Mobile Physiotherapist: Depreciation on Medical Equipment and Consumables

The recent push by the Hospital Authority (HA) to expand community-based rehabilitation services, outlined in its 2025-2026 Annual Plan, has created a surge in demand for mobile physiotherapy providers across Hong Kong. This shift, coupled with the Inland Revenue Department’s (IRD) intensified scrutiny of deductions claimed by self-employed professionals under Profits Tax (Part IV of the Inland Revenue Ordinance, Cap. 112), places a premium on accurate capital allowance and consumables expense reporting. The IRD’s 2024-2025 Profits Tax return (Form BIR51) requires detailed schedules for plant and machinery depreciation, a category that now explicitly includes portable ultrasound machines, TENS units, and therapeutic lasers under the revised Departmental Interpretation and Practice Notes (DIPN) No. 7, issued in 2023. For a mobile physiotherapist operating as a sole proprietor, the difference between claiming an annual allowance of 20% on a HKD 50,000 electrotherapy unit versus a full deduction as a consumable can mean a tax liability swing of HKD 12,000 or more in a single year. This article dissects the IRD’s classification rules for medical equipment and consumables, providing a compliance roadmap for the 2025/26 tax year.

The Territorial Source Rule and Profits Tax for Mobile Practitioners

Determining the Source of Professional Fees

The Inland Revenue Ordinance (Cap. 112) applies Profits Tax (Section 14) to any person carrying on a trade, profession, or business in Hong Kong. For a mobile physiotherapist, the source of the professional fees is the location where the services are performed. The IRD’s DIPN No. 21 (revised 2022) confirms that fees for treatments delivered within Hong Kong’s territorial boundaries, whether in a client’s home, a care home, or a temporary clinic, are subject to Profits Tax. If a mobile physiotherapist occasionally treats a client in Shenzhen or Macau, those fees are sourced outside Hong Kong and are not subject to Profits Tax, provided no part of the business is carried on in that other jurisdiction. The burden of proof for an offshore claim rests on the taxpayer, requiring contemporaneous travel logs and client invoices specifying the treatment location.

Deductibility of Operating Expenses

Section 16 of Cap. 112 allows a deduction for all outgoings and expenses incurred in the production of chargeable profits. For a mobile physiotherapist, this includes motor vehicle expenses for travel between appointments, professional indemnity insurance premiums, and fees for continuing professional development (CPD) courses recognized by the Hong Kong Physiotherapy Council. The IRD’s 2024 Field Audit Manual explicitly lists mileage logs as a key verification point. Practitioners must maintain a detailed record of each journey—date, destination, purpose, and distance—to substantiate the deduction. A flat-rate claim of HKD 10,000 per year without supporting documentation is routinely disallowed on review.

Depreciation and Capital Allowances on Medical Equipment

Classification of Assets under DIPN No. 7

The IRD’s DIPN No. 7 (2023) distinguishes between plant and machinery (eligible for depreciation allowances) and consumables (fully deductible in the year of purchase). For a mobile physiotherapist, the following items are typically classified as plant and machinery:

• Portable treatment tables: Depreciable at 20% per annum under the reducing balance method (Part VI of Cap. 112, Section 37).
• Therapeutic ultrasound machines: Depreciable at 20% per annum.
• TENS and EMS units: Depreciable at 20% per annum.
• Laser therapy devices: Depreciable at 20% per annum.
• Manual therapy tools (e.g., Graston tools, cupping sets): Depreciable at 20% per annum if the cost per unit exceeds HKD 5,000. Below this threshold, the IRD may treat them as small tools and allow an immediate deduction under Section 16(1).

The annual allowance is calculated on the written-down value (WDV) of the pool of qualifying assets. For example, if a practitioner purchases a portable ultrasound machine for HKD 30,000 in Year 1, the initial WDV is HKD 30,000. The Year 1 allowance is HKD 6,000 (20% of HKD 30,000). The WDV for Year 2 is HKD 24,000, and the allowance is HKD 4,800.

Consumables and Small Tools

Consumables are items that are used up in the course of treatment and have a short useful life. For a mobile physiotherapist, these include:

• Disposable electrode pads: Fully deductible in the year of purchase.
• Ultrasound gel: Fully deductible in the year of purchase.
• Massage oils and creams: Fully deductible in the year of purchase.
• Tape (kinesiology or athletic): Fully deductible in the year of purchase.
• Gloves and hygiene supplies: Fully deductible in the year of purchase.

The IRD’s 2024 Taxpayer’s Guide for Self-Employed Persons states that a taxpayer may treat the first HKD 5,000 of small tools and equipment as a revenue expense in each year of assessment. This is a concessionary practice and is not codified in the Ordinance. Practitioners should apply this on a consistent basis and note it in the tax computation.

