Hong Kong Ordinances

INLAND REVENUE ORDINANCE - SECT 26E

Home loan interest

(Past version on 25/06/2004).
(Past version on 01/04/2003).
(Past version on 17/04/1998).

(1) Subject to the other provisions of this section and to section  26F ,
where a person pays during any year of assessment any home loan  interest for
the purposes of a home loan obtained in respect of a dwelling which is used at
any time in that year of assessment by the person exclusively or partly as his
place of residence, a deduction in respect of the home loan interest shall be
allowable to that person for that year of  assessment.

(2) (a) Subject to paragraphs (b) and (c) and subsection

(3), a deduction allowable to a person under subsection (1) in respect of any
home loan interest paid by the person during any year of assessment shall be-

        (i)    (A) where the dwelling is used by the person exclusively as his
               place of residence during the whole of that year of assessment,
               the amount of the home loan interest paid; or (B) in any other
               case, such amount (whether representing the full amount of the
               home loan interest paid or any part thereof) as is reasonable
               in the circumstances of the case; or

        (ii)   the amount specified in Schedule 3D in relation to that year 
               of assessment, whichever is of the lesser amount.

   (b)  For the purposes of this section, where a dwelling is held by a person
        otherwise than as a sole owner, the amount of the home loan  interest
        paid referred to in paragraph (a)(i) shall be regarded as having been
        paid-

        (i)    where the dwelling is held by the person as a joint tenant, by
               the joint tenants each in proportion to the number of the joint
               tenants; or

        (ii)   where the dwelling is held by the person as a tenant in common,
               by the tenants in common each in proportion to his or her share
               in the ownership in the dwelling.

   (c)  For the purposes of paragraph (a), where a dwelling is held by a
        person otherwise than as a sole owner, the relevant amount specified
        in Schedule 3D referred to in paragraph (a)(ii) shall be regarded as
        having been reduced-

        (i)    where the dwelling is held by the person as a joint tenant, in
               proportion to the number of the joint tenants; or

        (ii)   where the dwelling is held by the person as a tenant in common,
               between the tenants in common each in proportion to his or her
               share in the ownership in the dwelling.

(3) (a) Where any home loan interest is paid by a person during any
year of assessment for the purposes of a home loan obtained in respect of a
dwelling which is used at any time in that year of assessment by that person
exclusively or partly as his place of residence, but the loan was not applied
wholly for the acquisition of the dwelling, the deduction allowable to the
person under subsection (1) for that year of  assessment in respect of the
home loan interest paid shall be such part of the amount of the
home loan interest paid as is reasonable in the circumstances of the case.

   (b)  Where any home loan interest is paid by a person during any
        year of assessment for the purposes of a home loan obtained in respect
        of a dwelling which is used at any time in that year of assessment by
        that person exclusively or partly as his place of residence, but the
        person has paid during that year of assessment any other
        home loan interest for the purposes of a home loan obtained in respect
        of any other dwelling which is also used at any time in that
        year of assessment by that person exclusively or partly as his
        place of residence, a deduction shall, subject to subsection (4), be
        allowable to the person under subsection (1) for that
        year of assessment in respect of both the first-mentioned home 
        loan interest and the second-mentioned home loan interest, and the
        deduction so allowable shall be such amount (whether representing the
        full amount of the aggregate of the respective amounts of the
        first-mentioned home loan interest and the second-mentioned
        home loan interest or any part thereof) as is reasonable in the
        circumstances of the case.

(4) A deduction shall not be allowable under this section to a person in
respect of any home loan interest paid during any year of  assessment for the
purposes of a home loan obtained in respect of a dwelling where-

   (a)  the sum representing the home loan interest is allowable as a
        deduction under any other section of this Ordinance;

   (b)  any other home loan interest paid in respect of any other dwelling has
        been allowed to the person as a deduction for that year of  assessment
        under this section other than by virtue of subsection (3)(b); or

   (c)  a deduction has been allowed to the person under this section, whether
        in respect of the same dwelling or in respect of any other dwelling,
        for 10 years of assessment (whether continuous or not). (Amended 9 of
        2004 s. 3; 13 of 2006 s. 2)

