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The recently announced 2026–27 Budget focuses on the core theme of "Innovation-driven, Finance-empowered, Diversified Development, and Caring for the People" to steer the economy forward. For Small and Medium Enterprises (SMEs), this budget introduces several targeted financial reliefs and strategic initiatives designed to bolster competitiveness in an increasingly digital global market. Direct Financial Relief and Funding Boosts SMEs can look forward to immediate cost-saving measures and enhanced funding support: • Tax and Rates Relief: A 100% reduction in profits tax for the 2025–26 assessment year is provided, subject to a $3,000 ceiling. Additionally, rates for non-domestic properties will be waived for the first two quarters of 2026–27, capped at $500 per quarter. • "BUD" Fund Expansion: To assist businesses in expanding into outside markets, the government is injecting 200 million into the "BUD" Fund. Notably, the grant ceiling for "EasyBUD" applications is being raised to 150,000 per case. • Industry-Specific Support: For those in the food sector, food safety testing certificate fees will be waived for two years to facilitate market expansion. Empowering SMEs through Technology and AI The budget places a heavy emphasis on AI-driven transformation, which offers SMEs a pathway to modernization: • AI Training and Application: A total of $50 million has been allocated to support AI application learning courses, seminars, and competitions, ensuring the workforce is equipped for a "digital and intelligent" ("数智化") transition. • I&T Guidance: A $10 billion Innovation and Technology (I&T) Industry Guidance Fund will be launched within the year to support emerging industries. • R&D Incentives: The government plans to review and optimise tax arrangements for Research and Development (R&D) expenditures, which could provide significant fiscal space for innovative SMEs. Strategic Growth and Market Expansion Beyond direct subsidies, the budget outlines frameworks to help SMEs scale and protect their assets: • New Industrialisation: The "New Industrialisation Elite Enterprise Cultivation Programme" will be launched this year to provide focused support for high-growth enterprises. • Intellectual Property (IP) Support: To encourage the trade of ideas, the government is proposing tax deductions for capital expenditure on purchasing IP and has reserved $52 million to establish an "Intellectual Property Academy". • Logistics and Trade: The "Future Smart Logistics Accelerator Scheme" will be introduced to promote data interconnectivity, while the Export Credit Insurance Corporation (ECIC) will launch a pilot scheme to help SMEs explore higher-risk new markets. Economic Outlook These measures come at a time when the government predicts a consolidated surplus of $22.1 billion for 2026–27, with fiscal reserves expected to reach $733.7 billion by March 2031. By leveraging these new grants and tax incentives, SMEs can better position themselves to contribute to Hong Kong’s high-quality economic development.

To support businesses and practitioners in coping with their recent operational needs, the Inland Revenue Department has decided to further extend the due date for filing 2024/25 Profits Tax returns with Accounting Date Code ‘M’ (i.e. accounting date falling within 1 January 2025 to 31 March 2025) in paper form from 2 December 2025 to 15 December 2025. The due date for filing the tax returns electronically remainsunchanged (i.e. 2 January 2026). Despite this extension, tax representatives are encouraged to file as many returns as possible well before the further extended due date.

On October 3, the tax administration announced that, starting from October 6, 2025, the annual interest rate for tax saving bonds will change from the current 0.3417% to 0.2583%. Under the new rate, you can earn 0.0215 yuan in interest per 100 yuan each month. The interest on tax saving bonds is calculated using simple interest. Interest accrues from the purchase date until the date the bond is used to pay tax, calculated monthly, and interests can be earned proportionally for periods less than a month. Interest is only calculated when the bond is used to pay tax. If the principal value of the bond is returned to its holder, no interest is paid. The interest rate for tax saving bonds is based on the average 12‑month fixed‑term deposit rates for deposits of 100,000 to 499,999 yuan at three issuing banks, reviewed monthly. The new rate applies to all bonds purchased on or after October 6, 2025. Bonds purchased before that date will still use the rate in effect on the purchase date. The following table shows recent rates: - Bonds purchased on or after June 3, 2024 but before October 7, 2024: annual rate 0.8833% - Bonds purchased on or after October 7, 2024 but before November 4, 2024: annual rate 0.8000% - Bonds purchased on or after November 4, 2024 but before December 2, 2024: annual rate 0.7167% - Bonds purchased on or after December 2, 2024 but before January 6, 2025: annual rate 0.5500% - Bonds purchased on or after January 6, 2025 but before February 3, 2025: annual rate 0.4250% - Bonds purchased on or after February 3, 2025 but before October 6, 2025: annual rate 0.3417% - Bonds purchased on or after October 6, 2025 until further notice: annual rate 0.2583% Bonds will stop earning interest after 36 months.

The Accounting and Finance Reporting Authority (AFRA) released an article titled "Maintaining Capital Market Credibility: Carefully Appointing Auditors and Determining Audit Fees," emphasizing the importance of improving audit quality. It notes that the recent rapid resignation problem among auditors has markedly improved, dropping from 70 % in 2021 to 30 % in 2024. To further enhance audit quality, AFRA offers the following observations and recommendations: **Challenges of Hasty Auditor Appointment** Between 2020 and 2024, 45 % of auditor resignations occurred within a month before or after the fiscal year-end, tightening audit timelines and increasing the risk of first‑year audit misstatements. **Competitive Underpricing** Seventy‑three percent of auditor changes accompanied a reduction in audit fees, potentially leading auditors to cut back on audit procedures, reduce sample sizes, or rely on less‑experienced staff, thereby compromising audit quality and heightening the risk of non‑compliance. **Delayed Audit Fee Payments** As of 31 March 2025, at least ten listed companies had not fully paid their 2023 and/or 2024 audit fees, with some delays extending up to 30 months. This could erode auditor independence and increase the risk of biased audit opinions. **AFRA’s Recommendations** • **Audit Committees** should appoint auditors early, carefully evaluate low‑bid proposals, and ensure timely fee payment to preserve independence. • **Auditors** should set reasonable fees, decline rushed engagements due to resource constraints, and establish fair payment terms. **Goal** AFRA stresses that audits are a professional service essential for maintaining trust in capital markets. Fees should reflect service quality and be paid on time, supporting accounting firms’ investment in talent and technology to promote Hong Kong’s resilience as an international financial centre.

