On 26 February, Financial Secretary Paul Chan presented Hong Kong’s budget for 2020-21. The budget introduced one of the widest ranging Hong Kong budgets in recent years. As a response to various challenges that Hong Kong experienced in the 2019-20 financial year, Paul Chan stated that the goal of this budget was to: support enterprises, safeguard jobs, stimulate the economy and relieve people’s burdens.
However, it is clear that Hong Kong budget deficits are a result of costs rising faster than the 2.8% trend growth rate in tax revenues assumed for 2021-24. To steadily grow revenues, the Hong Kong government has proposed various relief measures to support businesses.
Among the many relief measures, small and medium-sized enterprises (“SME’s”) can expect to enjoy the following relief measures:
The above relief measures are very welcomed and are expected to bring much support to Hong Kong’s start-up and SME community. However, as stated by Paul Chan during his budget speech, there is a need for Hong Kong to identify new sources of revenue in the medium term.
It is clear from the Hong Kong budget that the Hong Kong Government is putting increased focus on securing new sources of revenue by expanding on the city’s key business strengths – most notably, low tax rates and simple business registration procedure.
To encourage international businesses to utilize Hong Kong as a base of operations, business registration fees will be waived for the 2020-21 financial year while company registry fees will be waived for the next two years. International businesses looking to expand their scope of operations to Asia can capitalize on this initiative by incorporating a Hong Kong business at a much lower cost than what is considered standard.
To help safeguard jobs and support enterprises, Hong Kong businesses can enjoy a reduction of the profits tax rate by 100% for the 2019-20 financial year (subject to a cap of HKD 20,000). This waiver will help SME’s maximize their earnings, providing a much needed cushion of support.
Last year, Hong Kong businesses have unfortunately found themselves in unfavourable economic conditions. Many Hong Kong SME’s have suffered drops in revenue and have incurred unexpected expenditures. A reduction in tax rate will help ensure that these companies are able to continue their operations for the near-future.
Further supporting Hong Kong businesses, a concessionary low-interest loan of up to HKD 2 million will be provided to enterprises under the SME Financing Guarantee Scheme. SME’s can utilize this scheme to obtain increased financing from participating lenders to meet their business needs, enhance productivity and their competitiveness.
Participating lenders like HSBC have outlined their dedication to helping SME’s with their financing troubles through the provision of Business Installment Loans. What makes Business Installment Loans so attractive for SME’s, like those offered by HSBC is that they provide a variety of benefits. For instance, once a HSBC Business Installment Loan has been obtained, applicants will be able to enjoy the following loan terms:
How Can FastLane Help?
The FastLane Group and its affiliate, FastLane CPA, are licensed Hong Kong CPA firms that have extensive experience in providing accounting, audit and Hong Kong tax services. We can provide assistance in preparing your profits and salary tax computation and filing so that you can benefit from your reduced tax obligations in this financial year.
We can also assist international parties who are looking to incorporate a company in Hong Kong and take advantage of the waivers of business registration fee and company annual return. FastLane is licensed with the Hong Kong Company Registry to provide corporate services in Hong Kong and can assist in all stages of your company incorporation.
FastLane has always emphasized our desire to assist Hong Kong’s start-up and SME community. We look at ourselves as business builders by providing a one-stop solution for all of our clients accounting and advisory needs.
This article originated on https://fastlanepro.hk/hk-budget-2020-sme-relief-measures/