Hong Kong as the APAC IP holding hub of choice – Part 1

As intellectual property and other intangible assets become increasingly important drivers of enterprise value, the choice of jurisdiction for holding and commercialising IP has become a strategic consideration.

For businesses with significant China-facing operations, Hong Kong offers a combination of market access, tax incentives and legal infrastructure that few regional competitors can match.

In this two-part series, we first consider how the Mainland and Hong Kong Closer Economic Partnership Arrangement ("CEPA") can improve access to the Chinese Mainland for selected IP-intensive sectors, and how Hong Kong’s fiscal incentives can further support this proposition by rewarding qualifying R&D and eligible IP income. In the second part, we will consider bilateral arrangements with the Chinese Mainland on dispute resolution, company liquidation and preferential tax treatment, and explain how those features strengthen Hong Kong’s competitiveness as an IP-holding platform.

CEPA enhances Hong Kong’s position as a regional IP hub 

CEPA is a framework arrangement between Hong Kong and the Chinese Mainland covering trade in goods, trade in services, investment, and economic and technical cooperation. For IP-intensive businesses, CEPA's most relevant component is usually trade in services. The Second Agreement Concerning Amendment to the CEPA Agreement on Trade in Services was implemented and introduced new liberalisation measures on 1 March 2025 ("CEPA Amendment Agreement II") across sectors where Hong Kong has competitive advantages, including financial services, construction and related engineering services, testing and certification, telecommunications, motion pictures, television and tourism services. 

CEPA enhances Hong Kong’s role as an IP holding and commercialisation hub for businesses targeting the Chinese Mainland. It does not change IP ownership rules or create special copyright, trademark, patent or trade secret protections, but it gives qualifying Hong Kong service suppliers preferential access in regulated and access sensitive sectors. When an IP heavy business uses a Hong Kong company to hold, license or deliver IP based services, CEPA offers more favourable and predictable access to the Chinese Mainland market than is typically available to non CEPA jurisdictions. 

To enjoy preferential treatment under CEPA as a Hong Kong Service Supplier, an entity needs to be validly incorporated or established in Hong Kong, be legally entitled to carry on the relevant service business, and satisfy sector-specific requirements in areas including business operations, tax, premises, staffing and other regulatory criteria. Under the latest CEPA Amendment Agreement II, the general requirement for Hong Kong service suppliers to demonstrate a minimum period of substantive business operations has been removed for most service sectors. As a result, many IP-intensive businesses no longer need to satisfy a fixed operating-years threshold, although sector-specific eligibility requirements continue to apply.

These enhanced market-access opportunities complement Hong Kong's longstanding strengths as an international business and legal centre. The city offers a common law system, sophisticated professional and financial services, well-established infrastructure for cross border licensing and enforcement, and a long track record of acting as a gateway to the Chinese Mainland. By improving market access in key IP intensive sectors, CEPA allows Hong Kong Service Providers to deploy and monetise their IP in the Chinese Mainland through regulated service delivery, joint ventures or wholly owned platforms more readily than many competing regional hubs. Together, Hong Kong’s legal and business environment and CEPA’s preferential treatment make Hong Kong a strategically attractive location for regional IP holding and commercialisation structures.

Sector-specific applications

CEPA is most useful where Chinese Mainland market access, regulatory approval or qualification requirements are integral to the IP monetisation model.

