Hong Kong Ordinances

INLAND REVENUE ORDINANCE - SECT 40

Interpretation

(Past version on 21/05/2004).
(Past version on 17/04/1998).
(Past version on 30/06/1997).



*(1) In this Part-

"basis period" (評稅基期) has the meaning assigned to it by section 2
except that-

   (a)  where 2 basis periods overlap the period common to both shall be
        deemed to fall in the first basis period only, and

   (b)  where there is an interval between the end of the basis period for one
        year of assessment and the beginning of the basis period for the next
        year of assessment the interval shall be deemed to fall in the second
        basis period but where, in respect of salaries tax, the interval is
        the year ending on 31 March 1973, that interval shall not be deemed to
        fall in the second basis period; (Replaced 49 of 1956 s. 28. Amended 8
        of 1973 s. 8)

"capital expenditure" (資本開支)-

   (a)  includes interest paid and commitment fees incurred in respect of a
        loan made for the sole purpose of financing the provision of an
        industrial building or structure or commercial building or structure
        or machinery or plant; but

   (b)  does not include expenditure which is reimbursed by way of or
        attributable to any grant, subsidy or similar financial assistance and
        in relation to the person incurring the expenditure does not include
        any expenditure which is allowed to be deducted in ascertaining for
        the purpose of Part IV the profits of a trade, profession or business
        carried on by that person; (Replaced 30 of 1981 s. 7. Amended 32 of
        1998 s. 25)

"capital expenditure on the provision of machinery or plant"
(在提供機械或工業裝置方面的 資本開支) includes
capital expenditure on alterations to an existing building incidental to the
installation of that machinery or plant for the purposes of the trade,
profession or business;

"class of machinery or plant"
(該類機械或工業裝置、類別的機械或工業裝置) means the items
of machinery or plant for which the same rate of depreciation is prescribed by
the Board of Inland Revenue; (Added 63 of 1980 s. 4)

"commercial building or structure" (商業建築物或構築物) means any
building or  structure or part of any building or structure used by the person
entitled to the relevant interest for the purposes of his trade, profession or
business other than an industrial building or structure; (Replaced 35 of 1965
s. 22. Amended 26 of 1969 s. 22)

"industrial building or structure" (工業建築物或構築物) means any
building or  structure or part of any building or structure used-

   (a)  for the purposes of a trade carried on in a mill, factory or other
        similar premises; or

   (b)  for the purposes of a transport, tunnel, dock, water, gas or
        electricity undertaking or a public telephonic or public telegraphic
        service; or (Amended 39 of 1969 s. 5)

   (c)  for the purposes of a trade which consists of the manufacture of goods
        or materials or the subjection of goods or materials to any process;
        or

   (d)  for the purposes of a trade which consists in the storage-

        (i)    of goods or materials which are to be used in the manufacture
               of other goods or materials; or

        (ii)   of goods or materials which are to be subjected in the course
               of a trade to any process; or

        (iii)  of goods or materials on their arrival into Hong Kong; or
               (Amended 7 of 1986 s. 12)

   (e)  for the purposes of the business of farming;

   (f)  for the purposes of research and development related to any trade,
        profession or business, (Amended 32 of 1998 s. 25; 9 of 2004 s. 5)
        and, in particular, the said expression includes any
        building or structure or part of any building or structure used by a
        person carrying on a trade, undertaking or business specified in
        paragraphs (a) to (e) of this definition and provided by him for the
        welfare of workers employed in his trade, undertaking or business and
        in use for that purpose: Provided that-

        (i)    where part of the whole of a building or structure is, and part
               thereof is not, an industrial building or structure, and the
               capital  expenditure which has been incurred on the
               construction of the second mentioned part is not more than
               one-tenth of the total capital expenditure which has been
               incurred on the construction of the whole building or 
               structure, the whole building or structure and every part
               thereof shall be treated as an
               industrial building or structure; and

        (ii)   subject to the provisions of paragraph (i) of this proviso but
               notwithstanding anything else contained in the foregoing
               provisions of
this definition, the expression "industrial building or structure"
(工業建築物或構 築物) shall not include any building or structure or
part of any building or  structure used as a dwelling house (other than as a
dwelling house for the housing of manual workers), retail shop, showroom,
hotel or office; (Replaced 35 of 1965 s. 22)

"relevant interest" (有關權益) means, in relation to any expenditure
incurred on the construction of a building or structure the interest in that
building or structure to which the person who incurred the expenditure was
entitled when he incurred it; (Amended 49 of 1956 s. 28)
+"residue of expenditure" (開支剩餘額)-

   (a)  in relation to a commercial building or structure- (Amended 12 of 2004
        s. 13)

