May 2018 - Enhanced Deduction for R&D Expenditures Introduced in Hong Kong

To encourage enterprises to invest in R&D in Hong Kong and to promote local R&D activities, the Hong Kong government proposed in the 2017 Policy Address to introduce an enhanced tax deduction for R&D expenditure.

After consultations made to solicit views from the public and interested groups, the Inland Revenue (Amendment) (No.3) Bill 2018 (the “Bill”) was gazetted on 20 April 2018. The Bill sets out the details of the proposed normal and enhanced tax deduction for R&D expenditure in Hong Kong. Once the Bill is enacted into law, the new regime will take retrospective effect for qualifying expenditure incurred and qualifying payment made on or after 1 April 2018.