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Articles

Hong Kong Companies to Benefit from Additional R&D Expenditure Tax Deductions

Written by: Editor

The Hong Kone Government has released the draft of a bill which is meant to encourage companies to engage in research and development activities in Hong Kong. Investors who open a Hong Kong company already have a set of advantages regarding taxation and selected business activities, however, this bill would reshape the manner in which the basic tax deductions are offered for research and development activities.

Proposed additional tax deductions for expenditure on domestic R&D

 
The Inland Revenue Department No. 3 Bill 2018 proposes an additional tax deduction for expenditure on domestic research and development activities. The Bill is still in a draft state and will need to pass through the Parliament before companies in Hong Kong could start benefiting from the new provisions.
 
According to the draft bill, the first 2 million HKD spent on research and development activities (that qualify for this purpose) would enjoy a 300 percent tax deduction. What’s more, the expenditure above this amount would continue to benefit from a 200 percent deduction. 
 
The changes target section 16B of the Inland Revenue Ordinance. One of our Hong Kong company formation agents can give you complete information on the specific provisions of this Ordinance.
 

R&D expenditure deduction in Hong Kong

 
According to the current provisions contained in the Inland Revenue Ordinance, the expenditure deduction for R&D in Hong Kong is 100 percent. There is also an additional 100 percent deduction for capital expenditure on the purchase of plant or machinery for the same types of activities, which was introduced last year.
 
The taxation regime in Hong Kong is already one of the most beneficial in the region. With these changes, Hong Kong companies would benefit from an even more attractive business location for research and development activities.
 
For complete details on the current taxation regime as well as updates on new tax law and company formation changes, please contact our Hong Kong company registration agents.
 

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