Can I Claim Home Office Expenses as a Business Expense in Hong Kong?
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.
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What Inland Revenue Department (IRD) says
Section 16 of the Inland Revenue Ordinance allows deductions for expenses incurred wholly, exclusively, and necessarily in the production of assessable profits. The IRD accepts proportional home-office claims where a defined portion of the premises is used exclusively for business, not as a combined living/working space. The deduction is allowed only to the extent the expense is incurred in the production of chargeable profits. Rent, rates and utilities for a home are private in nature, so the claim must show that a distinct part of the home is used only for the business. Corporations deduct the cost in the profit and loss account, and sole traders deduct it in the computation of assessable profits.
When you can claim
- A dedicated room used exclusively and regularly as a home office (proportional share of rent, rates, management fees, electricity)
- Broadband and telephone costs attributable to business use
- Home office furniture and equipment depreciation based on business-use proportion
- Costs where a clear log or floor-plan can demonstrate the business proportion
- Rent paid by the company to the director for a part of the home under a written lease at market rate
When you cannot claim
- The full rent or mortgage payments (only the business-use proportion applies)
- Rooms used for both personal and business purposes with no clear exclusive allocation
- Mortgage interest for a home used partly for business (only a proportional deduction of interest may be claimed)
- Capital costs of home improvements not directly related to the business workspace
- Home insurance and furniture for the family areas of the home
Good to know
Pro tip: Document the floor plan showing the dedicated office space as a percentage of total floor area. Apply that percentage to rent, rates, and utilities. The IRD expects the space to be genuinely exclusively used for work, not a spare bedroom that doubles as an office.
Important: Home office claims by a company director who also lives in the property can attract an IRD enquiry. A written lease or licence between the director and the company, a market rent and proof of payment support the claim. Business records must be kept for at least 7 years under section 51C of the Inland Revenue Ordinance.
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