Bill introduced to grant tax deduction for lease reinstatement costs and tax depreciation allowances for used buildings acquired after their usage period expired

Last Friday on 18 October 2024, the Inland Revenue (Amendment) (Tax Deductions for Leased Premises Reinstatement and Allowances for Buildings and Structures) Bill 2024 (the Bill) was gazetted.

The Bill seeks to amend the Inland Revenue Ordinance (IRO) to implement the following profits tax enhancement measures as proposed in the 2024-25 Budget starting from the year of assessment (YA) 2024/25:

(a) Introduction of a tax deduction for expenses incurred by a lessee for reinstating the condition of premises under a lease to their original condition (reinstatement costs); and

(b) Removal of the time limit for claiming annual allowances in respect of a commercial or industrial building or structure. The proposed removal would enable buyers who acquired an old building or structure after the expiry of its usage period of 25 or 50 years as specified under the current provisions of the IRO to claim annual industrial or commercial building allowances in respect of the building or structure.

This alert explains the background and major provisions of the Bill. Clients who have any questions on the Bill can contact their tax executives.