Hong Kong Budget 2025-26 Implications for SMEs

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Hong Kong SMEs Budget 2025-26

Hong Kong Budget 2025-26 Implications for SMEs

The Hong Kong Budget 2025-26, delivered by Financial Secretary Paul Chan, arrives at a critical juncture for Small and Medium Enterprises (SMEs). With a focus on "fiscal consolidation" and "high-quality development," the budget balances necessary spending cuts with targeted support for digitalization, global expansion, and liquidity.

For SMEs, the message is clear: the government is pivoting from broad-based pandemic-style relief to strategic growth incentives.

1. Liquidity and Financing: The Lifeline for SMEs

Cash flow remains the top priority for local businesses. The 2025-26 Budget introduces several measures to ensure SMEs can access capital despite a cautious economic outlook.

Principal Moratorium Extension: The principal moratorium arrangement under the SME Financing Guarantee Scheme has been extended. This allows businesses to pay only interest for up to 12 months, providing immediate breathing room for those facing tight margins.
Dedicated Loan Portfolios: Participating banks in the Taskforce on SME Lending have committed over HK$390 billion in dedicated funds specifically for SME financing, ensuring that credit remains available for business transformation.
SME Financing Guarantee Scheme (SFGS): The application period for the 80% and 90% Guarantee Products is maintained to support those needing government-backed security to secure bank loans.

2. Digital Transformation and "E-commerce Express"

To counter rising operating costs and changing consumer habits, the budget places a heavy emphasis on technology.

E-commerce Express: The Hong Kong Trade Development Council (HKTDC) is launching this new program to provide SMEs with one-on-one consultations and technical support. Its primary goal is to help local brands penetrate the Mainland China e-commerce market.
Digital Transformation Support Pilot Programme (DTSPP): Funding continues for SMEs in the F&B and retail sectors to adopt digital payment systems, online promotion tools, and customer management solutions.
AI for Productivity: As the government trims the civil service by 10,000 posts, it is actively promoting AI adoption. SMEs are encouraged to follow suit, with various matching grants available for implementing "smart" production lines.

3. Tax Concessions and Cost Relief

While the government is facing a fiscal deficit, it has maintained several one-off relief measures, though some have been scaled back compared to previous years.

Measure	Detail
Profits Tax Reduction	100% reduction for YA 2024/25, capped at HK$1,500 (down from HK$3,000 last year).
Salaries Tax Reduction	100% reduction for YA 2024/25, capped at HK$1,500.
Rates Concessions	Up to HK$500 per quarter for non-domestic properties (Q1 2025/26).
Stamp Duty	Threshold for the HK100fixeddutyraisedtopropertiesworthupto∗∗HK4 million**.

4. Expanding Markets: BUD Fund and Global Reach

For SMEs looking to grow beyond Hong Kong, the budget reinforces the city's role as a "super-connector."

BUD Fund Injection: An additional HK$1.5 billion has been injected into the BUD Fund (Dedicated Fund on Branding, Upgrading and Domestic Sales). The cumulative funding ceiling remains at HK$7 million per enterprise, supporting expansion into the GBA, ASEAN, and Middle Eastern markets.
Research Matching Grant Scheme: A new round of HK$1.5 billion will be introduced to encourage industry-academia collaboration, perfect for tech-heavy SMEs and startups.

Summary Checklist for SME Owners

To maximize the benefits of the 2025-26 Budget, business owners should:

Review Loan Terms: Contact your bank to see if you qualify for the 12-month principal moratorium.
Apply for BUD Funding: If you plan to sell in Mainland China or overseas, the HK$7M ceiling is a significant resource.
Go Digital: Explore the "E-commerce Express" via HKTDC to modernize your sales funnel.
Monitor Talent Schemes: New enhancements to the Top Talent Pass and vocational visa schemes may make it easier to hire skilled technicians.

Would you like a step-by-step guide on how to apply for the BUD Fund or the E-commerce Express program?

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How Bestar Hong Kong can Help

Hong Kong Budget 2025-26 Implications for SMEs

As the Hong Kong Budget 2025-26 shifts from broad-based pandemic relief to strategic growth, SMEs face a more complex regulatory and financial landscape. Bestar Hong Kong serves as a vital partner for businesses navigating these changes, ensuring they don't just comply with new rules but actively capitalize on the available incentives.

Here is how Bestar’s expertise aligns with the 2025-26 Budget measures to drive your business forward.

1. Navigating New Tax Realities

While the 100% Profits Tax waiver for 2024/25 (capped at HK$1,500) provides modest relief, the real value lies in long-term tax efficiency. Bestar helps SMEs optimize their position through:

Two-Tiered Tax Strategy: We help group companies determine which entity should elect for the 8.25% tax rate on the first HK$2 million of profit to maximize savings.
IP & R&D Deductions: With the 2025 Budget reviewing deductions for Intellectual Property (IP), Bestar assists in claiming 200%–300% "super deductions" for R&D and licensing fees.
Offshore Tax Exemption: For businesses operating internationally, we provide documentation for "Economic Substance" to maintain tax-free status on offshore income under the refined FSIE regime.

2. Maximizing Government Funding (BUD & TVP)

The budget's HK$1.5 billion injection into the BUD Fund and the new E-commerce Express are massive opportunities. Bestar simplifies the application process:

BUD Fund Advisory: We guide you through the process of securing up to HK$7 million for branding and expansion into Mainland China, ASEAN, and Middle Eastern markets.
Technology Voucher (TVP) Support: As the government pushes for AI and smart production, we help you apply for funding to upgrade your digital infrastructure and automate workflows.
Success-Driven Compliance: We ensure your project proposals and financial reports meet the stringent audit requirements of the HKPC and Innovation and Technology Bureau.

3. Financial Liquidity & Loan Support

The extension of the SME Financing Guarantee Scheme (SFGS) and the HK$390 billion in dedicated bank funds are only useful if you can secure the credit. Bestar assists by:

Audit-Ready Financials: Banks require rigorous, up-to-date audits for loan approvals. We ensure your accounts meet HKFRS standards to speed up credit assessments.
Principal Moratorium Applications: We advise on the 12-month "interest-only" payment arrangements to help you preserve cash flow during market transitions.

4. Simplified SME Compliance (SME-FRS)

Under the Companies Ordinance, many SMEs qualify for Reporting Exemptions. Bestar helps you determine if you meet the HK$100 million revenue/asset threshold to:

Adopt Simplified Accounting Standards (SME-FRS).
Reduce administrative overhead and audit complexity.
Focus resources on business growth rather than excessive paperwork.

Why Choose Bestar Hong Kong?

With over 20 years of experience, Bestar is a premier registered CPA firm that goes beyond basic bookkeeping. We act as your strategic CFO, aligning your financial health with the specific opportunities created by the latest Hong Kong Budget.

Service	Benefit to Your SME
Statutory Audit	Ensures IRD compliance and bank-readiness for SFGS loans.
Tax Advisory	Minimizes liabilities through R&D deductions and FSIE claims.
Corporate Secretarial	Keeps your company in good standing with the Companies Registry.
Funding Consultancy	Unlocks government grants like BUD, TVP, and EMF.