On 16 May 2018, the Legislative Council passed the Inland Revenue (Amendment) Bill 2018 providing special tax measures including a one-off 75% reduction in salaries tax, tax under personal assessment, and profits tax for the 2017/18 tax year, subject to a ceiling of HKD30,000 (USD3,821) per case.
In addition to the one-off measures, the bill also provides tax relief for individuals. The marginal salary tax range has been increased from HKD45,000 to HKD50,000, the child allowance is increased from HK100,000 to HK120,000, and a HK75,000 personal disability allowance is introduced.
The Inland Revenue (Amendment) Bill 2018 is also intended to encourage more enterprises to conduct R&D activities in Hong Kong by amending and restructuring section 16B of the Inland Revenue Ordinance to provide for a new schedule, which sets out the operational details of the basic and enhanced tax deduction regimes for R&D activities.
Subject to passage of the bill through Hong Kong’s parliament, enterprises will be able to enjoy an additional tax deduction for expenditure incurred on domestic R&D. The first HKD2m (USD255,000) spent on qualifying R&D will enjoy a 300 percent tax deduction and expenditure above this threshold will benefit from a 200 percent deduction. There is no cap on the amount of enhanced tax deduction.
At present, the Inland Revenue Ordinance provides a 100 percent deduction for expenditure on R&D, as well as 100 percent deduction for capital expenditure incurred on the purchase of plant or machinery for R&D in the year it was incurred.
