đź“‹ Key Facts at a Glance
- Green Finance Grant Extended: The Green and Sustainable Finance Grant Scheme now runs through 2027, supporting over 600 green debt instruments worth US$167 billion
- Super R&D Deductions: Qualifying R&D activities get 300% tax deduction on first HK$2 million, 200% on remaining amounts
- Immediate Green Asset Write-offs: 100% immediate tax deduction available for environmental protection equipment, renewable energy devices, and electric vehicles
- Carbon Credit Tax Exemption Proposed: New tax exemptions for carbon credits and emission derivatives under enhanced UFE regime (consultation closed January 2025)
- Direct R&D Funding: Green Tech Fund provides up to HK$30 million per project, with HK$147 million approved for 33 projects as of December 2024
Did you know that Hong Kong has transformed into Asia’s leading green finance hub with one of the most comprehensive tax incentive ecosystems for sustainable investments? As businesses worldwide grapple with decarbonisation challenges, Hong Kong offers unprecedented opportunities to turn environmental responsibility into financial advantage. From “super deductions” for green R&D to grants for sustainable bonds and proposed tax exemptions for carbon credits, discover how your business can benefit from Hong Kong’s evolving green tax landscape in 2024-2025.
Green and Sustainable Finance Grant Scheme: Your Pathway to Green Financing
The cornerstone of Hong Kong’s green finance incentives is the Green and Sustainable Finance (GSF) Grant Scheme, which has been so successful that the 2024-25 Budget extended it through 2027. This isn’t just another government program—it’s a proven catalyst that has already supported over 600 green and sustainable debt instruments worth approximately US$167 billion.
What Exactly Does the Scheme Cover?
The GSF Grant Scheme provides tangible financial support in two key areas:
- General bond issuance costs: Legal fees, stock exchange listing fees, and related professional expenses
- External review costs: Pre-issuance and post-issuance third-party opinions and verification services
For green and sustainable loans, subsidies are limited to external review costs only. The expanded scheme now covers not just traditional green bonds but also sustainable bonds, sustainability-linked bonds, and the newly added transition bonds and loans—providing crucial flexibility for industries on their decarbonisation journey.
Digital Bond Grant Scheme: Innovation Meets Sustainability
In November 2024, Hong Kong launched the Digital Bond Grant Scheme (DBGS), marking a significant leap in sustainable finance technology. This innovative program encourages the use of distributed ledger technology in green bond issuances, positioning Hong Kong at the forefront of digital securities markets.
| Grant Type | Amount | Requirements |
|---|---|---|
| Half Grant | HK$1.25 million (50% of eligible expenses) | Issuances meeting Basic Requirements |
| Full Grant | HK$2.5 million (50% of eligible expenses) | Issuances meeting all Additional Requirements |
The scheme accepts applications from 28 November 2024 for an initial three-year period, providing a clear window for businesses to leverage this cutting-edge incentive.
Enhanced R&D Tax Deductions: Supercharging Green Technology Innovation
Hong Kong’s “super tax deduction” for research and development, introduced in the 2018/19 assessment year, provides game-changing benefits for companies investing in green technology innovation. This isn’t just a tax break—it’s a strategic advantage for businesses developing sustainable solutions.
| Expenditure Type | Amount Range | Deduction Rate |
|---|---|---|
| Type A Expenditure | All amounts | 100% |
| Type B Expenditure | First HK$2 million | 300% |
| Type B Expenditure | Amount exceeding HK$2 million | 200% |
Qualification Requirements You Need to Know
To unlock these enhanced deduction rates, your business must meet specific criteria:
- R&D activities must be conducted in Hong Kong
- Activities can be carried out by your company or outsourced to designated local research institutions
- Only consumables and staff costs directly related to R&D qualify
- Expenses must be exclusively and directly attributable to qualifying R&D activities
Environmental Protection Equipment: 100% Immediate Deduction
Since the 2018-19 assessment year, Hong Kong has offered accelerated capital allowances for environmental investments that fundamentally change the tax treatment of green assets. This means you can write off qualifying environmental investments immediately rather than over several years.
What Qualifies for Immediate Deduction?
Capital expenditure on the following qualifies for 100% immediate deduction in the year of acquisition:
- Environmental protection machinery and installations
- Energy-efficient building installations registered under HKEERSB (Hong Kong Energy Efficiency Registration Scheme for Buildings)
- Renewable energy devices
- Environment-friendly vehicles (hybrid and electric vehicles)
Carbon Credits and Emission Derivatives: The Next Frontier in Green Tax Incentives
In November 2024, the Financial Services and Treasury Bureau (FSTB) issued a groundbreaking consultation paper proposing significant enhancements to Hong Kong’s preferential tax regimes, with major implications for green investments. This represents Hong Kong’s strategic move to become a regional carbon trading hub.
Proposed Expansion of Unified Fund Exemption (UFE)
The consultation proposed including carbon credits and emission derivatives as qualifying assets under three key tax regimes:
- Unified Fund Exemption (UFE)
- Family-Owned Investment Holding Vehicle (FIHV) tax concession
- Carried Interest Tax Concession
The proposed scope includes emission derivatives traded on systems like the UK Emissions Trading Registry and the European Union Emissions Trading System, plus carbon credits traded on HKEX’s Core Climate platform—the only marketplace in Asia-Pacific offering HKD and RMB settlement for international carbon credit transactions.
