On 16 September 2026, Chief Executive John Lee delivered the 2026 Policy Address alongside Hong Kong's first Five-Year Plan (2026-2030). For business owners and investors, the key takeaway is clear: Hong Kong is shifting from industry-wide tax breaks to a value-based approach, with targeted concessions for high-value sectors and a major push on commodity trading, CTCs, and IP investment.

Here's a practical breakdown of the tax and business policy changes that actually matter — what they are, when they take effect, and who qualifies.

The 5% / Half-Rate Concession: Value-Based, Not Industry-Based

The headline announcement is a new preferential tax rate of 5% (or half-rate, i.e. 8.25%) for qualifying high-value-added enterprises in strategic sectors. But read the fine print — this isn't a blanket industry cut.

Here's the catch: instead of automatically applying to all companies in a sector, the concessions will be offered through tailored preferential policy packages. Eligibility is based on the enterprise's investment plan and its actual economic contribution to Hong Kong, not just its business category.

Targeted sectors include financial services, advanced manufacturing, innovation and technology R&D, headquarters activities (regional/international HQs, supply chain management), and logistics and supply chain management.

An amendment bill is expected to be introduced in the Legislative Council in Q4 2026. If passed, qualifying companies could see their profits tax rate drop from the standard 16.5% down to 8.25% or even 5%.

Common mistake: assuming any Hong Kong company in finance or tech automatically qualifies. It won't. The government has explicitly stated that concessions will be based on the value the enterprise brings — job creation, R&D spending, revenue contribution, and local substance all matter.

Physical Commodity Trading: Half-Rate Tax + Gold Ecosystem Push

Hong Kong is going all-in on commodity and gold trading. The government will implement a half-rate tax concession for physical commodity trading — cutting the 16.5% profits tax to 8.25% on qualifying trading profits.

Beyond the half-rate, the government will also explore additional tax concessions for qualifying activities within the gold and commodity trading ecosystem. Consultations on these expanded concessions are planned for 2027.

Why gold specifically? Hong Kong already has over 60,000 sqm of LME-approved warehouse space with capacity exceeding 20,000 metric tons of metals. The Gold Central Clearing and Settlement System is scheduled to launch in Q1 2027. HKEX will also announce details of new RMB-denominated, physically-settled gold futures contracts. And the Exchange Fund is studying a moderate increase in its gold holdings, with existing inventory to be gradually transferred to designated warehouses of the Gold and Silver Exchange Society.

For businesses involved in commodity trading, precious metals, or related financial services, this is a signal to start positioning now — the infrastructure is being built out and the tax regime is becoming competitive.

Corporate Treasury Centres: Two-Tier Regime Coming in 2027

The existing CTC tax concession already gives qualifying treasury centres an 8.25% rate on qualifying profits. Following a public consultation that concluded in September 2026, the government is now introducing a two-tier enhancement:

• Tier 1 (all QCTCs): Enhanced tax deduction for interest expenses and clarifications to the existing regime. The 75% safe harbour rules and central management & control (CMC) requirement are retained.
• Tier 2 (pre-approved QCTCs): Additional tax benefits and operational flexibility, including removal of the 75% safe harbour rules and a shift from CMC to a "normal management or control" requirement. Valid for a 5-year period subject to IRD approval.

Separate bank accounts and financial statements will be required for CTC vs. non-CTC business under Tier 2. The amendment bill is planned for H1 2027.

For multinational groups using Hong Kong as a regional treasury hub, the Tier 2 pre-approval route is worth watching closely — it addresses many of the pain points companies have raised about the current regime's rigidity.

IP Capital Expenditure: Tax Deductions for Purchasing and Licensing IP

To lower IP trading costs and support technology transfer, the government will introduce a bill in 2026 allowing tax deductions for capital expenditure incurred when purchasing IP rights or licensing IP rights.

This follows refined proposals released in May 2026. Currently, capital expenditure on IP is generally not deductible unless it falls within specific categories like R&D. The new rules should make it more cost-effective for companies to acquire technology, brands, and other intangible assets through Hong Kong entities.

What This Means for Your Business

If you're running a Hong Kong company or considering setting one up, here's what to do now:

• HQ and treasury functions: If your group has cross-border financing, cash pooling, or supply chain management activities, map them against the enhanced CTC and HQ concession criteria. The value-based approach means documenting substance matters more than ever.
• Commodity and gold trading: Watch for the half-rate concession details and the Q1 2027 gold clearing system launch. Hong Kong is positioning itself as a full-stack gold trading hub — warehousing, trading, clearing, and financing.
• IP-heavy businesses: Plan IP acquisition or licensing timing around the new deduction rules expected later this year.

None of these concessions are automatic. Each requires specific qualification criteria, documentation, and in some cases, pre-approval from the IRD. Getting your structure right early — before the bills pass — can make a significant difference in what you're able to claim.

Need help assessing whether your business qualifies for any of these new tax concessions, or planning your Hong Kong company structure to maximise benefits? Email Lemon Accountancy at info@lcpa.com.cn or call +852-55749538. We handle Hong Kong company setup, tax planning, CTC advisory, and compliance for businesses of all sizes.

Disclaimer: This article provides general information based on the 2026 Policy Address announcements and is current as of September 2026. Proposed measures are subject to legislative approval and may change. It does not constitute legal or tax advice. Consult a qualified professional for advice specific to your circumstances.