When Hong Kong companies think about EV incentives, they usually think about one thing: the First Registration Tax waiver. And fair enough – the 2026-27 Budget just extended it for commercial vehicles through to March 2028, so it’s in the news.
But there’s a second incentive that rarely gets the same attention: a 100% profits tax deduction on EV capital expenditure, available in the year of purchase under the Inland Revenue Ordinance since 2010.
Most businesses are vaguely aware of one or the other. Very few are using both deliberately. These are the mistakes we see most often.
Mistake #1: Treating the EV Deduction Like Normal Depreciation
It’s not a depreciation allowance; it’s a full year-one deduction
Most finance directors are used to capital assets being written down gradually. You buy a vehicle, it goes on the balance sheet, and you claim depreciation allowances over time – an initial allowance, then annual allowances on the reducing value. That’s how it works for conventional vehicles.
The EV deduction works differently
For eligible electric vehicles, Section 16I of the Inland Revenue Ordinance gives businesses the option to deduct the entire capital expenditure in the year of purchase. Not 60% upfront and the rest over time. The whole amount, in year one, by election.
Why this matters
This distinction is what makes the incentive useful as a planning tool rather than just a passive saving. Because the deduction is front-loaded and elective, you have control over when and how it lands in your tax position.
Mistake #2: Not Seeing How the Two Incentives Stack
What the First Registration Tax (FRT) waiver covers
The first registration tax on electric commercial vehicles is currently waived in full, and that concession has been extended until March 31, 2028. So right away, your capital outlay is lower than it would be for an equivalent diesel vehicle.
What the profits tax deduction adds
Then the 100% profits tax deduction kicks in. The full purchase price is deductible against your assessable profits in the year you bought the vehicle. Not spread over several years through depreciation allowances. Not written down gradually. The whole thing, in year one.
Here’s what that looks like in practice
Take the FUSO eCanter entry model at HK$600,000 as an example. It’s a light-duty electric truck that sits squarely in the category of commercial vehicles qualifying for both incentives.
| Purchase price | HK$600,000 |
| First Registration Tax | HK$0 (waived) |
| Total cash outlay | HK$600,000 |
| Reduction in assessable profits | HK$600,000 |
| Tax saving at 8.25% | HK$49,500 |
| Total cash outlay | HK$600,000 |
| Less: tax saving | (HK$49,500) |
| Effective net cost | HK$550,500 |
For companies on the standard 16.5% profits tax rate, the tax saving doubles to HK$99,000, bringing the effective net cost down to HK$501,000.
Either way, the sticker price and the after-tax cost are two quite different numbers.
Mistake #3: Treating the Purchase Date as an Afterthought
The deduction lands in the year you buy
Because the deduction falls entirely in the year of purchase – and because it’s elective – the timing of that purchase is itself a planning decision. This is the part most companies don’t think about until it’s too late.
High-profit year coming? Consider moving faster
If your company is heading into a high-profit year, bringing an EV purchase forward into that financial year can meaningfully reduce your taxable exposure. If a quieter year is ahead, you might deliberately hold off.
Fleet replacement becomes a tax calendar decision
For businesses running larger fleets, this logic extends further. Rather than replacing vehicles on a purely operational schedule, procurement can be phased across financial years to maximise the deduction’s impact each time. The question shifts from when does this truck need replacing? to which financial year do we want this deduction to land in?
Mistake #4: Assuming All Vehicles and All Companies Qualify the Same Way
Not every vehicle type is covered equally
This is an important one. While the FRT waiver for electric commercial vehicles, motorcycles and tricycles runs until March 2028, the concession for electric private cars was not extended beyond March 31, 2026. If your fleet includes private cars, the calculus is different and worth reviewing separately.
Not every business benefits equally
The profits tax deduction is most valuable when your company is profitable and paying profits tax, and when the vehicle is genuinely used in income-generating activities. If a vehicle is only partly used for business, the deduction is proportional to that usage. For companies currently running at a loss, the immediate deduction has limited short-term value.
The Bigger Picture: You Have Until 2028, But Don’t Wait
The 2028 FRT deadline isn’t just a cut-off to worry about; it’s a planning window. Companies that have enough runway to approach fleet transitions deliberately should align their purchases with the financial years where the deduction delivers the most value, rather than making rushed decisions as deadlines approach.
That’s where Monx comes in. As Hong Kong’s most dedicated accountants, we can help model the after-tax cost of your EV procurement, identify the right financial year to make your move, and make sure you’re claiming every deduction you’re entitled to under the Inland Revenue Ordinance.
And if you have broader tax questions beyond EVs, we’ve got those covered too – profits tax returns, IRD liaison, offshore income claims, capital allowances, and more.
Free consultation. Same-day response. Fill out the form below or email hello@monx.team to get started.
