The Hong Kong Inland Revenue Department has Departmental Interpretation and Practice Notes (DIPN) No. 54 on taxation of aircraft leasing activities. DIPN No. 54 covers the tax concession for qualifying aircraft lessors introduced by the 2017 Amendment (No. 3) Ordinance, which includes that a qualifying aircraft lessor is entitled to have its qualifying profits from an aircraft leasing business charged at one-half of the corporate profits tax rate for a year of assessment if an irrevocable election is made and in the year of assessment:
A corporation is a qualifying aircraft lessor for a year of assessment if, in the basis period for that year of assessment:
When a qualifying aircraft lessor makes the election for the profits tax rate concession, the depreciation allowance will be denied in respect of the capital expenditure incurred on the provision of the aircraft concerned for the year in which the half rate concession applies. To compensate for the loss of depreciation allowance, a 20% tax base concession is provided, which includes that the net lease payments to be included in the assessable profits is equal to 20% of the tax base (i.e., gross lease payments less deductible expenses, excluding tax depreciation).
Click the following link for DIPN No. 54 for additional information, including several examples.
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