Enhanced Tax Deduction for R&D Activities in Hong Kong

On 24 October 2018, the Inland Revenue (“IRD”) (Amendment) (No. 3) Bill 2018 (“Bill”) was passed by the Legislative Council. The introduction of this bill is a first step to encourage more the research and development (“R&D”) activities in Hong Kong through the use of tax incentives. Under this new R&D tax deduction regime, the tax deductions available for two types of qualifying R&D expenditure, Type A and Type B are as below:
  • Type A expenditure (R&D expenditure other than Type B expenditure ) – a 100% normal deduction
  • Type B expenditure (R&D expenditure on in-house qualifying R&D activities) – a 300% deduction for the first HK$2 million and a 200% deduction for the remaining amount without any limit
The IRD will issue a DIPN to provide more guidance in the interpretation and application of this new R&D tax deduction regime.

For more information please contact Kevin Lei, Zetland Tax Supervisor at kevin.lei@zetland.biz / + 852 3552 9096

Zetland Tax