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HKICPA Welcomes the New Government’s Bold Taxation Changes Announced in First Policy Address

11 October 2017

(HONG KONG, 11 October 2017) The Hong Kong Institute of Certified Public Accountants (HKICPA) welcomed the proposed changes to the taxation system that were announced by HKSAR Chief Executive Carrie Lam in her first policy address today. The proposed changes to profits tax supporting small and medium sized enterprises (SMEs), and the proposed tax deduction for research and development are what the HKICPA has long campaigned for.


On the two-tier profits tax rate


The Institute has proposed a special lower tax rate for SMEs in our budget submissions to the government for several years and is glad to see that the reduced tax rate proposed is even more competitive than we had campaigned for. SMEs constitute an important part of Hong Kong's economy, representing 98% of businesses. This new tax rate would significantly lower the tax paid by many SMEs. In 2014-15 roughly 80,000 companies (around 80 percent of tax-paying companies) had assessable profits of less than $2 million.


At the same time, many governments around the world offer additional support for the SME sector, and this proposal will improve Hong Kong's international competitiveness and attractiveness to start-ups and small business operators.


We welcome the special measure proposed by the Chief Executive that only one enterprise nominated by each business group be eligible for the lower tax rate. This is to ensure that this is targeted at SMEs and that large companies do not abuse the concession.


However, we believe there should be a clear definition of "business group" and we look forward to more details from relevant government departments at a later stage.


On incentives for research and development (R&D)


The proposed tax deduction for research and development is considerable and will support innovation and technology and start-up companies in Hong Kong. The Institute has been advocating "super deductions" for R&D expenditure for many years, as well as other R&D-related measures. The proposed deductions are more generous than we anticipated. R&D is essential to the success of innovation and technology, which is why many countries, including China, offer similar incentives.


The new proposals should also seek to simplify the incentives for R&D and intellectual property development and usage. Currently these incentives are too limited and too inflexible, which makes it difficult for Hong Kong to compete internationally. The current proposed tax deduction goes some way to remedy this situation.


We do not think these measures will have a significant impact on government revenue given that Hong Kong consistently generates large surpluses, as acknowledged by the Chief Executive, and the economic outlook is expected to be positive.


Indeed, more money invested in R&D will, in the longer term, boost the economy and bring in more revenue for the government.




(香港,二零一七年十月十一日) 香港特別行政區行政長官林鄭月娥今天發表上任後首份《施政報告》。香港會計師公會(下稱「公會」)歡迎報告提出的稅改措施。新建議的利得稅制方案可紓緩中小企的稅務負擔,而稅務減免則可推動企業投資科研,該等措施亦是公會一直以來不斷向政府建議的稅務政策,公會對此表示非常歡迎。




公會多年前已在財政預算案建議中,向政府提出給予中小企較低的特別稅率,很樂見今次建議的低稅率比我們之前所提出的更具競爭力。中小企業是支持香港經濟的重要一環,並佔公司總數 98%。新稅制將顯著降低中小企的稅務負擔。2014 2015年度,本港約有 8 萬家公司(佔所有須繳稅公司的 80%)持有 200 萬元以下應評稅利潤。世界各地的政府都為中小企業提供額外的支援,是次建議將會提高香港的國際競爭力,並吸引更多初創企業及小型企業在港營商。