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Hong Kong Budget 2026-27: Tax Reforms, Enterprise Incentives, and What Global Businesses Should Know
Key Takeaways:
- Financial Secretary Paul Chan delivered the Hong Kong Budget 2026-27 on 25 February 2026 under the theme “Driving High-quality, Inclusive Growth with Innovation and Finance.” The government recorded a consolidated fiscal surplus of HK$2.9 billion for 2025-26 the first surplus since 2021-22 turning around a previously forecast HK$67 billion deficit.
- Hong Kong’s economy grew 3.5% in 2025, marking the third consecutive year of expansion. The government projects GDP growth of 2.5%–3.5% for 2026, with an average of 3% per year from 2027 to 2030.
- OASES (Office for Attracting Strategic Enterprises) has attracted over 100 strategic enterprises to Hong Kong. Among them, 76 have established global or regional headquarters, generating approximately HK$60 billion in investment and 22,000 jobs.
- The budget introduces preferential tax rates of half-rate or 5% for targeted industries, alongside a 100% profits tax reduction for 2025-26 (capped at HK$3,000) double the previous year’s cap.
- Talent admission schemes have drawn over 270,000 professionals, including 100,000 through the Top Talent Pass Scheme. HK$50 million supports AI training courses for students, youth, and the public.
Why Does the Hong Kong Budget 2026-27 Matter for International Businesses?
The Hong Kong Budget 2026-27 arrives from a position of renewed fiscal strength. After years of post-pandemic deficits, the government delivered a consolidated surplus of HK$2.9 billion for 2025-26 a dramatic reversal from the originally projected HK$67 billion shortfall. Fiscal reserves stood at HK$657.2 billion as of 31 March 2026, and the 2026-27 outlook projects a further surplus of HK$22.1 billion, with reserves rising to HK$679.3 billion.
For businesses evaluating expansion into Asia-Pacific, this budget sends an unambiguous signal: Hong Kong’s public finances have stabilised, the economy has momentum, and the government will invest heavily to attract enterprises, capital, and talent.
At TopSource, we work with companies across 180+ countries to manage employer of record, payroll, and HR compliance obligations. Over the past two decades, we have helped hundreds of businesses set up operations in Hong Kong without the complexity of local entity incorporation. This budget reinforces why the city remains one of the most compelling launchpads for regional growth.
Hong Kong’s Economic Performance in 2025: The Numbers Behind the Budget
Understanding the economic foundation helps contextualise the budget’s ambitions.
Hong Kong’s economy grew 3.5% in 2025 the third consecutive year of expansion. Total goods exports climbed 12%, and service exports rose 6.3%. The labour market improved through the second half of the year, with seasonally adjusted unemployment falling to 3.8% in Q4. Underlying inflation remained subdued at 1.1%.
Financial markets delivered even stronger results. The Hang Seng Index gained 28% over the year. Average daily stock market turnover surged 90% to nearly HK$250 billion. IPO fundraising exceeded HK$280 billion, placing Hong Kong first globally for the year a remarkable rebound that underscores renewed investor confidence.
These figures demonstrate a city that has moved decisively past the post-pandemic adjustment period. The Hong Kong Budget 2026-27 builds on this momentum with a fiscal strategy designed to lock in competitive advantages and open new growth corridors.
2026-27 Economic Outlook: What Paul Chan Projects
Financial Secretary Paul Chan delivered a confident outlook anchored by improving domestic fundamentals and strategic alignment with Mainland China’s 15th Five-Year Plan.
He projects GDP growth of 2.5%–3.5% for 2026. From 2027 to 2030, growth averages approximately 3% per year in real terms, with underlying inflation holding at around 2% per annum. Headline inflation for 2026 sits at an expected 1.8%.
Chan emphasised Hong Kong’s alignment with the Greater Bay Area (GBA) development strategy and deepening participation in the Guangdong-Hong Kong-Macao economic corridor. For businesses expanding from Hong Kong, this signals that policy and positioning will continue to support the city as a platform for broader regional operations.
| Metric | 2025 Actual | 2026 Projection | 2027–2030 Average |
|---|---|---|---|
| GDP Growth | 3.5% | 2.5%–3.5% | ~3% |
| Underlying Inflation | 1.1% | — | ~2% |
| Headline Inflation | — | 1.8% | — |
| Fiscal Surplus | HK$2.9 billion | HK$22.1 billion (projected) | — |
| Fiscal Reserves | HK$657.2 billion | HK$679.3 billion (projected) | — |
The government also established a Tax Policy Advisory Committee, chaired by Paul Chan, to gather input from commercial, industrial, and professional sectors. This signals that tax competitiveness will remain central to Hong Kong’s economic strategy in the years ahead.
