Tax Concessions Bill Passed for Insurance-related Businesses in Hong Kong
The passage of the Inland Revenue (Amendment) (Profits Tax Concessions for Insurance-related Businesses) Bill 2019 by the Legislative Council on July 2020 was welcomed by the Secretary for Financial Services & the Treasury.
Details of the New Bill
The ordinance will serve as an amendment to the Inland Revenue Ordinance by reducing the profits tax rate by 50% and bringing it to 8.25% for the following types of insurance businesses:
- All general reinsurance businesses,
- Selected general insurance businesses of direct insurers,
- Selected insurance brokerage businesses.
The Secretary for Financial Services & the Treasury commented that the amendment would help to promote the development of Hong Kong’s marine and speciality risk insurance businesses while enhancing the development of high value-added maritime services. The Ordinance would also help the insurance industry seize new opportunities in trade such as those that will arise from the Belt & Road Initiative.
The next stage of preparatory work will be advanced by the Government and the Insurance Authority and involves the formulation of specifications of implementation and
the drafting of subordinate legislation. It is expected that these advancements should be able to give effect to the tax concessions by the end of the 2020 or early 2021.
Relieving the Burden of Taxpayers
Hong Kong’s economic performance has been affected due to higher financial uncertainty and this has led to the need for the government to step in and relieve the burden of citizens.
Hong Kong’s Legislative Council has also passed the Inland Revenue (Amendment) (Tax Concessions) Bill 2020. Under this new bill, tax concessions that were previously proposed will become into full effect and help to reduce salaries tax, tax under personal assessment and profits tax for the year of assessment 2019-20 The Bill will give effect to a one-time 100% tax rebate for profits tax, salaries tax, and tax under personal assessment for the year of assessment 2019/20 with a ceiling of HKD 20,000. These tax reductions will automatically be applied to tax fees for Hong Kong taxpayers by the Inland Revenue Department (IRD).
It is estimated that 1.95 million people paying salaries tax and tax under personal assessment along with 141,000 tax-paying corporations and unincorporated businesses will benefit from the new Tax Concessions Bill 2020. Accordingly, it has been calculated that government revenue will be reduced by $20.8 billion in 2020-21.