Incentives for Doing Business in Hong Kong

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How can my company access government grants to fund marketing and international expansion?

If your business is already registered in Hong Kong and looking to grow its brand presence, enter new markets, or increase export activity, two government schemes offer direct cash reimbursement for eligible expenditures, with minimal red tape.

Contributing Advisor

Jennifer Lu

Partner

What is the BUD fund, and how much can my business receive?

The Dedicated Fund on Branding, Upgrading, and Domestic Sales (BUD Fund), administered by the Hong Kong Productivity Council, is one of the most widely used SME support programs in Hong Kong. It provides matching funding for activities that enhance a company's competitiveness in the Mainland China market and 48 additional economies with which Hong Kong has signed Investment Promotion and Protection Agreements (IPPAs) or Free Trade Agreements (FTAs).

What activities are covered?

• Design and production of promotional and branding materials
• Advertising and marketing campaigns
• Participation in trade exhibitions and business missions
• Creating or upgrading company websites and mobile applications
• Testing, certification, and product compliance services
• Applying for patents, trademark registration, or copyright protection

How much funding is available?

The "Easy BUD" pathway is specifically designed for SMEs, featuring an online application process with a turnaround time of approximately 30 working days. In 2024–25, the government injected an additional HK$ 63.8 million) into the BUD Fund, expanding its scope to include e-commerce development under the "E-commerce Easy" initiative.

Who qualifies?

Applicants must be private companies registered under Hong Kong's Business Registration Ordinance with substantive operational activity in Hong Kong. Publicly listed companies are not eligible for Easy BUD.

Are BUD fund grants taxable, and how should I report them?

This is a critical question that many recipients overlook. The tax treatment of BUD Fund grants depends on how the funds are used:

• Capital expenditures (e.g., purchasing equipment, setting up a new facility): Generally not taxable, as they are treated as capital receipts
• Revenue or operational expenditures (e.g., marketing campaigns, staff costs): May be treated as taxable income and should be reported accordingly in your profits tax filing

Companies receiving BUD Fund grants should maintain clear documentation of how funds are applied and consult a qualified Hong Kong tax advisor to ensure proper classification in financial statements and tax returns. Misclassification can result in unexpected tax liabilities or compliance penalties.

How does the SME export marketing fund work, and is it stackable with the BUD fund?

The SME Export Marketing Fund (EMF), administered by the Trade and Industry Department, complements the BUD Fund by focusing specifically on export promotion activities targeting foreign markets. Unlike the BUD Fund, which covers a broader range of branding and business development activities, the EMF reimburses expenses related to:

• Participating in trade exhibitions and fairs — both overseas and in Hong Kong (for major international exhibitions)
• Conducting business missions to foreign markets
• Advertising and promotional activities targeting overseas buyers
• Creating or upgrading websites and mobile apps for international audiences

Funding terms:

• Reimbursement rate: 25 percent of approved project expenses
• Per-application cap: HK13,900)
• Maximum per company: HK128,000)
• Website/app development: Up to 50 percent of total expenditure, subject to the same cap

From April 30, 2021 through June 30, 2026, the EMF's scope has been temporarily expanded to include major local-market exhibitions, making this a timely opportunity for companies planning to exhibit in Hong Kong before mid-2026.

Can you use both the BUD Fund and the EMF? Yes, the two schemes cover different expense categories and can be applied to complementary activities. However, the same expense cannot be claimed under both programs simultaneously. A structured multi-scheme application strategy developed with an advisor can maximize your total reimbursable amount.

What R&D and technology adoption grants are available for companies operating in Hong Kong?

Hong Kong's Innovation and Technology Fund (ITF), managed by the Innovation and Technology Commission (ITC), is the government's primary vehicle for channeling capital into research, development, and technology deployment. The ITF is not a single program but an ecosystem of funding schemes catering to different stages of innovation, from early-stage R&D to commercialization, talent development, and startup financing.

Which ITF programs support in-house R&D and can my company apply directly?

For companies conducting proprietary research and development, the following programs offer direct financial support:

What counts as qualifying R&D expenditure under Hong Kong Tax Law?

