Hong Kong Implemented the “Patent Box” Tax Incentive

Release Time：2024-07-18 09:37Author：Views：180

To encourage the industrial and R&D sectors, creative industries and IP users to engage in more IP trading activities, the Government of Hong Kong Special Administrative Region of China has implemented the “patent box” tax incentive. The tax rate for assessable profits from eligible IP income derived from eligible IPs (i.e. patents, plant variety rights and copyright subsisting in software) has been reduced from 16.5% to 5%.

The relevant regulation of the Inland Revenue (Amendment) (Tax Concessions for Intellectual Property Income) Ordinance 2024 was gazetted on 5 July, coming into operation from the same day.

The Amendment Ordinance mainly covers the following five key areas:

a) eligible IPs covered are patents, copyrighted software and new plant variety rights;

b) eligible IPs can be registered in different places around the world and their related profits sourced in Hong Kong can benefit from the "patent box" tax incentive;

c) the concessionary tax rate is set at 5 per cent, which is substantially lower than the existing normal profits tax rate in Hong Kong (i.e. 16.5 per cent);

d) eligible IPs must be developed by taxpayers themselves. If the R&D process involves acquisition of other IPs, or outsourcing part of the R&D activities, the amount of profits eligible for the concessionary tax rate may be reduced proportionally; and

e) enterprises need to obtain local registration for their inventions or new plant varieties in order to enjoy the "patent box" tax incentive. This requirement will only start to implement two years after the "patent box" tax incentive comes into operation.

Information resource:

l https://www.ip.gov.hk/en/ip-trading-centre/policy-initiatives/patent-box-tax-incentive/index.html

l https://www.info.gov.hk/gia/general/202407/05/P2024070500186.htm?fontSize=1

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