Hong Kong Tax News Flash

Jun 2024, Issue 9

Bill on patent box tax incentive passed into law

On 26 June 2024, the Inland Revenue (Amendment) (Tax Concessions for Intellectual Property Income) Bill 2024 (Bill), as amended by way of a committee stage amendment (CSA), passed its third reading in the Legislative Council. The Bill aims to establish a patent box regime in Hong Kong, aligning with international trends to incentivise research and development (R&D) activities and intellectual property (IP) development. It is anticipated that the Bill will be gazetted as an amendment ordinance on 5 July 2024, which will take retrospective effect from the year of assessment 2023/24.

The CSA is technical in nature and seeks to clarify that the three-year transitional period, during which an eligible person with insufficient records is allowed to compute the R&D fraction using a three-year rolling average, commences from the first day of the eligible person’s basis period for the year of assessment 2023/24, as opposed to the previously stated date of 1 April 2023.

This news flash explains the CSA and discusses the key clarifications and responses to written submissions regarding the Bill as provided by the Hong Kong SAR government (the Government) during the legislative process, along with our observations.