Invest Hong Kong Incentives Update

Our close working association with Invest Hong Kong provides us with timely updates on the government tax and financial incentives which exist for investors wishing to establish enterprises in Hong Kong.

Hong Kong is a springboard into Greater China both geographically and financially and a base from which to develop your business into Asia.

With a legal system similar to that of Australia and other Commonwealth Countries it is a favoured jurisdiction for expansion of Asian business.

We thank Invest Hong Kong for providing these updates on the incentives provided. If clients have any questions or wish to be introduced to Invest Hong Kong for more detailed discussions on these incentives, please contact Mr. Richard Kimber using the contact details provided below.

Reduction of duty on liquor with alcoholic strength of more than 30 per cent (Government Press Release)

1. Policy Announcement: The Chief Executive’s 2024 Policy Address announced a reduction in duty on liquor with an alcoholic strength of more than 30%.

2. Two-Tier System:

•Import Price Over $200 (AUD40): Duty rate reduced from 100% to10% for the portion above $200.
•Import Price $200 (AUD40) or Below: Duty rate remains at 100%.

3. Applicability: The new duty rates apply to liquor up to one litre. For largercontainers, duty is calculated on a “value per litre” basis.

4. Government’s Rationale: The reduction aims to promote high-end liquortrade, benefiting sectors like logistics, storage, tourism, and high-end foodand beverage consumption, while balancing public health concerns.

5. Legal Framework: The two-tier system is part of the Public RevenueProtection (Duty on Liquor) Order 2024, enforced by the Secretary forCommerce and Economic Development.

Tax concession for single family offices operating in Hong Kong

Profits tax concessions for Family-owned Investment Holding Vehicles (FIHVs) and Family-owned Special Purpose Entities (FSPEs):

1. Effective Date: The ordinance (Act) came into operation on 19 May 2023and applies to the year of assessment starting on or after 1 April 2022.

2. Eligibility for FIHVs:

• Must be an entity not engaged in general commercial or industrial purposes.
• Must be related to one or more family members and meet specific ownership requirements.
• Must be managed or controlled in Hong Kong.
• Must be managed by an eligible Single Family Office (SFO) and meet the minimum asset threshold.
• Must carry out core income-generating activities in Hong Kong.

3. Ownership Requirements:

• At least 95% of the beneficial interest must be held by family members.
• Family members include a wide range of relatives, including spouses, ancestors, descendants, and siblings.

4. Eligible Single Family Office (SFO):

• Must be a private company managed or controlled in Hong Kong.
• At least 95% of its beneficial interest must be held by family members.
• Must provide services to specified family members and derive at least 75% of its profits from these services.

5. Charitable Entities:

• Can hold up to 25% of the beneficial interest in an FIHV or SFO, provided family members hold at least 75% and unrelated persons hold no more than 5%.

6. Management by SFO:

• The SFO must conduct investment activities for the FIHV, including research, property management, and administration of FSPEs.
• A cap of 50 FIHVs managed by the same SFO can benefit from the tax concession.

7. Election Mechanism:

• FIHVs must make a written election for the tax concession, which is irrevocable and applies to all subsequent years.

8. Minimum Asset Threshold:

• The aggregate value of specified assets managed by the SFO for the FIHV must be at least HK$240 million.

Government subsidy: SME Export Marketing Fund and BUD Fund

Objective:

•Encourage SMEs to expand markets outside Hong Kong by providing financial assistance for export promotion activities.

Funding Scope:

•Trade exhibitions (outside and within Hong Kong targeting external markets, and local market)
•Online trade exhibitions
•Business missions (outside Hong Kong and online)
•Advertisements in trade publications targeting external markets
•Export promotion activities via electronic platforms/media targetingexternal markets
•Setting up/enhancing corporate websites/mobile apps targeting externalmarkets
•Expanded scope (April 2021 – June 2026) includes large-scale local exhibitions and online exhibitions by reputable organisers.

Funding Amount:

•Maximum of HKD100,000 or 25% of total approved expenditures per application.
•Cumulative limit of HKD1,000,000 per enterprise, with up to 50% for website/mobile app enhancements.
•Initial Payment is 20% of approved government funding.

Eligibility and Requirements:

•Non-listed enterprises registered in Hong Kong with substantive business operations.
•Must not be related to the organiser/service provider of the promotion activity.

Application Procedure:

•Open all year round.
•Submit applications via online e-Form, post, drop-in box, or in person.
•Indicate whether applying for reimbursement or initial payment cum final payment.

o Reimbursement: Submit within 60 days after activity completion.
o Initial Payment cum Final Payment: Submit 45-120 days before activity start for initial payment; final payment within 60 days after activity completion.

Service Counter:

•Address: Room 1301, 13/F, Trade and Industry Tower, 3 Concorde Road, Kowloon City, Hong Kong.
•Hours: Monday to Friday, 08:45 a.m. to 12:30 p.m., 01:30 p.m. to 05:45 p.m. (Closed on weekends and public holidays).
•Drop-in box available for after-hours submissions.

Here are the main points about the Dedicated Fund on Branding, Upgrading and Domestic Sales (BUD Fund):

Objective

•Support non-listed Hong Kong enterprises in developing brands, upgrading operations, and promoting sales in the Mainland and other markets with Free Trade Agreements (FTA) and/or Investment Promotion and Protection Agreements (IPPA).

Funding Scope

•Eligible Projects: Developing brands, upgrading operations, and promoting sales in the Mainland and 40 other FTA/IPPA markets.
•“Easy BUD”: Expedites applications for projects with funding up toHKD$100,000.
•“E-commerce Easy”: Allows flexible use of HKD$800,000 within a cumulative ceiling of HKD$800,000 each applicant for e-commerce projects in the Mainland.

Funding Amount and Duration

•General Application: Up to HKD$800,000 per project.
•“Easy BUD”: Up to HKD$100,000 per project.
•Matching Basis: Government covers up to 25% of project costs.
•Cumulative Ceiling: HKD$800,000 per enterprise for all projects.
•Project Duration: 24 months for general and “E-commerce Easy” projects,12 months for “Easy BUD” projects.

Eligibility and Requirements

•Non-listed enterprises registered in Hong Kong.
•Substantive business operations in Hong Kong.

Application Procedure

•Open all year round.
•Online application with simplified requirements for “Easy BUD”.
•One application every 3 months per enterprise.
•Processing Time: “Easy BUD” applications processed within 30 working days.

This fund aims to enhance the competitiveness of Hong Kong enterprises and facilitate their business development in various markets.