Guide on year 2008-09 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 2008/2009 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., Chartered Accountants

Certified Public Accountants (Practising)

February 2008

 

Introduction

 

On 27 February 2008, the Financial Secretary, the Hon John C Tsang delivered his 2008-2009 Budget Speech.  The details of the budget are summarised as follows:

 

Economic prospects for 2008

 

l        Consolidated budget deficit is forecast at $-7.5 billion in 2008/09 (2007/08 :surplus $115.7 billion).

 

l        Gross Domestic Product (in real terms) is forecast to grow at 4-5% in 2008/09 (2007/08 :6.3%).

 

l        Composite Consumer Price Index is forecast at 3.4% in 2008/09 (2007/08 :2.0%).

 

l          Public expenditure as a percentage of GDP is forecast at 19.2% in 2008/09 (2007/08 : 15.9%).

 

Investing in Infrastructure and Promoting Long Term Development

 

l          To create about 27,000 new construction jobs with an estimated expenditure amounting to $21.8 billion on infrastructure projects for 2008/09.  This does not include the upfront endowment of $21.6 billion to the West Kowloon Cultural District Authority.

l          To increase land supply and study the relocation of three government office buildings at the Wan Chai waterfront.

l          To earmark an additional $150 million to step up overseas promotion to enhance the appeal of Hong Kong as an international convention, exhibition and tourism capital.

l          To waive the Hotel Accommodation Tax.

l          To include ‘restricted to hotel use’ sites on the Application List.

l          To exempt the duties on wine, beer and all other alcoholic beverages except spirits.

l          To study the site location for Container Terminal 10.

l          To offer a reduction in the First Registration Tax for environment-friendly commercial vehicles.

l          To offer a more concessionary profits tax reduction for capital expenditure on environment- friendly machinery and equipment.

l          To provide a one-off grant of $18 billion for the establishment of a Research Endowment Fund.

1.          Profits tax

 

Changes have been proposed for profits tax rates in 2008/09.   The respective tax rates are summarised below.

 

			Proposed		Actual
			2008/09		2007/08
Corporate; Corporate partner in unincorporated business			16.5%		17.5%

 

2.          Salaries tax

 

Changes have been proposed for salaries tax rates and/or allowances in 2008/09.  The respective tax rates are summarised below.

 

					Proposed		Actual
					2008/09		2007/08
Standard rate					15.0%		16.0%
Progressive rate				HK$		HK$
First				40,000	2%	35,000	2%
Second				40,000	7%	35,000	7%
Third				40,000	12%	35,000	12%
				Remainder	17%	Remainder	17%
Personal allowance					108,000		100,000
Married allowance					216,000		200,000
Single parent allowance					108,000		100,000
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%		25%

 

3.          Stamp duty

 

No changes have been proposed for stamp duty rates in 2008/09.  The respective tax rates are summarised below.