Stock Market and IPO Performance: Global Leadership Restored
The budget documents highlight several indicators of Hong Kong’s restored market confidence.
Average daily stock market turnover reached nearly HK$250 billion a 90% year-on-year jump. IPO fundraising exceeded HK$280 billion in 2025, placing Hong Kong as the world’s top IPO market for the year.
Hong Kong retains its position as Asia’s largest hedge fund hub and second-largest private equity centre after Mainland China. The asset and wealth management sector continues to expand, with the government now legislating to enhance tax concession regimes for funds, including funds-of-one, and extending qualifying investment definitions to cover digital assets, precious metals, and specified commodities.
For businesses considering expansion, these metrics translate into practical advantages: deep capital markets, a sophisticated financial services ecosystem, and a talent pool experienced in international finance and cross-border transactions.
Enterprise Attraction: OASES, InvestHK, and Preferential Incentive Packages
The Hong Kong Budget 2026-27 significantly expands the government’s enterprise attraction toolkit.
OASES: Over 100 Strategic Enterprises
The Office for Attracting Strategic Enterprises (OASES) has attracted over 100 strategic enterprises to Hong Kong. Among them, 51 have been publicly listed and 76 have established their global or regional headquarters in the city. These enterprises have collectively brought approximately HK$60 billion in investment and created around 22,000 jobs.
OASES now expands its focus into aerospace, with HKEX reviewing listing requirements for aerospace enterprises. The government also plans to attract enterprises in microelectronics, embodied AI, quantum technology, and new materials.
InvestHK: 560 Enterprises in 2025
InvestHK assisted 560 enterprises in establishing or expanding operations in Hong Kong during 2025 generating approximately HK$70 billion in investment and over 10,000 jobs. The number of companies in Hong Kong with Mainland or overseas parent companies and the number of start-ups both rose 11%, hitting new highs.
Preferential Policy Packages: Half-Rate or 5% Tax
The budget’s most significant enterprise measure introduces structured incentive packages for targeted industries. Companies will qualify based on factors such as sector, technology level, and scale of expected economic value and job creation.
Eligible companies can expect land grant arrangements, financial subsidies, and preferential tax rates either at half-rate or 5%. The government plans to introduce the relevant amendment bill within 2026.
Company Re-domiciliation
Building on last year’s legislative submission, the re-domiciliation mechanism will allow businesses registered elsewhere to transfer their corporate domicile to Hong Kong. For multinational companies evaluating their regional headquarters location, this removes a major structural barrier.
Why this matters for your business: Whether you operate in technology, financial services, life sciences, aerospace, or advanced manufacturing, OASES, InvestHK, and the new preferential tax packages offer direct pathways into Hong Kong with government-backed incentives. TopSource regularly supports companies through this process, handling employer of record, payroll, and compliance obligations while the business focuses on market entry strategy.
Tax Reforms and Business Incentives in the Hong Kong Budget 2026-27
The budget delivers a wide-ranging programme of tax enhancements the most ambitious in recent years.
Immediate Tax Relief
The government offers a 100% reduction in profits tax for the 2025-26 assessment year, capped at HK$3,000 double the HK$1,500 cap from the previous budget. An estimated 171,000 businesses will benefit.
Salaries tax and tax under personal assessment for 2025-26 receive the same treatment: a 100% reduction, capped at HK$3,000.
Rates concessions for domestic and non-domestic properties apply for the first two quarters of 2026-27, capped at HK$500 per rateable property per quarter.
Increased Personal Tax Allowances (from 2026-27)
Increased Personal Tax Allowances (from 2026-27)
| Allowance Type | Previous | New (2026-27) |
|---|---|---|
| Basic Allowance | HK$132,000 | HK$145,000 |
| Single Parent Allowance | HK$132,000 | HK$145,000 |
| Married Person’s Allowance | HK$264,000 | HK$290,000 |
| Child Allowance | HK$130,000 | HK$140,000 |
| Dependent Parent/Grandparent (60+) | HK$50,000 | HK$55,000 |
| Dependent Parent/Grandparent (55–59) | HK$25,000 | HK$27,500 |
Sector-Specific Tax Incentives
Intellectual Property (IP) Development: The government consults on tax deduction arrangements for capital expenditure incurred in purchasing IP or IP usage rights. An amendment bill follows within 2026.
Maritime Services: Enhanced tax concessions for the maritime industry, including a half-rate tax concession for eligible commodity traders, arrive through an amendment bill in H1 2026.
Asset and Wealth Management: Legislation in 2026 enhances fund tax regimes, extends concessions to funds-of-one, and treats digital assets, precious metals, and specified commodities as qualifying investments. A stamp duty waiver applies for REIT acquisitions of non-residential property meeting specified conditions.
