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Patent or copyright fees paid to associates

Generally speaking, if you collect money for filming, television, recording, and using or authorizing the use of patents, designs, trademarks, equations, etc. in Hong Kong, the Inland Revenue Department will treat 30% of the money as assessable profits. In the past, some taxpayers planned some tax avoidance schemes, so that the receiving party only had to assess 30% of the payment, and the paying party could get the full deduction. In these tax avoidance schemes, the paying party and the receiving party are connected. The method is that the paying party first transfers the ownership of, for example, a trademark to the receiving party, and the receiving party leases the use right back to the paying party. This arrangement allows the company as a whole to obtain a 70% deduction. The Inland Revenue Department later amended the tax regulations to crack down on the above tax avoidance schemes and stipulated that all payments from associates should be treated as assessable profits. Associated persons include relatives, partners, taxpayer-controlled corporations, associated corporations, etc…

The above information is for reference only. If you have any questions, we welcome your tax inquiries

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