1. I am the sole-proprietor and a partner of 2 companies who is liable to pay Profits Tax. Am I entitled to the basic or other tax allowances (such as child, single parent, dependent parent, dependent grandparent or dependent brother/sister allowances), and Home Loan Interest deduction?
   
   
2. I bought two machines for $200,000 and a second-hand lorry for $50,000. The purchase costs are capital expenditure and cannot be deducted from my assessable profits. Is there any relief that I can claim?
   
   
3. Are all properties bought by my company for business purposes qualified for building allowances?

Profits from sole-proprietorship or partnership businesses are taxed at the standard rate (16% for year of assessment 2004/05 onwards) under "Profits Tax". However, if you are eligible to choose "Personal Assessment", you may also claim the following deductions and the tax on your income will be computed at the progressive rates applicable to "Salaries Tax":

1. interest incurred on money borrowed for the purpose of producing property income (the amount deductible should not exceed the net assessable value of the individual property let);
2. approved charitable donations;
3. elderly residential care expenses (from year of assessment 1998/99 onwards);
4. home loan interest (from year of assessment 1998/99 onwards);
5. business losses incurred in the year of assessment;
6. losses brought forward from previous years under "Personal Assessment"; and
7. Personal allowances (include but not limited to basic allowance, child allowance, dependent parent allowance, etc.).

If you are married and your spouse has assessable income, the option of Personal Assessment must be chosen by both of you in the tax returns (so that you and your spouse can enjoy the above allowances and deductions).

You can claim for depreciation allowances. Please refer to the summary below:

• Initial Allowance ("IA") is 60% of the cost of the machinery or plant, to be granted in the year of asset purchase.
• Annual Allowance ("AA") is by nature a "wear and tear" allowance, granted annually on the reducing value of machinery or plant at 10%, 20% or 30% as laid down in the Inland Revenue Rules, a subsidiary legislation under the Inland Revenue Ordinance.
• Some examples of the rates of AA for the more common machinery or plant :

• A "Pooling System" was introduced in 1980/81. All items of machinery and plant qualifying for AA at the same rate are brought together in one "Pool", with additional items added to, and disposal proceeds subtracted from, the "Pool".
• A balancing charge arises where the disposal proceeds exceed the reduced value of the "Pool".
• A balancing allowance can only be granted to you on the cessation of the business.
• The allowances that you may claim for your machines and lorry for the year of purchase and the next two years are shown in the table below.

Notes:

* Your assessable profits for Year 4 will be increased by the balancing charge of $3,040.

** An AA will be given in respect of the sold machines every year until the balance of the "20% Pool" is reduced to zero. (In practice, this will rarely happen. Under normal circumstances, there would be new assets added to this "20% Pool".)

No. Certain specified conditions have to be satisfied before an allowance is granted. Broadly speaking, the relevant allowances are classified into 2 groups: "industrial buildings allowances" and "commercial buildings allowances" . For details, please refer to the Inland Revenue Department's Departmental Interpretation & Practice Notes No. 2 (Revised).