The Hong Kong Institute of Certified Public Accountants (HKICPA) has unveiled its budget recommendations for the fiscal year 2026-27. These proposals are centered around reinforcing Hong Kong’s strengths in innovation and talent development. The HKICPA’s key message emphasizes the need for a strategic approach to enhance competitiveness and support economic growth.
Proposed Tax Measures
To boost investment, the HKICPA suggests implementing a half-rate profits tax concession of 8.25% for qualifying regional headquarters (RHQs) over five years. Furthermore, it proposes an additional two-year tax exemption for Chinese mainland enterprises establishing RHQs in Hong Kong.
The institute also calls for a comprehensive review of tax incentives focusing on research and development. Support for quantum computing is highlighted, alongside lighter tax burdens for small and medium-sized enterprises. Digitalization incentives are proposed to promote further growth in this sector.
Capital Markets and Financial Instruments
In terms of capital markets, the HKICPA recommends refined tax concessions tailored for single family offices. It stresses the importance of developing more renminbi-denominated offshore financial products, including annuities, insurance policies, and various financial instruments. In addition, promoting the “Brand Hong Kong” initiative is deemed crucial for attracting international business.
Talent Retention and Community Support
Measures aimed at retaining and nurturing talent are also emphasized. The HKICPA suggests streamlining visa application processes, providing subsidies for competitive employment packages, and offering education allowances for overseas talent’s children. These initiatives are designed to create a welcoming environment for skilled professionals.
Sustainable Public Finances
As the HKICPA discusses fiscal health, it estimates a budget deficit of approximately HK$1.4 billion (around $179 million) for 2025-26. By March 2026, fiscal reserves are anticipated to reach about HK$652.9 billion. The HKICPA reassures that Hong Kong’s financial stability remains intact, bolstered by a well-managed Exchange Fund exceeding HK$4 trillion in assets.
Current Economic Outlook
The deficit-to-gross domestic product (GDP) ratio stands at about 4.8%. Following a government revision, the real GDP growth projection for 2025 is set at 3.2%, coupled with modest inflation. Given these factors, the HKICPA does not foresee any immediate fiscal risks.
HKICPA President Stephen Law remarked on the resilience of Hong Kong’s economy amidst global uncertainties. He noted that steady export growth, improving domestic demand, and a robust capital market contribute to this resilience.
