Hong Kong’s Budget 2025-26 sets a strategic course to strengthen the city’s economy, ensuring fiscal sustainability, promoting business growth, and enhancing public services. Released on February 26, 2025, by the Financial Secretary, Paul Chan, the budget arrives amidst global uncertainties and domestic challenges. This forward-looking financial plan emphasizes economic resilience, competitive business policies, and strategic investments to maintain Hong Kong’s status as a global hub.
Hong Kong’s Economic Performance in 2024
Despite global challenges, Hong Kong’s economy demonstrated resilience in 2024:
- GDP Growth: The economy expanded by 2.5%.
- Trade: Goods exports rose by 4.7%.
- Tourism: Visitor arrivals surged by 30% to 45 million.
- Investment: Overall investment expenditure increased by 2.4%.
- Employment: The unemployment rate remained low at 3.1%.
- Wages: Median monthly employment earnings climbed by 4.8%.
- Inflation: The underlying consumer price inflation rate was 1.1%.
- Stock Market: The Hang Seng Index rose by 18% with a 26% increase in average daily turnover.
- Real Estate: Residential property transactions grew by 23%, although prices fell by 7%.
Key Highlights of Hong Kong Budget 2025-26
To navigate economic uncertainties, the government has introduced several measures to support businesses and economic recovery:
1. Fiscal Consolidation and Sustainability
- A 7% reduction in recurrent expenditure is planned by 2027-28 to restore fiscal balance without compromising essential public services.
- Strategic spending adjustments aim to ensure long-term economic stability while supporting social well-being.
2. Investment in Infrastructure and Innovation
- The government will accelerate the development of the Northern Metropolis, creating new business opportunities and boosting regional growth.
- Additional funding will be directed toward technology and innovation, attracting global talent and fostering entrepreneurship.
3. Bond Issuance for Development
- The government plans to expand bond issuance, using the proceeds to fund infrastructure projects and technological advancements, reinforcing Hong Kong’s global financial leadership.
Tax Reforms and Incentives in Budget 2025-26
The budget introduces targeted tax measures to strengthen fiscal health while promoting investment:
1. Public Finance Initiatives
- Departure Tax Increase: Starting October 2025, air passenger departure tax will rise from HK$120 to HK$200, generating HK$1.6 billion annually.
- Global Minimum Tax Implementation: The government will adopt BEPS 2.0 measures, expected to generate HK$15 billion in revenue.
- Digital Tax Enhancements: New digital tools will streamline tax filing and improve compliance.
2. Tax Relief for Individuals and Businesses
- Salaries Tax: A 100% tax reduction for 2024/25, capped at HK$1,500 per taxpayer.
- Profits Tax: A 100% tax reduction for businesses, with a HK$1,500 cap.
- Stamp Duty Exemptions: Increased exemption thresholds for residential and non-residential property transactions valued at HK$4 million or below.
- Rates Concessions: Property tax relief of up to HK$500 for the first quarter of 2025-26.
- Social Welfare Support: Extra half-month allowances for CSSA, Old Age Allowance, Old Age Living Allowance, and Disability Allowance recipients.
Strategic Tax Incentives for Key Industries
The government is offering industry-specific tax benefits to drive economic expansion:
- Innovation and Technology: Enhanced tax deductions for intellectual property and research investments.
- Financial Services: Optimized tax incentives for funds and single-family offices to attract global capital.
- Shipping Industry: A half-tax concession for eligible commodity traders, supporting maritime growth.
- Green Energy: Tax exemptions for green methanol fuel usage, aligning with sustainability goals.
Measures to Attract Global Enterprises to Hong Kong
The government has unveiled a series of initiatives to strengthen Hong Kong’s position as a global business hub:
- Enterprise Re-Domiciliation: New legislation facilitates the relocation of foreign businesses to Hong Kong.
- Strategic Enterprise Investments: Over HK$50 billion in foreign investments will generate more than 20,000 jobs.
- IOMed Headquarters: The International Organization for Mediation (IOMed) will establish its headquarters in Hong Kong, reinforcing the city’s role in global dispute resolution.
- Kai Tak Sports Park Opening: This new world-class venue will host international sports and cultural events, enhancing tourism and economic activity.
- WTCF Tourism Summit 2025: Scheduled for April, this event will welcome representatives from 40 countries, further promoting Hong Kong as a premier global destination.
Support for Small and Medium Enterprises (SMEs)
Recognizing the crucial role of SMEs in economic growth, Budget 2025-26 introduces dedicated support measures:
- HK$1.5 billion injection into SME Funds: The BUD Fund and Export Marketing Fund receive substantial financial backing to enhance market access and competitiveness.
- Extended SME Financing Guarantee: Loan relief measures are available until November 2025, with HK$390 billion in dedicated SME lending support.
- E-Commerce Expansion: The Hong Kong Trade Development Council (HKTDC) will launch E-Commerce Express to assist businesses in digital transformation.
- Shopping Festival Revival: A second edition of the Hong Kong Shopping Festival will provide further opportunities for SMEs to connect with local and international markets.
A Balanced Approach to Growth
Hong Kong’s Budget 2025-26 seeks to balance fiscal prudence with strategic investment, ensuring long-term economic resilience. By implementing tax relief measures, enhancing public services, and fostering innovation, the government is setting the stage for sustained growth. While challenges remain—ranging from global economic shifts to demographic changes—this budget presents a comprehensive roadmap for a competitive and dynamic Hong Kong.
For further analysis and updates on the Hong Kong Budget 2025-26, visit Daljoog News.
