• Service: Tax, Global Compliance Management Services, International Tax
  • Type: Regulatory update
  • Date: 9/4/2013

Hong Kong - Tax treatment of plant, machinery, equipment 

September 4: Recent judicial actions in Hong Kong concern the tax treatment of a taxpayer’s sale of plant and machinery, and concern deductions and depreciation allowances for the taxpayer’s plant and equipment located outside Hong Kong.

Balancing charge

Hong Kong’s Court of Appeal in August 2013 granted the Commissioner of Inland Revenue leave to appeal to the Court of Final Appeal in a case concerning whether a balancing charge is to be imposed on the taxpayer with respect to the sale of plant and machinery.

At issue was the Commissioner’s contention that there was a clear finding that there was a sale of the taxpayer’s business, including the facility (being the plant and machinery, prescribed fixed assets and industrial buildings for the purpose of the balancing charges), and that the sale value of each item of the assets must be apportioned.

Deduction, depreciation allowances for plant, equipment located outside Hong Kong

Hong Kong’s Court of Final Appeal on 19 August 2013 dismissed the application for leave to appeal filed by the taxpayer concerning whether an arrangement with Chinese mainland factories for the provision of moulds was within the statutory definition of a “lease.”

Thus, the Inland Revenue Department’s position stands, so that no deduction or depreciation allowances are allowable when plant and equipment are made available by Hong Kong taxpayers to factories outside Hong Kong to manufacture its products.

Read a September 2013 report [PDF 409 KB] prepared by the KPMG member firm in Hong Kong: Application for leave to appeal to the Court of Final Appeal: Aviation Fuel Supply Company v CIR and Braitrim (Far East) Limited v CIR

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