The Pooling System for Plant and Machinery

Section 39 of Cap. 112 establishes a pooling system for plant and machinery. All qualifying assets are placed into a single pool, and the annual allowance of 20% is applied to the aggregate WDV of the pool. When an asset is sold, the proceeds are deducted from the pool, and any resulting negative balance (a balancing charge) is added to the assessable profits. If the pool balance is zero and an asset is sold, a balancing allowance may be claimed. For a mobile physiotherapist who sells an old treatment table for HKD 2,000, that amount reduces the pool WDV. If the pool WDV was HKD 1,000, the sale creates a balancing charge of HKD 1,000, increasing assessable profits.

Personal Allowances and Self-Employed Deductions

Mandatory Provident Fund (MPF) Contributions

A self-employed mobile physiotherapist must register with the Mandatory Provident Fund (MPF) Schemes Authority and make mandatory contributions of 5% of relevant income, capped at HKD 18,000 per year for the 2025/26 tax year (the maximum relevant income level is HKD 360,000 per annum). These contributions are deductible under Section 16(1) of Cap. 112 as an expense incurred in the production of profits. Voluntary contributions are not deductible. The IRD’s 2025-26 Tax Return Guide for Individuals (BIR60) confirms that self-employed persons should report MPF contributions on Line 8 of Schedule 4.

Home Office Deduction

If a mobile physiotherapist uses a part of their home exclusively for administrative work—booking appointments, maintaining records, purchasing supplies—they may claim a deduction for a portion of household expenses. The IRD’s DIPN No. 21 (2022) states that the deduction is calculated on a floor-area basis. For example, if the home office occupies 10% of the total floor area, 10% of rent, rates, electricity, and internet costs may be claimed. The claim must be supported by a floor plan and receipts. The IRD has historically disallowed claims where the office is also used for personal purposes, such as a spare bedroom used for storage.

Professional Subscriptions and CPD

Fees paid to the Hong Kong Physiotherapy Council for annual registration (HKD 1,500 for 2025/26) and membership subscriptions to the Hong Kong Physiotherapy Association are deductible under Section 16(1). CPD course fees, including travel costs for courses held outside Hong Kong, are also deductible, provided the course maintains or improves the practitioner’s professional skills. The IRD’s 2024 Taxpayer’s Guide for Self-Employed Persons notes that the cost of a course that qualifies the practitioner for a new specialization (e.g., acupuncture certification) is a capital expense and is not deductible.

Record-Keeping and Tax Return Compliance

Required Documentation

The IRD requires all self-employed persons to maintain records for at least seven years after the end of the relevant year of assessment (Section 51C of Cap. 112). For a mobile physiotherapist, the following records are essential:

• Receipts for all equipment purchases (including serial numbers and purchase dates).
• Invoices for consumables (itemized by type and quantity).
• Mileage logs (date, destination, purpose, distance).
• Client appointment records (showing location and fee charged).
• Bank statements (separate business account recommended).

The IRD’s 2025 Field Audit Manual identifies inadequate mileage logs as the most common issue in audits of mobile professionals. A log that lists only “client visit” without a specific address is considered insufficient.

Filing the Profits Tax Return

A self-employed mobile physiotherapist must file a Profits Tax return (Form BIR51) by the due date specified in the notice. For the 2025/26 tax year, the standard due date for individuals is 1 June 2026 (for paper returns) or 1 July 2026 (for e-filing). The return must include a detailed computation of assessable profits, showing the deduction for capital allowances and consumables. The IRD’s 2025-26 Tax Return Guide for Sole Proprietors recommends attaching a separate schedule listing all plant and machinery assets, their purchase dates, costs, and the accumulated allowances claimed.

Statute of Limitations

The IRD may raise an assessment within six years after the end of the year of assessment in which the profits were earned (Section 60 of Cap. 112). For a return filed for the 2025/26 year, the IRD’s right to open an examination extends until 31 March 2032. If fraud or wilful evasion is suspected, the limitation period extends to ten years. Practitioners should retain all supporting records until at least seven years after the end of the year of assessment to which they relate.

Actionable Takeaways

1. Classify all medical equipment costing over HKD 5,000 as plant and machinery and claim the 20% annual allowance on the reducing balance pool to maximize deductions over the asset’s life.
2. Maintain a contemporaneous mileage log for every client visit, including the exact address and distance, to substantiate motor vehicle expense claims under Section 16(1) of Cap. 112.
3. Deduct all consumables—electrode pads, gels, oils, tape, and gloves—in full in the year of purchase, as they are revenue expenses under the IRD’s 2024 Taxpayer’s Guide for Self-Employed Persons.
4. Register for MPF as a self-employed person and deduct the mandatory 5% contribution (capped at HKD 18,000 per year) from assessable profits, ensuring the deduction is reported on Schedule 4 of the BIR60 return.
5. Retain all receipts, invoices, and logs for at least seven years after the end of the relevant year of assessment to survive an IRD field audit, which the 2025 Field Audit Manual targets at mobile professionals.

本文不構成稅務建議。涉及個人稅務情況請諮詢持牌會計師或稅務師。This does not constitute tax advice. Consult a licensed CPA or tax advisor for your specific situation.