In general, Profits Tax is imposed for a year of assessment ending on 31st March upon Hong Kong assessable profits for the year ending on the preceding 31st March. Adjustments are made in appropriate cases for other accounting years and for assessments on the commence- ment and cessation of a business.
3. EXEMPTIONS AND DEDUCTIONS.
Dividends received from a corporation which is subject to Hong Kong Profits Tax, as well as amounts already included in the assessable profits of other persons chargeable to Profits Tax, are exempt from Profits Tax.
Generally, all expenses to the extent to which they have been in- curred by the taxpayer in the production of chargeable profits are allowed as deductions including—
(1) Interest on funds borrowed and rent of buildings or land
occupied for the purpose of producing the profits.
(2) Bad and doubtful debts [any recoveries to be treated as income
when received].
(3) Depreciation allowances, subject to certain limitations.
(4) Repairs of articles, premises, plant and machinery used in
producing the profits.
(5) Registration in the Colony of a trademark used in the business. (6) Expenditure for scientific research and payments for technical
education subject to certain rules.
(7) Employers' annual contributions or premiums paid to approved retirement scheme funds, limited in respect of any one employee to fifteen per cent of his total emoluments for the relevant period.
In computing the profits deduction is specifically prohibited in respect of the following:-
(1) Domestic or private expenses and any sums not expended
for the purpose of producing the profits.
(2) Any loss or withdrawal of capital, the cost of improvements
and any expenditure of a capital nature.
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