ATTRACTING INNOVATORS WITH TAX INCENTIVES

A flagship program announced the introduction of a Patent box tax regime that will slash the tax rates on profits derived from qualifying Intellectual Property (“IP”) to just 5% significantly lower than the normal 16.5% profits tax rate. This Patent Box incentive is designed to encourage business to ramp up their research and development efforts and monetize their IP asset more effectively.

The reduced 5% tax rates bring Hong Kong in line with other innovation centers like Luxembourg (4.99%), Ireland (10%), and Israel (up to 16%) that offer similar preferential tax treatment on IP income. By lightening the tax burden on IP earnings, Hong Kong hopes to attract more companies to base their IP holdings and commercialization activities in the city.

UPDATING LAWS FOR ARTIFICIAL INTELLIGENCE (“AI”) ERA

Another key initiative announced is a comprehensive review of Hong Kong’s Copyright Ordinance to ensure that it keeps pace with rapid advancements in artificial Intelligence (“AI”) and other emerging technologies. A public consultation on potential amendments to copyright laws will be conducted this year.

Francis Fong Po-kiu of the Hong Kong IT Federation, highlighted that in Hong Kong, copyright is presently considered a property right inaccessible to AI systems themselves. To adapt to the evolving landscape of AI-generated works, Fong suggests potential updates to the law, such as broadening the definition of ‘author’ to encompass the entities behind AI systems or establishing a distinct category of rights for AI-generated creations. This indicates a recognition of the need for legal adjustments to accommodate the complexities introduced by AI in the realm of IP in Hong Kong.

FORGING CROSS-BORDER COOPERATION

Beyond domestic policy updates, Hong Kong also aims to deepen cross-border IP cooperation, particularly with the main land Chinese cities in the Greater Bay Area economic zone. Specific plans include:

• Facilitating cross-border applications and registrations of IP protections
• Promoting Hong Kong’s professional IP services to business operating in the Greater Bay Area
• Pursuing IP examiner training programs with the China National Intellectual Property Administration.
• Leveraging national policies to develop Hong Kong as an international innovation hub.

Leveraging Growth Potential in Hong Kong’s Intellectual Property Landscape

Hong Kong recorded over 10,000 annual patent registrations from 2021-2023, up to 50% from a decade which highlights the city’s growth potential as an IP trading center. With these new initiatives, Hong Kong is skating its claim as a globally competitive IP regime that can attract innovators and bridge the gap between Chinese and international markets.

Fong asserts that Hong Kong possesses a distinctive opportunity to emerge as a central hub for Intellectual Property (“IP”) trading and protection, both within the Greater Bay Area and across Asia. He emphasizes the importance of updating IP laws and providing strong incentives for commercialization to sustain the city’s relevance amidst technological advancements. By modernizing its IP framework and encouraging commercial ventures, Hong Kong can effectively position itself as a leader in fostering innovation and safeguarding intellectual property rights.

SECURING HONG KONG’S INNOVATION FUTURE

As companies around the world ramp up their focus on IP assets and innovation, Hong Kong is arming itself with an increasingly competitive legal infrastructure and policy environment. These forward-looking measures could cement Hong Kong’s status as an internationally vital IP and innovation hub for decades to come.

The Finance Minister underscores the significance of enhancing legal safeguards for IP, citing their pivotal role in stimulating technological advancement and fostering creative industries. Leveraging its stable legal system, global financial connectivity, and recent pro-innovation measures, Hong Kong aims to position itself as the premier hub in Asia for the commercialization of Intellectual Property. By prioritizing robust IP protection and implementing initiatives which support innovation, the city seeks to attract and facilitate the exchange of IP assets, further solidifying its status as a leading player in the global IP landscape.

HOW  WE CAN HELP ?

Our specialised experts’ approach and industry knowledge enable us to provide comprehensive IP solutions, including:

• International Tax Planning: For businesses engaged in international operations or cross-border transactions, our experts offer assistance with transfer pricing studies, tax treaty analysis, and the development of strategies for efficient tax planning and structuring across multiple jurisdictions.
• Tax Advisory and Risk Management: Our team provides proactive tax advisory services, assisting clients in understanding the complexities of tax implications of their business decisions, transactions, or restructuring plans.
• IP Strategy Development: Our experts collaborate with clients to develop a tailored, comprehensive IP strategy that meets their specific needs. We assess existing IP assets and identify new opportunities for IP protection and commercialization.
• Patent Drafting and Prosecution: Our experts are proficient in patent registration, excelling in the drafting of high-quality patent applications. We ensure precise descriptions of inventions and properly framed claims, crucial for successful registration.