資訊
Jul-29-2009 Extension of the Deductibility of Interest Incurred on Loans to Finance Capital Expenditure
Under section 16(2)(e)(i) Inland Revenue Ordinance (“IRO”), subject to the relationship between the lender and borrower, interest incurred on funds to finance capital expenditure incurred on providing plant and machinery which qualifies for depreciation allowances is deductible for profits tax purposes.
However, interest incurred on loans to purchase plant and machinery the capital cost of which qualifies as a deductible expense in the year of acquisition is not a qualifying deductible expense as the assets do not qualify for depreciation allowances. Plant and machinery falling into this category are prescribed fixed assets, plant and machinery used for research, development (Section 16B IRO) and environmental protection (Section 16H(1) IRO).
The Inland Revenue (Amendment) (No.2) Bill 2009, recently introduced into the Legislative Council, includes proposed amendments to rectify this anomaly. Interest incurred on loans to finance the plant and machinery referred to above is to be specifically included in Section 16(2)(e)(i) IRO as a deductible expense.