Chief Executive Carrie Lam Cheng Yuet-ngor announced a profits tax cut in her maiden policy address at the Legislative Council on Wednesday.
Lam proposed halving the profits tax from 16.5 percent to 8.25 percent for the first HK$2 million earned by all companies.
The new policy will benefit particularly small and medium-sized enterprises.
A 300 percent tax deduction will be given to all companies for the first HK$2 million spent on research and development, with a 200 percent deduction applied to any further spending.
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