Bad Debt Tax Deductions Hong Kong — IRO s.16(1)(d)
Bad and doubtful trade debts are deductible under IRO s.16(1)(d) — but IRD requires specific evidence of irrecoverability. A well-documented claim saves tax; a vague provision gets rejected.
Bad Debt Tax Deduction
Bad and doubtful trade debts are deductible under IRO s.16(1)(d) — but IRD requires specific evidence of irrecoverability. A well-documented claim saves tax; a vague provision gets rejected.
⚠ General Provisions Are Usually Rejected by IRD
A general provision for doubtful debts (e.g., 5% of debtors) is rarely accepted by IRD. You need specific debt-by-debt analysis, evidence of collection attempts, and documentation that each debt is genuinely irrecoverable to support the deduction claim.
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Specific vs General Provisions
IRD accepts specific provisions for identified debts with evidence of irrecoverability. General portfolio provisions (standard accounting bad debt provisions) are typically disallowed.
Trade vs Capital Debt
Only trade debts (arising from the normal course of trading) qualify for deduction. Loans to associates, investment debts, or intercompany loans written off are capital — not deductible.
Recovery Treatment
If a debt previously written off and claimed as a deduction is subsequently recovered, the recovery is taxable income in the year of receipt.
Documentation Requirements
IRD expects correspondence with the debtor, solicitor demand letters, winding-up proceedings, or insolvency evidence to support specific debt write-offs.
適合對象
Import/export and wholesale businesses with significant debtor balances from trade sales.
Lenders, factoring companies, and financial intermediaries with loan or receivable write-offs.
Firms with irrecoverable professional fee debts from clients.
Companies with irrecoverable rental arrears or proceeds from property transactions.
服務範疇
Debtor Portfolio Review
Analyse all debtor balances to identify qualifying specific bad debt provisions and write-offs for IRD-defensible deduction claims.
Bad Debt Documentation
Prepare or review the documentation package supporting each bad debt claim — correspondence, demand letters, insolvency evidence.
Doubtful Debt Provision Analysis
Structure the doubtful debt provision to maximise the allowable specific element while correctly excluding general provisions.
IRD Query Defence
Represent the company in IRD field audit queries on bad debt deductions, with CPA-signed representations.
簡單、高效、專業
Debtor Analysis
Review aged debtor list and identify potential bad debt write-off candidates.
1 weekDocumentation Gathering
Compile supporting evidence for each specific bad debt claim.
1-2 weeksTax Return Claim
Include properly documented bad debt deductions in the profits tax return.
1 weekAnnual Review
Annual review of debtors to identify new write-offs and recoveries.
Annual為真實客戶帶來真實成果
Wholesale trader — HKD 8M debtors review
- HKD 8M aged debtors reviewed
- HKD 3M specific bad debts identified with evidence
- Documentation package prepared for each debt
- Deduction of HKD 3M → tax saving of HKD 495K at 16.5%
Professional services firm — IRD audit defence
- IRD challenged 3-year bad debt claims
- Documentation retrospectively compiled
- HKD 2.1M in claims successfully defended
- Only HKD 600K minor items conceded
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