Hong Kong Taxation Depreciation allowance.pptxVIP

Hong Kong Taxation -- Depreciation allowanceW.L.Ho Co.Plant and machineryCalculation of depreciation allowance for the purpose of profits tax and salaries tax.Initial allowance – 60%.Annual allowance – 10%, 20%, 30% pooling system.Different treatment:Cash purchase: pooling items, eligible for IAHire purchase: non-pooling, only the capital portion of the down payment and installments paid are eligible for IAPrivate assets introduce without consideration: pooling items, not eligible for IAPrescribed fixed assets/Environmental protection machinery: fully deductible, not entered into the pooling system.Plant and machineryInitial allowance:IA = Capital expenditure * 60%IA is granted in the year of the expenditure occurs.No matter whether the plant and machinery is in use or not during the basis period. Annual allowanceAA is granted to a person who owns or once owned plant and machinery which is or was in use. AA is still granted to a person who has sold all plant and machinery as long as he is still carrying on the business. Plant and machinery10%30%Total WDV b/f800,000400,000Example – cash purchaseTax written down values brought forward:Purchase of vehicle (AA 30%) HK$900,000Purchase of furniture (AA 20%) HK$250,000Purchase of photocopier (AA 20%) HK$100,000Compute the depreciation allowance for this year.Plant and machinery10% pool20% pool30% poolAllowanceW.D.V b/f800,0000400,000Additions350,000900,000Less:I.A.210,000140,000540,000360,000750,000800,000140,000760,000Less:A.A80,00028,000228,000336,000W.D.V c/f720,000112,000532,000Total DA1,086,000SolutionPlant and machineryExample-Hire purchaseA down-payment of 60,000 was paid on 1 July 2009Repayable by 24 monthly installments of 10,000 each started from 1 August 2009.Close accounting year at 31 DecemberMotor car – 30%Plant and machineryHire purchase 30%Cash prices300,000Less: I.A (2009/10)[60,000+(240,000*5/24)]*60%66,000234,000Less: A.A (234,000*30%)70,200W.D.V163,800Less: I.A (