Corporate Treasury Centres: Additional tax incentives, improved flexibility, and a pre-approval mechanism strengthen the CTC regime.
Gold Trading: Following a cooperation agreement with the Shanghai Gold Exchange, the government explores tax incentives for eligible institutions conducting gold trading and settlement in Hong Kong.
R&D Expenditure: The government commits to reviewing and enhancing tax arrangements for R&D spending.
Global Minimum Tax (BEPS 2.0)
Implementation of the OECD global minimum tax and Hong Kong minimum top-up tax for large multinational enterprise groups generates approximately HK$15 billion in additional tax revenue annually, starting from 2027-28. Companies with annual revenues exceeding €750 million should review group structures with qualified tax advisors.
Stamp Duty Changes
The intra-group transfer stamp duty relief under Section 45 of the Stamp Duty Ordinance expands: the scope of qualifying associated bodies corporate widens, and the minimum threshold drops from 90% to 75%. Changes apply retrospectively to instruments signed on or after 25 February 2026.
Residential property transactions valued above HK$100 million face a stamp duty increase from 4.25% to 6.5%, effective 26 February 2026.
SME and Local Enterprise Support
The SME Financing Guarantee Scheme continues with enhancements. The 80% Guarantee Product application window extends to 31 March 2028. The principal moratorium application period extends to mid-November 2026. The government raises the scheme’s total loan guarantee commitment by HK$20 billion.
The BUD Fund (Branding, Upgrading and Domestic Sales) receives HK$200 million in additional funding. The “Easy BUD” application ceiling increases from HK$100,000 to HK$150,000, with targeted support for enterprises pursuing AI-related projects.
The Hong Kong Export Credit Insurance Corporation launches “SME Protect Plus,” a pilot scheme offering more comprehensive risk protection for exporting SMEs.
Talent Attraction: Schemes, Performance, and Workforce Development
Hong Kong’s talent attraction engine has delivered measurable results, and the budget expands its reach.
Current Performance
Talent admission schemes have attracted over 270,000 professionals from around the world. The Top Talent Pass Scheme alone has drawn over 100,000 global elites to the city.
Workforce Upskilling and AI Training
The Employees Retraining Board rebrands as “Upskill Hong Kong,” launching skills-based training courses including AI applications.
The government allocates HK$50 million for public organisations, technology companies, and tertiary institutions to run AI application courses, seminars, and competitions for students, youth, and the public.
Universities funded by the University Grants Committee introduce 27 new undergraduate programmes in STEAM disciplines covering AI, creative industries, and data science over the 2025/26 to 2027/28 triennium.
Youth Employment and Education Investment
The government allocates a HK$10 billion loan to support campus development in the Northern Metropolis University Town and HK$60 million for the HYAB Funding Scheme for International Youth Exchange.
Practical implication: For businesses planning to hire in Hong Kong, the combination of expanded talent pipelines, AI upskilling programmes, and continued inflows through the Top Talent Pass Scheme creates a wider and more capable hiring pool. TopSource manages end-to-end employer of record services in Hong Kong employment contracts, payroll processing, MPF contributions, and statutory compliance so you can hire without establishing a local entity.
Innovation, Technology, and AI: The Budget’s Strategic Bets
The Hong Kong Budget 2026-27 positions AI and technology at the centre of the city’s next growth phase.
AI and Committee Leadership
Paul Chan established and chairs the Committee on AI+ and Industry Development Strategy, bringing together experts, academics, and industry players. The initial focus covers life and health technology as well as embodied AI.
I&T Infrastructure
The government commits HK$10 billion to the San Tin Technopole through a dedicated company. A separate HK$10 billion supports initial operations of Hung Shui Kiu Industry Park Company Limited, with operations beginning in 2026.
The HK$10 billion I&T Industry-Oriented Fund begins operation this year, providing direct funding for innovation and technology enterprises.
Approximately HK$220 million establishes Hong Kong’s first national manufacturing innovation centre outside the Mainland, located near the border to facilitate cross-boundary collaboration.
Crypto-Asset Reporting and Digital Assets
The government introduces the Crypto-Asset Reporting Framework (CARF) from 1 January 2027 and the amended Common Reporting Standard (CRS) from 1 January 2028 positioning Hong Kong as a regulated, transparent hub for digital asset activity.
Greater Bay Area Integration and International Trade
GBA Development
Hong Kong deepens its alignment with the Mainland’s 15th Five-Year Plan and the Guangdong-Hong Kong-Macao Greater Bay Area strategy.
