In any year of assessment, the outgoings and expenses incurred by the taxpayer’s business operations to generate assessable profits can be deducted. Outgoings and expenses are sometimes paid for two or more purposes at the same time. If the used part is of a private nature or has nothing to do with business, no deduction can be claimed. Therefore, taxpayers must use apportionment methods to separate out the expenditures related to business purposes and the proportions of expenditures. If necessary, the Inland Revenue Department may require the taxpayer to submit basic documents to support the basis of apportionment. Another situation is that sometimes the profits of the taxpayer’s business are derived from both the Hong Kong and overseas parts. In order to be reasonable and fair, business outgoings and expenses should be limited to the portion of profits derived from Hong Kong. Therefore, taxpayers must make a reasonable allocation of outgoing and expenses when filing taxes.
The above information is for reference only. If in doubt, we welcome your tax inquiries