Hong Kong Budget 2020: Government unveils unprecedented support package for individuals and SMEs

For Hong Kong 2019 was, without any doubt, a year of some of the most challenging times, including economic uncertainties due to the US-China trade conflict, and unprecedented social unrest. The outbreak of COVID-19 at the beginning of 2020 has further compounded the challenges Hong Kong is facing, and yet many still remain positive for the future.

The 2020-21 Budget puts its focus on “supporting enterprises, safeguarding jobs, stimulating the economy and relieving people’s burden”. We have summarised the key points from the Budget that are likely relevant to many of our clients’ businesses: 

Support Enterprises and Safeguard Jobs 

For enterprises, new relief measures include:

a)    Introducing a concessionary low-interest loan under the SME Financing Guarantee Scheme, under which 100% guarantee will be provided by the Government.  The application period will last for six months.  The maximum amount of loan for eligible enterprises is based on their salary and rental expenditures for six months, subject to a ceiling of HK$2 million.  The repayment period is up to three years and, on an opt-in basis, a principal moratorium is available for the first six months during which only interest payments must be made.  The Government will provide guarantee of up to HK$20 billion under this concessionary loan scheme;

b)    Reducing profits tax for the year of assessment 2019/20 by 100%, subject to a ceiling of HK$20,000.  The reduction will be reflected in the final tax payable for the year of assessment 2019/20.  This will benefit 141,000 taxpayers and reduce government revenue by HK$2 billion;

c)    Waiving rates for non-residential properties for four quarters of 2020-21, subject to a ceiling of HK$5,000 per quarter in the first two quarters and a ceiling of $1,500 per quarter in the remaining two quarters for each rateable non-residential properties.  This proposal is estimated to benefit 420,000 non-residential properties and reduce government revenue by HK$3.2 billion;

d)    Waiving business registration fees for 2020-21.  This will benefit 1.5 million business operators and reduce government revenue by HK$3 billion;

e)    Waiving registration fees for all annual returns (except for late delivery) charged by the Companies Registry for two years.  This will benefit about 1.4 million companies and reduce related revenue by about HK$212 million in total;

The following measures will continue to be implemented:

f)    Providing a subsidy to each eligible non-residential properties accounts for four extra months to cover 75 % of their monthly billed electricity charges, subject to a monthly cap of HK$5,000 per account.  This will involve an expenditure of about HK$2.9 billion;

g)    Waiving 75 % of water and sewage charges payable by non-residential properties for four extra months, subject to a monthly cap of HK$20,000 and HK$12,500 respectively per household.  This will reduce government revenue by HK$340 million;

h)    Providing a new round of rental subsidy for six months to local recycling enterprises.  This will involve an expenditure of approximately HK$100 million;

i)    Reducing rental by 50 % for another six months for eligible tenants of government properties, government land and EcoPark.  This will reduce government revenue by HK$573 million;

j)    Reducing rental and fees by 50% for another six months for eligible operators of properties covered by short-term waivers.  This will reduce government revenue by HK$265 million;

k)    Providing hirers of civic centres under the Leisure and Cultural Services Department (LCSD) with a 50% reduction of hire charges for another six months.  This will reduce government revenue by HK$23 million; and

l)    Offering another six months of fees and rent reduction for cruise lines and existing tenants of the Cruise Terminal.  This will reduce government revenue by HK$18 million.

The above initiatives will cost a total of HK$18.3 billion and are directed to not only help support SMEs in Hong Kong but also safeguard jobs for more than three million workers.  

Developing a Diversified Economy

Financial services, tourism, trading and logistics, business and professional services are key pillars of Hong Kong's economy.  In addition to strengthening the existing industries with a further competitive edge, there is also a need to identify new growth engines by actively developing emerging industries which will broaden the foundation of Hong Kong’s economy.

Financial Services

The Government has been continuously enhancing the financial market infrastructure and the regulatory regime, with the aim of boosting the competitiveness of Hong Kong as an international financial centre.  To ensure financial security, financial regulators have taken great efforts on shock-resistance and market surveillance for the operation of a stable and orderly financial market.  While consolidating Hong Kong’s strengths and developing the market, the Government will ensure that the regulatory framework can keep pace with the times, manage systemic risks effectively and provide protection for investors.

Securities Market 

The securities market in Hong Kong enjoyed significant development in the past year.  Since the launch of reforms at the end of April 2018 to facilitate the listing of new-economy companies in Hong Kong, a total of 17 enterprises have listed in Hong Kong under the new regime and raised more than HK$200 billion, representing more than one-third of the funds raised through initial public offerings during the same period.

The rapid growth of the Exchange Traded Fund (ETF) market in recent years has brought new opportunities for the development of Hong Kong’s securities market.  In order to strengthen the competitiveness of Hong Kong as an ETF listing platform, it is proposed to waive the stamp duty on stock transfers paid by ETF market makers in the course of creating and redeeming ETF units listed in Hong Kong.  This initiative will further reduce the transaction cost of ETFs listed and spur the development of the ETF market in Hong Kong.

Fixed-rate Mortgage Loans

To provide potential homebuyers with more loan options and reduce the risks of interest rate volatility, Hong Kong Mortgage Corporation Limited (HKMC) will launch a pilot scheme to offer through banks fixed-rate mortgage loans, with interest rates of 2.75%, 2.85% and 2.95 % per annum for periods of 10, 15 and 20 years respectively, capped at a ceiling of HK$10 million per loan transaction.  The total loan amount under the scheme is HK$1 billion, subject to review based on market response.

Asset and Wealth Management

Hong Kong is an international asset and wealth management centre.  The development of the Greater Bay Area presents enormous opportunities for the sector.  To attract more funds to Hong Kong, new fund structures have been introduced, including the preparation of new legislation on the establishment of a limited partnership regime that meets the operational needs of funds, so as to encourage the setting up of private equity funds in Hong Kong.

Innovation and Technology

Innovation and technology is an important growth engine for future economic development.  In the past three years, the Government introduced a number of policies and allocated over a hundred billion dollars to support a series of measures for the development of innovation and technology.

Supporting Start-ups

The Government will support start-ups through various means, including strengthening the support of the Hong Kong Science and Technology Park and Cyberport for tenants and incubatees, backing university start-ups through the Technology Start-up Support Scheme for Universities, and making use of the Innovation and Technology Venture Fund for co-investing with venture capital funds in local technology start-ups.

Transport and Logistics

Hong Kong will continue to promote the development of transportation and logistics services, and harness the opportunities brought about by the Belt and Road Initiative and the development of the Greater Bay Area, so as to consolidate Hong Kong's position as an international and regional aviation, maritime and logistics hub.

Maritime Sector

The Government will continue to assist the port industry in enhancing its operational efficiency, and strive to develop high value-added maritime services by leveraging our strengths in professional services.  The Government will amend the relevant legislation to provide tax concessions for the ship leasing business, including offering a profits tax exemption to qualifying ship lessors and a half-rate profits tax concession to qualifying ship leasing managers.  Besides, profits tax will be halved for eligible insurance businesses including marine insurance.  The Government will also explore other tax measures to attract more global shipping business operators and commercial principals to set up business in Hong Kong.

For further details and full speech of the Hong Kong Budget 2020-2021, please refer to https://www.budget.gov.hk/2020/eng/speech.html.

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