Hong Kong's 2026 - 2027 Budget proposes enhancements to tax-incentive measures

• On 25 February 2026, Hong Kong's Financial Secretary announced the 2026/27 Hong Kong Budget, which proposes a new preferential policy package for tax, financial subsidies and nonfinancial assistance to attract specific business.
• The budget enhances the existing 8.25% corporate treasury centers by introducing additional incentives and flexibilities, aimed at attracting more businesses to establish their treasury operations in Hong Kong.
• Tax deductions for intellectual property-related transactions would be relaxed, including those for lump-sum licensing fees and research and development expenditures.
• A new 8.25% tax concession for eligible commodity traders in international maritime business will be introduced, along with expanded tax-exempt funds to include specific funds-of-one and broadened qualifying investment categories, which may facilitate asset and wealth management businesses operating in Hong Kong.

On 25 February 2026, the Financial Secretary of Hong Kong announced the 2026/27 Hong Kong Budget, which proposes various enhancements to tax-incentive regimes, including:

• Offering a preferential policy package that includes a 5% or 8.25% concession rate tax incentive, land grant arrangements and financial subsidies based on the merits of each case
• Enhancing the existing 8.25% tax concession for qualified corporate treasury centers by introducing additional tax incentives and flexibility in the regime, as well as a preapproval mechanism
• Relaxing the tax deduction for certain intellectual property (IP) from associates and lump-sum licensing fees for acquiring the rights to use IP; the tax deduction for research and development (R&D) expenditure is also under review for enhancement
• Introducing a new 8.25% tax concession for eligible commodity traders in international maritime businesses, potentially covering taxpayers that own the cargo and manage their fleet for cargo delivery; a tax deduction would be provided for ship acquisition costs for ship lessors under an operating lease, and deductibility rules of related finance cost would be relaxed
• Expanding the scope of eligible tax-exempted funds to cover specific funds-of-one (e.g., pension and endowment funds) and broadening qualifying investment categories to include digital assets, precious metals and specified commodities

Implications

Multinational enterprise (MNE) groups may follow the development of these proposed tax-incentive regimes and consider how they could facilitate investment and MNE group structural improvements.

For additional information concerning this Alert, please contact:

Ernst & Young Tax Services Limited, Hong Kong

• Wilson Cheng 
• Paul Ho, Financial Services 

Ernst & Young LLP (United States), Hong Kong Tax Desk, New York

• Charlotte Wong 

Ernst & Young LLP (United States), Asia Pacific Business Group, New York

• Jeremy Litton
• Kenny Zhang
• Dhara Sampat

For a full listing of contacts and email addresses, please click on the Tax News Update: Global Edition (GTNU) version of this Alert.

Published by NTD’s Tax Technical Knowledge Services group; Carolyn Wright, legal editor