Environment-friendly Vehicles

To encourage the business sector to purchase more electric vehicles, hybrid vehicles and other environment-friendly commercial vehicles, the Financial Secretary proposed to accelerate the tax deduction for capital expenditure on environment-friendly vehicles.

According to the Inland Revenue Ordinance (Cap. 112), businesses are entitled to a total of 72% of the capital expenditure as deduction of depreciation allowance in the first year of its purchase of the specified machinery (taking the category of motor vehicle as example). Starting from the second year onwards, businesses will be granted annual allowances at the rate of 30% (applicable for the category of motor vehicle) of the reducing value for that specified machinery. Under the proposed tax relief, the tax deduction provided to a business in the first year of purchase of an eligible Environment-friendly Vehicle will be increased from 72% to 100% of the capital expenditure. Thus, the deduction of cost is accelerated.

The Inland Revenue (Amendment) (No.3) Ordinance was gazetted on 18 June 2010. For further details regarding this new tax deduction, please visit the following websites:

FAQ: Tax Deduction for Environment-friendly Vehicles