Hong Kong Tax Alert: 10 October 2013

Commentary

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Given the IRD’s narrow interpretation of section 16B(1) explained above, the scope for a tax deduction for expenditure incurred on sub-contracted out R&D activities appears to be very limited. 

With a view to enhancing the deductibility of relevant expenditure, clients who have incurred or will incur significant costs in respect of sub-contracted out R&D activities should review their tax position and consider the scope for amending their R&D arrangements where these involve group companies.

The issues involved are complicated and clients should seek professional tax advice where necessary.