Hong Kong is lowering property taxes and relaxing visa requirements for non-permanent residents to draw in international talent and resurrect the city’s reputation as a global financial center. The new measures address the current workforce shortage while simultaneously developing the local talent base and closing the skills gap.
On October 19, 2022, Hong Kong Chief Executive John Lee unveiled several policy proposals, including tax breaks and looser visa rules, to attract foreign talents to the Special Administrative Region (SAR) and support its economic recovery.
According to government data released in August 2022, Hong Kong registered a record 1.6 percent fall in population year-on-year, with 113,200 people leaving the city. Moreover, due to the impact of COVID-19, employment rates have dramatically decreased since 2020. Younger generations have been hit particularly hard by this trend. The number of workers between the age of 20 and 39 fell significantly in the second quarter of 2022, and the number of those in the age group between 20 and 24 was down 14.98 percent.
The new measures designed by the government intend to check the ‘brain drain’ that has affected Hong Kong’s labor market and jeopardized its economic recovery.
Below we cover the latest policy proposals for attracting foreign talents to Hong Kong and discuss the impact the new policy may have on the city.
Key policy highlights at a glance
During his policy address, Chief Executive John Lee discussed several policies to attract business, investment, and talent to Hong Kong. Below is a summary of the various schemes:
- Top Talent Pass Scheme: A new Top Talent Pass Scheme will be implemented for individuals who have been earning at least HK$ 2.5 million (US$318,472) a year, or those who have graduated from one of the world’s top 100 with at least three years of work experience.
- Office for Attracting Strategic Enterprises: An Office for Attracting Strategic Enterprises, headed by the Financial Secretary, will be established with the goal of attracting strategic businesses from both Mainland China and abroad, with a particular emphasis on sectors with a strategic significance, such as life and health technology, artificial intelligence and data science, advanced manufacturing, and new energy technology.
- Strengthen the connection between universities and businesses: The responsibilities of Mainland offices and overseas economic and trade offices will be increased in order to promote the programs of the Hong Kong Special Administrative Region to businesses and professionals and to engage with the top 100 institutions in the world. A HK$30 billion (US$2.83 billion) fund will be established to invite companies to establish operations in Hong Kong SAR and invest there.
- Relaxed immigration plans: The General Employment Policy Scheme (GEP) and the Admission Scheme for Mainland Talents and Professionals (ASMTP) will be relaxed by removing the need for labor market testing for a select group of jobs where there is a recognized shortage of skilled workers or where the proposed annual salary is HK$2.5 million (US$318,000) or more.
- Suspension of the Quality Migrant Admission Scheme: The annual quota of the Quality Migrant Admission Scheme – currently set at 4,000 units – will be suspended for the next two years, to allow the entry of more talents. Subsequently, the Talent List will be updated to reflect current market demands and shortages in relevant professional fields.
- Expanded IANG: Under the new policy plan, the Immigration Arrangements for Non-local Graduates (IANG) will extend its stay period from one to two years, and its scope will grow to include graduates from the Guangdong-Hong Kong-Macao Greater Bay Area (GBA) campus of a Hong Kong SAR university.
- TechTas Scheme: The Technology Talent Admission Scheme (TechTas) will be further improved to include emerging technology areas into its list, and to lengthen the quota validity period to two years.
- Other stay permits and visa renewal arrangements: The government announced that more provisions would be taken to modify the stay arrangements for several other talent admission schemes and streamline the visa renewal process.
Attracting (young) foreign talents
One of Hong Kong’s existing visa programs, the Quality Migrant Admission Scheme, enables qualified workers to stay in the city for 24 months without taking down a job. However, there are several requirements that applicants must meet in addition to passing point-based exams, and as of 2021, there is an annual quota restriction of 4,000. In previous years, the quota was even lower. With the roll-out of new policy measures, the quota will be suspended – for a specified period.
A two-year pass for exploring opportunities in Hong Kong will be available to those who make HK$25 million (US$318,000) or more per year or who are graduates of one of the top 100 colleges in the world and have three years of job experience in the previous five years.
The suggested 18-month visa could be similar to the strategy employed in the UK – which also identified regions with a talent shortage and implemented a work visa program for “High Potential Individuals.”
Tax breaks and house purchase
The government announced its intention to enhance the tax breaks on offer to investors and introduce new tax relief measures as part of the new measures to attract foreign skilled workers.
To support the asset and wealth management industry, by the end of 2022, Hong Kong will introduce a bill to provide tax concessions for qualified family offices. This move is anticipated to attract a target of at least 200 family offices to establish or expand their operations in Hong Kong by the end of 2025.
In his policy address, Lee added that the government will improve the favorable tax framework for aircraft leasing and undertake tax incentive measures to entice more high-value-added maritime firms to establish a presence in Hong Kong. He outlined plans for the Office for Attracting Strategic Enterprises (OASES), as the organization will oversee interacting with “high-potential and strategic enterprises from across the globe,” particularly those involved in financial technology (Fintech), advanced manufacturing, and new energy technology, as well as life and health technology, artificial intelligence, and data science. OASES will be given the authority to formulate attractive plans covering aspects such as land, tax, and financing that are applicable exclusively to targeted businesses, and provide them with tailored plans to facilitate the setting up of their operations in Hong Kong.
Finally, to attract the relocation of skilled foreign nationals, starting October 19, 2022, those who arrive in Hong Kong under talent attraction programs and purchase a home will be eligible to request a refund of the buyer’s stamp duty. Currently, foreign residents must pay 30 percent in stamp duty when purchasing a home, which is twice what locals who are not first-time purchasers must pay. The extra stamp duty will be returned to foreign homebuyers under a scheme being developed provided they are granted permanent residency, a status they can request after living in the city for seven years.
Looking ahead: challenges and trends
The Chief Executive’s policy address come as Hong Kong strives to revitalize its economy and global reputation. The city recently lost its place as Asia’s top financial hub to Singapore in the Global Financial Centres Index.
As there are not enough local graduates to match demand and the market for young talent has long been unsaturated, these measures can help ease the labor shortage and revive the city’s international competitiveness.
Moreover, the policy plan pledges to transform Hong Kong into a smart city, with the goal of bringing all governmental services online within two years. This may extend to the increased digitization of visa application procedures.
As the government wants to draw “at least 100 innovation and technology businesses” by 2027, business representatives have already expressed satisfaction with the announcement of such programs, hoping that such measures will further extend beyond the field of technology sectors.
Notwithstanding the challenges in attracting foreign talents, the new measures will make it considerably easier for businesses and investors to relocate to Hong Kong. Indeed, in the short-term, high-skilled talents in specific fields may be benefiting more from such policies. However, in the long run, these may need to extend to other sectors as well.
Overall, the new policy plan is a welcome step towards returning the city to its spot as a worldwide international hub and business center
China Briefing is written and produced by Dezan Shira & Associates. The practice assists foreign investors into China and has done so since 1992 through offices in Beijing, Tianjin, Dalian, Qingdao, Shanghai, Hangzhou, Ningbo, Suzhou, Guangzhou, Dongguan, Zhongshan, Shenzhen, and Hong Kong. Please contact the firm for assistance in China at [email protected].
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