Hong Kong Ordinances

INLAND REVENUE ORDINANCE - SECT 42

Calculation of total income

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

(1) For the purposes of this Part the total income of an individual for any
year of assessment shall be the aggregate of the following amounts- (Amended
30 of 2004 s. 3)

   (a)  (i) (Repealed 56 of 1993 s. 21)

        (ii)   in respect of the years of assessment commencing on or after 1
               April 1983, the sum equivalent to the net assessable value as
               ascertained in accordance with sections 5(1A) and 5B; (Added 8
               of 1983 s. 12) Provided that where an individual is a joint
               owner or co-owner of property, that individual's share of the
               net assessable value shall be computed by apportioning the
               value ascertained in accordance with section  5 (1A) or 5B-

   (a)  in the case of joint ownership, between the joint owners equally; and

   (b)  in the case of ownership in common, between the owners in common each
        in proportion to his share in such ownership; (Added 52 of 1993 s. 3)

   (b)  the net assessable income of the individual for that year of 
        assessment; and (Replaced 71 of 1983 s. 21)

   (c)  subject to subsection (1A), the assessable profits of the individual
        for that year of assessment computed in accordance with Part IV:
        (Amended 32 of 1998 s. 27)

   (d)  (Repealed 17 of 1989 s. 10) Provided that there shall be deducted from
        that part of the total income arising from paragraph (a) the amount of
        any interest payable on any money borrowed for the purpose of
        producing that part of the total income where the amount of such
        interest has not been allowed and deducted under Part IV. (Amended 17
        of 1989 s. 10)

(1A) For the purposes of subsection (1)(c), any assessable profits in respect
of concessionary trading receipts shall be deemed to be the amount arrived at
by dividing such assessable profits by the adjustment  factor. (Added 32 of
1998 s. 27)

(2) There shall be deducted from the total income of an individual for any
year of assessment-

   (a)  such deductions as are under Part IVA allowable to the individual; and
        (Replaced 31 of 1998 s. 18)

   (b)  the amount of the individual's loss or share of loss for that
        year of assessment computed in accordance with Part IV.

(3)-(4) (Repealed 31 of 1998 s. 18)

(5) (a) Where in any year of assessment the aggregate amount of the deductions
under subsection (2)(a) and the loss under subsection

(2)(b) for an individual exceeds the total income of the individual-

        (i)    subject to subparagraph (ii), that part of the amount of such
               excess not exceeding the amount of the loss under subsection
               (2)(b) for the individual for that year of assessment shall be
               carried forward to be set off against the total income of the
               individual for future years of assessment;

        (ii)   where the total incomes of the individual and his or her spouse
               are required to be aggregated under section 42A(1), the amount
               of such excess shall be reduced as far as can be done by being
               set off against the total income of his or her spouse for that
               year of assessment as reduced under subsection (2), and that
               part of the amount of such excess not exceeding the amount of
               the loss under subsection (2)(b) for the individual for that
               year of assessment which is not so reduced shall be carried
               forward to be set off against the total income of the
               individual for future years of assessment.

   (b)  Where paragraph (a) does not apply and in any year of  assessment the
        amount of the loss under subsection (2)(b) for an individual exceeds
        the total income of the individual-

        (i)    subject to subparagraph (ii), the amount of such excess shall
               be carried forward to be set off against the total income of
               the individual for future years of assessment;

        (ii)   where the total incomes of the individual and his or her spouse
               are required to be aggregated under section 42A(1), the amount
               of such excess shall be reduced as far as can be done by being
               set off against the total income of his or her spouse for that
               year of assessment as reduced under subsection (2), and that
               part of the amount of such excess which is not so reduced shall
               be carried forward to be set off against the total income of
               the individual for future years of assessment.

   (c)  Where paragraphs (a) and (b) do not apply and in any year of 
        assessment the amount of the deductions under subsection (2)(a) for an
        individual exceeds the total income of the individual-

        (i)    subject to subparagraph (ii), the amount of such excess shall
               not be carried forward to be set off against the total income
               of the individual for future years of assessment;

        (ii)   where the total incomes of the individual and his or her spouse
               are required to be aggregated under section 42A(1), the amount
               of such excess shall be reduced as far as can be done by being
               set off against the total income of his or her spouse for that
               year of assessment as reduced under subsection (2), and that
               part of the amount of such excess which is not so reduced shall
               not be carried forward to be set off against the total income
               of the individual for future years of assessment. (Replaced 31
               of 1998 s. 18)

(6) Subsection (5)(a)(ii) and (b)(ii) shall apply, with any necessary
modifications, in relation to an individual who has elected to be personally
assessed under this Part and to his or her spouse where- (Amended 31 of 1998
s. 18)

   (a)  by reason of the application of section 41(1A), that individual could
        not have so elected unless his or her spouse did so too, had his or
        her spouse had income assessable under this Ordinance; and

   (b)  for this reason only he or she was able so to elect, as if the total
        income of both spouses had been required to be aggregated under
        section 42A(1). (Replaced 43 of 1989 s. 13)

(7) The amount of any excess set off under subsection (5) against an
individual's total income or that of the individual's spouse for any
year of assessment shall not be set off for any other year of assessment.

(8)-(9) (Repealed 30 of 2004 s. 3)

(10) Where an election is made by a husband and wife under section  41 (1A)
the total income (as reduced under subsections (2) and (5)) of each of them
shall be separately calculated under this section before both incomes are
aggregated under section 42A. (Replaced 43 of 1989 s. 13) (Replaced 7 of 1975
s. 30. Amended 71 of 1983 s. 21; 43 of 1989 s. 13)