Hong Kong’s IP tax bill and why ownership matters for enforcement

Hong Kong published a bill on 16 October that would let businesses deduct more of what they spend on acquiring intellectual property. The Inland Revenue (Amendment) (Tax Deductions for Intellectual Property Expenditure) Bill 2026 goes to the Legislative Council for its first and second readings on 28 October. If it passes, it will apply to contracts entered into on or after 1 April 2026. [1], [2]

The government’s summary describes three changes. Capital spent on buying eligible IP rights from an associated company, such as another company in the same group, would become deductible. The cost of buying IP used outside Hong Kong would be deductible in proportion, where the royalties it earns are taxed in Hong Kong. And upfront licence fees paid to use eligible IP would be deductible too. There are safeguards: a main purpose test for purchases from associates, a formula that limits the amount, and an independent valuation report where purchases or licences from associates go above a threshold. [1], [2]

The stated aim is to build on the patent box concessionary rate and to attract groups to use Hong Kong for cross-border technology transfer and IP financing, as part of its push to become a regional IP trading centre. [1], [2]

This is tax policy, and the tax detail is for tax advisers. But it’s worth a brand owner’s attention for a practical reason. Enforcement follows ownership. The owner is the party that records rights with customs, files the complaint with police and stands behind the evidence in court. If the deduction persuades more groups to move brands and patents into a Hong Kong company, that company becomes the one that has to show it holds the rights.

Moving ownership is often where an enforcement file goes quiet. An assignment gets signed, but the registrations aren’t updated in every market, customs recordals still name the old owner, and the authorisation letters an investigator or agent carries refer to a company that no longer holds the rights. None of that need stop an action, but it can slow one down when speed matters, and it gives the other side something to argue about.

The valuation requirement points the same way. A group that needs an independent valuation to support its deduction will need a clear record of what it bought: which marks and patents, registered where, and in whose name. That’s the same list an enforcement programme starts from.

The bill may change in LegCo, and the thresholds and the calculation are in the bill itself rather than the summary. For anyone planning to move IP into Hong Kong on the back of it, the time to check the enforcement paperwork is while the assignments are being drafted, not after the first seizure.

This piece is general commentary, not legal or tax advice. Anyone thinking about moving or acquiring IP because of the bill should get advice from qualified tax and legal advisers on their own circumstances.

Sources

1. Hong Kong SAR Government (GovHK press release). Inland Revenue (Amendment) (Tax Deductions for Intellectual Property Expenditure) Bill 2026 gazetted. Published 2026-10-16 11:30 Hong Kong time. English. Issued by: Commerce and Economic Development Bureau. Accessed 19 October 2026.
2. Hong Kong SAR Government (GovHK press release). 《2026年稅務（修訂）（知識產權開支的稅項扣除）條例草案》刊憲. Published 2026-10-16 11:30 Hong Kong time. Traditional Chinese. Issued by: Commerce and Economic Development Bureau. Accessed 19 October 2026. Working English title: Inland Revenue (Amendment) (Tax Deductions for Intellectual Property Expenditure) Bill 2026 gazetted (Chinese release).