Beyond government grants, Hong Kong offers a profits tax deduction for qualifying R&D expenditure. Companies can claim deductions for:

• Payments to approved research institutes
• Staff costs directly attributable to qualifying R&D
• Costs of plant and machinery used for R&D

Expenditures on basic research and applied research in categories approved by the Commissioner of Inland Revenue may qualify for enhanced deductions of 300% for the first HK$2 million and 200% for amounts above that threshold. This is separate from — and stackable with — ITF grant funding in certain circumstances.

How can non-tech SMEs benefit from the Technology Voucher Program (TVP)?

Not every business needs to conduct original R&D to benefit from ITF support. The Technology Voucher Program (TVP) is the most accessible and broadly applicable technology adoption scheme, specifically designed for non-listed SMEs that want to upgrade their operational systems or digital infrastructure.

What does TVP cover?

• Implementing or upgrading ERP (enterprise resource planning) systems
• Deploying cybersecurity solutions
• Adopting cloud computing and data analytics platforms
• Automating business processes
• Upgrading point-of-sale systems, logistics software, or customer management tools

Funding terms:

• Matching basis: 3:1 (government contributes HK1 spent by the company)
• Cumulative cap: HK76,800) per company
• Project limit: Up to 6 funded projects per company
• Project duration: Generally completed within 12 months

Eligibility: Non-listed companies registered or incorporated in Hong Kong with substantive business operations. Government-subvented organizations are excluded.

TVP is particularly popular among trading companies, professional services firms, retail businesses, and logistics operators looking to modernize without the scale of an enterprise-grade technology overhaul.

What funding is available for hiring and training technology talent?

Recruiting qualified technology professionals in Hong Kong is competitive. The ITF addresses this with programs that subsidize both hiring costs and professional development:

Research Talent Hub for Technology Companies (RTH-TC)

This scheme provides salary subsidies to help technology companies hire research-focused employees:

• Maximum employment duration: 36 months per talent
• Limit per company: Up to 4 talent positions supported simultaneously
• Eligibility: Company must be registered in Hong Kong with substantive business operations and an active or planned R&D program; talent must hold a qualifying degree from a recognized institution and have the legal right to work in Hong Kong

New Industrialisation and Technology Training Programme (NITTP)

For companies investing in advanced manufacturing or industrial technology, NITTP subsidizes staff training in areas such as robotics, smart production, and advanced materials:

• Matching basis: 2:1 (government pays two-thirds, company pays one-third)
• Annual funding ceiling: HK64,000) per company
• Eligible for both local and overseas training programs; course providers must have a minimum of two years of relevant experience

How can SMEs in Hong Kong access credit and working capital more easily?

Access to affordable credit is one of the most frequently cited constraints for Hong Kong SMEs, particularly amid periods of economic uncertainty. The government's SME Financing Guarantee Scheme (SFGS), administered by the Hong Kong Mortgage Corporation Limited Insurance Limited (HKMCI), directly addresses this through loan guarantees that reduce lending risk for participating financial institutions.

What loan guarantees are available under the SME financing guarantee scheme, and who qualifies?

The SFGS provides guarantee coverage ranging from 50 percent to 100 percent on business loans, enabling eligible companies to secure financing they might not otherwise qualify for based on collateral alone.

The government has allocated an additional HK$10 billion to the scheme, and participating banks across the Taskforce on SME Lending have committed over HK50.7 billion) in dedicated SME credit facilities.

Core eligibility requirements:

• Registered and operationally active in Hong Kong
• Demonstrable operational track record with reasonable financial standing
• Not engaged in moneylending or related financial businesses
• No corporate affiliation with the applying lender
• Not a publicly listed corporation

Applications are submitted through participating financial institutions. Companies should prepare up-to-date financial statements, business registration documentation, and a clear use-of-proceeds statement before approaching a lender.

What tax incentives are available?

Hong Kong's tax incentives are less about headline exemptions and more about targeted concessions for specific sectors and business structures that meaningfully reduce effective tax rates for qualifying enterprises.

Which industries receive the most generous tax concessions in Hong Kong?

