On 24 October 2018, the Hong Kong Legislative Council passed in the third reading the Inland Revenue (Amendment) (No. 3) Bill 2018, which provides for a new incentive for R&D activities conducted in Hong Kong. The incentive includes an additional tax deduction equal to 300% of qualifying expenditure incurred on R&D for the first HKD 2 million spent and 200% of expenditure beyond that amount. Subject to certain conditions, qualifying expenditure includes expenditure for both in-house and out-sourced R&D, with no annual cap for the incentive. The Bill is expected to be published in the Official Gazette as enacted in the coming days.
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