Deductions for Capital Expenditure on Environment-friendly Vehicles under Profits Tax

On profits tax, the Financial Secretary proposed to provide from the year of assessment 2010/11 onwards tax deductions for capital expenditure on environment-friendly vehicles.

The categories of eligible vehicles will be set out in a Schedule in the Inland Revenue Ordinance. They mainly cover some electric vehicles, hybrid electric vehicles promulgated by the Environmental Protection Department (EPD) and other eligible vehicles required under schemes or ordinances administered by the EPD. The Schedule will be announced when the relevant amendment bill to the Inland Revenue Ordinance is published in the gazette. However, it should only be regarded as final when the relevant law is enacted.

The proposed tax deduction is not limited to new purchases of environment-friendly vehicles. Eligible vehicles already in use by a business are also eligible for the deduction. The reducing value of the eligible vehicles under the depreciation allowance regime will be treated as specified capital expenditure for which deduction will be provided accordingly.

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