Hong Kong gazettes Bill to implement proposed ‘Patent Box’ tax incentive

The Hong Kong SAR government published the Inland Revenue (Amendment) (Tax Concessions for Intellectual Property Income) Bill 2024, on 28 March, which is to implement the ‘patent box’ tax incentive to encourage research and development (R&D) activities and promote intellectual property (IP) trading.

First announced in the Chief Executive’s 2023 Policy Address, the concessionary tax rate for the patent box tax incentive will be set at 5%, a substantial deduction from the standard 16.5% profits tax rate in Hong Kong.

To further encourage more filings under the local patent system, if the relevant eligible IP is a patent filed or granted outside Hong Kong then qualification for the patent box tax incentive will be subject to a further requirement for the applicant to have lodged an application for an original grant patent (OGP) or a short-term patent (STP) in Hong Kong in respect of the underlying invention.

A post-grant substantive examination request must also be filed for an STP. The relevant requirement will apply to those applications for registration of an eligible IP that are filed after the period of 24 months following the commencement date of the Bill.

“The increase in IP trading activities will be conducive to creating more business and employment opportunities for relevant professional services such as legal, valuation, management, consultation and agency services, thereby further developing and strengthening the IP ecosystem,” said a government spokesperson. “All these will help foster Hong Kong’s development into an international I&T centre and a regional IP trading centre as set out in the 14th Five-Year Plan.”

The Bill was introduced into the Legislative Council for first and second readings on 10 April.