The Hong Kong Legislative Council passed the Taxation (Amendment) (Tax Creations, Preferential Deductions and Allowances) Bill 2026 on the third reading yesterday, implementing the recommendations of this year's budget, increasing the upper limit of a number of allowances and preferential deductions, and extending the claim period for additional allowances for newborn children. About 2.09 million taxpayers will benefit. the ordinance will be gazetted on may 22 and the sar government welcomes this.

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A Government spokesman said that the measures included increases in the basic allowance, married person allowance, single parent allowance, basic and additional child allowance, basic and additional dependent parent/grandparent allowance, maximum deduction for residential care expenses for the elderly, and extension of the claim period for additional allowance for new born children with effect from year of assessment 2026/27.

The spokesman pointed out that the measures also include a one-time reduction of 100% of salaries tax, personal assessment and profits tax for the year of assessment 2025/26. The upper limit of each case is 3000 yuan, which is expected to benefit about 2.12 million taxpayers and 170000 enterprises. About 24% of the taxpayers and 18% enterprises will not have to pay tax for the year of assessment 2025/26.

At the meeting, Guan Haoming, a member of the Election Committee, said that at present, the allowance for dependent parents and grandparents, as well as the deduction of residential care expenses for the elderly, there are still restrictions on "dependants must live in Hong Kong" and "homes must be set up in Hong Kong". It is hoped that the government can "remove the wall and relax" and extend the relevant tax allowances to nine cities in the mainland of the Greater Bay area.

The Secretary for Financial Services and the Treasury, Xu Zhengyu, responded that the relevant conditions were formulated to avoid possible abuse of the relevant allowances. He said that if taxpayers can apply for tax allowances for dependent parents or grandparents living outside Hong Kong, it involves verifying the relationship between the taxpayer and them, whether the taxpayer has supported the dependants, and whether the dependants are still alive, etc. These all need to be considered. The Government will therefore carefully review the system with a view to striking a balance between the policy objective of promoting taxpayer care for the elderly and tax protection.

In response to the proposal to introduce or increase tax allowances in different areas such as FDH expenditure, Xu Zhengyu said that when considering whether new tax allowances or tax deductions should be provided, it is important to ensure that a balance is struck between promoting relevant policy objectives and prudent financial management. The Government will continue to listen to views and see if there is room for other optimizations after the relevant policy bureaux have explored them.

The aforementioned legislation, having been approved, will be published in the Official Gazette on May 22. The one‑off tax relief, the increase in the tax exemption threshold, and the additional tax deductions will be reflected in taxpayers’ final tax liabilities for the 2025/26 tax year and in their tax liabilities for the 2026/27 tax year, respectively.