World Economy

Tax Breaks in Store for HK Startups

Tax Breaks in Store for HK StartupsTax Breaks in Store for HK Startups

Small and medium-sized enterprises in Hong Kong can look forward to more tax incentives as the government tries to counter competition from regional rivals offering lower rates.

Though the city has been known for its business-friendly environment and low tax regime for decades, it is losing its competitive edge as the rest of the world is redrawing economic policies to attract more business, CNA reported.

To ensure the city stops losing young talent to regional rivals such as Singapore, South Korea and mainland China, new Chief Executive Carrie Lam Cheng Yuet-ngor, who took up the top job in Hong Kong last month, has put tax reform on her agenda. Her administration is now in the process of formulating two tax policies, which Lam promised in her election manifesto, favoring SMEs and startups.

The first is a two-tier profits tax system which will lower the rate for the first HK$2 million ($255,743) of corporate profits to 10%, from the current 16.5%. The second proposal, meanwhile, will offer additional tax deductions on expenses related to research and developments, as well as environmental protection, art and design initiatives.

Last week, Lam told a group of business leaders at a dinner that the new administration was making the final preparations to implement policies, while financial chief Paul Chan Mo-po said on Saturday that the government was ready to announce the details of the two-tier tax system upon Lam’s approval.

Most business leaders welcomed the introduction of the new tax system.

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