November 14 2017

New tax relief for SMEs and R&D to be introduced in Hong Kong

On 11 October 2017, the Chief Executive of Hong Kong Carrie Lam delivered her maiden Policy Address.

As widely expected Carrie Lam confirmed her intention to reform the tax system of the Country. This reform aims at reducing the fiscal burden and incentivizing investments in Research and Development (R&D) for small and medium-sized enterprises (SMEs).

The major points of the tax reform include:

  • Two-tier profits tax system for enterprises where the tax rate for the first HK$2 millions of profits will be reduced to 8.25%, while the standard tax rate for profits above this amount will remain at 16.5%
  • The introduction of a 300% tax deduction on the first HK$2 million eligible R&D expenditure, with the remainder subject to¬†200%, in a move to encourage enterprises to invest in R&D

A bill to implement the two initiatives will be submitted to the Legislative Council as soon as possible and it is expected that this reform will be introduced within 2018.

For more information about the tax reform and the restrictions applied to SMEs part of holding groups contact:

Alberto Innocenti
Tax Advisor & General Manager