Depreciation Allowances in Hong Kong

Depreciation Allowances in Hong Kong

There are three main form of depreciation allowance in Hong Kong

Industrial Buildings and Structures

Special allowances are given in respect of capital expenditure incurred on the construction of industrial buildings and structures used in certain trades. An initial allowance of 20% of such capital expenditure is given in the year of expenditure and an annual allowance of 4% of the expenditure is given until the total expenditure is written off.

Commercial Buildings and Structures

A building or structure which is not an industrial building or structure but is nevertheless used for the purposes of a trade, profession or business (other than as stock in trade) can qualify for an annual “commercial building allowance” of 4% of the capital expenditure incurred on the construction of such building or structure.

Plant and Machinery

The following allowances on capital expenditure incurred on the provision of plant and machinery for the purpose of producing chargeable profits, except those assets referred to under “Tax Incentives” above, are deducted in arriving at the assessable profits:

  • An initial allowance at 60% on the cost of plant and machinery.
  • Annual allowances at rates prescribed by the Board of Inland Revenue on the reducing value of the asset. The rates are 10%, 20% and 30% according to the estimated working life of the particular category of plant or machinery
  • A balancing allowance based on the unallowed expenditure compared with moneys received on disposal of the plant and machinery is available on cessation of a business to which there is no successor
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