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      Commentary

      On 25 February 2026, the Financial Secretary delivered the Hong Kong SAR Government’s (“the Government”) 2026-27 Budget (“the Budget”).  Benefiting from a buoyant stock market and accelerated economic growth, stamp duty and profits tax revenues were higher than expected, and the Government’s operating account is expected to record a surplus ahead of schedule in the 2025-26 fiscal year.

      Despite substantial expenditure on various capital projects and a resulting deficit in the capital account, the Financial Secretary forecasts that, after accounting for the issuance and repayment of government bonds, the fiscal position for the 2025-26 fiscal year has improved from the previously estimated budget deficit of HKD 67 billion to a budget surplus of HKD 2.9 billion—the first surplus recorded since 2021-22. Hong Kong’s fiscal reserves remain relatively healthy and are projected to stand at HKD 657.2 billion as at 31 March 2026.   

      International geopolitical and economic conditions continue to be complex and volatile, but Hong Kong’s economy remains resilient, with local economic growth exceeding expectations. We are pleased to see that the Budget proposes a number of measures to align with the National 15th Five-Year Plan, support Hong Kong’s next stage of development, and maintain Hong Kong’s attractiveness to global capital, these include:

      • Promoting the development of innovation and technology in Hong Kong, raising public awareness and adoption of artificial intelligence, and using technology to improve government services. At the same time, the Government plans to refine tax deductions for R&D activities to strengthen scientific collaboration between Hong Kong and the Greater Bay Area;
      • We are pleased that the Government has adopted our recommendations to enhance tax policies and rules to strengthen Hong Kong’s status as an international financial centre. This includes enhancing tax incentives for funds and family offices by broadening the definition of “fund” and recognising digital assets, precious metals, and certain commodities as eligible investments for tax concessions;
      • Beyond the traditional asset and wealth management industry, the Budget also proposes several measures to support emerging areas in the financial sector, including providing additional tax incentives and flexibility for corporate treasury centres and their associated companies, as well as various measures targeting the development of digital assets;
      • The Budget also increases investment in the Northern Metropolis to create jobs, attract investment, and promote high-quality, high value-added, and diversified economic development.

      In summary, we are pleased to see a range of measures to facilitate local economic transformation and sustainable development in the Budget. These measures are essential for maintaining Hong Kong’s competitiveness in the medium to long term and achieving sustainable growth.  

      We are pleased to see the Hong Kong SAR Government return to a fiscal surplus. This Budget sets out a clear vision for technology-driven growth, particularly through the active promotion of AI research into practical productivity gains through collaborative R&D. Supported by Hong Kong’s well-established financial system, greater use of AI will help businesses modernise and improve operational efficiency.

      John Timpany

      Head of Tax, Hong Kong SAR

      KPMG China

      The Budget’s measures to strengthen corporate treasury centres (CTCs) and international trading functions are strategically important. As a ‘springboard’ for Chinese Mainland enterprises expanding overseas and for multinational corporations entering the Asian market, Hong Kong’s role continues to grow. We welcome the Government’s enhancements to the tax regime for CTCs and the proposed reforms supporting Hong Kong as a regional intellectual property (IP) trading centre, which will attract more companies to establish operations in Hong Kong. The introduction of preferential policy packages to promote industries and investment, as well as the establishment of an Advisory Committee on Tax Policy will also support steady and sustainable economic development.

      Stanley Ho

      Tax Partner

      KPMG China

      Enhancing tax concessions for funds and family offices and expanding the definitions of eligible investment categories are fundamental to strengthening Hong Kong’s position as a leading wealth and asset management hub. We welcome the Government’s efforts to attract family offices and encourage greater asset diversification. At the same time, we suggest accelerating the relevant legislative process and granting stamp duty exemptions for asset transfers by high-net-worth individuals to their family-owned investment holding vehicles. These targeted measures would enhance Hong Kong’s competitiveness among ultra-high-net-worth individuals.

      Alice Leung

      Tax Partner

      KPMG China

      We support the Government’s continued development of the Northern Metropolis, which represents not only an important driver of Hong Kong’s future economic growth but also a strategic blueprint for industrial development. The Northern Metropolis will inject substantial new economic momentum locally and help shape a ‘South-North dual engine’, combining financial services with innovation and technology. By accelerating the development of the Northern Metropolis and adopting a diversified range of financing strategies, the Government is making more effective use of fiscal resources, safeguard the delivery of major projects, and providing a strong foundation for Hong Kong’s long-term prosperity.

