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Hong Kong Tax Rules on Intellectual Property: Driving Growth or Driving in the Wrong Direction?

This paper reviews the Hong Kong Government’s initiative to implement the enhanced tax deduction on research and development (“R&D”) expenditure and argues that, with the specific anti-avoidance measures introduced, coupled with the various deeming provisions of the Inland Revenue Ordinance (“IRO”), including the new section 15F, businesses may find Hong Kong an unfriendly or even aggressive tax jurisdiction for intellectual property (“IP”) related activities. The objectives of encouraging enterprises to invest more in R&D in Hong Kong, to promote local R&D activities, and to groom local R&D talent may not be attainable.