Hong Kong Tax News Flash
February 2026, Issue 2
Consultation on expanding intellectual property tax deductions launched
Following the 2025/26 Budget speech, the HKSAR Government (Government) released a consultation paper on 30 January 2026 proposing amendments to the Inland Revenue Ordinance. The objective is to broaden profits tax deductions for capital expenditure on intellectual property (IP), with the dual aims of accelerating the growth of IP intensive industries and promoting IP trading in Hong Kong.
Specifically, the proposals seek to:
- permit deductions for covered IP acquired from associates, subject to conditions such as a main purpose test, compliance with transfer pricing rules (including for domestic transfers) and the requirement to obtain an independent valuation report if the cost of the IP is HK$3 million or more; and
- allow deductions for upfront licence fees for the right to use covered IP, to be spread over the term of the licence.
However, no changes will be made to the existing restriction which denies deductions for capital expenditure on acquiring IP that is used by a licensee outside Hong Kong.
The Government targets introducing a legislative bill in 2026, with consultation open until 31 March 2026.
This news flash summarises the proposed qualifying conditions set out in the consultation paper and our observations thereon.
Contact us
South China and Hong Kong Tax Leader, China M&A Tax Leader, PwC Hong Kong
Tel: +[852] 2289 5616
South Private Clients and Family Office Tax Leader, PwC Hong Kong
Tel: +[852] 2289 3816