Green Tech Fund: Direct R&D Support Beyond Tax Deductions
Beyond tax deductions, the Green Tech Fund (GTF) provides direct financial support for green technology research and development projects. With a total allocation of HK$400 million, this fund represents a substantial commitment to sustainable innovation.
| Parameter | Details |
|---|---|
| Total Allocation | HK$400 million |
| Funding Range | HK$2.5 million to HK$30 million per project |
| Maximum Duration | 5 years |
| Projects Approved (as of Dec 2024) | 33 projects, HK$147 million committed |
| Current Application Period | Fifth round: 23 December 2024 – 24 March 2025 |
Priority Areas for Funding
The GTF prioritises projects supporting Hong Kong’s decarbonisation objectives in:
- Net-zero electricity generation
- Energy saving and green buildings
- Green transport
- Waste reduction and resource recovery
- Promotion of new energy technology
Additional Green Initiatives: Building a Comprehensive Ecosystem
2025-26 Budget: New Green Tax Measures
The 2025-26 Budget introduced additional green incentives that further strengthen Hong Kong’s sustainable finance ecosystem:
- Green methanol tax exemption: Tax exemption for green methanol used for marine bunkering
- EV charging subsidy: HK$300 million to support installation of 3,000 fast chargers by 2030
- GreenTech Hub: Development of InnoCentre in Kowloon Tong to house over 200 green technology companies
- Talent development: Pilot Green and Sustainable Finance Capacity Building Support Scheme extended to 2028, having approved over 5,700 applications
Environment-Friendly Commercial Vehicles
Since April 2008, businesses investing in environmentally friendly commercial vehicles meeting Euro V emission standards receive First Registration Tax (FRT) reductions:
- 100% reduction for taxis, light buses, non-franchised buses, and special purpose vehicles
- 50% reduction for goods vehicles (except van-type up to 1.9 tonnes)
- 30% reduction for van-type goods vehicles up to 1.9 tonnes permitted gross vehicle weight
Practical Considerations for Maximising Green Tax Benefits
Documentation Requirements You Can’t Afford to Miss
To successfully claim green tax incentives, maintain these crucial documents:
- EMSD compliance certificates: For HKEERSB-registered energy-efficient installations
- Detailed R&D expenditure records: Segregating Type A and Type B costs
- Proof of Hong Kong-based R&D activities: Or outsourcing to designated local institutions
- Purchase invoices and documentation: For environmental equipment and vehicles
- External review reports: For green bond/loan issuances claiming GSF grants
Strategic Planning for Maximum Benefit
To maximise your green tax benefits, consider these strategic approaches:
- Coordinate green building certification (BEAM Plus) with HKEERSB registration for equipment
- Structure R&D activities to ensure Hong Kong nexus and proper cost categorisation
- Consider digital bond issuances to access both GSF and DBGS grants
- Monitor final regulations on carbon credits following January 2025 consultation close
- Evaluate Green Tech Fund eligibility for larger R&D initiatives before relying solely on tax deductions
âś… Key Takeaways
- Hong Kong has established Asia’s most comprehensive green tax incentive ecosystem, spanning grants, enhanced deductions, and accelerated capital allowances
- The Green and Sustainable Finance Grant Scheme’s extension to 2027 provides long-term certainty for sustainable financing
- Enhanced R&D deductions (up to 300%) and immediate 100% capital allowances for environmental equipment deliver substantial cash flow benefits
- The proposed inclusion of carbon credits in preferential tax regimes positions Hong Kong as a regional carbon trading hub
- With mandatory climate disclosures approaching (2026-2028), green investments qualifying for tax incentives will become increasingly important for compliance
- Proper documentation of HKEERSB registration and R&D nexus requirements is essential for maximising available benefits
- The convergence of tax incentives, direct grants, and evolving ESG regulations creates an optimal environment for green technology innovation
Hong Kong’s green tax incentives represent more than just financial benefits—they’re a strategic framework for businesses to align profitability with planetary responsibility. As the global transition to sustainable business practices accelerates, companies that leverage these incentives today will gain competitive advantages tomorrow. Whether you’re issuing green bonds, developing clean technologies, or investing in energy-efficient infrastructure, Hong Kong’s comprehensive suite of tax incentives provides tangible pathways to turn environmental commitment into business success. The time to act is now, with clear application deadlines and extended grant schemes offering unprecedented opportunities for forward-thinking businesses.
đź“š Sources & References
This article has been fact-checked against official Hong Kong government sources and authoritative references:
- Inland Revenue Department (IRD) – Official tax rates, allowances, and regulations
- Rating and Valuation Department (RVD) – Property rates and valuations
- GovHK – Official Hong Kong Government portal
- Legislative Council – Tax legislation and amendments
- Financial Services and Treasury Bureau – Green and Sustainable Finance Grant Scheme details
- 2024-25 Budget – Green Future Initiatives – Official budget documents on green incentives
- Green Tech Fund – Official fund information and application details
Last verified: December 2024 | Information is for general guidance only. Consult a qualified tax professional for specific advice.
English 
Chinese