Amidst the global economic challenges and the ongoing impact of the pandemic, Hong Kong’s Financial Secretary, Paul Chan, has rolled out the Hong Kong Budget 2024-25 on 28 February under the theme ‘Advance with confidence. Seize opportunities. Strive for high-quality development’. The budget introduces measures aimed at boosting economic recovery, driving sector-specific growth, and providing support for small and medium enterprises (SMEs). These measures will be crucial for maintaining Hong Kong’s competitiveness in the medium to long term and ensuring sustainable growth for the city.
In this article, we will provide a simplified summary to help you understand how these measures will impact businesses:
- Introduction
- Bolstering Confidence
- Strategic Partnerships Enhancing the Small Business Landscape
- Attracting Global Talent and Business Re-domiciliation
- Enhancing Liquidity and Financial Assistance for SMEs
- Accelerating Digital Transformation and Online Expansion
- Revitalizing Tourism and Sector-Wide Benefits
- Tax Reductions, Incentives, and Business Support
- Accelerating High-quality Development
- Conclusion
Bolstering Confidence
Strategic Partnerships Enhancing the Small Business Landscape
The announcement by the Finance Chief of over ten strategic enterprises partnering with The Office for Attracting Strategic Enterprises (OASES) signifies a major advancement in enriching Hong Kong’s business ecosystem. Anticipated to introduce over $40 billion in investments and generate around 13,000 jobs (including 30 companies from the initial batch), this initiative nurtures a dynamic and supportive environment for businesses. It offers SMEs opportunities for new collaborations, broader network access, and the chance to tap into the innovation and market prospects brought by these strategic enterprises to Hong Kong.
Attracting Global Talent and Business Re-domiciliation
The proactive measures of the government have welcomed over 140,000 applicants through talent admission schemes to Hong Kong, with more than 100,000 already establishing their new residence in the city. This significant influx of skilled professionals is crucial for companies in search of expertise and significantly contributes to the vitality of the local economy.
Enhancing Liquidity and Financial Assistance for SMEs
Recognizing the essential role of SMEs, which account for more than 98% of all local businesses, the Hong Kong budget prolongs the application period for the 80% and 90% Guarantee Products under the SME Financing Guarantee Scheme by an additional two years until March 2026. This move, coupled with a $10 billion increase to the existing $280 billion fund, is intended to facilitate easier access to government-backed loans at preferential rates.
Accelerating Digital Transformation and Online Expansion
The budget emphasizes the importance of digital transformation for SMEs via the Digital Transformation Support Pilot Programme, specifically designed to help SMEs in the retail and food service sectors to integrate digital technologies, with the expectation of aiding over 8,000 businesses. Moreover, the “E-Commerce Easy” program, part of the BUD Fund, seeks to enable firms to enter the Chinese e-commerce market, offering up to HK$1 million in support for each qualifying company.
Revitalizing Tourism and Sector-Wide Benefits
In an effort to rejuvenate the economy and various sectors, the government plans to organize over 80 major events in the first half of 2024, with a commitment of $100 million for event promotion over the next three years. Alongside the Tourism Board’s introduction of seasonal festivals and thematic tours, these initiatives are aimed at revitalizing tourism and sparking demand in retail, hospitality, catering, and transport sectors.
Tax Reductions, Incentives, and Business Support
The Hong Kong budget introduces several tax reductions, incentives, and support for businesses for the fiscal years 2023/24 and 2024/25.
For the fiscal year 2023/24, it offers a total, 100% exemption on both salaries tax and personal assessment tax, limited to $3,000, which will be reflected in the final tax bill for the 2023/24 assessment year, benefiting approximately 2.06 million taxpayers.
It also proposes a one-time 100% profit tax rebate for 2023-24, capped at $3,000, expected to assist around 160,000 businesses. The budget also allows for tax deductions on expenses incurred to reinstate leased commercial premises and makes allowances for industrial buildings and structures effectively claimable by new owners upon ownership changes.
For the fiscal year 2024/25, it plans a rate concession for non-domestic properties for the first quarter, from April to June 2024, with a cap of $1,000 per rateable property, which is anticipated to assist about 430,000 non-domestic properties.
Accelerating High-quality Development
Investment in Future Growth and Innovation
The Hong Kong government commits HKD 10 billion to the New Industrialisation Acceleration Scheme (NIAS) to attract high-value-added manufacturing in areas such as biotechnology, artificial intelligence, and green technology. This initiative complements previous investments, such as the Hong Kong Growth Portfolio’s backing of tech firms and startups, focusing on the Strategic Tech Fund for local startups.
The government continues to support startups through incubator programs, accelerator schemes, and access to venture capital. The collaborative efforts of the Hong Kong Science Park, Cyberport, and InvestHK to draw international startups demonstrate the government’s dedication to creating a thriving startup ecosystem. Additionally, sectors expected to experience growth, including green finance, the digital economy, and advanced manufacturing, will receive policy enhancements and financial backing, further enriching the business environment.
Responding to Changes in Global Trade Dynamics
Hong Kong is actively refining its trade and economic strategies to better align with the evolving global trade landscape, emphasizing an uptick in exports to burgeoning markets such as ASEAN and the Middle East. With the globalization of Mainland manufacturing enterprises, Hong Kong is positioning itself as a premier hub for multinational supply chain management, offering extensive professional services. This strategic pivot is supported by the expansion of Hong Kong’s economic and trade network overseas, reinforcing its role in the international business arena. Efforts to encourage Mainland manufacturing firms to set up their global or regional headquarters in Hong Kong highlight the city’s ambition to become a central node for global business activities.
In conclusion, the 2024-25 Hong Kong budget establishes a solid groundwork for business resurgence and economic renewal. Concentrating on SME empowerment, digital transformation, tax incentives, and investments in sectors with high growth potential, the government is dedicated to fostering a business-friendly climate that propels companies towards success and cement Hong Kong’s position as a frontrunner in innovation and economic progress. The strategic efforts to attract worldwide talent and simplify business re-domiciliation further bolster Hong Kong’s competitive advantage, rendering it an appealing choice for both businesses and professionals.