In the past, many startups viewed patents and trademarks as costly legal certificates. From 2026 onwards, however, they are increasingly becoming valuable business assets that can help reduce tax liabilities and support financing.
In the global race for innovation, the Hong Kong Government has made a significant commitment to intellectual property in its 2026–27 Budget, allocating hundreds of millions of Hong Kong dollars to support the IP ecosystem. For entrepreneurs, this is more than a fiscal plan—it is a blueprint for turning technology into business value.
(I) A Policy Shift: From Protection to Commercialization
The 2026–27 Budget marks a significant milestone in Hong Kong's transition towards an IP-driven economy. Rather than focusing solely on protecting intellectual property, the Government is placing increasing emphasis on its commercialization, valuation, and financing.
Timeline
July 2024: Hong Kong's Patent Box regime was first introduced.
End of 2025: The IP Financing Sandbox was launched on a pilot basis with three participating banks.
February 2026 (Budget Announcement): The Government announced HK$52 million to establish the Hong Kong IP Academy; and HK$28 million for the Patent Valuation Support Pilot Scheme.
5 July 2026 (Key Milestone): New Patent Box rules took effect. Certain overseas patents must also be registered in Hong Kong to remain eligible for the preferential tax treatment.
(II) Legal Insights: Three Key Policies Every Startup Should Know
1. The 5% Patent Box Tax Regime
Under the amended Inland Revenue Ordinance, income derived from qualifying intellectual property may be taxed at a 5% profits tax rate, instead of the standard 16.5%.
Key Requirement: The preferential tax rate primarily applies to qualifying IP resulting from the company's own research and development (R&D) activities. Businesses relying on acquired IP may receive reduced benefits under the applicable nexus rules.
New Requirement from 2026: From 5 July 2026, where a qualifying patent has been granted overseas (for example, by the USPTO), businesses may also need to obtain corresponding patent protection in Hong Kong—such as an Original Grant Patent (OGP) or a Short-term Patent—to remain eligible for the Patent Box concession.
2. Patent Valuation Support Pilot Scheme
Traditionally, lenders required tangible assets, such as real estate, as collateral. The new Patent Valuation Support Pilot Scheme aims to help businesses demonstrate the commercial value of their patents through assessments conducted using recognized Chinese National Standards (GB Standards).
Why It Matters: This represents one of Hong Kong's first large-scale initiatives to align patent valuation methodologies with those used in Mainland China, potentially enhancing the credibility of patent valuations for financing and commercial transactions across the Greater Bay Area.
3. IP Financing Sandbox
Jointly launched by the Hong Kong Monetary Authority (HKMA) and the Intellectual Property Department (IPD), the scheme enables technology companies to use IP assets to support financing.
Illustrative Example: A biotech startup used its patented AI technology to secure financing under the Sandbox, despite having no real estate as collateral.
(III) Practical Checklist for Startups
To maximize the opportunities created by the 2026 Budget, startups should consider taking the following steps:
1. Review Your Patent Portfolio
Review patents granted in jurisdictions such as the United States (USPTO) or China (CNIPA). If you intend to continue benefiting from the 5% Patent Box tax rate after 5 July 2026, consider filing a corresponding Original Grant Patent (OGP) application in Hong Kong where appropriate.
2. Maintain Comprehensive R&D Records
The Patent Box regime follows the OECD Nexus Approach, which links tax benefits to qualifying R&D activities. Maintain detailed records of R&D expenditure, including employee costs, materials, and development expenses, to demonstrate that the qualifying innovation resulted from your company's research activities.
3. Obtain a Patent Valuation
Take advantage of the Government's HK$28 million Patent Valuation Support Pilot Scheme by obtaining an independent valuation of your core patents. A professional valuation report may strengthen applications for bank financing, investment, licensing, or other commercial transactions.
4. Strengthen Your IP Expertise
The Government has allocated HK$52 million to establish the Hong Kong IP Academy. Consider enrolling key management personnel in IP-related training programmes to enhance your company's capabilities in IP management, commercialisation, and financing.
Expert's Note: The 2026–27 Budget sends a clear message: intellectual property is no longer simply a legal right—it is increasingly recognised as a strategic business asset.
By leveraging these IP initiatives, businesses can reduce taxes, improve access to financing, and strengthen their competitiveness.