Hong Kong to cut tax on intellectual property profits to 5%, align copyright law with AI advances

Tax on profits derived from qualifying IP will be reduced to encourage companies to devote more resources to R&D, according to finance chief Paul Chan

City should also focus on exploiting ‘enormous potential’ of IP trading market as it seeks to fulfil national mission of becoming innovation and technology hub, he says

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Hong Kong recorded an average of more than 10,000 standard patent registrations each year from 2021 to 2023, up 50 per cent from the annual average a decade ago. Photo: Jelly Tse

Published: 6:33pm, 7 Apr 2024Updated: 6:38pm, 7 Apr 2024

Hong Kong will reduce the tax on profits derived from intellectual property (IP) and update legislation to reflect breakthroughs in artificial intelligence (AI) as part of a wider push to turn the city into a hub for copyright trading, the finance minister has said.

Paul Chan Mo-po said on Sunday the city would also seek closer cooperation with the China National Intellectual Property Administration over the training of patent examiners and pursue deeper ties with mainland Chinese cities in the Greater Bay Area to bolster the cross-border protection of various forms of IP registration.

Boosting legal protection for IP was critical as it provided incentives for the advancement of technology and the development of creative industries, the minister stressed.

On Wednesday, Chan said the government would introduce a bill in the Legislative Council to amend the Inland Revenue Ordinance and implement a “patent box” tax incentive.

It will reduce the tax on profits derived from qualifying IP to 5 per cent, much lower than the normal profits tax rate of 16.5 per cent, in the hopes of encouraging companies to devote more resources to research and development (R&D), as well as make money off the results.

Hong Kong can play a pivotal role in facilitating IP trading within the bay area, finance chief Paul Chan says. Photo: Elson Li

More would also be done to protect IP rights, Chan pledged.