Hong Kong Discusses Tax Support For SMEs

by Mary Swire, Tax-News.com, Hong Kong

16 December 2011

In his reply to a question in the Legislative Council, Hong Kong’s Secretary for Commerce and Economic Development, Gregory So, confirmed that the government would, in formulating the 2012-13 Budget, consider whether further measures were required to help small and medium-sized enterprises (SMEs) to overcome the challenges faced in the current economic environment.

The question was, with many SMEs facing a series of problems, such as decreases in orders, high costs, difficulties in financing, and arrears from clients in payments for goods, whether the government would consider allowing more SMEs to defer prepayment of profits tax and offering concessionary tax rates to SMEs with turnover or profits below a certain threshold.

So’s reply pointed out that the principle of "earning more, paying more; earning less, paying less" is already included in the existing single profits tax rate. In 2009-10, only about 83,000 corporations, accounting for 12% of registered corporations, paid profits tax, he said, explaining that the majority of SMEs either do not have to pay any tax or pay a very small amount of tax.

In addition, he confirmed that, as regards holdover of provisional tax, the existing Inland Revenue Ordinance has already made flexible arrangements to cater for changes in taxpayers' income or profits. If taxpayers (including SMEs) expect that their income or profits for the current year would be less than 90% of that of the previous year, they may lodge, not later than 28 days before the due date for tax payment, applications to the Inland Revenue Department (IRD) for holding over the whole or part of the provisional tax.

Furthermore, if individual taxpayers are unable to pay tax on time due to financial difficulties, they may apply to the IRD to pay tax by instalments. The government therefore believes that the existing well-established arrangements can help those SMEs whose profits are expected to decrease due to adverse economic circumstances, to arrange tax payment in a more flexible manner.

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