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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