• Creative and media. CEPA can help commercialise film and audiovisual content in the Chinese Mainland. Subject to vetting and approval by the relevant Mainland authority, Chinese-language motion pictures produced in Hong Kong may be imported into, and distributed in, the Chinese Mainland without counting towards the annual foreign-film import quota. Hong Kong–Mainland co-productions are also treated as Mainland motion pictures for distribution purposes. Recent examples, including Twilight of the Warriors: Walled In and The Last Dance, demonstrate the commercial potential of Hong Kong content in the Chinese Mainland market. CEPA Amendment Agreement II further liberalised the sector by, among other things, removing restrictions on Hong Kong Service Suppliers investing in film production enterprises and allowing eligible enterprises established by approved Hong Kong Service Suppliers to distribute imported buy-out Hong Kong films. For Hong Kong production companies and rights holders, this offers a more direct route to commercialising content in the Chinese Mainland than relying solely on an offshore IP holding structure.
• Telecommunications, broadcasting and digital services. CEPA Amendment Agreement II further opens the Chinese Mainland services market by introducing liberalisation measures across sectors, including telecommunications and television, with measures such as relaxing restrictions on equity shareholding, business scope and professional qualifications. This is relevant because copyrights, software, proprietary interfaces, databases, technical know-how and digital service models are often commercialised through regulated service delivery rather than simple licensing. CEPA therefore supports the market-access layer through which such IP is used commercially in the Chinese Mainland. This may be particularly relevant for businesses whose value is derived primarily from software, AI-enabled technologies, proprietary platforms, data analytics and other technology-driven intellectual property.
• Medical services. Under CEPA, Hong Kong Service Suppliers can set up wholly owned or equity joint venture medical institutions in the Chinese Mainland. Leveraging the market access provided under CEPA, the first 100% Hong Kong-owned eye hospital was established in Shenzhen in 2013 and has since developed into a broader healthcare network, which currently operates 55 medical facilities in the Chinese Mainland. Its growth illustrates how CEPA can facilitate the commercialisation of healthcare-related intellectual property, including clinical know-how, treatment protocols, training programmes, software systems and healthcare management methodologies.
• Franchising, retail and brand management. By qualifying as a Hong Kong Service Supplier, a brand owner can combine IP licensing from a Hong Kong IP holding company with CEPA facilitated activities such as advertising, market research and tourism related services, which are central to launching and scaling branded concepts across Mainland cities. In practice, this enables, for example, a Hong Kong based F&B or lifestyle brand to roll out a franchised store network using Hong Kong held IP, while relying on CEPA opened services for cross border marketing, consumer insight work and integrated online-to-offline retail operations, giving more predictable market access than entering the Mainland directly from non CEPA jurisdictions. 

Hong Kong innovation incentives

The Inland Revenue Department has expressly linked Hong Kong’s patent box regime to encouraging R&D sectors, creative industries and IP users to create and exploit intellectual property, and to promoting IP trading and related professional services such as IP legal, valuation, management, consultation and agency services.

The alignment is clear. While CEPA facilitates access to the Chinese Mainland market for selected IP-intensive service activities, Hong Kong’s innovation incentives support the creation and management functions that give the Hong Kong platform substance. Together, they encourage IP-intensive businesses to develop and commercialise their IP in Hong Kong, instead of using their Hong Kong entities as passive IP holding structures.

Patent box and R&D support

Hong Kong's patent box regime taxes the concessionary portion of assessable profits derived from eligible IP income at a reduced profits tax rate of 5%, compared with the standard profits tax rate of 16.5%.

The patent box regime is particularly relevant for businesses that develop, enhance or commercialise technical IP through Hong Kong. Eligible IP income includes income from qualifying intellectual property such as patents, plant variety rights and copyright subsisting in software, subject to applicable statutory conditions and nexus-based requirements.

Hong Kong further encourages innovation through a “super deduction” regime for qualifying R&D expenditure, allowing a 300% deduction on the first HK$2 million of eligible expenditure and a 200% deduction on the remainder. For an IP holding or management company involved in developing, improving or adapting IP assets in Hong Kong, the R&D deduction regime can reduce the effective tax cost of creation activity. The patent box regime may then reduce the tax cost of qualifying income generated from eligible IP. Together, they support both the creation and commercialisation phases of the IP value chain.

Viewed together, CEPA and Hong Kong’s innovation incentives support different but complementary stages of an IP strategy. CEPA facilitates access to the Chinese Mainland market and exploitation of IP through qualifying service activities, while Hong Kong’s patent box and R&D incentives encourage the development, enhancement and management of technical IP within Hong Kong. For businesses with substantial China-facing operations, this combination can make Hong Kong an attractive hub for creating, managing and commercialising IP across the region.

CEPA and Hong Kong's innovation incentives form only part of the broader proposition. The effectiveness of an IP-holding structure also depends on the ability to protect, enforce and monetise IP across borders. In the next part, we will examine how Hong Kong's arrangements with the Chinese Mainland on dispute resolution, insolvency cooperation and tax treatment further strengthen Hong Kong's position as a regional IP hub.

If you have any questions on this topic, please get in touch with your usual Withers contact or the authors of this article.