Generally, all outgoings and expenses, to the extent to which they have been incurred by the taxpayer in the production of chargeable profits and that are not capital in nature are allowed as deduction. However, there are certain expenditures that has relevant special deduction rules/tax relief.

Donations
Charitable donations made to approved charitable institutions or trusts of a public character or to the Hong Kong Government, amounting in aggregate not less than HK$100 but not exceeding 35% of the adjusted assessable profits before deduction of donations, are allowable for deduction in computing the assessable profits.

Tax Depreciation of Fixed Assets

• Industrial buildings and structures: An initial allowance of 20% on the cost of construction of premises can be claimed for a qualified industrial building or structure, in addition to the annual allowance of 4%. Balancing allowance or charge will apply upon disposal of the premises.
• Commercial buildings and structures: An annual allowance of 4% on the cost of construction of premises can be claimed for a qualified commercial building or structure. Balancing allowance or charge will apply upon disposal of the premises.
• Plant and Machinery: An initial allowance of 60% on the cost on plant and machinery. An annual depreciation allowance at three prescribed rates of 10%, 20% and 30% on the reducing value of each depreciate rate “pools”. Balancing allowance is available only on cessation of business to which there is no successor. A balancing charge can, however, arise whenever the disposal proceeds of one or more assets exceed the reducing value of the whole “pool” of assets to which the disposed items belong.

Expenditure on Building Refurbishment
Capital expenditure incurred on renovation or refurbishment of business premises is allowed to be deducted over a period of 5 years in equal instalments commencing from the year in which the expenditure is made.

Expenditure on computer hardware and software, and prescribed plant and machinery for manufacturing purposes
Full deduction is allowed in the basis period in which the expenditure was incurred.

Expenditure on Environmental Protection Facilities

• Environmental protection machinery: Full deduction is allowed in the basis period in which the expenditure was incurred.
• Environmental protection installation: With effect from the year of assessment 2018/19, a full deduction is allowed in the basis period in which the expenditure was incurred.
• Environment friendly vehicle: Full deduction is allowed in the basis period in which the expenditure was incurred.

Research and Development
For applicable research and development (R&D) expenditures incurred on 1 April 2018 onwards, qualifying R&D expenditures are now classified into Type A expenditures and Type B expenditures. Subject to certain conditions, Type A expenditure will be granted 100% normal deduction, while Type B expenditure will be entitled to a 300% deduction for the first HKD2 million of the expenditure and a 200% deduction for the remaining amount. There is no limitation on the amount of enhanced tax deduction.

Source：Hong Kong Inland Revenue Department’s website

- https://www.ird.gov.hk/eng/tax/bus_pft.htm#06
- https://www.ird.gov.hk/eng/ppr/archives/18110201.htm