On 27 February 2019, the Financial Secretary of Hong Kong announced the Budget for the fiscal year 2019-2020. The forecast is that for the fiscal year 2018-19, there will be a surplus of HKD 58.7 billion, and that the fiscal reserves will reach HKD 1,161.6 billion by 31 March 2019. This Budget has been prepared with a Focus on supporting enterprises, safeguarding jobs, stabilising economy and strengthening livelihoods.

The Hong Kong economy grew by 3% in 2018, which is higher than the average trend growth rate of 2.8% over the past decade. Looking ahead for 2019, the Financial Secretary is of the view that the global economy faces various uncertainties and slow economic growth, such as the trade conflict between the United States and Mainland China, the Brexit deadlock & the lingering risk of a hard Brexit, as well as the slowing down of the Mainland China and European economy.

Nevertheless, it is expected that Hong Kong shall benefit from the business opportunities brought by the Greater Bay Area development and the Belt and Road Initiative. In addition, Hong Kong is devoted to develop a diversified economy in particular to encourage innovation and technology business. Hence, the future economic development of Hong Kong should be optimistic. It is forecasted that Hong Kong will have economic growth of 2% to 3% in 2019.

Same as previous years, the Financial Secretary proposes a number of support and relief measures in his 2019-2020 Budget with a view to alleviate the financial burdens of enterprises and individuals. The major measures relevant for enterprises as well as middle-class and upper-class individuals include the following:

Please note that most of the above-mentioned measures are subject to enactment of legislation before effective.

Hong Kong has already signed CDTAs with 40 tax jurisdictions. It is targeted to conclude CDTAs with about 10 more tax jurisdictions in the next few years with a view to attract investment.

The number of companies with regional headquarters in Hong Kong has increased to over 1,500 in 2018 and more and more Mainland China enterprises have chosen Hong Kong as the platform to expand their business globally. The Hong Kong government will continue to enhance the relevant tax measures for the corporate treasury centres to strengthen Hong Kong’s competitiveness.

The Hong Kong government is studying the establishment of a limited partnership regime for private equity funds with a view to offer more choices on the fund structure for the industry. In addition, it is also considering to introduce more competitive tax arrangements so as to attract private equity funds to be set up and operated in Hong Kong.

In order to promote the marine insurance business so that shipowners and shipping companies can enjoy better support, 50% profits tax concession will be offered to eligible insurance businesses including the marine insurance industry.

It is also proposed by the Hong Kong government to amend the relevant legislation so as to allow for the formation of special purpose vehicle companies specifically for issuing insurance-link securities.

The Hong Kong government has commissioned the Hong Kong Maritime and Port Board to set up a dedicated task force to study tax and other measures with a view to attract ship finance companies to establish their presence in Hong Kong and develop Hong Kong as a ship leasing centre in the Asia Pacific region. The study is expected to be completed in the second half of 2019.

The Tax Policy Unit, which is currently under the Financial Services and the Treasury Bureau, will be transferred under the Financial Secretary’s Office. Additional resources will be provided to the Tax Policy Unit as and when necessary.

This article was contributed by HKWJ Tax Law & Partners Limited.

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