The Financial Secretary of the Hong Kong SAR Government, the Honourable Mr. Paul Chan Mo-po, delivered the 2026-27 Budget Speech in the Legislative Council on 25 February 2026.

The 2026-27 Budget reaffirms Hong Kong’s commitment to a simple, low rate tax regime, while using targeted measures to deliver short term relief, sharpen sectoral competitiveness and align with evolving international standards. Stronger than expected revenues from stamp duties and profits tax, together with disciplined spending under the Fiscal Consolidation Programme, have allowed the Government to return the Operating Account to surplus ahead of schedule without broad based rate increases.

To keep you informed about the latest changes to Hong Kong’s tax system and help you make well informed business decisions, we, PKF Hong Kong, have prepared a summary of the key updates, including salaries tax, profits tax and stamp duty. Please click on the button below to access and download the summary.

For further enquiries, please feel free to contact us at henryfung@pkf-hk.com.

 

Our insights

From a tax perspective, this is an “evolution not revolution” Budget. The main themes are: (i) one off relief for individuals and small and medium-sized enterprises (“SMEs”); (ii) permanent but modest enhancements to personal allowances; (iii) selective use of stamp duty and sector specific concessions to influence behaviour; and (iv) continued implementation of OECD Pillar Two and new transparency rules for digital assets. A number of signaling moves on R&D, IP and corporate treasury centres (“CTCs”) also point to further tax changes over the next one to two years.

 

1. One-off tax reductions and personal tax relief

For the year of assessment 2025-26, the Government proposes: -

• a 100% reduction of salaries tax and tax under personal assessment, capped at HK$3,000 per case; and
• a 100% reduction of profits tax, also capped at HK$3,000 per case.

These measures will benefit around 2.12 million individual taxpayers and 171,000 businesses. They provide immediate cash flow relief, but do not alter underlying rates.

More structurally, from 2026-27 the salaries tax system will become slightly more generous, especially for families and those supporting elderly relatives: -

• the basic and single parent allowances will rise from HK$132,000 to HK$145,000, and the married person’s allowance from HK$264,000 to HK$290,000;
• child allowance (basic and additional) will increase from HK$130,000 to HK$140,000 per child; and
• the allowances for dependent parents/grandparents and the deduction cap for elderly residential care expenses will both be increased (the latter from HK$100,000 to HK$110,000).

For many middle income households, this will translate into a modest but permanent reduction in the effective tax burden.

 

2. Property related measures: rates and stamp duty

Rates remain an important relief channel. For the first two quarters of 2026-27, both domestic and non domestic properties will receive a rates concession capped at HK$500 per quarter per tenement, reducing government revenue by about HK$3.5 billion. This continues the practice of using the rating system, rather than income or profits tax, to deliver broad based support.

At the upper end of the residential market, the Budget tightens stamp duty. For transactions with consideration exceeding HK$100 million, ad valorem stamp duty will increase from 4.25% to 6.5%, a change expected to affect only about 0.3% of residential deals but raise roughly HK$1 billion per annum. This clearly reflects the “affordable users pay” principle.

In contrast, corporate reorganizations are made easier. The Government will relax the criteria for intra group stamp duty relief by expanding the scope of “associated body corporates”, with the relevant amendment bill to be introduced this year. Once enacted, the new rules will apply retrospectively to instruments signed on or after Budget day. This should reduce frictional costs and facilitate internal asset transfers and restructuring.

 

3. Funds, family offices and sector specific incentives

The Budget contains several important signals for the financial and real economy sectors.

For funds and family offices, the Government will: -

• expand the statutory definition of a “fund” to cover specific funds of one, particularly relevant for single family structures; and
• broaden the list of qualifying investments for fund tax concessions to include digital assets, precious metals and specified commodities.

An amendment bill is expected in the first half of 2026, with the intention that the changes apply from the 2025-26 year of assessment.

For CTCs, a package of enhancements will be announced in mid 2026. These are expected to include additional tax incentives and flexibility for CTCs and their associated companies, as well as a pre approval mechanism to provide greater upfront certainty. Groups considering centralizing regional treasury and financing activities in Hong Kong should monitor these developments closely.

The Government also proposes to: -

• further promote the real estate investment trust (“REIT”) market, including future legislative changes to facilitate REIT privatizations/restructurings and to exempt stamp duty on transfers of non residential properties into listing REITs;
• enhance tax concessions for the maritime services industry and introduce a half rate profits tax concession for eligible commodities traders; and
• explore tax incentives for institutions undertaking gold trading and settlement in Hong Kong, following the establishment of a central gold clearing system.