        (i)    subject to subparagraph (ii), means the amount of the capital 
               expenditure incurred on the construction of the
               building or structure reduced by- (A) the amount of any
               initial allowance made under section 34(1); (B) the amount of
               any annual allowance made under section 33A or 34(2); (C) the
               amount of any balancing allowance made under section 35, or
               under section 33B or 35 that was in force immediately before
               the commencement# of the Inland Revenue (Amendment) Ordinance
               2004 (12 of 2004), and increased by the amount of any
               balancing charge made under section 35, or under section 33B or
               35 that was in force immediately before the commencement# of
               the Inland Revenue (Amendment) Ordinance 2004 (12 of 2004); or

        (ii)   where the building or structure is a building or structure to
               which section 33A(4) applies, means the amount of the
               capital expenditure incurred on the construction of the
               building or structure as determined under section 33A(4)(a)
               reduced by- (A) the amount of any initial allowance made under
               section 34(1) in respect of any year of assessment commencing
               on or after 1 April 1998; (B) the amount of any
               annual allowance made under section 33A or 34(2) in respect of
               any year of assessment commencing on or after 1 April 1998; (C)
               the amount of any balancing allowance made under section 35, or
               under section 33B or 35 that was in force immediately before
               the commencement# of the Inland Revenue (Amendment) Ordinance
               2004 (12 of 2004), in respect of any year of assessment
               commencing on or after 1 April 1998, and increased by the
               amount of any balancing charge made under section 35, or under
               section 33B or 35 that was in force immediately before the
               commencement# of the Inland Revenue (Amendment) Ordinance 2004
               (12 of 2004), in respect of any year of assessment commencing
               on or after 1 April 1998: Provided that in computing the
               residue of expenditure there shall be written off, in respect
               of any year in which no allowance fell to be made under
               section 33A or 34, an amount of one-twenty-fifth of the capital
expenditure, and for the purposes of this proviso "year" (年) means the
period which would have comprised a year of assessment commencing on 1 April
1998 or any subsequent year of assessment in respect of which an
annual allowance would have fallen to be made under section 33A if the
building or structure had been in use as a commercial building or  structure;
(Added 32 of 1998 s. 25)

   (b)  in relation to an industrial building or structure, means the amount
        of the capital expenditure incurred on the construction of the
        building or structure reduced by-

        (i)    the amount of any initial allowance made under section 34(1);

        (ii)   the amount of any annual allowance made under section 33A or
               34(2);

        (iii)  the amount of any balancing allowance made under section 35, or
               under section 33B or 35 that was in force immediately before
               the commencement# of the Inland Revenue (Amendment) Ordinance
               2004 (12 of 2004), and increased by the amount of any
               balancing charge made under section 35, or under section 33B or
               35 that was in force immediately before the commencement# of
               the Inland Revenue (Amendment) Ordinance 2004 (12 of 2004):
               Provided that in computing the residue of expenditure there
               shall be written off, in respect of any year in which no
               allowance fell to be made under section 33A or 34, an amount of
               one-fiftieth of the capital  expenditure in the case of a year
               prior to the year of assessment commencing on 1 April 1965, and
               one-twenty-fifth of the capital  expenditure in the case of
               such or any subsequent year of assessment, and
for the purposes of this proviso "year" (年) means the period which would
have comprised a year of assessment in respect of which an initial or
annual allowance would have fallen to be made under section 34(1) or (2), as
the case may be, if the building or structure had then been in use as an
industrial building or structure and the provisions of section 34 had then
been in force. (Replaced 35 of 1965 s. 22. Amended 32 of 1998 s. 25; 12 of
2004 s. 13)

(2) For the purposes of this Part, any capital expenditure incurred for the
purposes of a trade, profession or business by a person about to carry on such
trade, profession or business shall be treated as if it had been incurred by
that person on the first day upon which he does carry on such trade,
profession or business. (Added 35 of 1965 s. 22)

(3) References in this Part to capital expenditure incurred on the
construction of a building or structure do not include any expenditure
incurred on the acquisition of, or of rights in or over, any land. (Added 29
of 1982 s. 11) (Replaced 36 of 1955 s. 46)
___________________________________________________________________________
___ Notes:

* The amendment made by 9 of 2004 to section 40(1) applies in relation to the
year of assessment commencing on 1 April 2004 and to all subsequent years of
assessment. (Please see 9 of 2004 s. 1(2))

+ The amendments made by 12 of 2004 to this definition apply in relation to
the year of assessment 2004/05 and to all subsequent years of assessment.
(Please see 12 of 2004 s. 2(3))

# Commencement date: 25 June 2004.

"basis period" (評稅基期)

"capital expenditure" (資本開支)

"capital expenditure on the provision of machinery or plant"
(在提供機械或工業裝置方面的 資本開支)

"class of machinery or plant"
(該類機械或工業裝置、類別的機械或工業裝置)

"commercial building or structure" (商業建築物或構築物)

"industrial building or structure" (工業建築物或構築物)

"relevant interest" (有關權益)

"residue of expenditure" (開支剩餘額)

"year" (年)