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Hong Kong to introduce a patent box tax incentive
On 1 September 2023, the Commerce and Economic Development Bureau (CEDB) issued a consultation paper on the “Introduction of a Patent Box Tax Incentive in Hong Kong” (the Paper).
The Paper proposes that eligible intellectual property (IP) income derived from eligible IP assets that are patents or patent-like will be taxed at a concessionary tax rate in Hong Kong. The exact concessionary rate to be offered is one of the features of the proposals that views are sought.
The extent of the eligible IP income that will be taxed at the concessionary rate is to be determined by the “nexus approach” as explained in the Action 5: 2015 Final Report of the Base Erosion and Profit Shifting Project released by the Organization of the Economic Co-operation and Development and the Group of Twenty (Action 5 Report).
Subject to the views collected in a one-month consultation period ending on 30 September 2023, the HKSAR Government (the government) will codify the proposals by way of amending the Inland Revenue Ordinance (IRO) by the first half of 2024.
Clients who have any views or thoughts on the proposals can contact their tax executives and we will convey the same to the CEDB in an appropriate manner.
This alert explains details of the proposals contained in the Paper.