In its recommendations for the 2024-25 Budget, the Chamber suggests introducing short-term relief measures, schemes that focus on retaining talent, as well as initiatives to boost Hong Kong’s tax competitiveness. Below is a summary of some of the main points in the submission.
Given the challenging economic environment, we call on the Government to provide a one-off rebate on profits tax, salaries tax and tax under personal assessment by 100%, subject to a ceiling of HK$6,000 for each case.
We also call on the Government to extend the time-limited special concessionary measures of the SME Financing Guarantee Scheme for a further 24 months, and strongly recommend the immediate and complete removal of the existing property cooling measures, which include the Special and Double Stamp Duties.
Retaining and Attracting Talent and Business
To enhance Hong Kong’s overall operating environment, there is a pressing need for a systemic and predictable approach to address policy and administrative inefficiencies. We call on the Government to implement a regulatory impact assessment framework to assess new policies and review existing regulations, ensuring their relevance and effectiveness.
Businesses in Hong Kong continue to grapple with acute manpower shortages. To ensure a sustainable supply of skilled labour in Hong Kong, our recommendations range from introducing a tax deduction for expenses incurred in hiring domestic helpers and caretakers, providing adequate and affordable childcare services for young families, to supporting employers for upskilling their workforce.
Regional Headquarters (RHQs)
To attract enterprises outside Hong Kong to set up headquarters and/or corporate divisions in Hong Kong, we call on the Government to provide finite concessions such as a three-year tax holiday and preferential tax rates to RHQs.
We also recommend that the Government engage with its Mainland counterparts on eliminating withholding tax on dividends paid by Mainland businesses to Hong Kong investors by way of an administrative concession. As a starting point, we recommend launching a pilot scheme in the Greater Bay Area (GBA).
Creating the Ecosystem for Ultra-High-Net-Worth Families and Single Family Office (SFO)
To enhance Hong Kong’s competitiveness in the global private wealth market, we call on the Government to grant a waiver regarding the 5% cap on incidental transactions and expand the scope of qualifying assets for SFOs to enjoy profits tax concession. We also urge the Government to provide further clarity on the process for the Capital Investment Entrant Scheme.
To elevate Hong Kong as the preferred base for multinational corporations facilitate companies based overseas for re-domiciliation to Hong Kong, we call on the Government to provide greater flexibility and tax certainty for companies seeking to change their domicile to Hong Kong. We recommend that the IRD issues comprehensive guidance to specifically address transitional tax matters.
R&D and Innovation
The requirement to conduct R&D activities locally in Hong Kong to qualify for an enhanced tax deduction poses considerable challenges due to the chronic lack of talent and facilities compared to other GBA cities such as Shenzhen. We call on the Government to relax the policy on granting super deduction to also include R&D activities in the GBA.
Green and Sustainable Finance
Considering the current higher interest rates and the consequent increase in financing costs, we call on the Government to issue bonds in different tranches periodically to mitigate interest rate risks. Consideration should be given to the issuance of green bonds, to support environmentally friendly projects that align with the Government's commitment to sustainable development and addressing climate change.
To promote the development of green and sustainable finance in Hong Kong, private sector participation, especially from SMEs, in sustainable investments is important. We call on the Government to incentivize banks and other financial institutions to develop green finance products and services, to support sustainable projects across various industries, as well as provide related financial and administrative assistance to SMEs in green financing.
Existing Connect Schemes could be further harnessed to enhance the internationalization of the RMB across global markets. We also call on the Government to engage with Mainland authorities to broaden the range of eligible listed stocks under the HKD-RMB Dual Counter Model, thereby facilitating the trading of Hong Kong stocks denominated in RMB.
To further enhance the usage of RMB for international trade finance, we suggest that consideration be given to allowing the issuance of RMB stablecoins or stablecoins backed by a basket of different currencies, including RMB, in addition to HKD or USD stablecoins. We also call on the Government to explore the establishment of a Virtual Asset Connect Scheme, with a daily limit of approximately HK$20 billion initially.
Attracting Financial Investors
To enhance the diversity of institutional investors in Hong Kong, ranging from hedge funds and pension funds to sovereign wealth funds, it is recommended that the tangible benefits of establishing a presence in Hong Kong be clearly articulated. Additionally, the Government can play a valuable role by facilitating dialogue with Middle East sovereign wealth funds that express interest in investing in the Mainland.
Taxing Non-Hong Kong Resident Digital Service Suppliers
To swiftly alleviate Hong Kong’s serious financial pressures, the Government could impose a digital services tax ranging from 3% to 5% on digital services provided by foreign service providers, effective from the second half of 2024. This tax would apply to services such as online advertising, e-marketplaces, social media platforms, streaming and sharing of content, search engines, and user data intermediation.
Global Minimum Tax
We recommend that the Government design the domestic minimum top-up tax in a way that satisfies the requirements of functional equivalence to the OECD’s Global Anti-Base Erosion Model Rules while satisfying the Consistency Standard set out therein to qualify for Qualified Domestic Minimum Top-Up Tax Safe Harbour. Given the global trend of delayed implementation of the Undertaxed Payments Rule, we suggest that the Government adopt a "wait-and-see" approach, to better determine an appropriate timeline for implementing UTPR in Hong Kong.
The global tax landscape has been evolving at an unprecedented pace. We call on the Government to
(1) rapidly undertake the requisite digital transformation of the tax administration process, (2) set a specific goal on the number of additional treaties to be negotiated over a defined period, and
(3) enhance clarity and promote efficiency for the oversight of non-tax grants and incentives.
Regional Intellectual Property (“IP”) Trading Centre
To enhance Hong Kong’s role as a regional IP trading centre, we suggest that the Government widen the scope of eligible IP assets, and permit claims by affiliates of IP owners to qualify for profits tax deductions, as this would encourage IP owners with overseas IP rights to register in Hong Kong.
International Trade Centre
To enhance the appeal of establishing a trading base in Hong Kong, we suggest that international traders be incentivized with a reduced tax rate of either 5% or 10%, depending on the nature of the qualifying trading income. Such a measure would be highly attractive for international traders that are seeking to establish a trading base in Hong Kong.
In the face of an ageing population, we call on the Government to provide tax incentives to boost retirement savings. Consideration should be given to setting the individual tax deduction caps at HK$60,000 for tax deductible MPF voluntary contributions and qualifying deferred annuity policies premiums.
We also call on the Government to broaden the range of investment vehicles currently on offer. Consideration should be given to allowing partial withdrawal of MPF contributions for major life events, such as making a property purchase deposit by first time homeowners.