Gov't introduces 5% concessionary tax for IP development

The initiative aims to stimulate the commercialisation of IP.

The government has introduced the “Patent Box Regime,” offering a 5% concessionary tax rate on Hong Kong-sourced profits derived from the use or sale of eligible intellectual property (IP), subject to certain conditions. 

To qualify, taxpayers must develop the eligible IP themselves. If research and development (R&D) activities are partially outsourced, the profits eligible for the concessionary tax rate may be proportionally reduced.

The initiative aims to encourage enterprises to allocate more resources to R&D and stimulate the commercialisation of IP.

The nexus approach will be used to determine the portion of assessable profits from eligible IP that qualifies for the concessionary tax rate.

The regime covers patents, copyrighted software, and new plant variety rights.

However, the tax concession will be withdrawn under certain conditions, such as if the eligible patent is unconditionally revoked, the patent application is abandoned, refused, or withdrawn, or if the plant variety right is cancelled or its application lapses.