July 22 2019

Departmental Interpretation and Practice Notes on foreign taxes deduction for profits tax purposes – issued

Source: IBFD Tax Research Platform News

On 19 July 2019, Hong Kong's Inland Revenue Department issued an updated Departmental Interpretation and Practice Notes (DIPN) 28 to set out the Department's interpretation and practice on the provisions relating to foreign tax deduction after the enactment of the Inland Revenue (Amendment) (No. 6) Ordinance 2018.

The main contents of DIPN 28 are summarized below.

Rules of tax on profits

All outgoings and expenses that are not capital in nature, to the extent that they are incurred in the production of taxable profits, are deductible for profits tax purposes.

Deduction of foreign taxes on specified interest and gains

If a foreign tax is paid in a territory outside Hong Kong that has a treaty in force with Hong Kong, and the relevant treaty provides relief from double taxation by way of a tax credit, a Hong Kong resident person can only apply for a tax credit under section 50 of the Inland Revenue Ordinance (IRO). A non-Hong Kong resident person not covered under the relevant treaty may seek unilateral relief from its residence jurisdiction or bilateral relief under the treaty between its residence jurisdiction and the treaty territory (if any).