An assignment occurs when IP is transferred from its existing owner (called an assignor) to a new owner (called an assignee).

This can occur when:

• IP is bought and sold;
• IP created by a contractor (such as a software engineer or design consultant) is transferred by the contractor to the contractor’s customer; or
• IP created by a contract research organisation is transferred by it to its customer.

Another common way that IP can effectively be bought and sold is by acquiring a company which owns an IP, instead of acquiring the IP itself. By acquiring the company, the acquirer effectively acquires the company’s IP as well.

Such an acquisition can occur when companies merge, or when one company takes over another company.

Expansion of the scope of tax deductions for capital expenditure incurred for purchase of IP rights

With the commencement of the Inland Revenue (Amendment) (No. 5) Ordinance 2018 (the "Amendment Ordinance") on 29 June 2018, capital expenditure incurred by enterprises for the purchase of eight types of IP rights are deductible from profits tax starting from the year of tax assessment 2018/19.

The additional three types of IP rights involved are rights in:-

• layout-designs (topographies) of integrated circuits;
• plant varieties; and
• performances.

The original deductible five types of IP rights are:

• patents;
• know-how;
• copyright;
• registered designs; and
• registered trade marks.

The Amendment Ordinance also expands the scope of tax deductions originally provided for the registration expenses for trade marks, designs and patents, to cover those for plant variety rights as well.