46
CAP. 112]
Inland Revenue
[1989 Ed.
16B. Expenditure on scientific research
(1) Notwithstanding anything in section 17, in ascertaining the profits from any trade or business in respect of which a person is chargeable to tax under this Part for any year of assessment there shall, subject to subsection (2), be deducted the following payments made, and expenditure incurred, by such person during the basis period for that year of assessment (other than any amount which is allowable as a deduction apart from this section), namely
(a) payments to—
(i) an approved research institute for scientific research related to that trade or business; or
(ii) an approved research institute, the object of which is the undertaking of scientific research related to the class of trade or business to which that trade or business belongs; and
(b) expenditure on scientific research related to that trade or business, including capital expenditure except to the extent that it is expenditure on land or buildings or on alterations, additions or extensions to buildings.
(2) Where any payment or expenditure to which this section refers is made or incurred outside Hong Kong and the trade or business in relation to which it is so made or incurred is carried on partly in and partly out of Hong Kong, the deduction allowable under this section shall be such part of the amount which would otherwise be allowable as is reasonable in the circumstances. (Amended 7 of 1986 s. 12)
(3) (a) Where any plant or machinery, representing scientific research expenditure of a capital nature which pursuant to subsection (1)(b) has been allowed as a deduction in ascertaining the profits from a trade or business, ceases to be used by the person carrying on the trade or business for scientific research related to that trade or business and is then or thereafter sold by him, the proceeds of sale shall be treated as a trading receipt of the trade or business accruing at the time of the sale or, if the sale occurs on or after the date on which the trade or business is permanently discontinued, accruing immediately before the discontinuance.
(b) Where any such plant or machinery is destroyed, it shall for the purposes of paragraph (a) be treated as if it had been sold immediately before the destruction thereof and any insurance moneys or other compensation of any description received by the person carrying on the trade or business in respect of the destruction and any money received by him in respect of the remains of the plant or machinery shall be treated as if they were proceeds of that sale.