Hong Kong: tax deductions for IP

IP tax changes in Hong Kong: the Inland Revenue (Amendment) (No. 2) Bill 2011, published on 25 February 2011, proposes

  • providing tax deduction for capital expenditure incurred on the purchase of a copyright, registered design and registered trade mark;
  • modifying existing provisions for deduction of capital expenditure on the purchase of patent rights and rights to any know-how, include legal and valuation fees in the deductible expenditure; and
  • removing the requirement for “use in Hong Kong” condition (currently, to get a tax deduction on patent rights/know-how, the IP has to be used in Hong Kong).
  • Hong Kong already allows a 100% tax deduction for capital expenditure on the purchase of patents and industrial know-how (ie: a full deduction against tax in the year of acquisition).  The proposed deductions for copyright, registered designs and trademarks would not be quite as generous, with the deduction being spread over 5 years instead, with 20% per year being allowed as a deduction.  Anti-avoidance rules will mean that purchases from associated entities will not get a tax deduction.



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