Hong Kong Regulations

INLAND REVENUE RULES - RULE 2A

General apportionment of outgoings and expenses

METHOD OF ASCERTAINMENT, FOR THE PURPOSES OF SECTION 16 OF THE ORDINANCE, OF
THE EXTENT TO WHICH OUTGOINGS AND EXPENSES ARE INCURRED IN THE PRODUCTION OF
PROFITS IN RESPECT OF WHICH A PERSON IS CHARGEABLE TO TAX UNDER PART IV OF THE
ORDINANCE

(1) No deduction shall be allowed for any outgoing or expense incurred in the
production of profits not arising in or derived from Hong Kong, but where any
outgoing or expense was incurred partly in the production of profits arising
in or derived from within Hong Kong and partly in the production of profits
arising or derived from outside Hong Kong, then, for the purpose of
ascertaining the extent to which such outgoing or expense is deductible under
section 16 of the Ordinance, an apportionment thereof shall be made on such
basis as is most appropriate to the activities of the trade, profession or
business concerned. (7 of 1986 s. 12)

(2) Where, apart from or in addition to the circumstances referred to in
paragraph (1) as giving rise to an apportionment, it is necessary to make an
apportionment of any outgoing or expense by reason of it having been incurred
not wholly and exclusively in the production of profits in respect of which a
person is chargeable to tax under Part IV of the Ordinance, such apportionment
or further apportionment, as the case may be, shall, subject to the provisions
of rules 2B and 2C, be made on such basis as is most reasonable and
appropriate in the circumstances of the case. (L.N. 129 of 1965)