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Budget 2024- 2025: Energizing the Economy, Property Curbs Scrapped with Immediate Effect

Budget 2024- 2025: Energizing the Economy, Property Curbs Scrapped with Immediate Effect

This year’s Budget, themed “Advance with Confidence. Seize Opportunities. Strive for High-quality Development”, has heavy emphasis on stimulating economic growth. There is fresh funding earmarked for higher education, research & development institutions, development of financial services, boosting tourism and supporting cultural activities, while salary and profit taxes are reduced to ease the financial burden on the public and small and medium-sized enterprises, yet this all comes at the expense of government finances, thus potentially leaving Hong Kong’s fiscal reserves at their lowest in a decade.

Reviving the Property Market

In his two-hour address, Financial Secretary Paul Chan Mo-po announced that the decade-old restrictions on property transactions are to be scrapped with immediate effect, saying that “relevant measures are no longer necessary amidst the current economic and market conditions”. Therefore, the Special Stamp Duty, Buyer’s Stamp Duty and New Residential Stamp Duty are not required to be paid for any residential property transactions.

Taxes

Profits-tax payers will be granted a deduction for expenses incurred in reinstating the condition of leased premises to their original condition. The time limit for claiming the allowances for industrial and commercial buildings will be removed, allowing the new owner to claim money for the property after a change of ownership.

Paul Chan says the government will raise salaries tax for high-income individuals.

The first HK$5 million of net income will continue to be subject to the standard rate of 15%, while the portion over HK$5 million will be subject to the standard rate of 16%.

It is expected that about 12,000 taxpayers will be affected, accounting for 0.6 per cent of the total number of people who pay salaries tax and tax under personal assessment. Salaries tax follows a progressive system, starting at 2% and ending at 17% after deductions and allowances, or at a standard rate of 15% on net income. Taxpayers are charged whichever is lower.

SMEs

To assisting Small and Medium Enterprises (“SMEs”), the SME Financing Guarantee Scheme will extend application period for 80% and 90% Guarantee Products till end March 2026. HK$500 million is earmarked for the Dedicated Fund on Branding, Upgrading and Domestic Sales (“BUD Fund”) with launch of “E-commerce Easy”, where HK$1 million per enterprise is provided for implementing e-commerce projects in the Mainland. Also the Digital Transformation Support Pilot Programme will help SMEs in the food & beverages and retail industries to select ready-to-use solutions starting early this year.

Lifting Stocks

There will be a waiver on stamp duties payable on transfer of Real Estate Investment Trust (“REIT”) units and jobbing business of option market-makers. A treasury share buy-back regime is being introduced, and more measures to enhance listing regime, improve transaction mechanism, boost investor services, step up market promotion, etc. will be implemented.

Industry Support, Trade and Bonds for Northern Metropolis

To further consolidate the city’s role as an asset management and investment hub, there will be preferential tax regimes for family office funds, and promotion of block trading, RMB counters under Southbound Stock Connect, and expansion of the mutual access regime to REITs. HK$100 million shall be spent on promoting sustainable development of financial services.

A multinational supply chain management centre is to be established with the aim to provide consulting services, trade financing, corporate training and more seamless services for enterprises, as well as attract Mainland manufacturing companies to establish offshore-trading management headquarters in Hong Kong.

The government will issue bonds in the range of HK$95 billion to HK$135 billion annually over the next five years to drive development under the Northern Metropolis scheme and other infrastructure projects. Chan adds that the expected ratio of government debt to gross domestic product over the next five years will be around 9% to 13%, which he says is “much lower than most of the other advanced economies.”

Tourism

HK$1.09 billion will be spent to support the Tourism Commission and Tourism Board in organizing mega events and activities, with the Tourism Board developing new seasonal, festival and event experiences of different themes featuring Chinese and Western arts, pop culture, wining and dining and active sports to woo a wider range of visitors. Also more diversified activities are offered with efforts to boost the flow of people and create more business opportunities retailers.

While recovery is underway with retail growth expanding in 2023, the economy still has some distance to go to be back on track, Chan explained that the external environment remains volatile, and as a small and fully open economy, Hong Kong will continue to face challenges.

These measures to fire up the economy would mean another financial year of deficit of over HK$100 billion, however these measures, and thus the fiscal spending, are needed to enhance Hong Kong’s competitiveness and solidify its recovery.

For full details of the 2024-2025 Budget, please refer to: https://www.budget.gov.hk/2024/eng/index.htmlHome