In this blog we will explore what are elderly residential care expenses and how tax policy is implemented by board of revenue department on such expenses. We will also have discussion on the allowances of Inland Revenue department for principal place of residence, home loan interest and home loan lender.

Mr. Chu was in perceptible income of $120,000 for the year 2015 to 16 and suffered an acceptable expanse of $10,000 during the year. Mr. Chu donated $50,000 to the Community Chest of Hong Kong in the Month of March 2016. After approved donation expense, Mr. Chu’s NAI for the year 2015 to 16 is like:

Mr. Chu

Computation of Salaries Taxes

Valuation Year 2015/16

Basis period: year ended March 31, 2016

Perceptible income


Less: Permissible outflow


Net perceptible income


Less: Permitted altruistic bequest (limited to $ 110,000 x 35%)


After permitted altruistic bequest, Net perceptible income


In the year 2015 to 16 Mr. Chu donated $50,000, he can only deduct the amount of $38,500, 35% of his NAI in that year.

The charitable donations that are made in the case of a husband and wife, by a spouse are to be deducted from the income of that spouse only. The criteria for deduction is subjected to 35% limit.  Any profound is allowed to be transfer to the other spouse.

No material benefit is derived in case of ‘pure’ donation. In a case of Sanford it was observed that in order to visit a charity show 10 cinemas tickets were purchased by taxpayer from the sellers having company setup in Hong Kong and price of each ticket was $300. The consideration that was received by the taxpayer were clearly showing that his amount of $3,000 does not qualify as a donation for charity.

A donation is not a legal duty it is a gift or moral duty. So this money for charity purpose should be transferred in the account of charitable institution voluntarily. This should not be as to fulfill the contractual responsibility.

Elderly Residential Administration Expenses

According to actual meanings of ‘residential care expenses’:

The expenses that are paid in accordance to the residential supervision that is received at a home of residential care is called ‘residential care expenses’ or RCE. The reference for this statement is taken from the Section 25D (5) of Hong Kong tax law. According to DIPN 36 the cost of supervision that is not residential is allowable to assessment from tax authorities of Hong Kong.

According to the Ordinance, a ‘residential care home’ is/are any premises that are licensed under it or a nursing home that is registered under Ordinance of Nursing homes, hospitals and Maternity homes registration.

Person Allowable for Deduction

Where a person or his/her partner pays during an assessment year but not as a partner living apart, then any RCE in the respect of grandparent or parent of that taxpayer at any time during that assessment year is:

  • Having age 60 or more than that
  • Or having age less than 60, becomes legally eligible to claim an allowance under the scheme of Government’s disability allowance.

According to Section 26D (1) the deduction will be allowed to that taxpayer for that year of assessment. Discussing an example.

During the year ended 31 March 2016 the following amounts of RCE were paid by Mr. Chan.

  • His father-in-law was 57 years old and is eligible under scheme of Government’s disability allowance to claim an allowance. The amount of $88,000 were paid by Mr. Chan in respect of him.
  • He paid amount of $55,000 in respect of his father who was 65-year-old.
  • He paid amount of $55,000 in respect of his mother who was 53-year-old.

Mr. Chan is also entitled for claiming this in respect of:

  • His father as age of him is more than 60 year.
  • His father in law who was eligible under scheme of Government’s disability allowance to claim an allowance.

Mr. Chan is eligible to claim elderly residential care expenses. As age of mother of Mr. Chan is less than 60 years so he was not allowed to claim elderly residential care expenses.




Amount to be deducted

In respect of each allowed grandparent or parent the maximum amount of elderly residential care expenses that are to be deducted under personal assessment or salaries tax for each of the assessment years 1998 - 99 to 2015 - 16, in accordance with Section 26D (3) and Schedule 3C.


Assessment year

1998-99 to 2011-12


2012-13 to 2013-14

2014-15 to 2015-16

Elderly residential care expenses





The payments that are not deductible also include payment to hospitals or doctors in the form of medical expenses.

Other Limitations in regards to RCE


A deduction that is specifically related to the elderly residential care expenses is not allowable in assessment year to more than one person. And this restriction is in respect of same parent of grandparent under Section 26D (4) of Hong Kong tax law.

A person will not be allowed a dependent grandparent allotment or dependent parent allotment if he has been granted a deduction for elderly residential care expenses for same assessment year for same grandparent/parent, as in Section 30 (5) and 30(6).

In accordance with previous example, in respect of his father of law of Mr. Chan has been allowed a deduction in term of elderly residential care expenses for the assessment year 2015 to 16, then:

  • In respect of his father-in-law, Mr. Chan will not be allowed for a deduction of allowance of dependent parent for the assessment year 2015 to 16.
  • In respect of father-in-law of Mr. Chan, it is not allowed to any other person to deduct the elderly residential care expenses for the assessment year 2015 to 16.

