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Government proposes to allow tax deductions for (i) capital expenditures on purchasing intellectual property (IP) from associates and (ii) upfront license fees for the right to use IP
The above two proposals are contained in an industry consultation paper issued by the Government in January 2026 and engagement sessions with stakeholders were subsequently held in March 2026.
During the engagement sessions, the representatives from the Inland Revenue Department (IRD) explained in more details the rationale for the key tax provisions of the proposals, including the justification for the retention of section 16EC(4)(b) in the Inland Revenue Ordinance (IRO) based on the principle of tax symmetry.
A legislative bill for the above proposals is expected to be introduced within 2026. Clients who have any questions on the above can contact their tax executive.