New Tax Regime in Hong Kong: Patent Box

In the budget for the fiscal years 2024-2025, presented on February 28, 2024, the Financial Secretary of Hong Kong proposed several tax measures, including the introduction of a ‘Patent Box’ regime with a reduced corporate tax rate of 5% (compared to the standard rate of 16.5%).

On March 28, 2024, the Hong Kong government published a bill outlining the proposed terms of this regime for specific income derived from intellectual property sources in Hong Kong, related to corresponding intellectual property such as patents, copyrighted software, and plant variety rights developed as a result of R&D starting from the 2023/24 fiscal year. This regime involves applying the OECD’s ‘nexus’ approach under BEPS Action 5.

The bill reflects some recommendations made during public consultation, including expanding the income covered by the regime to include insurance, losses, or compensation related to the corresponding intellectual property.

The bill will be presented to the Legislative Council for its first and second readings on April of 10th.

The full document you can find via this link.

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