Which Business Expenses Are Tax-Deductible in Hong Kong? The Rules, and the Common Cases

By Di Ma, Project Manager 29 OCT 2026 · 4 MIN READ

"Is this deductible?" is the question every business owner asks about a receipt. In Hong Kong the answer comes from two sections of the Inland Revenue Ordinance: section 16, which says what can be deducted, and section 17, which lists what can't. Here's how they work, and how the common expenses fall.

The general rule: section 16

In working out a company's assessable profits, section 16(1) allows a deduction for all outgoings and expenses, to the extent they're incurred during the basis period in the production of profits chargeable to tax. Three parts of that sentence do the work:

"Incurred": the expense belongs to the period, whether or not it's been paid yet. That's why accruals matter (see month-end adjustments).
"In the production of profits": it has to be spent for the business, not for someone's private benefit.
"Chargeable to tax": if some of the company's profits aren't chargeable in Hong Kong, the expenses for earning them generally aren't deductible here either.

Section 16 then names specific items, including interest on money borrowed to produce the profits (subject to detailed conditions), rent for premises used for the business, bad debts, and repairs.

What section 17 disallows

Section 17(1) says no deduction is allowed for, among other things:

Domestic or private expenses, expressly including the cost of travelling between home and the place of business;
Spending not for producing the profits;
Capital expenditure, and the cost of improvements;
Amounts recoverable under insurance or an indemnity;
Rent and costs of premises not used for producing the profits;
Tax under the Ordinance itself, so profits tax isn't deductible;
Employer retirement contributions, including regular MPF contributions, to the extent they exceed 15% of the employee's total pay for the period.

Capital isn't lost, it's claimed differently. A laptop or a van isn't an expense for tax, but depreciation allowances or the full deduction for computers and software usually give relief (see fixed assets and depreciation).

Donations

Donations generally aren’t deductible under section 16, because they don’t produce profits, but section 16D allows a separate deduction for approved charitable donations, if they total at least HK$100 in the year, up to 35% of assessable profits. Keep the charity's receipt, and keep donations in their own account so they're easy to find.

Common expenses at a glance

Generally deductible

Office rent, for premises used for the business (premises not used aren't: s.17(1)(f)).
Salaries and staff costs, but employer MPF and retirement contributions only up to 15% of each employee's pay (s.17(1)(h)).
Business travel and entertainment, but not the private part, or travel between home and the office (s.17(1)(a)).
Repairs (s.16(1)(e)); improvements are capital, not repairs (s.17(1)(d)).
Interest on business borrowing, if the detailed conditions in s.16(2) are met; check with your adviser.
Bad debts once they're bad (s.16(1)(d)), but only debts first taxed as trading receipts (see bad debts).
Donations to approved charities, under s.16D: at least HK$100 in the year, capped at 35% of assessable profits.

Not deductible, or claimed differently

Equipment, computers, vehicles: capital (s.17(1)(c)), relieved through depreciation allowances or the s.16G deduction instead.
Profits tax itself (s.17(1)(g)).
Losses covered by insurance, to the extent the insurer pays (s.17(1)(e)).
A director's personal spending: private (s.17(1)(a)). Book it to the director's current account, not to expenses.

How it works in the tax computation

The profits tax computation starts from the profit in your accounts, then adds back what isn't deductible (private spending, capital items, depreciation, donations, profits tax) and deducts what's allowed separately (depreciation allowances, approved donations). That's why it helps to keep those items in their own accounts all year rather than in "general expenses" (see the chart of accounts).

The Certanta client portal, income statement of the fictional demo company Harbourfront Trading Ltd for 1 January to 30 September 2026, with expense lines including bank charges, depreciation, freight and delivery, office and IT, professional and audit fees, rent and rates, staff salaries and MPF, and travel and entertainment. — The expense lines in the demo company's income statement: the starting point for the tax computation, kept in accounts that separate what's treated differently.

Records: the deduction is only as good as the receipt

Every deduction needs evidence: the invoice or receipt, and for anything that could look private, a note of the business purpose. Records must be kept for at least seven years (section 51C). See lost a receipt?

How Certanta helps

Every expense filed with its document, from receipts in any language, company card or director-paid.
Accounts that separate what the tax computation treats differently: entertainment, donations, depreciation, capital items, director's personal spending.
The profits tax return prepared from your books, with the computation, included on monthly plans (see pricing). You sign and file.

Frequently asked questions

What business expenses are tax-deductible in Hong Kong?

Under section 16(1) of the Inland Revenue Ordinance, all outgoings and expenses incurred during the basis period in the production of profits chargeable to profits tax, including rent for business premises, repairs, bad debts and, subject to conditions, interest on business borrowing.

What expenses are not deductible?

Section 17(1) disallows domestic or private expenses (including travel between home and work), spending not for producing the profits, capital expenditure and improvements, amounts recoverable under insurance, premises not used for the business, tax under the Ordinance itself, and employer retirement and MPF contributions above 15% of an employee's pay.

Is profits tax deductible in Hong Kong?

No. Section 17(1)(g) disallows any tax paid or payable under the Inland Revenue Ordinance, other than salaries tax paid in respect of employees' remuneration.

Are charitable donations deductible for a company?

Approved charitable donations are deductible under section 16D if they total at least HK$100 in the year, up to 35% of the company's assessable profits.

Can I deduct the cost of a laptop or equipment?

Not as an expense, because it is capital. Relief comes through depreciation allowances, or for computer hardware and software through the full deduction in section 16G.

Are employer MPF contributions deductible?

Yes, up to 15% of each employee's total pay for the period; regular contributions above that are disallowed by section 17(1)(h).

Expenses booked so the tax computation is easy

Certanta files every expense with its document, in accounts that separate what the tax computation treats differently, and prepares the profits tax return from your books, included on monthly plans.

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This article summarises the Inland Revenue Ordinance (Cap. 112) as published on e-Legislation on 29 October 2026. It is general information, not tax advice. Whether a particular expense is deductible depends on the facts, including whether all of the company's profits are chargeable in Hong Kong; ask your tax adviser.