These measures, while still subject to detailed legislation, underscore the policy direction towards “Finance+” – using the tax system to support targeted financial and logistics activities.

 

4. Innovation, R&D and IP related tax policy

In support of Hong Kong’s innovation and technology agenda, the Government will review and enhance tax arrangements for R&D expenditures, particularly in the context of closer integration with the Greater Bay Area and the development of new industrialization. No specific adjustments to the existing 200%/300% R&D super deduction regime have yet been announced, but further refinements are clearly on the table.

In parallel, the Government is consulting on introducing tax deductions for capital expenditure on acquiring intellectual property or rights to use IP. This would support Hong Kong’s ambition to be a regional IP trading and financing centre, and would be of particular interest to IP rich and technology driven groups.

 

5. International tax and transparency: Pillar Two and crypto assets

On the international front, Hong Kong is moving ahead with the OECD Pillar Two agenda. Amendments to the Inland Revenue Ordinance (“IRO”) to implement the global minimum tax and the Hong Kong minimum top up tax for MNE groups with annual consolidated revenue of at least EUR 750 million are in place, with additional annual revenue of around HK$15 billion expected from 2027-28. Affected groups will need to reassess effective tax rates, incentive interactions and profit allocation models in light of these rules.

Separately, the Government will amend the IRO to implement the Crypto Asset Reporting Framework and the updated Common Reporting Standard over the next two years. An amendment bill is targeted for the first half of 2026. Financial institutions, virtual asset service providers and custodians should anticipate widened reporting obligations on crypto asset holdings and transactions, and may wish to commence impact assessments early.

 

6. Strategic direction

Finally, the forthcoming Advisory Committee on Tax Policy, chaired by the Financial Secretary, together with the continued expansion of the Comprehensive Avoidance of Double Taxation Agreement (“CDTA”) network (now 55 agreements), suggests that Hong Kong’s tax system will become more actively managed as a tool to enhance competitiveness. While headline rates remain unchanged, the regime is becoming more nuanced and sector specific, with increasing interaction between local incentives and global standards.

Once the detailed amendment bills are released, taxpayers – particularly large groups, funds and IP heavy businesses – may need to carefully assess how these measures affect their structures, effective tax rates and Hong Kong’s relative attractiveness within their global footprint.

 

7. What this means for you

Although no major rate changes were announced, the combined effect of the measures is material for many taxpayers: -

For corporates and multinational groups

• Large MNEs should now treat Pillar Two/Hong Kong minimum top up tax as a live issue, not a future concept. Group structures, incentive usage, IP and R&D arrangements, and treasury locations may all warrant review.
• Groups contemplating reorganizations or asset rationalization can potentially benefit from the relaxed intra group stamp duty relief, subject to the final legislative wording.
• Businesses in shipping, commodities, logistics, fintech, gold trading and new industrial sectors should actively monitor the sector specific concessions and consider whether functions can be relocated or expanded in Hong Kong.

For funds, asset managers and family offices

• The planned changes to the fund exemption regime (funds of one; broadened qualifying investments) will be important for single family structures and alternative strategies involving digital assets and commodities.
• The evolving REIT, gold and digital asset frameworks, together with expanding CDTA coverage, point to more structuring options but also more complexity; early planning will help avoid adverse tax or regulatory outcomes.

For individuals and SMEs

• The one off reductions (up to HK$3,000) and rates concessions provide near term cash flow support, particularly for smaller businesses and salary earners.
• From 2026-27, the higher personal allowances and elderly related deductions permanently lower the tax burden for many families, and may justify revisiting whether to elect for personal assessment in some cases.

 

Next steps

The Budget sets the policy direction, but many of the key measures will only be crystallized when the amendment bills and detailed guidance are issued over the coming months. In the meantime, taxpayers may wish to: -

• identify exposures and opportunities arising from Pillar Two, fund tax changes, intra group stamp duty relief and sector specific concessions;
• consider whether forthcoming personal allowance increases or rates concessions affect their personal tax and spending planning; and
• start gathering the data and documentation that will likely be required under the new crypto asset reporting and other transparency regimes.

We will continue to monitor legislative developments and will be delighted to assist you in assessing the impact of these measures on your group, fund structures or personal tax position once more details become available.