On 24th of February 2021, Financial Secretary, Mr. Chan Mo Po presented his fifth Budget speech for Hong Kong. After a whole year of COVID-19 battle, total government revenue for 2021-2022 is estimated to be HKD591.1billion; and total government expenditure is estimated to be HKD727.8billion. A budget deficit of HKD257.6 billion for 2020/2021 is expected; and anticipated fiscal reserves of HKD902.7 billion by 31st of March 2021.
Unemployment rate continue to rise and has reached 7%, approximately 253 thousand of people are unemployed. Underemployment rate reached 3.8%. The Government has been putting an enormous effort to enhance Hong Kong’s competitive edge and assist Hong Kong enterprises to harbour the Greater Bay Area. Industries like innovation, technology, biotechnology, and system risk management play a pivotal role in the government’s cradle.
Apart from promoting Greater Bay Area, government introduced several relief and boosting measures for individuals and commercial sectors. For instance, issuing the HKD5,000 e-consumption vouchers, reducing the salaries tax and profits tax, encouraging family offices to set up operations, and attracting REITs to list in Hong Kong.
2021 continues to be challenging. However, we welcome the government measures to promote Hong Kong as a hub for asset & wealth management, family offices, business & legal consultation.
Reduce profits tax for the year of assessment 2020/21 by 100%, subject to a cap of HKD10,000.
Waive the business registration fees for 2021-22.
Revive the economy
Issue HKD5,000 e-consumption vouchers to Hong Kong residents to stimulate local consumption.
Subsidize the IT solutions and relevant training expenses of enterprises.
Support enterprises / manufacturers in practicing and commercializing their R&D results, utilize technological services to improve productivity, and set up smart production line in Hong Kong to make them grasp the opportunities in the new economy.
Inject a total of HKD375 million to TDC to develop online platform and enhance digitalization.
Provide funding support to TDC and promote Hong Kong’s strength in the development of the Greater Bay Area and in healthcare products and services.
Develop a business version of “iAM Smart” and “Commercial Data Interchange”.
Promote LawTech development and explore the development of Hong Kong Legal Cloud. As of 2021, the online dispute resolution and deal making platform will roll out negotiation, arbitration, mediation and online training services gradually. Other services, for instance, e-translation and smart contract will be developed in phases.
Showcase the image of Hong Kong as an open international city in the Greater Bay Area from various perspectives; for instance, finance, innovative & technology, culture & creativity, tourism.
Stimulating the economy
Provide subsidies for qualifying REITs to list in Hong Kong. The subsidy will cover 70 per cent of the expenses paid to local professional service providers for the listing of REITs, subject to a cap of $8 million per REIT.
Seek to include ETF and other types of assets in order to expand the scopes of eligible securities. HKEX will quicken the preparatory work for the launch of MSCI China A-Index Futures contract.
Suggest launching a Pilot Insurance-linked Securities Grant Scheme to attract insurance enterprises to issue insurance-linked-securities in Hong Kong.
Suggest to allow foreign investment funds to re-domicile to Hong Kong for registration as Open-ended Fund Companies (OFC) or Limited Partnership Fund (LPF).
Provide financial support to OFCs to set up or re-domicile to Hong Kong; subject to a cap of $1 million per OFC.
Provide one-stop support services to family office businesses who are interested in setting up operations in Hong Kong.
Local and International Tax
Will actively implement BEPS 2.0 proposal and minimize the impact on local SMEs.
Will not revise rates of profit tax and salaries tax.
Will not introduce new taxes.
A week after the Budge speech, the appointment of Mr. Alejandro Nicolas Aguzin as Chief Executive of the Hong Kong Exchanges and Clearing Limited (HKEX) brings hope to the market. His extensive knowledge and experience can further sharpen the competitive edge of HKEX and Hong Kong in the global financial market. This helps government to implement the financial plans, and make the stock exchange a catalyst for connecting China with the globe, and vice versa.
We are glad to see government has put in effort to accelerate the development of digitalization. Particularly iAM Smart and Commercial Data Interchange helps business advisory enterprises minimizing the operation cost. Besides, with the government support in REITs, green finance and relevant tax measures for family offices in Hong Kong, this helps generate new capital to Hong Kong financial market.
We welcome government strengthen the strategic position of Hong Kong in the Greater Bay Area. Under ‘One Country, Two Systems”, Hong Kong serves as a hub of international mediation, legal and dispute resolution services. By taking the Greater Bay Development as an entry point, we will be a major role as a facilitator to connect the domestic circulation and international circulation. This encourages overseas enterprises to set up operations in Hong Kong to get into a market of GDP USD1679.5 billion; concurrently, enjoys the legal protection of Hong Kong as a Hong Kong company.
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