According to an announcement from the Hong Kong Government, Chief Executive Carrie Lam outlined plans to diversify Hong Kong's economy and create more opportunities for the city in her policy address on 11 October 2017. As part of the plans, a new tax measure is proposed that would introduce a two-tiered profits tax system with an 8.25% tax rate on profits up to HKD 2 million and the standard 16.5% tax rate on profits exceeding that amount. To ensure the tax benefit targets SMEs, only one enterprise in a group may benefit from the lower rate. Further, the plans include a tax measure that would provide for a 300% tax deduction on the first HKD 2 million in eligible R&D expenditure, with a 200% deduction for expenditure exceeding that amount.
A bill to implement the two initiatives will be submitted to the Legislative Council as soon as possible.
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