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Hong Kong announces 2025-26 Budget proposing favorable tax measures for specific sectors
- Under the new budget, a tax deduction may be allowed for expenditures related to acquisition of intellectual property.
- The budget proposes enhancements of preferential tax regimes in capital management and shipping industries.
On 26 February 2025, the Financial Secretary of Hong Kong announced the 2025/26 Hong Kong Budget. The key proposed tax measures are highlighted below.
A tax deduction is proposed for intellectual-property (IP) related expenditures, including lump sum licensing fees for acquiring the rights to use IP, and related expenses incurred on purchase of IP (or the right to use IP) from associates.
One proposal would enhance the preferential tax regimes for privately offered funds, family investment holding vehicles managed by a single-family office, as well as for the distribution of carried interest by private equity funds. It may include expanding the scope of permissible assets to cover immovable property situated outside Hong Kong, emission derivatives/allowances and carbon credits, insurance-linked securities, interests in non-corporate private entities, loans and private credit investments and virtual assets.
The 8.25% tax concession would be extended to eligible commodity traders in international maritime business, potentially covering taxpayers that own the cargoes and manage their fleet for cargo delivery.
A tax deduction would be provided for ship acquisition costs for ship lessors under an operating lease.
Implications
The long-awaited relaxation of tax deduction for IP acquisition costs is welcomed. Multinational enterprise (MNE) Groups in the capital management and shipping industries will want to closely follow the development of these proposed enhancements to tax incentive regimes.
For additional information concerning this Alert, please contact:
Ernst & Young Tax Services Limited, Hong Kong
- Wilson Cheng
- Paul Ho, Financial Services
Ernst & Young LLP (United States), Hong Kong Tax Desk, New York
- Charlotte Wong
Ernst & Young LLP (United States), Asia Pacific Business Group, New York
- Dhara Sampat
- Min Fei
Ernst & Young LLP (United States), Asia Pacific Business Group, Chicago
- Pongpat Kitsanayothin
Published by NTD’s Tax Technical Knowledge Services group; Carolyn Wright, legal editor
For a full listing of contacts and email addresses, please click on the Tax News Update: Global Edition (GTNU) version of this Alert.