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More opportunities in Hong Kong from the 2017 Policy Address

The Hong Kong Chief Executive Ms Carrie Lam announced her first Policy Address on 11 October 2017.  In order to encourage the development of small and medium-sized enterprises and Research and Development (R&D) industries, she proposes the following policies:-


Two-tier profits tax system

The Government will provide tax relief to small and medium-sized enterprises.  Profits tax rate for the first HK$2 million (US$255,000) of profits is proposed to be lowered to 8.25% (which is half of the prevailing tax rate of 16.5%).  Profits above that amount will continue to be subject to the prevailing standard tax rate of 16.5%.  Such relief is only restricted to one enterprise nominated by each business group.


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Encouragement to R&D investment by enterprises


It is proposed to provide additional tax deduction for R&D expenditure.  A 300% tax deduction is proposed to be offered for the first HK$2 million eligible R&D expenditure, with the remainder at 200%.


Comparison:

Increase the total number of comprehensive avoidance of double taxation agreements (CDTA)

The Chief Executive proposes to increase the total number of CDTAs to be signed with other tax jurisdictions to 50 in the next few years.  As of 24 August 2017, the total number of CDTAs which Hong Kong has concluded with other jurisdictions is 38.


According to the Hong Kong Inland Revenue Department, a bill to implement the Two-tier profits tax system and Encouragement to R&D investment will be submitted to the Legislative Council as soon as possible.

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