      Chi Sum Li

      Head of Government & Public Sector, Hong Kong SAR

      KPMG China

      Budget highlights

      Inject HKD 500 million into Chinese Medicine Development Fund to support strategic research, training and international publicity 

      Preferential policy packages: including preferential arrangements on land grants; financial subsidies and tax incentives; preferential tax rates at half rate or 5%; introduce amendments to tax law this year

      Allocate HKD 100 million to attract international, large-scale exhibitions with new themes to Hong Kong

      Allocate HKD 28 million for the Hong Kong Technology and Innovation Support Centre to provide patent evaluation and implement a two-year Pilot Patent Valuation Support Scheme

      Allocate HKD 1.66 billion for the Hong Kong Tourism Board in 2026/27 to enhance Hong Kong’s tourist appeal

      Allocate HKD 10 billion to accelerate land development, provide infrastructure, establish venture funds, and develop the Hetao Co-operation Zone Hong Kong Park

      Develop San Tin Technopole by establishing a dedicated company and injecting HKD 10 billion as initial capital 

      Allocate HKD 10 billion to support the initial operation of Hung Shui Kiu Industry Park Company Limited, with operations to begin this year 

      Allocate a HKD 10 billion loan to support campus development in the Northern Metropolis University Town

      Launch pilot NM Urban-rural Integration Fund, totalling HKD 200 million to support rural tourism projects

      Allocate HKD 50 million to help public organisations, tech enterprises and tertiary institutions set up AI application courses, seminars and competitions 

      Allocate HKD 100 million to accelerate the Government’s digital transformation with leading technologies

      HKD 10 billion Innovation and Technology Industry-Oriented Fund to begin operation this year

      Allocate around  HKD 220 million to establish the first national manufacturing innovation centre outside the Mainland

      Inject HKD 200 million into the Branding, Upgrading, and Domestic Sales (BUD) Fund

      Raise funding ceiling for each Easy BUD application to HKD 150,000

      Grant 3,600 short-term internship placements in government departments and public bodies for tertiary students 

      Allocate HKD 65 million to provide additional government-funded training places for construction professionals

      Extra 1 month allowance of standard CSSA payments, Old Age Allowance, Old Age Living Allowance or Disability Allowance.  Similar arrangements for Working Family Allowance

      HKD 4 billion to support long-term housing arrangements for those affected by the Tai Po Fire

      Elderly Health Care Voucher Pilot Reward Scheme to be extended to end-2028. Participants who accumulate voucher spending of HKD 1,000 on specific primary healthcare services in the same year to receive HKD 500 voucher reward

      Number of Community Care Service Vouchers for the Elderly to increase to 16,000

      Number of Residential Care Service Vouchers for the Elderly to increase to 7,000

      Make available about 22,000 units from 9 residential sites under the 2026/27 Land Sale Programme, in addition to railway property developments, URA projects and private development and redevelopment projects

      0 general commercial sites will be put on sale in the coming year

      3 post-secondary student hostel sites to be made available for land sale, subject to market response

      Public housing – total supply will reach 196,000 units in the coming 5 years

      Private housing – completion of 17,000 units annually on average in the 5 years from 2026. The potential first-hand private residential unit supply for the next 3 to 4 years will be around 104,000 units

      Government revenue and expenditure (estimated), real GDP growth rate, underlying inflation rate, unemployment rate

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      Strive for high-quality development, innovation and technology, supporting SMEs and nurturing local talent, caring society, land and housing.

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      Tax summary

      Reduction in Profits Tax payable for 2025-2026

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      Reduction in Salaries Tax payable for 2025-2026

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      Rates waivers

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      Hong Kong Budget Summary
      2026-2027

      Contact us

      Lewis Lu
      Lewis Lu

      National Head of Tax

      KPMG China

      John Timpany
      John Timpany

      Head of Tax

      Hong Kong SAR

      KPMG China

      Stanley Ho
      Stanley Ho

      Tax Partner

      KPMG China

      Alice Leung
      Alice Leung

      Tax Partner

      KPMG China

      Chi Sum Li
      Chi Sum Li

      Head of Government & Public Sector

      Hong Kong SAR

      KPMG China

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      The information contained in the Hong Kong Budget Summary 2026-2027 is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavour to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation.

      Legislative proposals do not generally become law until their enactment and may be modified by the Legislative Council before enactment.

      It should be noted that the information is presented in summary form and readers are advised to seek professional advice before formulating business decisions.

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