On October 11, 2017, the Chief Executive of Hong Kong proposed a new tax concession for small and medium-sized enterprises (SMEs). According to the proposal, a new two-tier profit tax system that would reduce the corporate income tax rate to 8.25% to the first profit of HK $ 2 million and the normal profit tax rate of 16.5% for profits beyond HK$ 2 million would remain unchanged.
The Chief Executive of Hong Kong also proposed a new tax incentive to promote innovation and R&D in Hong Kong, and to boost Hong Kong’s economy. An additional tax deduction of 300% would be introduced on qualifying R&D expenditure up to HK$ 2 million, and an additional 200% deduction on qualifying expenditure exceeding this amount. The government is expected to submit draft legislation soon, with a view to implementing the proposals in 2018.
