Tax measures proposed in 2010-11 Budget

     The Financial Secretary, Mr John C Tsang, proposed several tax measures in his 2010-11 Budget delivered today (February 24).

     On salaries tax and tax under personal assessment, a one-off reduction of 75% of the tax payable for 2009-10 was proposed, subject to a ceiling of $6,000 per case. Tax reduction enjoyed by taxpayers by reduction range under this proposal is set out in the annex.

     As on previous occasions, the tax reduction will be reflected in the tax bill for the coming year. Taxpayers will, as usual, file their tax returns for 2009-10 which will be issued from May. Upon enactment of the relevant legislation, the Inland Revenue Department will effect the reduction in the assessment issued for that year.

     Individuals with business or rental income, if eligible, will be able to enjoy the tax reduction by electing personal assessment. They can make the election in their 2009-10 tax returns. The Inland Revenue Department will check if the election will reduce the amount of tax payable in each case, and assess the taxpayer in the way most advantageous to him.

     The proposed reduction will apply only to the 2009-10 final tax, but not to the provisional tax of the same year. For most taxpayers, the second instalment of their 2009-10 provisional tax will fall due in April this year, which should be paid on time despite the proposed reduction. The provisional tax paid will, in accordance with the Inland Revenue Ordinance, be applied in payment of the final tax for 2009-10 and provisional tax for 2010-11. Excess balance, if any, will be refunded.

     On profits tax, the Financial Secretary proposed to accelerate the tax deduction for capital expenditure on environment-friendly vehicles whereby enterprises can enjoy a 100% profits tax deduction in the first year. The tax deduction for capital expenditure on intellectual property rights is also proposed to be extended to cover registered trademarks, copyrights and registered designs. He also proposed to extend the concessionary profits tax rate at 50% of the normal rate applicable to the interest income and profits derived from qualifying debt instruments to cover those with a maturity period of less than three years. The provisions under the Inland Revenue Ordinance that require such debt instruments to be issued to the public in Hong Kong are also proposed to be amended. He further proposed to update the lists of recognised stock exchanges and futures exchanges under the Inland Revenue Ordinance so as to extend the application of tax exemption for offshore funds engaged in futures trading. These proposals will take effect upon enactment of the relevant legislation.

     The Financial Secretary proposed to increase the stamp duty rate on transactions of properties valuing over $20 million from 3.75% to 4.25%. Also, residential property transactions valuing over $20 million will not be eligible to apply for deferred payment of stamp duty on chargeable agreement for sale. These new measures will come into effect from April 1 and apply to property documents executed on and after that date. He further proposed to extend the stamp duty concession in respect of the trading of exchange traded funds (ETFs) to cover ETFs that track indices comprising not more than 40% of Hong Kong stocks.

     It was also proposed in the Budget that the waiver of business registration fees would continue for another year up to July 31, 2011.

     The Government will start the legislative proceedings to implement the measures very soon. Further implementation details of the above proposals and examples on tax calculations are available on the department's website ( or fax hotline 2598 6001.

Ends/Wednesday, February 24, 2010
Issued at HKT 19:18