Beyond the standard 16.5 percent profits tax rate and the two-tier 8.25 percent/16.5 percent system for SMEs, the following sectors benefit from specific, codified tax concessions:

• Financial services: Profits derived from qualifying debt instruments, offshore funds, and qualifying corporate treasury centers receive concessionary tax treatment. The Unified Fund Exemption Regime provides profits tax exemption for qualifying funds — including non-Hong Kong domiciled funds — subject to conditions around fund type and investor composition.
• Aviation: Aircraft leasing companies and aircraft lessors can benefit from a concessionary profits tax rate of 8.25 percent on qualifying aircraft leasing and aircraft leasing management activities.
• Shipping: Profits derived from the operation of ships registered in Hong Kong are exempt from profits tax.
• Treasury and financing operations: A half-rate concession (8.25%) applies to qualifying profits earned by corporate treasury centers in Hong Kong, including intra-group financing transactions.
• Intellectual property: Under Hong Kong's patent box regime, qualifying IP income (derived from patents and certain other IP) may be eligible for a concessionary rate of 5 percent, one of the most competitive IP tax rates in Asia.

How does the two-tier profits tax system benefit my company directly?

Under Hong Kong's two-tier profits tax structure:

• First HK$2 million of assessable profits: taxed at 25 percent
• Profits above HK$2 million: taxed at the standard 5 percent

For a company generating HK$5 million in annual assessable profits, the two-tier system reduces the effective tax rate to approximately 13.2 percent versus a flat 16.5 percent, a saving of approximately HK$165,000 per year. Only one entity per connected group of companies qualifies for the reduced rate on the first tier, making corporate structure planning an important consideration for groups with multiple Hong Kong entities.

Are there specific incentives for family offices in Hong Kong?

Hong Kong has made a deliberate and well-resourced push to attract family offices and private wealth management operations, with a package of regulatory, tax, and operational incentives that competes directly with Singapore's Variable Capital Company framework and Switzerland's private wealth ecosystem.

What tax exemptions are available for Family-Owned Investment Holding Vehicles (FIHVs)?

The government provides a profits tax exemption for family-owned investment holding vehicles (FIHVs) managed by single-family offices in Hong Kong. To qualify:

• The FIHV must be managed by a family office operating in Hong Kong
• The family office must meet substance requirements in Hong Kong (team, operations, decision-making)
• The FIHV's investment activities must fall within the scope of qualifying transactions

The tax exemption extends to investment income from a broad range of asset classes, including equities, bonds, private equity interests, and real estate investment trusts — making it one of the most comprehensive family wealth exemption regimes in Asia.

What is the Capital Investment Entrant Scheme (CIES), and who qualifies for residency through investment?

The Capital Investment Entrant Scheme (CIES) is Hong Kong's investment immigration pathway, allowing approved investors to reside in Hong Kong — along with their spouse and dependent unmarried children, in exchange for qualifying asset investments.

Permissible assets under the scheme include:

• Equities listed on the Hong Kong Stock Exchange
• Debt instruments issued by companies listed in Hong Kong
• Subordinated debts issued by authorized financial institutions
• Eligible collective investment schemes (including qualifying funds)

The CIES is administered by InvestHK and is particularly relevant for Mainland Chinese families, Southeast Asian entrepreneurs, and international wealth holders seeking a Hong Kong base with residency rights.

What support infrastructure has the Hong Kong Government created for family offices beyond tax benefits?

Below are the new measures designed to attract family offices to Hong Kong.

What green industry and sustainability incentives are available?

For businesses with sustainability objectives, whether driven by internal ESG targets, investor requirements, or regulatory obligations, Hong Kong offers a growing set of financial incentives tied to green investment and decarbonization.

What government funding is available for green finance and sustainability-linked activities?

The Green and Sustainable Finance Grant Scheme provides support for enterprises issuing green bonds or sustainability-linked loans, covering a portion of issuance costs including certification and verification fees. The scheme has been extended through 2027 and expanded to include transition bonds and loans, a significant broadening that now covers companies in high-emission industries transitioning toward cleaner operations, not just those already operating sustainably.

For fintech companies developing green financial products, the Green and Sustainable Fintech Proof-of-Concept Subsidy Scheme provides early-stage funding to facilitate commercialization of innovative green technologies.

Ready to maximize your incentives?

Hong Kong’s ecosystem of grants, tax concessions, and financing guarantees can dramatically lower your operating costs, but navigating applications and compliance requires expertise. Partner with our advisory team to design a tailored incentive strategy, secure funding faster, and unlock every advantage available to your business. Let us help you turn opportunities into measurable savings and sustainable growth.