Implementation of the “Patent Box” Tax Concession

 

To promote IP trading encompassing creation, protection, management and exploitation of IPs and support innovation and technology (I&T) development, the Government implemented the “Patent Box” Tax Concession recently. It encourages the I&T sector and enterprises to invest in research and development activities, protect the outputs by IP registration as needed and actively commercialise such IPs.             

 

The Inland Revenue (Amendment) (Tax Concessions for Intellectual Property Income) Ordinance 2024 commenced operation on 5 July 2024. Starting from the year of assessment 2023/24, the tax rate for profits derived from eligible IPs, viz. patents, copyright subsisting in software and plant variety rights, has been substantially reduced from the pre-existing 16.5% to 5%, subject to conditions. Taxable profits derived from exploitation of eligible IPs in or outside Hong Kong stand to benefit.

 

A prerequisite to enjoying the tax concession is seeking local IP registration of the underlying innovation in terms of, for example, a standard patent by original grant. But this condition will only kick in after a two years’ grace period during which rightsholders may review and adjust their IP filing strategies. 

 

For details of the “Patent Box” Tax Concession, please visit the webpage of the Inland Revenue Department: https://www.ird.gov.hk/eng/tax/bus_patentbox.htm.