2026-27 Hong Kong Budget: Deloitte unveils recommendations to boost capital markets, wealth management, Northern Metropolis and innovation & technology

Deloitte China today unveils its proposals for the 2026-27 Hong Kong Budget, outlining tax incentives, supportive measures, and policy initiatives across capital markets, wealth management, the Northern Metropolis, and innovation & technology (I&T) to attract more enterprises, capital, innovation, and talent to Hong Kong, reinforcing the city's strengths as a "super connector" and "super value-adder" and driving high-quality economic growth.

Deloitte China Southern Region Managing Partner Edward Au says, "Hong Kong's economy and capital markets are showing robust recovery, with GDP growth reaching 3.2% last year and the city leading the world in IPO fundraising. Meanwhile, momentum in I&T and the Northern Metropolis is fueling fresh impetus for economic diversification. With the launch of China's 15th Five-Year Plan, the Central Government's support is enabling Hong Kong to better integrate into and serve the national development strategy, while cementing its role as an international financial centre and innovation hub, underpinned by strong support of the motherland and global connectivity. To succeed in a shifting global landscape, Hong Kong must advance its capital markets, wealth management, Northern Metropolis development and I&T, while aligning with national strategies to drive new growth."

Deloitte China Hong Kong Tax & Business Advisory Leader Anthony Lau says, "Deloitte China's Hong Kong Budget Team expects the HKSAR Government to post a HKD0.5 billion surplus in fiscal year 2025-26 despite weak land sales, supported by better-than-expected stamp duty revenue from stock trading, stronger operating income and improved investment returns. This represents a significant turnaround from the HKD67 billion shortfall projected by the Financial Secretary last February, highlighting a more resilient public finance position. Fiscal reserves are projected to reach HKD654.8 billion by the end of March 2026, equivalent to around 10 months of government expenditure."

Strengthening Capital Markets and Wealth Management

To reinforce Hong Kong's position as an international financial centre, Deloitte recommends targeted measures to boost stock market liquidity, support wealth management, and promote the development of corporate treasury centres (CTC). By attracting more international companies to list in Hong Kong and encouraging high-net-worth (HNW) individuals and asset managers to establish operations locally, the city can foster a more competitive financial ecosystem.

Edward Au says, "The strong performance of Hong Kong's stock market has not only generated solid government revenue, but also underscored the confidence of businesses and investors in the city's capital markets. Looking ahead, Hong Kong should focus on strengthening its appeal as a preferred listing destination for international companies.

The key to attracting international issuers is not solely about listing requirements or one-off fundraising arrangements, but also the post-listing ecosystem – including liquidity depth, valuation support, and investor engagement. To this end, policymakers could consider enhancements at the institutional and market infrastructure level, such as introducing safe-harbour arrangements for dual-listed companies, exploring a specific stamp duty adjustment mechanism to enhance liquidity, positioning secondary listings as an economically attractive option, refining market segmentation and research coverage for international issuers, and improving post-listing liquidity and price discovery.

We also recommend establishing a dedicated international issuer interface and market communication platform, integrated with Hong Kong’s regional headquarters strategy, to create a 'Headquarters + Listing' proposition. This would help Hong Kong move beyond being just a listing venue and position itself as Asia's capital and investment hub for international and Global South enterprises."

Anthony Lau says, "To attract more HNW individuals and asset managers to Hong Kong, we recommend offering a profits tax rate of 8.25% to fund managers who meet the necessary scale and substance requirements. Meanwhile, single family offices with sufficient local operations and asset size would also be eligible for the same preferential rate. In addition, the Government could consider extending the tax exemption for family-owned investment holding vehicles to cover assets such as art and investment-linked insurance policies, and applying a multiplier to local investments when calculating assets under management to stimulate capital inflows."

Deloitte China Hong Kong Budget Team Lead Partner Polly Wan says, "With more enterprises going global, enhancing tax incentives for CTCs will help attract companies to leverage Hong Kong as a launchpad for global growth. Specifically, the Government could shift the deductibility condition of CTC interest expenses from the 'subject to tax' rule to a headline tax rate, and provide unilateral tax credits for CTC income. We also recommend introducing a 15% preferential tax rate option for companies subject to Pillar Two rules, alongside the existing 8.25% rate, to help reduce compliance costs."

Northern Metropolis and I&T as New Growth Engines

For Northern Metropolis development, Deloitte proposes three tax and investment incentives to attract enterprises and foster industry clusters: (1) investment tax credits based on eligible expenditures, with start-ups and SMEs able to opt for cash subsidies to support early-stage establishment, particularly in life sciences, AI and robotics; (2) a 150% tax deduction for bond interest and professional fees incurred in connection with Northern Metropolis development; and (3) a dedicated cross-border tax framework for the Hetao Shenzhen–Hong Kong Innovation and Technology Cooperation Zone to prevent additional tax burdens on cross-border I&T activities.

To increase Hong Kong's attractiveness as a regional hub for R&D and IP ownership, Deloitte recommends a range of reforms to current tax legislation, such as relaxing deductibility for outsourced R&D, clarifying the scope of super deductions to cover applied research, streamlining the application process for designated local research institutions, and easing restrictions on one-off license fee deductions. By supporting the commercialization of innovation and encouraging MNCs to establish R&D and operations centres in Hong Kong, these proposals can help further expand the city's global I&T footprint.

Moreover, the Government could consider refining the patent box regime by extending incentives to Greater Bay Area R&D expenditure and broadening the definition of "embedded IP income" to encourage process innovation.

Supporting Livelihoods

Deloitte recommends a one-off tax waiver of FY2025-26 salaries tax and personal assessment, capped at HKD5,000. Given that personal allowances have not been adjusted for many years amid continued inflation, Deloitte proposes increasing personal allowances by 10% from FY2026-27 to ease the public's financial burden.

Click here for the full set of recommendations (available in Chinese only).