Deduction of interest on operating business loans

Taxpayers borrow money to operate businesses and pay interest. If the interest generates business profits, it can be tax deducted, but the following conditions must be met:

• The loan was borrowed by a financial institution or a utility company

• The loan is borrowed from a non-financial institution or an overseas financial institution, and the interest paid is subject to profits tax

• Loans are guaranteed by the borrower itself or its associates’ deposits in a financial institution or another financial institution

• The borrowed loan is fully and purely funding the purchase

• Machinery or industrial installations, and this expenditure is eligible for depreciation allowance

• Machinery or industrial equipment used for R&D activities

• Operating inventory

• Fixed assets as prescribed in Article 16G(6) of the Inland Revenue Ordinance, such as computer software and hardware

• Environmentally friendly machinery or environmentally friendly vehicles

The above information is for reference only. If in doubt, we welcome your tax inquiries

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