Proposed changes to tax law could save Hong Kong’s small businesses HK$165,000 a year
Bill with proposed amendments to the current rules will be discussed next month
A Hong Kong tax reform bill that would see small businesses save up to HK$165,000 a year will be tabled to the city’s legislature early next month.
The Inland Revenue (Amendment) Bill 2017, which seeks to implement a two-tier profits tax system, will be gazetted on Friday.
The draft bill, to be discussed in Legco on January 10, came two months after Chief Executive Carrie Lam Cheng Yuet-ngor announced her plan to introduce the new system in her maiden policy address in October.
Under the system, the profits tax for the first HK$2 million of profits made by companies will be lowered to 8.25 per cent from 16.5 per cent.
Profits after the amount will continue to be taxed at 16.5 per cent.
For unincorporated businesses, which are mostly partnerships and sole proprietorships, the two-tier tax rates will be 7.5 per cent and 15 per cent respectively.
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If the new system is implemented, a corporation could save up to HK$165,000 a year and an unincorporated business could save up to HK$150,000.
“It is our objective to adopt a competitive taxation system to promote economic development while maintaining a simple tax regime and low tax rates,” a government spokesman said. “Introducing a two-tiered profits tax rates regime will reduce the tax burden on enterprises, especially small and medium enterprises and start-up enterprises. This will help foster a favourable business environment, drive economic growth and enhance Hong Kong’s competitiveness.”
All enterprises with assessable profits will benefit from the system, regardless of their size.
In the case of a group of connected companies, the government proposes to apply the system to only one of the companies nominated by the group, to make sure the reform benefits real small businesses.
During her election campaign, Lam had promised the reform in her election manifesto to tackle regional competition and attract more entrepreneurial talent.