What expenses cannot be deducted for Hong Kong profits tax?

Section 17 of the Inland Revenue Ordinance bars deductions for, among others:

• Domestic or private expenses, and any sum not spent to produce the profits.
• Any loss or withdrawal of capital, improvements, and other capital expenditure (though depreciation allowances may be available separately).
• Sums recoverable under insurance or an indemnity.
• Rent of, or expenses on, premises not occupied or used to produce the profits.
• Taxes under the Inland Revenue Ordinance (except salaries tax paid on employees' remuneration).
• Any remuneration or interest on capital or loans paid to the sole proprietor or to partners, or their spouses, and Mandatory Provident Fund (MPF) contributions for them except as allowed (for example the self-employed mandatory contribution, up to HK$18,000).

Common practical issues

• Director's salary paid by a company is deductible if genuine and wholly for business, but personal expenses paid by the company are not.
• Entertainment, travel and "personal use" costs are often adjusted; keep records showing business purpose.
• Fines and penalties are not specifically listed in the Inland Revenue Department's (IRD's) guide, but they usually fail the "incurred in producing profits" test.
• Provisions that are not actual losses, for example general bad-debt provisions, may be disallowed until actual write-off.

Your tax computation adds these back to accounting profit.