What tax reduction did the 2026-27 Budget give to Hong Kong businesses?
The 2026-27 Budget provides a one-off 100% reduction of profits tax for year of assessment 2025/26, capped at HK$3,000 per business. It applies to the final tax, not to provisional tax, and needs no application. Profits tax rates were not changed. The legislation was passed on 13 May 2026 and gazetted on 22 May 2026.
What was announced. For the year of assessment 2025/26 (1 April 2025 to 31 March 2026), profits tax, salaries tax and tax under personal assessment are reduced by 100%, subject to a ceiling of HK$3,000 per case. For profits tax the ceiling applies to each business. For many small businesses with low tax the saving is the whole bill.
How it works.
- It reduces the final tax for 2025/26. It does not reduce provisional tax, so you still pay provisional tax on time; any excess is applied to the 2026/27 provisional tax or refunded.
- No application is needed. The IRD applies it in the final assessment, and will reassess any 2025/26 assessments issued before the law was enacted.
- It does not apply to property tax.
- A person with both a business and a salary gets the reduction under each tax type separately.
Rates unchanged. The two-tiered profits tax rates (8.25%/16.5% for companies, 7.5%/15% for unincorporated businesses) stay as they are.
Other 2026-27 measures mainly affect individuals (higher allowances from 2026/27) and stamp duty (see the other answers).
Sources
Applies to YA 2025/26 · Last reviewed 29 October 2026
General information for business owners, not legal, tax or professional advice. Rules change, so check the sources or ask a licensed professional before you act.
Related questions
- How does provisional profits tax work in Hong Kong?Provisional profits tax is an advance payment charged for a year of assessment, calculated from the previous year's assessed profits. It is then offset against the final tax for that year, with any excess applied to the next year's provisional tax or refunded. It is paid in instalments set out on the demand note.
- How can I hold over (reduce) my provisional profits tax?You can apply in writing to pay less or none of your provisional profits tax on prescribed grounds, most commonly if profits for the year are likely to be below 90% of the base figure. Apply at least 28 days before the due date or within 14 days after the demand note is issued, whichever is later.
- Which business expenses are deductible for Hong Kong profits tax?Expenses are deductible to the extent they are incurred in producing chargeable profits, and are not of a capital nature or private. Typical allowable items include rent of business premises, staff costs, bad debts, repairs, trade mark registration, MPF contributions for employees, and approved charitable donations within limits.
- What expenses cannot be deducted for Hong Kong profits tax?The law prohibits deductions for domestic or private expenses, capital losses and expenditure, insurance recoveries, rent of premises not used for the business, profits tax and other IRO taxes, and remuneration or interest paid to a sole proprietor or partners and their spouses.
- How are depreciation allowances calculated in Hong Kong?Accounting depreciation is not deductible. Instead the IRD gives statutory allowances: plant and machinery get a 60% initial allowance plus annual allowances of 10%, 20% or 30% on a reducing balance; industrial buildings 20% plus 4%; commercial buildings 4% a year. Certain assets can be written off immediately.