Three New Types of Specified Intellectual Property Rights Now Eligible for Tax Deductions
The Inland Revenue (Amendment) (No. 5) Ordinance 2018 has recently been enacted to grant tax deductions for three new types of specified intellectual property rights (“IPRs”), namely performer’s economic rights, protected payout-design (topography) rights, and protected plant variety rights. These new tax deductions work within the existing tax deduction regime that comprises two main provisions of the Inland Revenue Ordinance (“IRO”):1
- Section 16E, which is not affected by the new law and which grants a 100 percent tax write-off in the year of purchase for the costs of patent rights and rights to know-how where specified conditions are satisfied.
- Section 16E, which after the enactment of the new law effective from the year of assessment 2018/19 extends its coverage from registered trademarks, copyrights, and registered designs to include the three new types of IPRs detailed above. Under section 16EA, tax deductions for capital expenditure incurred on the purchase of such IPRs will generally be spread over five successive years in equal installments, beginning in the year of purchase.