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Hong Kong Tables Bill For Research And Development Tax Breaks

by Mary Swire, Tax-News.com, Hong Kong

24 April 2018


The Hong Kong Government has released a draft bill containing its 2017 proposal to provide an enhanced tax deduction for research and development expenditure.

The Inland Revenue (Amendment) (No. 3) Bill 2018 is intended to encourage more enterprises to conduct R&D activities in Hong Kong by amending and restructuring section 16B of the Inland Revenue Ordinance to provide for a new schedule, which sets out the operational details of the basic and enhanced tax deduction regimes for R&D activities.

Subject to passage of the bill through Hong Kong's parliament, enterprises will be able to enjoy an additional tax deduction for expenditure incurred on domestic R&D. The first HKD2m (USD255,000) spent on qualifying R&D will enjoy a 300 percent tax deduction and expenditure above this threshold will benefit from a 200 percent deduction. There is no cap on the amount of enhanced tax deduction.

At present, the Inland Revenue Ordinance provides a 100 percent deduction for expenditure on R&D, as well as 100 percent deduction for capital expenditure incurred on the purchase of plant or machinery for R&D in the year it was incurred.

The bill is scheduled to be introduced into Hong Kong's Parliament for first and second readings on May 2, 2018.

TAGS: tax | business | law | intellectual property | international financial centres (IFC) | legislation | Hong Kong | research and development

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