Hong Kong Profits Tax - Deductible Allowances -- Hong Kong Business -- kaizen
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Hong Kong Profits Tax - Deductible Allowances

The following allowances are deductible from assessable profits for profits tax purposes.

  • A deduction is allowed for a contribution (or provision for a contribution) by an employer amounting to not more than 15% of the employee's annual salary into a recognized retirement scheme registered under the Occupational Retirement Schemes Ordinance . (It is in any event an offence for an employer to operate a pension scheme that is not registered under this Ordinance). Since the Mandatory Provident Fund Scheme came into effect on 1st December 2000 allowable deductions are either 5% of an employee's gross salary or a maximum of US$2,560 per month.
  • Full deduction is allowed for charitable donations not exceeding 10% of annual assessable profits after deduction of depreciation allowances but prior to losses carried forward being added in.
  • Hong Kong tax paid on foreign income which by law is chargeable to profits tax in Hong Kong is an allowable deduction for profits tax purposes. (N.B. foreign source income is not normally subject to tax in the territory).
  • Any property tax already paid is deductible from income for profits tax purposes;
  • Depreciation allowances for capital equipment are as follows:
    • 100% first year allowances for manufacturing plant and machinery;
    • 100% first year allowances for computer equipment;
    • 60% of the cost of all other plant and machinery can be written off in the first year with a rate of 10-30% written off thereafter.
    • 20% of the cost of construction of an industrial building can be written off in the 1st year with 4% per annum thereafter.
    • Expenditure incurred refurbishing or renovating business premises can be written off in 5 equal instalments.
    • In May, 2004, LEGCO expanded the scope of deduction for research and development expenses under profits tax to cover design-related expenses.


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