Hong Kong officials have planned further corporate income tax cuts for small companies
in the city. Chief Executive Carrie Lam recently stated that she plans to introduce an even greater degree of relief for these types of companies
, more significant than the one initially described in her pre-election public declaration. The aim is to reduce the tax burden on small companies
and to encourage corporate innovation.
Further tax relief for small companies in Hong Kong
According to a Policy Address held by Chief Executive Carrie Lam, a new set of tax benefits that target small and medium-sized companies in Hong Kong will be introduced as soon as possible. The changes will include a tax cut to 8.25 percent on the first 2 million HKD, while the additional profits would be taxed at the usual 16.5 percent rate. Moreover, a 300 percent tax deduction will be possible for the first 2 million HKD of eligible research and development expenditure, followed by a 200 percent cut for any additional expenses incurred by companies in this field.
A restriction on these benefits will apply to groups of companies, in order to ensure that the tax benefits will specifically target small and/or medium-sized companies. For this purpose, in case of groups of enterprises, only one enterprise that shall be internally nominated will benefit from the lower tax rates.
The bill that will propose the two initiatives for tax cuts/deductions needs to be submitted to the Legislative Council for approval.
Corporate taxation in Hong Kong
Hong Kong has a low tax regime
with a corporate income tax rate of 16.5% and a lower rate of 15% for unincorporated businesses. There is no withholding tax on dividend payments made from a Hong Kong legal entity.
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