What are Deductible Expenses? 

Generally, all outgoings and expenses, to the extent to which they have been incurred by the taxpayer in the production of chargeable profits, are allowed as deductions. Reference can be made to section 16 of the I.R.O. 
 
A transfer of certain allowable head office administrative expenses by means of a charge to a local branch or subsidiary in Hong Kong would be allowed as a deduction for Hong Kong tax purposes, to the extent to which they were incurred during the basis period for the year of assessment in the production of profits chargeable to tax. 
 
Non-deductible Items 
 
In computing the assessable profits deduction is specifically prohibited in respect of the following:- 
 
domestic or private expenses and any sums not expended for the purpose of producing the profits; 
any loss or withdrawal of capital, the cost of improvements and any expenditure of a capital nature; 
any sum recoverable under insurance or contract of indemnity; 
rent of or expenses relating to premises not occupied or used for the purpose of producing the profits; 
taxes payable under the I.R.O., except Salaries Tax paid in respect of employees' remuneration; 
any remuneration or interest on capital or loans payable to or, subject to section 16AA, contribution made to a mandatory provident fund scheme in respect of the proprietor or the proprietor's spouse or, in case of a partnership, to its partners or their spouses.