Which business expenses are deductible for Hong Kong profits tax?

The general rule in the Inland Revenue Ordinance is that outgoings and expenses are deductible to the extent they are incurred in the production of profits chargeable to profits tax (section 16). The Inland Revenue Department's (IRD's) guide lists common items:

• Interest on money borrowed for the business, subject to conditions.
• Rent and rates of business premises.
• Bad and doubtful debts (recoveries are taxable when received).
• Repairs of premises, plant, machinery used to earn profits (improvements are capital).
• Registration costs of trade marks, designs, patents.
• Employer's contributions to Mandatory Provident Fund (MPF) or a recognised retirement scheme, limited to 15% of an employee's total emoluments.
• Research and development, within the rules.
• Approved charitable donations of at least HK$100 in total, capped at 35% of adjusted assessable profits.
• Reinstatement costs of leased premises (from 2024/25).

Specific write-offs apply to some capital items: certain IP purchases, refurbishment of premises over 5 years, manufacturing machinery and computer hardware/software written off at once, and depreciation allowances on plant (see the answers on research and development and depreciation allowances).

Evidence. Keep invoices and explain business purpose; the IRD wants schedules for large or unusual items such as fees to related parties, commissions and repairs.