(5) For the purposes of subsection (4)(c), where a deduction allowable to a
person under this section has been taken into account in any
year of assessment in ascertaining-

   (a)  subject to paragraphs (b) and (c), the net chargeable income of the
        person;

   (b)  where the person and his or her spouse have made an election under
        section 10(2), the aggregated net chargeable income of the person and
        his or her spouse; or

   (c)  where the person or the person and his or her spouse have made an
        election under section 41, the amount of the assessment made under
        section 42A(1) in respect of the person or the person and his or her
        spouse, the person shall be deemed to have been allowed the deduction
        under this section for that year of assessment.

(6) (a) A claim by a person to a deduction allowable to him under this section
may only be revoked by the person by notice in writing to the Commissioner
within 6 months after the date on which the deduction is allowed to him under
this section.

   (b)  Where a claim is revoked under paragraph (a), the claim shall be
        deemed not to have been made.

(7) The Commissioner may, for the purposes of this section, approve in writing
any organization or association as a recognized organization or  association.

*(8) For the purposes of this section, where a person pays any home 
loan interest for the purposes of a home loan obtained in respect of a
dwelling which is used by that person exclusively or partly as his place 
of residence in the circumstances described in subsection (1), and the
home loan was applied also for the acquisition of a car parking space, the car
parking space shall be deemed- (Amended 12 of 2004 s. 8)

   (a)  to be part and parcel of the dwelling; and

   (b)  to be used by that person in the same manner and to the same extent as
        the dwelling is used as his place of residence.

(9) In this section-

"dwelling" (住宅) means any building or any part of a building-

   (a)  which is designed and constructed for use exclusively or partly for
        residential purposes; and

   (b)  the rateable value of which is separately estimated under section 10
        of the Rating Ordinance ( Cap 116);

"home loan" (居所貸款), in relation to a person claiming a deduction under
this section for any year of assessment, means a loan of money which is-

   (a)  applied wholly or partly for the acquisition of a dwelling which-

        (i)    during any period of time in that year of assessment is held by
               the person as a sole owner, or as a joint tenant or tenant in
               common; and

        (ii)   during that period of time is used by the person exclusively or
               partly as his place of residence; and

   (b)  secured during that period of time by a mortgage or charge over that
        dwelling or any other property in Hong Kong;

"home loan interest" (居所貸款利息), in relation to a person claiming a
deduction in respect of a dwelling under this section, means interest paid by
the person as a sole owner, or as a joint tenant or tenant in common of the
dwelling for the purposes of a home loan to-

   (a)  the Government;

   (b)  a financial institution;

   (c)  a credit union registered under the Credit Unions Ordinance (
        Cap 119);

   (d)  a money lender licensed under the Money Lenders Ordinance ( Cap  163);

   (e)  the Hong Kong Housing Society;

   (f)  an employer of the person; or

   (g)  any recognized organization or association;

"place of residence" (居住地方), in relation to a person who has more than
one place of residence, means his principal place of residence;

"recognized organization or association" (認可組織或協會) means any
organization or association approved as such by the Commissioner under
subsection (7).

(10) For the avoidance of doubt, where any person has been allowed a deduction
under the provisions of this section in force immediately before 1 April 2003
or in force immediately before 1 April 2005, or has been regarded as having
been allowed such deduction by virtue of section  26F (2)(b), for any
year of assessment, that year of assessment shall be regarded as a
year of assessment for which a deduction has been allowed for the purposes of
subsection (4)(c). (Added 9 of 2004 s. 3. Amended 13 of 2006 s. 2) (Part IVA
added 31 of 1998 s. 12)
___________________________________________________________________________
_____ Notes:

* The amendment made by 12 of 2004 to this subsection applies in relation to
the year of assessment 1998/99 and to all subsequent years of assessment.
(Please see 12 of 2004 s. 2(2))

"dwelling" (住宅)

"home loan" (居所貸款)

"home loan interest" (居所貸款利息)

"place of residence" (居住地方)

"recognized organization or association" (認可組織或協會)