### Inland Revenue Ordinance 《稅務條例》

16N. Deductions for spectrum utilization fees
(1) Despite section 17, this section applies in ascertaining the profits from a trade, profession or business in respect of which a person is chargeable to tax under this Part for any year of assessment.
(2) Any capital expenditure that is a spectrum utilization fee incurred by the person is, to the extent that it is so incurred in the production of the profits for the person’s use of the radio spectrum in the carrying on of the trade, profession or business, to be allowed as a deduction from the profits.
(3) The deduction is to be allowed in accordance with—
(a) if the spectrum utilization fee is payable by annual instalments—section 16Q; or
(b) in any other case—section 16R,
but, in any event, the total amount of the deduction must not exceed the amount of the capital expenditure mentioned in subsection (2).
(4) This section does not apply to—
(a) any capital expenditure that is reimbursed by way of or attributable to any grant, subsidy or similar financial assistance; and
(b) any capital expenditure incurred as a spectrum utilization fee that is prescribed or otherwise determined under Cap. 106 before the date on which the Inland Revenue (Amendment) (Tax Deductions for Spectrum Utilization Fees) Ordinance 2024 (1 of 2024) comes into operation*.

Editorial Note:
* In operation on 19 January 2024.

16O. Capital expenditures deemed as incurred in case of unilateral transfers for spectrum utilization fees payable other than by annual instalments
(1) This section applies if—
(a) a spectrum utilization fee is payable other than by annual instalments by a person (preceding assignee

16P. Deductions not affected by transfers of frequency bands on swap
To avoid doubt, even if the use of the radio spectrum that falls within a frequency band is transferred from a person to another person on a swap, for applying this Subdivision to each of those persons, the use of the radio spectrum by either person is taken to remain the same one throughout the assignment term concerned as if the transfer had never occurred.

16Q. Deductions for spectrum utilization fees payable by annual instalments
(1) Unless subsection (2) applies, for the purposes of section 16N(3)(a)—
(a) if the relevant use of the radio spectrum by the person begins in the basis period for the year of assessment in which the assignment term concerned begins (assignment year of assessment

### Inland Revenue Ordinance 《稅務條例》

16R. Deductions for spectrum utilization fees payable other than by annual instalments
(1) Unless subsection (2) applies, for the purposes of section 16N(3)(b)—
(a) if the relevant use of the radio spectrum by the person begins in the basis period for the year of assessment in which the assignment term concerned begins (assignment year of assessment

16S. Released liabilities to pay spectrum utilization fees treated as trading receipts
If, in ascertaining the profits from a trade, profession or business carried on in Hong Kong, any capital expenditure incurred by a person has been deducted under section 16N, but the person’s liability to pay the whole, or any part, of the spectrum utilization fee concerned is subsequently released, the amount of the liability so released is to be treated as a trading receipt arising in or derived from Hong Kong of the trade, profession or business accruing—
(a) subject to paragraph (b), at the time of the release; or
(b) if the release occurs on or after the date on which the trade, profession or business is permanently discontinued—immediately before the discontinuance.

### Inland Revenue Ordinance 《稅務條例》

17C. Financial institution: general provisions on issuer of regulatory capital security
(1) This section applies in ascertaining profits in respect of which the issuer of a regulatory capital security is chargeable to tax under this Part for a year of assessment.
(2) Profits of the issuer are to be determined as if fair value accounting were not generally accepted accounting practice in relation to the security or part of the security.
(3) A sum representing—
(a) the paid-up amount of the security being written down on a permanent or temporary basis in accordance with any laws or regulatory requirements or the terms and conditions of the security; or
(b) the paid-up amount of the security being converted to a Common Equity Tier 1 capital instrument in accordance with any laws or regulatory requirements or the terms and conditions of the security,
is not to be treated as a receipt arising in or derived from Hong Kong by the issuer from a trade, profession or business carried on in Hong Kong.
(4) No deduction is to be allowed to the issuer under section 16(1) for any sum representing the paid-up amount of the security being written up in accordance with any laws or regulatory requirements or the terms and conditions of the security, following a write-down of the paid-up amount on a temporary basis in accordance with those laws or requirements or those terms and conditions.
(Added 12 of 2016 s. 14)

### Inland Revenue Ordinance 《稅務條例》

17E. Financial institution: profits adjusted if associates deal not at arm’s length in connection with regulatory capital security
(1) This section applies if—
(a) conditions are made or imposed between a financial institution or LAC banking entity (specified institution or entity

17F. Financial institution: issuer’s deduction if regulatory capital security is issued to, held by or issued or held for benefit of specified connected person
(1) No deduction is to be allowed to the issuer of a regulatory capital security (specified issuer

17G. Financial institution: non-resident financial institution’s Hong Kong branch treated as separate enterprise
(1) This section applies in ascertaining profits in respect of which a non-resident financial institution with capital raised through the issue of a regulatory capital security is chargeable to tax under this Part in relation to its Hong Kong branch.
(2) The profits of the Hong Kong branch of the non-resident financial institution are those that the Hong Kong branch would have made if it were a distinct and separate enterprise that—
(a) engaged in the same or similar activities under the same or similar conditions; and
(b) dealt wholly independently of the non-resident financial institution.
(3) In applying subsection (2), account is to be taken of the functions performed, assets used and risks assumed by the non-resident financial institution—
(a) through the Hong Kong branch; and
(b) through the other parts of the non-resident financial institution.
(4) In applying subsection (2), it is to be assumed that the Hong Kong branch—
(a) has the same credit rating as the non-resident financial institution; and
(b) has such equity and loan capital as it could reasonably be expected to have if it were a distinct and separate enterprise as described in that subsection.
(5) In accordance with subsection (2), transactions in connection with a regulatory capital security between the Hong Kong branch and any other part of the non-resident financial institution are treated as taking place on such terms and conditions as would have been agreed between parties dealing at arm’s length.
(6) No deduction is to be allowed for costs and expenses in excess of those that would have been incurred on the assumptions in subsection (4).
(7) In this section—
(a) non-resident financial institution (境外財務機構) means any financial institution whose head office is situated outside Hong Kong;
(b) Hong Kong branch (香港分行) means any business carried on in Hong Kong by a non-resident financial institution.
(Added 12 of 2016 s. 14)