COVID-19 Anti-Epidemic Fund: Tax Exemption on Government Subsidies 

June, 2020 -

In light of the COVID-19 public health crisis, the Government of Hong Kong has taken historic measures to restore confidence and liquidity to the economy. Such measures have taken the form of direct subsidies for both employers and employees, individuals and bodies corporate. A salient issue to consider was, however, whether such subsidies would be chargeable to tax. Under ordinary principles of revenue law, government subsidies are taxable to the extent that they are a substitute for trading profits or income from employment, or operate to supplement those income streams. That said, it would be circular and self-defeating for the Government to tax emergency subsidy payments.

Accordingly, the Exemption from Salaries Tax and Profits Tax (Anti-epidemic Fund) Order (Exemption Order) was enacted and came into force on 29 May 2020. The Exemption Order exempts, subject to certain conditions, individuals and businesses from the payment of salaries tax and profits tax in respect of financial assistance or relief provided under the Anti-epidemic Fund (AEF). The Exemption Order applies from the year of assessment 2019/20 and onwards.

Salaries tax

The Exemption Order exempts individuals (as employees) from the payment of salaries tax in respect of the following payments under AEF programmes:


Benefitted parties

Subsidies exempted from tax


Cleansing / security workers of private residential / composite / industrial / commercial buildings

A monthly hardship allowance of HK$1,000 each


Cleansing workers, toilet attendants and security workers engaged under Government and Hong Kong Housing Authority service contracts

A monthly allowance of HK$1,000 each


Registered construction workers

A subsidy of HK$1,500 or HK$1,000 each


Registered construction workers and registered inspectors under the Buildings Ordinance, and licensed plumbers under the Fire Service (Installation Contractors) Regulations

A subsidy of HK$7,500 each


Employed school bus drivers, school private light bus drivers, and
employed escorts/nannies.

A one-off relief grant of HK$10,000 each

A one-off relief grant of HK$10,000 per vehicle


Employed drivers of tour service coach

A one-off subsidy of HK$10,000 each


Employed cross-boundary goods vehicle drivers to conduct COVID-19 nucleic acid test in Hong Kong

A subsidy of HK$350


Employed instructors, coaches, trainers or operators of interests classes engaged by schools

A one-off grant of HK$7,500 each


Employed registered coaches under National Sports Associations and Sports Organisations who has proven coaching record in the past one year

A one-off grant of HK$7,500 each


Travel agents’ staff and active freelance tourist guides and tour escorts who are employees

A monthly subsidy of HK$5,000 each


Employed individuals with salesperson licence

Employed individuals with estate agent’s licence

A one-off cash subsidy of HK$2,510 each

A one-off cash subsidy of HK3,930 each


Employed Securities and Futures Commission licensed individuals

A cash subsidy of HK$2,000 each13

Individuals covered by the measures listed above are not required to report the payments under AEF programmes in their tax returns. Employers of these individuals are likewise not required to report the payments under AEF programmes listed above in their employers' returns for the years of assessment 2019/20 and onwards.

Profits tax

The Exemption Order exempts businesses from the payment of profits tax in respect of grants, subsidies or other financial assistance provided under AEF programmes. The exemption, however, does not apply to sums (other than sums paid on a matching arrangement) that are ordinary trading receipts arising in or derived from Hong Kong from a trade, profession or business carried on in Hong Kong, including:


Proceeds of sale of goods

  • Sale proceeds of masks received from the Government under the Local Mask Production Subsidy Scheme;

  • income received by technology companies for providing technology applications such as reusable masks; and

  • reimbursements received by oil companies in respect of price discounts on liquefied petroleum gas sold to taxis and public light buses.


Consideration for provision of services

  • Fees received by service providers, mediators and arbitrators for the provision of online dispute resolution services under the COVID-19 Online Dispute Resolution Scheme; and

  • administrative fees received by oil companies, MPF trustees, service contractors of the Government and the Hong Kong Housing Authority, and sports organisations for implementing the relevant AEF programmes.


Income from the letting, sub-letting or licensing of any premises or a portion thereof

  • Reimbursements received by landlords for offering "rental waivers" to their tenants


It is important to note that grants and subsidies not expressly exempted under the Exemption Order remain in principle taxable. Taken in the round, the Exemption Order is a welcome move by the Government to offer clarity and legal certainty on the tax consequences of the introduction of the AEF. It was in particular desirable that legislation, rather than mere, non-binding guidance, be enacted. That said, it remains unclear whether the Government will offer any further tax reductions or rebates to other affected sectors, or Hong Kong taxpayers generally.

Indeed, whilst the AEF is primarily aimed at rendering assistance to the hardest-hit sectors of the Hong Kong economy, the significant shortfall in tax revenues occasioned by the pandemic-induced economic downturn may paradoxically render the Hong Kong Inland Revenue Department (IRD) more aggressive in pursuing taxpayers outside of those vulnerable industries for profits tax and/or salaries tax. Taxpayers should be alert to sudden and unannounced changes in IRD assessing policy and practice and consult their advisors on how best to mitigate the risk of disputes arising and resolving any tax controversies that may arise.

How we can help

Efficient tax planning can assist you in weathering the economic fallout of the COVID-19 pandemic. We are experienced in both tax planning and tax dispute resolution, and can provide you with the advice and strategies you need to achieve your fiscal and financial objectives.


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