On November 4 2020, the Secretary of Innovation and Technology, Mr. Alfred Sit, announced that the Government is about to implement funding programmes for research and development (R&D) projects on innovation and technology via the Innovation and Technology Fund (ITF).
On the basis of this provision companies may receive tax deduction for the expenditures on R&D activities which involve participation of Designated Local Research Institutions. Vast number of businesses anticipate enhancement of this funding program by the Government, allowing more businesses to apply.
According to the information available in the Legislative Council, the Government only accepts and validates applications from the business entities that only conduct business with local institutions, and whose R&D work conducted in China Mainland doesn’t exceed 50% of the total work completed.
There have been some deliberations whether Mainland-Hong Kong Joint Funding Scheme in conjunction with the Innovation and Technology Fund would allow the maximum proportion of R&D work that may be conducted on the Mainland from the current 50 per cent to equal or over 80 per cent. However, the Government informed that it has no plan to raise the relevant maximum of R&D work in the Mainland, but it is still committed to steadily consider adopting enhancement measures.
Currently the Government is committed to enhance support and funding resources towards R&D businesses, as a part of the initiative to achieve favourable conditions for innovations and the technology ecosystem. This would also include solicit investments in research and development, obtaining the support of public research institutes and educational institutions, financing infrastructure operating in those fields and continue recruiting new talents.
The Innovation and Technology Commission (ITC) and the Ministry of Science and Technology (MOST) will offer HK and Mainland Applicant funding for conducting R&D work.
The outbreak of COVID-19 caused the applicants acceptance process to stall, whilst 113 applicants were already approved, there are still 84 applications submitted in 2020 to be approved.
Current regulations allow businesses to apply for a 100% tax deduction for the R&D work conducted outside of Hong Kong. However, the Government plans to establish new policy which would offer 300% tax deduction for R&D realized in Hong Kong. It is expected that this measure will allow to attract enterprises’ investments into R&D conducted in Hong Kong.
Stay up to date on this topic by filling the form below.
