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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 60th anniversary 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.