July 2024 / Hong Kong

The Government announced the Inland Revenue (Amendment) (Tax Concessions for Intellectual Property Income) Ordinance 2024. The Amendment Ordinance, which amends the Inland Revenue Ordinance (Cap. 112) to implement the "patent box" tax incentive to provide tax concessions for qualifying profits sourced in Hong Kong and derived from eligible intellectual properties (IP) created through research and development (R&D) activities, comes into operation.

The Amendment Ordinance mainly covers the following five key areas:

1. eligible IPs covered are patents, copyrighted software and new plant variety rights;
2. eligible IPs can be registered in different places around the world and their related profits sourced in Hong Kong can benefit from the "patent box" tax incentive;
3. the concessionary tax rate is set at 5 per cent, which is substantially lower than the existing normal profits tax rate in Hong Kong (i.e. 16.5 per cent);
4. eligible IPs must be developed by taxpayers themselves. If the R&D process involves acquisition of other IPs, or outsourcing part of the R&D activities, the amount of profits eligible for the concessionary tax rate may be reduced proportionally; and
5. enterprises need to obtain local registration for their inventions or new plant varieties in order to enjoy the "patent box" tax incentive. This requirement will only start to be implemented two years after the "patent box" tax incentive comes into operation.

The Government has spared no effort in protecting IP rights and promoting IP trading to tie in with the national strategy to develop IP, and has been implementing a series of short, medium and long-term measures from various aspects, including enhancing the IP regulatory regime, to promote the development of Hong Kong into a regional IP trading center.

Source: info.gov.hk

The Inland Revenue Department (IRD) sent out about 2.44 million tax returns for individuals for the year of assessment 2023/24. The filing deadline for general cases was June 3 while for sole proprietors of unincorporated businesses, a three-month period is allowed. Those filing via eTAX will be automatically granted a one-month extension (i.e. the deadline for general cases is July 3 and for sole proprietors is September 2).

The Commissioner of Inland Revenue, Mr. Tam Tai-pang, hosted a press conference on the completion of tax returns for individuals for the year of assessment 2023/24 and the tax collection of 2023-24, and also introduced new features of e-filing of profits tax returns.

Mr Tam referred to two tax measures proposed in the 2024-25 Budget, that is:

• the reduction of profits tax, salaries tax and tax under personal assessment for the year of assessment 2023/24 by 100 per cent, subject to a ceiling of $3,000 per case
• and implementing a two-tiered standard rates regime for salaries tax and tax under personal assessment starting from the year of assessment 2024/25.

In addition, the 2023 Policy Address announced that the deduction ceiling amounts for home loan interest and domestic rents will be raised for taxpayers who reside with their newborn children. Starting from the year of assessment 2024/25, the deduction ceiling for home loan interest or domestic rents will be raised from $100,000 to $120,000 for eligible taxpayers of salaries tax and tax under personal assessment who are residing with children born on or after October 25, 2023.

Source: info.gov.hk