The Cross-Boundary Wealth Management Connect Scheme expands its scope. The RMB Business Facility doubled to RMB 200 billion (HK$227.27 billion) earlier in February 2026, helping financial institutions and enterprises use RMB more widely for trade and cross-boundary business.
Northern Metropolis
The Northern Metropolis initiative advances with dedicated legislation to accelerate development. The NM Project Supervision Office facilitates large-scale private developments through strengthened coordination and time-limited approvals. These faster-track arrangements also apply to development projects elsewhere in Hong Kong.
Three major I&T parks in the Northern Metropolis now host nearly 500 enterprises and organisations, creating a growing innovation cluster.
GoGlobal Task Force
A new GoGlobal Task Force provides a one-stop service platform for Chinese Mainland companies expanding internationally through Hong Kong, reinforcing the city’s role as a gateway for outbound investment.
Expanding the Trade Network
Hong Kong expands its Comprehensive Avoidance of Double Taxation Agreement (CDTA) network currently 55 agreements adding Jordan, Maldives, Norway, and Rwanda. The government pursues further investment agreements with emerging markets in ASEAN, the Middle East, Central Asia, and North Africa.
Investment Migration: Capital Investment Entrant Scheme
The New Capital Investment Entrant Scheme (CIES), relaunched in 2024, continues to attract high-net-worth individuals investing HK$30 million in approved financial assets. Applicants maintaining their portfolio and residing continuously in Hong Kong for seven years may apply for permanent residency, including dependents.
The government announced potential enhancements, including alignment of qualifying investment lists under the CIES and family investment holding vehicle (FIHV) tax concession.
Infrastructure and Sustainability
Bond Issuance
The government issues approximately HK$160 billion in bonds during 2026-27, with repayments of about HK$59.7 billion, under the Government Sustainable Bond Programme and Infrastructure Bond Programme.
Green Economy
The government continues to accelerate EV infrastructure development and green transition initiatives, building on the HK$300 million fast-charger subsidy scheme launched in the previous budget year.
Government Efficiency
The civil service workforce reduction continues in line with the fiscal consolidation programme. Operating expenditure discipline strengthens, with the operating account projecting a surplus of approximately HK$11.9 billion for 2026-27.
Why Hong Kong Remains a Strategic Choice for Business Expansion
The Hong Kong Budget 2026-27 reinforces several structural advantages that make the city compelling for international businesses:
Strengthened fiscal position. A HK$2.9 billion surplus in 2025-26 the first since 2021-22 and projected reserves of HK$679.3 billion demonstrate fiscal stability.
Aggressive tax competitiveness. Preferential tax rates of half-rate or 5% for targeted industries, doubled profits tax relief caps, increased personal allowances, and sector-specific concessions for IP, maritime, asset management, and CTCs.
Dual market access. The “One Country, Two Systems” framework and GBA integration grant simultaneous access to global markets and Mainland China.
Global IPO leadership. HK$280 billion raised in 2025, placing Hong Kong first globally. Average daily turnover of nearly HK$250 billion reflects deep market liquidity.
Proven talent pipeline. Over 270,000 skilled professionals through talent schemes, 100,000 via the Top Talent Pass Scheme, and HK$50 million earmarked for AI workforce training.
Government-backed enterprise support. Over 100 enterprises through OASES, 560 through InvestHK in 2025 alone, and new preferential incentive packages for qualifying industries.
Innovation infrastructure. HK$10 billion each for San Tin Technopole, Hung Shui Kiu Industry Park, and the I&T Industry-Oriented Fund.
How TopSource Supports Your Hong Kong Expansion
At TopSource, we have spent over two decades helping companies expand into markets like Hong Kong without the cost and complexity of local entity setup.
Our employer of record (EOR) services allow you to hire, pay, and manage employees in Hong Kong fully compliant with local labour law, MPF contributions, and tax obligations while your team focuses on commercial growth.
Whether you want to test the market with a small team, transfer existing employees under a re-domiciliation strategy, or scale rapidly alongside an OASES-backed enterprise initiative, we provide the operational infrastructure to move quickly.
Our Hong Kong services cover:
- Employer of record and payroll processing
- Employment contract drafting compliant with Hong Kong labour ordinances
- Mandatory Provident Fund (MPF) administration
- Statutory benefits and leave management
- Tax filing and compliance reporting
- Work visa and talent scheme advisory support
Ready to explore expansion into Hong Kong? Contact our team today to discuss how the Hong Kong Budget 2026-27 incentives apply to your business and how we can get you operational in weeks, not months.
Mark is the Global Sales Director at Topsource Worldwide. He has been a pioneering figure in the global expansion space since 2013. He is the first salesperson to sell EOR services in Europe, a feat he accomplished in 2013.