The Inland Revenue Department (IRD) launched three new tax portals under eTAX today (July 22), namely the Individual Tax Portal (ITP), Business Tax Portal (BTP) and Tax Representative Portal (TRP), to further enhance the efficiency and user experience of electronic tax services. An IRD spokesman said, "The IRD is committed to promoting tax digitalisation and has been upgrading electronic tax services to provide convenience to taxpayers and enhance the efficiency, reliability and accuracy of return filing. The three new tax portals provide electronic tax services to individuals, businesses, and tax service agents respectively, allowing them to handle tax matters conveniently and efficiently." The ITP offers a centralised platform for users to manage their personal tax matters, providing functions such as tax return filing, personal particulars updates and viewing of tax positions. Individual users may also use the ITP on their mobile devices anytime, anywhere via the "eTAX" mobile application launched by the IRD today. The BTP is specifically designed for businesses to handle tax matters and compliance obligations electronically, including tax return filing and business registration. The TRP caters to tax service agents (tax representatives, company secretaries and other tax service providers) to facilitate them in managing clients' tax matters, including tax return filing and compliance tracking. "Profiles of existing eTAX users have been migrated to the ITP. They can use their registered information to log into the ITP. Businesses and service agents are encouraged to open an eTAX account as early as possible to handle tax matters electronically through the BTP and TRP in a safe, convenient and environmentally friendly way," the spokesman said.

In view of genuine operational difficulties faced by businesses and tax practitioners, the Inland Revenue Department has decided to extend the filing deadline for 2024/25 Profits Tax Returns for 'D' cases (i.e. those with accounting dates falling between 1 December 2024 and 31 December 2024). The original due date of 15 August 2025 will be extended by two weeks to 29 August 2025. However, tax representatives are encouraged to submit the majority of returns before the extended deadline.

The Hong Kong Government will officially launch the 'Company Re-Domiciliation Regime' on May 23, 2025. This allows companies registered outside of Hong Kong to transfer their place of registration to Hong Kong while preserving their legal identity and business continuity, and re-register as Hong Kong companies under the Companies Ordinance (Chapter 622). **Purpose and Background** This regime aims to consolidate Hong Kong's position as an international business and financial center, providing companies with a flexible re-domiciliation pathway, particularly attracting multinational enterprises seeking to relocate from low or no-tax jurisdictions in response to the global minimum tax (BEPS 2.0). **Tax Arrangements and Impact** * **Tax Residency**: Re-domiciled companies will be considered corporations established in Hong Kong, meeting the definition of a Hong Kong tax resident, and can enjoy the benefits of double taxation agreements signed between Hong Kong and other jurisdictions. * **Profits Tax Liability**: * If a company was already operating in Hong Kong and generating taxable profits before re-domiciliation, it must pay profits tax on those profits. Re-domiciliation will not exempt this tax liability. * If a company was not operating in Hong Kong before re-domiciliation, it will not be subject to profits tax for the period before re-domiciliation. * **Transitional Tax Arrangements**: Schedule 17L has been added to the Inland Revenue Ordinance, stipulating that expenses incurred by re-domiciled companies before re-domiciliation may be deductible when calculating profits tax after re-domiciliation, provided certain conditions are met. **Other Key Points** * **Legal Amendments**: The 2025 Companies (Revision) (No. 2) Ordinance amended the Companies Ordinance and related legislation, including the Inland Revenue Ordinance, to implement the company re-domiciliation regime. * **Handling of Inventory**: Inventory acquired by re-domiciled companies before re-domiciliation and used in Hong Kong business after re-domiciliation, its cost or value on the date of re-domiciliation (whichever is lower) may be treated as a deductible item. For further information or to consult detailed information, please refer to the relevant pages on the Hong Kong Inland Revenue Department's official website.

The 2024/25 tax returns for individuals were issued on 2 May 2025. Taxpayers are required to file duly completed returns to the Inland Revenue Department (IRD) within 1 month from the date of issue of the returns. The deadline falls on 2 June 2025. For sole proprietors, returns should be filed within 3 months, i.e. on or before 2 August 2025.

The Accounting and Financial Reporting Council (AFRC) today announces its Strategic Priorities for 2025-2027, to support the discharge of its statutory function. The AFRC's strategic priorities for 2025-2027 are based on four key pillars: Regulation: Upholding the quality of financial reporting and audit, thereby safeguarding stakeholder and public interests. Governance: Cultivating a healthy environment based on high-quality financial reporting and audit through robust governance. Development: Promoting the development of the accounting profession by advocating sustainability, digital transformation, and talent management. Organisational Effectiveness: Driving effective outcomes through efficient processes. For details, please visit: https://www.afrc.org.hk/media/stsjhckc/afrc-strategic-priorities.pdf

Employers must complete and submit the 2025 Salary and Pension Tax Return on or before May 2, 2025.