamp duty

 

Changes have been proposed for stamp duty rates in 2010/11.  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		2010/11		2009/10
	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

 

1. Rates

No changes have been proposed for property tax rate in 2010/11.  However, it is proposed to waive rates for 2010/11, subject to a ceiling of $1,500 per quarter.

			Proposed		Actual
			2010/11		2009/10
Rates			5.0%		5.0%

 

1. Duty on tobacco and alcoholic beverages

Abolish the duty-free concessions on tobacco products for incoming passengers.

Economic development

1. Estimated capital works expenditure will increase to $49.6 billion.
2. Earmark $100 million to support the Construction Industry Council.  Provide resources to promote the four traditional pillar industries and six industries with clear advantages.
3. Allocate $41 million in next two years to support the work of the Hong Kong Council for Testing and Certification and the Hong Kong Accreditation Service.
4. Implement Hong Kong Science Park Phase 3 development. 
5. Allocate $7.9 billion to implement remaining works under Harbour Area Treatment Scheme.
6. Set up a $300 million Pilot Green Transport Fund and provide $540 million in subsidies for the replacement of diesel commercial vehicles.
7. Complement the National 12th Five-Year Plan and enhance co-operation with Taiwan.

 

Caring society

1. Estimated recurrent expenditure on education, healthcare and social welfare will increase to $130 billion.
2. Increase recurrent funding for After-school Learning to $175 million.  Grant subsidy of up to $1,300 on internet access charges in the 2010 academic year for eligible children in primary and secondary schools. 
3. Allocate $1 billion for Matching Grant Scheme for tertiary institutions.  Inject $500 million to upgrade language proficiency.  Allocate an additional $500 million to help owners maintain their buildings.  To redevelop the collapsed building in Ma Tau Wai Road.
4. Inject $3 billion into the Arts and Sport Development Fund.  To inject $486 million over the next five years to support the development of the West Kowloon Cultural District.
5. Inject $3 billion into the Beat Drugs Fund, and allocate an additional $52 million to support anti-drug efforts.
6. Provide an additional $1.24 billion to the Hospital Authority to improve medical services.  Allocate $600 million and $40 million to strengthen primary care services and enhance drugs regulation respectively.
7. Provide additional funding of $942 million for services related to the elderly; the disabled and the disadvantaged.
8. Provide an additional $173 million to enhance employment services.
9. Pay two months' rent for public housing tenants.  Provide one more month of CSSA payment, Old Age Allowance and Disability Allowance.
10. Provide a $1,000 allowance to students receiving CSSA or student financial assistance.