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Possible New Tax Breaks for SMEs in Hong Kong

Written by: Editor

Possible-new-tax-breaks-for-SMEs-in-Hong-Kong.jpgHong Kong officials are considering introducing a new tax relief for small and medium sized companies, at the same time allowing for more tax deductions for research and development activities. Carrie Lam, Hong Kong’s new Chief Executive, made the proposal. The current tax regime in Hong Kong does allow for some tax deductions, however, not of this type. Our lawyers in Hong Kong can give you complete details on the tax law changes in the city.

New tax relief for small companies taken into consideration

Hong Kong’s new Chief Executive, Carrie Lam, proposed a set of new measures to ensure the tax relief for small and medium-sized companies in Hong Kong. The Government has recently confirmed that these proposed measures are being taken into consideration.
The changes would include a two-tier profit tax for small and medium sized companies, which would lower the profits tax for the first 2 million HKD (from 16.5% to only 10%). Additionally, the new taxation regime would allow for more tax deductions for those businesses that record expenditure on research and development activities. 
Our attorneys in Hong Kong can give you details on the current regime for R&D activities.

The current taxation regime in Hong Kong

Hong Kong does not impose a variety of tax incentives. While some tax facilities and deductions are possible, the Special Administrative region already has an attractive low tax rate and a duty-free status. Under special circumstances, non-resident companies like branches in Hong Kong may benefit from a preferential profits tax treatment.
The current corporate income tax rate in Hong Kong is 16.5% and a lower 15% rate applies to unincorporated businesses. The city does not levy VAT and does not have a withholding tax on dividends and interest. Double taxation relief is possible for those corporations that derive income both from Hong Kong and from another country with which the city has signed a double tax treaty.
The experts at our law firm in Hong Kong can give you more information on the applicable tax laws and the regime available for your chosen business structure.
Contact us for more information and advice on taxation laws in Hong Kong.