Interest on Loan for Home


Meanings of interest on loan for home?

The basic definition of ‘home loan’ is loan of money that is:

  • Secured by a contract during that period of time or change over any other property of a person in the premises of Hong Kong or change over that residence, in Section 26E (9).
  • Applied for the accession of residence partially or wholly which:

Is used by a person partly or exclusively as his place, during that period of time.

Is held by a person as a joint owner, having sole proprietorship HK or tenant in common during any period of time for that year of assessment.

The word ‘dwelling’ or residence is referred by definition of ‘home loan’. According to the specific definition word ‘dwelling’ means any part of ‘building’ or a ‘building’ that is to be estimated under Section 10 of the Rating Ordinance in that ‘rate able value’. The reference for this statement is taken from Section 26E (9) of Hong Kong tax law.

In the Inland Revenue Ordinance ‘building’ is not defined. In a case D 38/12 it was observed that, in order to finance the accession of a vessel a loan was obtained by person T. The loan was secured over the vessel by a contract. The interest was paid by T in respect of the loan and as a place of his residence vessel was used by T. T claimed the deduction as HLI for the payment of loan interest on the loan. The appeal of person T was dismissed by board of revenue because under the Section 10 of the Rating Ordinance the Vessel was not rate able.

The ‘building’ or dwelling should be present in the premises of Hong Kong of a person that is an employee or having sole proprietorship HK and the principal PoR of applicant. It was considered by board of revenue in the case D 44/10 that the expression ‘home loan interest’ only apply in relation to PoR. And PoR is used as ‘home’ by the taxpayer. To sleep at the premises of Hong Kong merely, is not irrefutable of residence. The question is strictly related to degree and fact. The relevant premises in order to claim the deduction of HLI must be primary or sole PoR of a person where he sleeps and lives.

Seeing an example to completely understand such situation. For the purpose of contract two properties were purchased by Mr. Cheung. One of these were in China while other one was in Hong Kong. He purchased these properties by savings and two loans for mortgage from Hang Seng Bank Ltd. In respect of his property in Hong Kong a deduction of HLI can be claimed by Mr. Cheung.

Primary Place of Habitant


In D 44/12, in respect of a property which was purchased by person T and his wife as joint tenants, a deduction of HLI was claimed in respect of that property. The accommodation at quarter E were provided by person T. And the son, daughter, and wife of T were allowed to reside at that quarter E. Quarter E was claimed as ‘living flat’ by T. Following usual home electrical appliances were present in Quarter E such as television, washing machine, air-conditioner, refrigerator, electric water heater, electric stove and rice cooker etc.


At quarter E, it was the duty of his wife to prepare the lunches and wash the clothes. It was insisted by T that he and his wife would go back to property A after holidays, work and over weekend. The assertions of T were still doubtful due to some evidences. These evidences include water usage and electricity usage at property. And these of his usage were extremely low at property A and almost zero in some cases. It was held by board of revenue department by considering all the evidences that it would be more suitable to regard E. This was due to the reason that the principal PoR of T and his wife should not be allowed any deduction of HLI in respect of property A.

Lender of Home Loan


In relation to an individual who claimed a deduction in respect of a dwelling under personal assessment or salaries tax ‘Home loan Interest’ means interest that is paid to:

  • A recognized association or company setup in Hong Kong that act as organization approved by CIR under Section 26E (9) of Hong Kong tax law.
  • An employer of a person providing Hong Kong incorporation services.
  • The housing society of Hong Kong.
  • The government of Hong Kong.
  • A money lender having license.
  • A financial institution.
  • A credit union that is registered.

Now we will discuss a similar example. A property at Shatin was purchased by Mr. Cheung. This purchasing of land by him was as his PoR in the form of loan by his friend and not was from the employer of Mr. Cheung working for a Hong Kong incorporation. Name of his friend was Mr. Wrong. The loan interest that was paid by Mr. Cheung to Mr. Wrong, no claim of deduction of HLI can be done by Mr. Cheung in respect of that interest. So due to this reason Mr. Wrong could not fall in any of above describe categories.

In D 11/07 it was observed that, a property was brought by a couple from a developer. The balance of instalment of interest along with 10% of purchase price was paid by them to developer. The occupied the property as licensees only until the payment of last installment. The property was allotted to them as joint tenants after they paid the last installment later. The claim of husband for interest hat was paid by him to the owner of property for HLI was disallowed by board of revenue department. And this was due to reason because:

  • The institution was not approved by developer and the loan from the developer side was not secured by charge or mortgage under Section 26E of Hong Kong tax law.
  • A claim of HLI can only be done by a registered owner under Section 26E (9). If the couple were licensees of property until it was assigned to them as discussed in cases D 22/04 and D 108/02. 

And this was due to same reason that wife of that person was also not allowed to claim HLI in respect of her interest that was paid by her along with her husband to developer in case D 11/07.  

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