- Hong Kong lawmakers question whether five-year tax breaks can attract major firms.
- Proposed tax rates of 5% or 8.25% would require major expansion and hiring plans.
- Companies could seek five-year renewals if they continue expanding in Hong Kong.
Hong Kong lawmakers supported proposed tax incentives for large innovative companies on Monday but challenged the five-year limit, saying it could discourage headquarters relocations and expansion. The government defended the timeframe, pointing to a renewal option for businesses that continue investing in the city.
The debate at the Legislative Council’s financial affairs panel focused on whether the concession would match companies’ investment timelines, particularly when profits take years to materialize.
Lawmakers Question Five-Year Tax Incentive Period
Lawmaker Alan Chan Chung-yee said many innovative companies earn no money during their first decade and therefore would not need to pay profits tax. He proposed a concession lasting 10 or 15 years.
Lawmaker Nick Chan Hiu-fung raised a related concern about regional headquarters. He said finance chiefs at major international technology companies take a long-term view, making a five-year reduction difficult to present to their boards as grounds for relocation.
However, Secretary for Financial Services and the Treasury Christopher Hui Ching-yu said five years should suffice, citing similar incentives in Singapore.
He added that companies could apply for another five-year period if they continued expanding locally. Business opportunities also influence companies’ decisions to enter Hong Kong, he said.
Lower Tax Rates Would Require Expansion and Hiring
Chief Executive John Lee Ka-chiu announced the proposal in his policy address last month. Planned legislation would offer selected innovative enterprises profits tax rates of 5% or 8.25% for up to five years.
The latter rate represents half the city’s standard corporate tax rate of 16.5%. Hui said the scheme would cover advanced manufacturing, finance, logistics, and supply chain management, alongside companies establishing Hong Kong headquarters.
Eligibility would require huge expansion and hiring plans from very large companies. Although Hui said thresholds would vary by industry, he did not provide specific requirements.
Committee Would Review Applications to Prevent Abuse
Addressing lawmakers’ concerns about abuse, Hui said a committee led by Financial Secretary Paul Chan Mo-po would approve each application. The process would differ from industry-specific incentives that apply automatically once companies meet set thresholds. Businesses would also report whether they delivered their expansion and recruitment plans.
Paul Chan noted last month that several leading emerging-industry firms were expected to arrive in the coming months. The scheme would begin in the tax year starting April 1, subject to legislative approval.
Separately, the panel considered longer stock trading hours. Other exchanges, including Nasdaq, London and South Korea, have pursued longer sessions. Hui called for careful study, saying extended sessions might simply spread turnover across more hours.
Related: Hong Kong Lawmaker Recommends Bitcoin For Fiscal Reserves Purposes
Disclaimer: The information presented in this article is for informational and educational purposes only. The article does not constitute financial advice or advice of any kind. Coin Edition is not responsible for any losses incurred as a result of the utilization of content, products, or services mentioned. Readers are advised to exercise caution before taking any action related to the company.
