### Inland Revenue Ordinance 《稅務條例》

18K. Financial instrument: special treatment of impairment loss
(1) This section applies in relation to a person to whom this section applies under section 18H for a year of assessment.
(2) Any impairment loss recognized by the person in respect of a financial instrument that is not credit-impaired is not deductible and any subsequent reversal of any amount of the impairment loss is not chargeable to tax.
(3) If an impairment loss is recognized by the person in respect of a financial instrument that is credit-impaired—
(a) if the instrument represents a debt that was included as a trading receipt in ascertaining the person’s assessable profits for the basis period in which the debt arose—the impairment loss is allowable as a deduction up to the amount of the debt so included;
(b) if the instrument represents a debt in respect of money lent, in the ordinary course of the business of lending money in Hong Kong, by the person who carries on that business—the impairment loss is allowable as a deduction up to the amount of the debt; and
(c) in any other case—the impairment loss is not deductible.
(4) If—
(a) a deduction of an amount was previously allowed to the person for a year of assessment—
(i) under section 16(1)(d) in respect of a bad debt or doubtful debt in respect of a financial instrument; or
(ii) under subsection (3) in respect of an impairment loss in respect of a financial instrument; and
(b) recovery or reversal of an amount of the bad debt, doubtful debt or impairment loss is recognized by the person for a subsequent year of assessment,
the amount recovered or reversed is chargeable to tax for the subsequent year of assessment.
(5) If—
(a) a financial instrument purchased or originated by the person is credit-impaired on initial recognition; and
(b) the instrument is on revenue account,
any impairment gain recognized by the person in respect of the instrument for a year of assessment is treated as the person’s trading receipt for the year.
(6) Subsection (7) or (8) applies if—
(a) the person (transferor

18L. Financial instrument: special treatment of equity instrument, financial liability, embedded derivative, preference share, non-arm’s length loan, etc.
(1) This section applies in relation to a person to whom this section applies under section 18H for a year of assessment.
(2) If an equity instrument on revenue account of the person that is measured at fair value through other comprehensive income is disposed of during the basis period for a year of assessment (year of disposal

### Inland Revenue Ordinance 《稅務條例》

19. Treatment of losses
(1) Where a loss is incurred in any year of assessment up to and including the year of assessment commencing on 1 April 1974 by a person chargeable to tax under this Part the amount of such loss attributable to activities in Hong Kong shall notwithstanding the provisions of section 70 be set off against what would otherwise have been the assessable profits of such person for that year of assessment. (Amended 49 of 1956 s. 15; 7 of 1975 s. 13; 7 of 1986 s. 12; 32 of 1998 s. 11)
(2) Where the amount of loss which may set off under subsection (1) is such that it cannot be wholly set off against the assessable profits of a person chargeable to tax under this Part for the year of assessment in which the loss occurred, the amount not so set off shall be carried forward and shall be set off against what would otherwise have been assessable profits of that person for the future years of assessment in succession:
Provided that—
(a) the amount of any such loss allowed to be set off in computing the assessable profits for any year of assessment shall not be set off in computing the assessable profits for any other year of assessment; and
(b) where a loss is set off under this subsection in respect of the year of assessment commencing on 1 April 1975 or any subsequent year of assessment, that loss shall be set off before the set off of any loss under section 19C. (Replaced 7 of 1975 s. 13)

(3)-(4) (Repealed 56 of 1993 s. 13)(Replaced 36 of 1955 s. 28)

### Inland Revenue Ordinance 《稅務條例》

19CAC. Treatment of unabsorbed losses: normal trading receipts
(1) This section applies if—
(a) a person has chargeable concessionary trading receipts for any year of assessment; and
(b) there is an unabsorbed loss in respect of the normal trading receipts of the person for that year of assessment.
(2) If the amount of the unabsorbed loss does not exceed the amount arrived at by dividing the chargeable concessionary trading receipts by the adjustment factor (adjusted chargeable concessionary trading receipts amount

### Inland Revenue Ordinance 《稅務條例》

19D. Computation of losses after 1 April 1975
(1) For the purposes of section 19C, the amount of loss incurred by a person chargeable to tax under this Part for any year of assessment shall be computed in like manner and for such basis period as the assessable profits for that year of assessment would have been computed. 
(2) This section shall apply to the year of assessment commencing on 1 April 1975 and to subsequent years of assessment. 
(Added 7 of 1975 s. 16)

19E. Adjustment of losses
(1) For the purposes of section 19D, the amount of loss for any year of assessment of any person chargeable to tax under this Part shall be increased by the allowances made to that person under Part 6 for that year of assessment to the extent to which the relevant assets are used in the production of the losses and decreased by the amount of any balancing charge directed to be made on that person under Part 6.
(2) Where in any year of assessment the amount of the balancing charge made under Part 6 to a person chargeable to tax under this Part exceeds the total amount of that person’s losses, as increased by any allowances, the amount of such excess shall be deemed to be assessable profits of that person for that year of assessment.
(3) This section shall apply to the year of assessment commencing on 1 April 1975 and to subsequent years of assessment.
(Added 7 of 1975 s. 16. Amended E.R. 1 of 2012)