income credited in account) − Depreciation allowances − Approved charitable donations Approved charitable donations The Approved charitable donations are limited to 35% (10% for years of assessment up to and including 2002/03; and 25% for years of assessment 2003/04 to 2007/08) of the adjusted assessable profits before deduction of donations, per section 16D of the IRO. Such aggregate must not be less than $100. Section 14 A person carries on a trade, a profession or a business in Hong Kong There are profits arising in or derived from (trade, profession, business). Profit is not from the sales of capital assets The profits must be arising in or derived from Hong Kong Contract effected test Operation test Provision of credit test Development test or registration test Badges of Trade Any trade may be subject to profit tax unless one can provide reasonable evidence to prove that there is not any revenue profit. In Hong Kong, capital profit is not subject to tax. In order to prove the nature of a trade, the badges of trade are to be considered: the taxpayer's intention of profit (one acquisition of the commodity) Subject Matter of the commodity disposal (If enjoyment can be assume on original acquisition, e.g. rental) the length of ownership, frequency of similar transactions, reason for disposal, supplementary work and so on. Basis period and year of assessment The year of assessment of each year starts from 1 April and ends on 31 March in the next year. For example, the year of assessment for 1 April 2014 to 31 March 2015 is "Year of Assessment 2014/15". However, no adjustment is required to align the financial information with the end-date of year of assessment. On the contrary, IRD accepts the profits assessed in accordance with the accounting year-end date. In the context of tax law, this is also referred as basis period. Tax depreciation Purchases of industrial building, commercial building and plant and machinery are not deductible because they are capital in nature. Yet, capital expenditure may be deductible if they are categorised into following: Capital expenditure on plant and machinery for research and development; Capital expenditure on renovation or refurbishment on buildings other than domestic ones; Capital expenditure on prescribed fixed assets (excluding lease or hire-purchase); Capital expenditure on environmental protection facilities (excluding lease or hire-purchase). If the capital expenditure is not deductible at any of the above provisions, the following