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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.