Hong Kong enacts Patent Box Regime
07 August 2024
The government of the Hong Kong Special Administrative Region enacted the “Patent Box Regime,” also known as the Inland Revenue (Amendment) (Tax Concessions for Intellectual Property Income) Ordinance 2024, last July 5, 2024.
Under this regime, a taxpayer who satisfies the conditions may be able to have their qualified intellectual property income subject to profits tax at a reduced rate of 5 percent, as opposed to the usual profits rate of 16.5 percent, under this system. It is important to remember that the taxpayer would not be eligible for the two-tiered profits tax rates after applying the preferential tax rate under the patent box system.
This regime hopes to drive and advance IP commerce by encouraging the industrial, research and development (R&D), and creative sectors to produce and utilize intellectual property.
The introduction of the patent box tax incentive at the Financial Secretary’s 2023–24 Budget Speech marked the beginning of Hong Kong's adoption of the patent box system. The objective was to promote innovation and raise Hong Kong's standing as a hub for regional intellectual property trade.
In September 2023, the Hong Kong government held consultations over the incentive that was suggested after this announcement. The Inland Revenue (Amendment) (Tax Concessions for Intellectual Property Income) Bill 2024, which contains specific guidelines for the patent box tax incentive, was gazetted on March 28, 2024. On June 26, 2024, the bill presented to the Legislative Council in April was approved.
- Excel V. Dyquiangco
