In a bid to transform Hong Kong into a leading hub for copyright trading and AI advancements, the city’s finance minister, Paul Chan Mo-po, announced a series of measures. These include reducing the tax on profits derived from intellectual property (IP) and updating legislation to keep pace with the breakthroughs in artificial intelligence. The goal is to enhance legal protection for IP and offer incentives for the advancement of technology and the development of creative industries.
To encourage companies to invest more resources in research and development (R&D) and monetize their IP, the government will introduce a “patent box” tax incentive. This incentive will reduce the tax on profits derived from qualifying IP to 5%, down from the normal profits tax rate of 16.5%. This move aims to attract companies and stimulate their participation in R&D activities.
Additionally, Hong Kong plans to strengthen the protection of copyright in response to the latest developments in AI. The Copyright Ordinance will be reviewed to ensure it offers adequate protection, and a consultation will be conducted within the year. These updates are necessary to keep pace with the rapid progress in AI technology and ensure that the law remains adaptable to future technological developments.
Chief Executive John Lee Ka-chiu has pledged to develop Hong Kong into a regional IP trading center in the 2023 policy address. The city recorded an average of over 10,000 standard patent registrations annually from 2021 to 2023, a 50% increase compared to a decade ago. This growth demonstrates the vast potential of the IP trading market in Hong Kong.
To further leverage the advantages offered by the mainland’s policy of developing “new quality productive forces,” Hong Kong aims to become an international innovation and technology hub. The integration with mainland Chinese cities in the Greater Bay Area, including Macau, is seen as a key opportunity for Hong Kong to facilitate IP trading and strengthen its position as an economic powerhouse.
Francis Fong Po-kiu, the honorary president of the Hong Kong Information Technology Federation, supports the review of copyright law to modernize it in light of the rapid advancements in AI technology. He suggests expanding the definition of an author to include legal entities responsible for AI-generated works or creating a new category of rights for AI-generated works. This would ensure that the law remains adaptable to future technological developments.
The introduction of the patent box tax incentive is seen as attractive for enterprises as it significantly reduces their tax burden and encourages engagement in more IP creation. Among overseas patent box regimes, the tax rates range from 4.99% in Luxembourg to up to 16% in Israel. Hong Kong’s reduced rate of 5% aims to incentivize companies to invest in R&D and foster innovation in the city.
By reducing tax on profits derived from IP and updating copyright legislation, Hong Kong aims to position itself as a driving force in AI advancements and a global hub for copyright trading. These measures seek to incentivize companies to engage in research and development, protect IP rights, and foster a thriving ecosystem for creative industries. The government’s commitment to adapting the law to keep pace with technological developments demonstrates Hong Kong’s dedication to innovation and maintaining a competitive edge in the global market.
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