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Denial of Depreciation Allowances — Is There Equity in Tax Law?

Over recent years, controversial debates have occurred over the interpretation and application of section 39E of the Inland Revenue Ordinance (IRO), since the Inland Revenue Department (IRD) does not allow Hong Kong taxpayers to claim depreciation allowances on their plant or machinery used outside Hong Kong under import-processing arrangements. Given that the plant or machinery forms an integral element, or even the core component, of the taxpayers’ business operations, this has given rise to a demand to come up with possible solutions to iron out their concerns. Entrepreneurs in the manufacturing industry are even pushing the legislative authorities to put their concerns over this issue at the top of the agenda.