As Covid-19 rages on, small and medium sized businesses continue to suffer the effects. It’s never easy running a business, but in these circumstances, it is almost impossible. We have no choice but to turn to the government for assistance. In an effort to mitigate these negative consequences, the Hong Kong government is doing what they can to ease the financial burden for small and medium sized businesses.
On 23 February 2022, Financial Secretary Paul Chan announced that Hong Kong is rolling out a HK$64 billion relief package for businesses and individuals, with an additional HK$20 billion set aside to counter the brutal fifth wave of COVID-19 the country is currently combatting.
As part of this relief package for businesses and individuals, the government will be helping with tax breaks, handouts and subsidies. This is welcome news for small business owners who are doing what they can to weather this current storm.
Here are some of the ways in which the government is assisting businesses through this difficult period:
Business Loan Scheme Extension
Cash flow is a major issue that many SMEs are facing right now. To help alleviate this issue, the application period will be extended for all products guaranteed under the SME Financing Guarantee Scheme (SFGS).
The assistance will also include enhancing “the special 100% Loan Guarantee by raising the maximum loan amount per business from the total sum of employee salary and rents for 18 months to 27 months.”
The current loan limit which is sitting at HK$6 million, will be raised to $9 million and the maximum repayment period will be stretched from eight to ten years.
Business Registration Fees Waiver
Registration fees can be a headache at the best of times, but during a pandemic, when restrictions are putting unbearable pressure on businesses, they can be the straw that breaks the camel’s back. Recognizing this, the government has offered to alleviate the pressure by wavering fees.
1.5 million businesses will benefit from a 2022-23 Business registration fees waiver. The government will bear the brunt of HK$3 billion loss in revenue.
Reducing Profits Tax
Many businesses have seen profit margins slim down considerably over the past two years. In an effort to support Hong Kong businesses hold on to the limited profit they are managing to generate, the government is taking a hit of approximately HK$1.2 billion in revenue by reducing profits tax for the year of assessment 2021/22. In a very welcome move, profit tax will be reduced by 100%, subject to a HK$10,000 ceiling.
Reducing Salaries Tax
Covid-19 brought with it many restrictions that put huge strain on businesses. Having to let go of loyal staff members is always a last resort and the Hong Kong government wants to reduce job losses as much as possible.
To help cushion the blow for SMEs, the government will take a further hit of HK$14.3 billion by allowing taxpayers a 100% reduction in salaries tax for the year of assessment 2021/22, subject to a HK$10,000 ceiling.
Relief for Businesses Directly and Indirectly Affected by the Pandemic
SME tenants of Hong Kong’s property developments will be allowed to defer payment for up to six months. Although this measure will be subject to the approval of the Legislative Council, if it is approved, property developers will be ordered to observe this grace period.
Restrictions for business that have been affected by the tightening of social distancing measures, especially those who are ordered to close early or completely will receive a double subsidy rate under the fifth-round AEF introduced on January 14. ‘Eligible premises licensees will receive a one-off subsidy ranging from $100,000 to $500,000 based on the premises’ licensed area.’ (infor.gov.hk)
This subsidy includes 3 categories:
a) This relates to businesses whose income is based on their premises. Examples would be guesthouses or hotels.
b) Local and cross-boundary passenger transport operators and practitioners will be eligible specific subsidies per vehicle and for fuel (details can be found here).
c) 75% Rental concessions for a period of six months for specific tenants.
For more information on the fifth round of anti-epidemic fund measures that total $3.57 billion and the specific industries that it relates to, please refer to the government website here: https://www.coronavirus.gov.hk/eng/anti-epidemic-fund-5.html.
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