On October 18,2024, the Inland Revenue (Amendment) (Tax Deductions for Leased Premises Reinstatement and Allowances for Buildings and Structures) Bill 2024 is set to be gazetted. This new legislation aims to introduce two significant enhancements to the profits tax framework as part of the 2024-25 Budget: a tax deduction for expenses related to reinstating leased premises and the removal of the time limit for claiming annual allowances on industrial and commercial buildings.
Key Provisions of the Bill
Under the proposed Bill, lessees who are required to restore their leased premises to their original condition—either at the end of the lease or upon early termination—are eligible to claim tax deductions for the reasonable costs incurred in the reinstatement process. This change is designed to ease the financial burden on tenants and promote responsible management of leased properties.
In addition, the Bill addresses the current limitations on claiming annual allowances for industrial and commercial buildings. Traditionally, these allowances could only be claimed by qualifying taxpayers during a specified usage period. If a taxpayer sold a building before this period ended, the buyer could continue to claim allowances. However, once the usage period expired, no further claims could be made—even if there were outstanding expenses. The proposed amendment aims to eliminate this time constraint, allowing buyers to claim annual allowances until all eligible expenses have been fully utilized, thereby encouraging the purchase of older properties.
Government’s Stance on the Bill
A government spokesperson remarked, “These two enhancement measures are designed to lighten the tax load for taxpayers while fostering a more conducive business environment. Since reinstatement costs typically form a minimal portion of a taxpayer’s overall income, we anticipate minimal impact on government revenues from the proposed deductions.” Furthermore, referencing data from the 2022/23 assessment year, the spokesperson noted that removing the time limit for claiming annual allowances might lead to an estimated reduction of approximately $164 million in annual government revenue.
Legislative Process and Implementation
The Inland Revenue Amendment Bill 2024 will be presented to the Legislative Council for its first reading on October 30. If approved, these measures are slated for implementation in the 2024/25 assessment year, promising to reshape the landscape of tax deductions related to commercial leases and buildings. By creating a more flexible tax environment, the government hopes to stimulate economic growth and encourage investment in property, ultimately benefiting the broader business community.
Read about China’s New VAT Law and its impacts on economy.
For further details, clarification, contributions or any concerns regarding this article, please feel free to reach out to us at editorial@tax.news. We value your feedback and are committed to providing accurate and timely information. Please note that all inquiries will be handled in accordance with our privacy policy
