Hong Kong has recently unveiled its fiscal year 2025/26 budget. The Financial Secretary of the Hong Kong Special Administrative Region (SAR), Paul Chan, released the government budget for the fiscal year 2025-26 on 26th February 2025. The Hong Kong budget 2025/2026 aims to position the city at the top of the global business charts. The budget has introduced a series of measures poised to significantly influence the city’s business environment. Indeed, it sets the foundation for a competitive Hong Kong business environment. Specifically, it emphasizes financial sustainability, strategic investments, and economic recovery procedures in Hong Kong.
The Hong Kong budget 2025/26 aims to introduce financial incentives for small and medium enterprises (SMEs). It also proposes economic recovery plans and steps to streamline regulatory processes. These things can simplify the process of establishing and operating a business and encourage entrepreneurship in Hong Kong. In addition, this budget also provides strategic support to industries involved in technology and innovation, such as artificial intelligence (AI) and machine learning. The primary purpose of this article is to provide an overview of the key changes and their potential business impact on the Hong Kong budget.
Overview of Key Changes in the Hong Kong Budget 2025/2026
The Hong Kong budget 2025/26 offers a reinforced version of the fiscal consolidation program. It provides a roadmap to restore financial balance, making Hong Kong a global financial hub. It lays special emphasis on the livelihood of the citizens while maintaining fiscal balance in operating accounts. The 2025/26 budget focuses on investing in future growth sectors and enhancing social well-being.
Also, it provides various proposals in the budget aimed at attracting talent and investment and strengthening Hong Kong’s role as a global business hub. By introducing this budget, the government aims to minimize the impact on public services while maintaining Hong Kong’s position to capitalize on future growth opportunities. The major announcements and policy changes in the Hong Kong budget 2025/26 are as follows:
- The budget proposes a seven per cent reduction in government recurrent expenditure. This concentrates on building a sustainable fiscal foundation for development in the future. It also ensures that the quality of public services does not deteriorate while implementing cost-cutting measures in the system.
- The Hong Kong budget 2025/26 plans to implement a strategy to expand the size of bond issuance. This can maintain healthy public finances and lead to better financial positioning of the city. Furthermore, the funds raised through this strategy can be invested in projects of infrastructural and innovative development.
- With continuous advancements in technology and the innovation industry, it has become important to introduce special programs for development in the industry. The budget aims to accelerate the development of the Northern Metropolis. This can be beneficial for the city in the long run and drive regional growth in Hong Kong.
What are the key tax changes in the Hong Kong Budget 2025/2026?
The Hong Kong budget 2025/26 has introduced a few tax changes for the fiscal year 2025/26.
- Corporate Tax Rates
The Hong Kong budget 2025/26 has introduced no changes to the corporate tax rates. Like earlier, the first HKD 2 million of assessable profits will be taxed at 8.25% for corporations and 7.5% for unincorporated businesses. The remaining balance will be taxed at 16.5% and 15% for corporations and unincorporated businesses, respectively.
- Personal Income Tax
The personal income tax rates or salaries tax rates have remained unchanged in the 2025/26 budget. The net assessable income, less charitable donations and allowable deductions is taxed at the standard rate of 15% on the first $5,000,000 of net income and 16% on the remainder. However, the net assessable income, less charitable donations, allowable deductions and personal allowances are charged at the progressive rates given below.
- First HKD 50,000 at 2%
- Next HKD 50,000 at 6%
- Next HKD 50,000 at 10%
- Next HKD 50,000 at 14%
- Remaining Balance at 17%
- Other Relevant Taxes
A reinstatement of the stamp duty on property transactions for non-permanent residents has been announced in the new Hong Kong budget. This might impact the real estate sector and businesses involved in property transactions with international clients. The maximum value of properties chargeable to a stamp duty of $100 has been increased to HKD 4 million starting 26 February 2025. Specifically, there have been no changes in the hotel accommodation tax, property tax, and customs duties.
How will the Hong Kong Budget 2025/2026 impact SMEs in Hong Kong?
The new budget plans to inject HKD 1.5 billion into both the BUD Fund, the Export Marketing and Trade and Industrial Organisation Support Fund, while streamlining application arrangements. This can help the SMEs to access capital for business expansion, technology adoption, purchasing equipment and other activities. It has launched a new round of the Research Matching Grant Scheme, totalling HKD 1.5 billion, to attract organisations to support the research endeavours of institutions. This program expects to motivate more businesses to invest in research and development programs to give rise to purpose-driven enterprises. However, SMEs need to understand the requirements of the schemes to capitalize on the opportunities effectively.
What new incentives are introduced in the Hong Kong Budget 2025/2026 for businesses?
The Hong Kong budget 2025/26 has introduced several tax breaks and incentives for businesses:
- Attraction Program for Strategic Enterprises (APSE) Enhancements: This program was launched to attract high-potential strategic enterprises to set up and expand the business in Hong Kong. Furthermore, the scope of eligible industries and incentives offered have been enhanced in the new budget. This program can be effective in creating jobs and diversifying the economy in Hong Kong.
- New Incentive Scheme for Green Technology Investments: This scheme is introduced to support businesses that are investing in specific green technologies. If they use specific equipment that contributes to environmental protection and carbon reduction, they can obtain tax breaks and subsidies from the government.
- Enhanced Tax Deduction for Research and Development (R&D): The new budget proposes increasing the tax deductions for qualifying R&D expenditures. The expenditure that can experience deductions includes costs directly related to R&D activities. The first HKD 2 million will get a 200% tax deduction, while the remaining portion will get a tax deduction of 150%.
How does the Hong Kong Budget 2025/2026 affect foreign investors in Hong Kong?
Although there have been a few changes to the tax regime, there is no such change that may affect Hong Kong’s position as a leading business giant. Indeed, entrepreneurs and investors from all over the world are interested in investing in Hong Kong. The simple tax system and low rates attract foreign investors, diversifying the Hong Kong market. However, the reinstatement of stamp duty for non-permanent residents might impact the investment in the residential property market. Apart from that, the general business regulations have not experienced any significant change.
What are the implications of the Hong Kong Budget 2025/2026 for the tech industry?
Furthermore, the Hong Kong budget 2025/26 has set aside HKD 1 billion to establish the Hong Kong Artificial Intelligence Research and Development Institute to promote the application of research outcomes. It has increased the funding for the Innovation and Technology Fund (ITF). Consequently, startups, fintech, and other tech-related businesses can benefit from the increased funding from the government. The establishment of new tech-focused infrastructure and talent attraction schemes may support technological advancement in Hong Kong.
How to adapt your business strategy to the Hong Kong Budget 2025/2026 changes?
Businesses need to adjust their strategies according to the new budget. This allows them to stay compliant and reduce the chances of legal charges and fines. Financial planning, forecasting, reviewing, and analysis can prove to be effective in adapting to the new budget. By staying informed and adapting to the changes, you can maximize benefits and mitigate risks efficiently. You can also get professional guidance from tax advisors and business experts to stay informed about the changes in the regulations. Contact a professional for budget analysis or strategic planning.
