HK Profits Tax R&D Deduction 2026 Calculator
Hong Kong Section 16B allows enhanced tax deduction for qualifying R&D expenditure: 300% of first HK$2M (Type A — in-house qualifying R&D), 200% on excess; 200% deduction for Type B (designated local research institution). One of Asia's most aggressive R&D incentive regimes — designed to compete with Singapore.
Section 16B Enhanced Deductions
HK Inland Revenue Ordinance Section 16B (introduced 2018) provides 200% and 300% enhanced deduction for qualifying R&D expenditure. Type A (in-house R&D conducted in HK): first HK$2M qualifies for 300% deduction, excess for 200%. Type B (R&D paid to designated local research institution): 200% deduction. Both require qualifying R&D activity per ordinance definitions.
Qualifying R&D Activities
R&D must seek to achieve advance in science or technology, involve systematic investigation/experimentation, resolve scientific or technological uncertainty. Includes: applied research, experimental development, software development that creates innovative algorithms. Excludes: market research, routine quality control, cosmetic style changes, social science research. IRD's R&D Deduction Practice Note (DIPN 55) provides examples.
Designated Institutions
Type B deduction applies to spend at IRD-designated local research institutions: HKUST R&D Centre, HKU TTO, CUHK Office of Research and Knowledge Transfer Services, PolyU Institute of Innovation, Vocational Training Council. List updated periodically by IRD. Foreign R&D institutions generally not designated — limits Type B to HK-conducted research.
Source: Inland Revenue Ordinance Cap. 112 Section 16B, IRD DIPN 55 (R&D Tax Deduction). Last updated: May 2026.