The Inland Revenue Department (IRD) of Hong Kong has issued amended interpretation and practice notes for taxpayers regarding the profits tax deduction for capital expenditure on intellectual property rights (IPR), and the taxation of royalties derived from their licensing. It was published on 28 July 2013.
In 1983, Section 16E was added to the Inland Revenue Ordinance due to giving incentive for boost technological innovation in local industries. Under this Section the deduction for the capital cost of acquiring patents and, from 1992, a deduction was added for rights to “know-how,” which was defined as industrial information and knowledge of techniques for manufacturing of goods. It was again extended in 2010-11 Budgets. The objective of the revised note is to point out in detail the IRD’s views and exercise on the profits tax deduction relating to the purchase of patent rights, rights to know-how, copyrights, registered designs and registered trademarks.
