What can Hong Kong businesses claim as expenses?
10 common business expenses with Inland Revenue Department (IRD)-compliant rules for limited companies, sole traders and contractors in Hong Kong.
Entertainment Expenses
Entertainment is deductible to the extent that it is incurred in the production of chargeable profits and is reasonable in the circumstances. Hong Kong has no blanket ban. Social entertaining and private entertainment are not deductible, and the taxpayer must keep records of the occasions, the people entertained and the receipts.
Equipment and Computer Hardware
Yes. Computer hardware and software and specified manufacturing plant and machinery can be written off in full in the year the cost is incurred. Other plant and machinery, such as office furniture and general equipment, gets a 60% initial allowance and then annual allowances at 10%, 20% or 30% on the reducing value.
Home Office Expenses
Yes. A proportional claim for home office costs is deductible under Section 16 of the Inland Revenue Ordinance where the home is used exclusively and regularly for business.
Interest on Borrowings
Interest on money borrowed to produce assessable profits is deductible. Interest on personal loans or loans for non-income-producing purposes is not. Related-party loan interest is subject to transfer pricing and thin capitalisation rules.
Motor Vehicle Expenses
The business-use proportion of motor vehicle costs is deductible. There is no published IRD per-kilometre rate. Capital allowances apply to the vehicle purchase price: an initial allowance of 60% where available for plant and machinery, then annual allowances at 10%, 20% or 30% on the reducing value.
Office Rent
Yes. Rent paid for business premises in Hong Kong is fully deductible as a trading expense under Section 16. This includes co-working memberships and serviced office fees.
Professional and Legal Fees
Yes for recurring revenue-purpose fees. Audit fees are always deductible. Legal fees for capital transactions (acquisition of assets, loan agreements for capital purchase) are capital and not deductible.
Staff Salaries and MPF
Yes. Employee salaries, bonuses, and employer MPF contributions (5%, capped at HKD 1,500/month) are fully deductible as business expenses under Section 16.
Training and Staff Development
Yes. Staff training and development costs are fully deductible. Director self-education expenses are deductible if directly related to existing skills required by the current trade.
Travel and Transport Expenses
Business travel is deductible; personal travel is not. There is no IRD mileage rate. Actual cost must be claimed and documented with the business purpose.