On 26 February 2025, the Financial Secretary, Mr. Paul Chan, announced the 2025/26 Budget themed 'Accelerating Development through Reform and Innovation'.
An anticipated deficit of HK$87.2 billion for the year 2024/25 was disclosed, with fiscal reserves projected to fall to HK$647.3 billion by 31 March 2025.
Looking into 2025, the Financial Secretary predicts that Hong Kong economy still faces a very challenging external environment, but there are quite a few positive factors at the same time. The economy is forecast to grow by 2-3% in real terms for 2025.
The Financial Secretary recommended reinforcing the fiscal consolidation programme from last year’s Budget. The Government will uphold the principles of strictly controlling government expenditure, supplemented by increasing revenue.
Hong Kong will maintain the competitiveness of its simple and low tax regime, avoid considerable increase in tax rates or introducing new taxes. The Government continues to uphold the “user pays” and the “affordable users pay” principles in identifying new or increasing Government revenue.
Key Proposed Measures
Corporate tax
Profits tax relief: Reduce profits tax for the year of assessment 2024/25 by 100%, subject to a ceiling of HK$1,500.
New tax regime: Introduce the following new measures:
- Provide half-rate tax concession to eligible commodity traders and target to introduce a bill into Legislative Council in the first half of 2026.
- Provide tax exemption for green methanol used for bunkering.
Existing tax regime enhancement: Introduce the following enhancement measures:
- Review the relevant tax deduction arrangements for various intellectual property (IP) related expenditures, including the lump sum licensing fees for acquiring the rights to use IP, and related expenses incurred on purchase of IP or the rights to use IP from associates.
- Expand the scope of “fund” under the tax exemption regime, increasing the types of qualifying transactions eligible for tax concessions for funds and single family offices, enhancing the tax concession arrangement on the distribution of carried interest by private equity funds, etc.
- Enhance shipping regime, including introduction of tax deduction on ship acquisition cost for ship lessors under an operating lease.
Individual tax
Salaries tax/tax under personal assessment relief: Reduce salaries tax and tax under personal assessment for the year of assessment 2024/25 by 100%, subject to a ceiling of HK$1,500.
Other taxes
Global minimum tax: Implement global minimum tax proposal drawn up by the Organisation for Economic Co-operation and Development with legislative bill submitted to the Legislative Council already in January 2025, aiming to apply the global minimum tax rate of 15% on large multinational enterprise groups with an annual consolidated group revenue of at least EUR 750 million and impose the Hong Kong minimum top-up tax in 2025 to bring in tax revenue of HK$15 billion annually from 2027/28.
Double taxation agreements: Conduct negotiations with 17 countries on Comprehensive Avoidance of Double Taxation Agreements.
Stamp duty: Raise the maximum value of residential and non-residential properties chargeable to a stamp duty of HK$100 from HK$3 million to HK$4 million with immediate effect.
Rates measures: Provide rates concession for domestic and non-domestic properties for the first quarter of 2025/26, subject to a HK$500 ceiling for each rateable property.
Air passenger departure tax: Increase air passenger departure tax from HK$120 to HK$200 per passenger starting from the third quarter of 2025/26.
Betting duty: explore regulating basketball betting activities and invite Hong Kong Jockey Club to submit a proposal. If basketball betting is legalized, this would potentially be subject to betting duty.
Other highlights
Artificial Intelligence: set aside HK$1 billion for the establishment of the Hong Kong Artificial Intelligence (“AI”) Research and Development Institute to spearhead and support Hong Kong’s innovative research and development as well as industrial application of AI.
Pilot Manufacturing and Production Line Upgrade Support Scheme: launch a 2-year Pilot Manufacturing and Production Line Upgrade Support Scheme (Manufacturing+) and provide funding of up to HK$250,000 each on a one (government) to two (company) matching basis to enterprises operating production lines in Hong Kong.
Bond issuance: Issue bonds worth HK$150 billion to HK$195 billion each year during the five-year period from 2025/26 to 2029/30 under the Government Sustainable Bond Programme and the Infrastructure Bond Programme.
GBA (Greater Bay Area) Youth Employment Scheme: Relax the requirements for joining the scheme to include people aged 29 or under with sub-degree or higher qualifications, and increase the allowance limit to HK$12,000 a month per person for up to 18 months.
Fidinam can help
Should you have any inquiries regarding how the Hong Kong Budget 2025/26 may impact your business operations or your personal financial situation, please contact us via info@fidinamgw.com or the form below.
Our team is dedicated to offering you the necessary guidance and support, ensuring you are well-informed about the potential effects of the Budget on your company or personal finances.
