Recent Concessions for SME’s from the IRD (and other Government Relief Measures)
(NB The following are not specific to SMEs, and some apply to individuals as well as companies)
Deferral of tax payments (December 2019 measure)
(Background: under the Hong Kong Inland Revenue Ordinance, tax payments not made by the due date will normally be charged with a surcharge of up to 5% on the amount of tax outstanding to the taxpayer. If this period of delay in payment exceeds six months from the due date, a further surcharge of up to 10% may also be charged on both the unpaid amount of tax and on the tax surcharge.)
Many companies and individuals will soon be receiving their tax demand notes for the Year of Assessment 2018/19. Because of the economic effects experienced in 2019’s social unrest, now exacerbated by COVID-19, many Hong Kong companies and individuals may be needing other options for tax payment.
Hong Kong taxpayers – whether individuals/sole proprietorships, partnerships or corporations – can now apply to pay the taxes they owe in instalments, if they face financial difficulties which affect their ability to settle their tax demands for the 2018/19 Year of Assessment.
Under relief measure announced on the 4th of December 2019, taxpayers, a taxpayer may propose an instalment plan to Inland Revenue Department. If the instalment plan is approved, the taxpayers are permitted to pay the tax by instalments in a period of up to 12 months from the original due date and no surcharge will be charged by Inland Revenue Department.
Key points of this relief measure:
- Who is eligible? Taxpayers in all categories below who will have financial difficulties in settling their tax bills on time.
- Types of tax assessments covered? Salaries Tax, Profits Tax and Personal Assessments issued between December 2019 and December 2020.
- Tax year covered? Year of Assessment of 2018/19.
- When to apply? Before the due date of the tax demand notes. I.e. don’t wait until you are already late.
- What must the application include? The application must include a completed an application form together supporting with documents including an instalment plan proposal, bank statements for the latest 3 months, details of financial positions (balance sheets) for the latest 3 months, debts repayment details, management accounts for the latest 3 months (for claims of deferral of profits tax payment), and cash flow position and forecast.
- How long will it take for the IRD to process the application? 21 working days from receipt of the application.
2020 Budgetary Concessions
- One-off tax debate
A one-off 100% tax rebate or HK$20,000 (whichever is lower) on 2019/20 Salaries Tax, Personal Assessment and Profits Tax has been proposed. The rebate will be deducted from the 2019/20 final tax (i.e. after the 2019/20 Individual Income Tax Returns and Profits Tax Returns are filed).
- Miscellaneous measures to support enterprises
A concessionary low-interest loan will be introduced under the SME Financing Guarantee Scheme, under which 100% guarantee will be provided by the Government. The maximum amount of loan for eligible enterprises is based on their salary and rental expenditures for six months, subject to a ceiling of HK$2 million. Miscellaneous measures to support enterprises
- Rates waiver
Rates for non-domestic properties will be waived for four quarters of 2020/21, subject to a ceiling of HK$5,000 per quarter in the first two quarters and a ceiling of HK$1,500 per quarter in the remaining two quarters for each rateable nondomestic property.
Rates will be waived on residential properties for all four quarters in 2020/21, subject to a ceiling of HK$1,500 per quarter for each rateable tenement.
- BRC waiver
The business registration fees for 2020/21 will be waived.
- Annual return waiver fees
The registration fees for all annual returns (except where the AR has been filed late – compare with tax payment deferral, above) charged by the Companies Registry will be waived for two years.
- Electricity rebate
A subsidy will be provided to each eligible non-domestic household accounts for four months to cover 75% of their monthly billed electricity charges, subject to a monthly cap of HK$5,000 per account.
- Water and sewage charge waiver
75% of water and sewage charges payable by non-domestic households will be waived for four months, subject to a monthly cap of HK$20,000 and HK$12,500 respectively per household.
- Recycling companies
Additional rental subsidies will be provided for six months to local recycling enterprises.
- Rental for government tenants
Rental fees will be reduced by 50% for six months for eligible tenants of government properties, government land and EcoPark.
Rentals for some existing short-term waivers will be reduced by 50% for a further six months.
- Hire of government facilities
Hirers of civic centres under the Leisure and Cultural Services Department (LCSD) will be provided with a 50% reduction of hire charges for six months; likewise for tenants of the Cruise Terminal.
- Main relief measure for individuals (permanent residents)
A cash payment (made by applying directly to your bank in Hong Kong) of HK$10,000 will be payable to Hong Kong permanent residents aged 18 or above. The stated purpose of this is to both encourage and boost local consumption, whilst relieving people’s immediate financial burden.
- The Hong Kong government has recently announced the Retail Sector Subsidy Scheme through its Anti-epidemic Fund (a one-off subsidy of $80,000).
- The IRD has advised that the bulk issue of the 2019/20 tax return 2019/2020 will be extended to May 2020 (from April).
UPDATE – 8th April, 2020
Full details are to be confirmed, but the government has announced on 8th April what appears to be a direct subsidy of salaries to employers, with the following conditions:
- Applies to six months’ salaries, using a selected base month
- Subsidy of up to 50% of each employee’s salary capped at 50% of HK$18,000 per employee
- Only employees in the MPF scheme are covered
- The company may not lay off that employee for 6 months
- Payment to be made in 2 parts.
For further information, please contact:
Business Development Director