January 2018 - Introduction of Two-Tier Profits Tax Rates System in Hong Kong

After the Chief Executive presented in her maiden Policy Address in October 2017 that a two-tier profits tax rates system will be introduced in Hong Kong, the Inland Revenue (Amendment) (No. 7) Bill 2017 (the “Bill”) was gazetted on 29 December 2017 in order to seek to implement the above system. Once enacted, the two-tier profits tax rates system will be effective from the year of assessment 2018/2019.

Under the proposed two-tier tax rates system, the maximum annual tax savings for corporations and unincorporated businesses will be HK$165,000 and HK$150,000 respectively. This helps to reduce the tax burdens of the enterprises, especially SMEs and start-up businesses. In addition, as a number of countries are planning to reduce their corporate tax rates, we welcome the government’s move to introduce the above reduced tax rates system in order to maintain Hong Kong’s competitiveness.