Proposals are also being formulated to enhance the preferential tax regimes for funds and family investment holding vehicles managed by a single-family office, as well as for the distribution of carried interest by private equity funds, as part of our drive to establish ourselves as the world’s largest cross-boundary wealth management center by 2028.
To further advance Hong Kong as an international maritime center, the FS indicated that a half-rate tax concession will be introduced to eligible commodity traders.
Regarding the development of new quality productive forces, Hong Kong will strive to establish artificial intelligence as a core industry and empower traditional industries in their upgrading and transformation efforts.
Intellectual property (IP) is an important foundation for the development of emerging industries. In this regard, the FS indicated that he will review the relevant deduction arrangements for various expenditures, including (i) lump sum licensing fees for acquiring the rights to use IP, and (ii) related expenses incurred on purchase of IP or the rights to use IP from associates (both currently non-deductible). The aim of this proposal is to accelerate the development of IP-intensive industries and foster the growth of IP trading in Hong Kong.
Northern Metropolis
The FS emphasized that the development of the Northern Metropolis is crucial to the social and economic development of Hong Kong. It serves as a catalyst for the growth of the innovation and technology industry, enabling deeper engagement in the development of the Greater Bay Area, while creating quality career development opportunities and living environments for the people of Hong Kong.
To fund this development and other important infrastructure projects geared towards improving people’s livelihood, it is expected that approximately HK$150 billion to HK$195 billion worth of bonds will be issued annually during the five-year period from 2025-26 to 2029-30.
Returning to consolidated fiscal surplus
After factoring in the proceeds from the cumulative bond issuances, net of repayments, the fiscal reserves of Hong Kong are estimated to stand at approximately HK$579 billion as of 31 March 2030, representing about 13.9% of the GDP or approximately eight months’ worth of government expenditure at that time.
The FS tried to balance the books over a period of time without proposing any new taxes, with the exception of raising the airport departure tax from HK$120 to HK$200 effective from October 2025. This adjustment is expected to generate an additional revenue of HK$1.6 billion per year.
The raft of measures unveiled in the Budget align with the FS’s view that the fiscal deficit confronting Hong Kong is primarily cyclical rather than structural. The focus on the development of the Northern Metropolis and enhancing Hong Kong’s economic capacity is viewed as a long-term investment in the future. It is expected that these initiatives will in time bring substantial economic benefits to Hong Kong, enabling the repayment of the investments made.
Major tax- or business-related measures mentioned