Levy Guide No. 3 Levy on Repair and Maintenance of Electrical and Mechanical Works

Disclaimer

This publication is prepared by the Construction Industry Council (CIC) to provide guidance on levy on repair and maintenance of electrical and mechanical works but is NOT intended to constitute any legal or other professional advice on the provisions of the Construction Industry Council Ordinance or the Industrial Training (Construction Industry) Ordinance. Should there be any discrepancies between this publication and the two ordinances, the latter prevails.

Enquiries and Assistance

For enquiries and assistance, please contact the Finance Department of the CIC at –

38/F, COS Centre, 56 Tsun Yip Street, Kwun Tong, Kowloon, Hong Kong
Tel - 2100 9200
Fax - 2100 9339
E-mail - [email protected]

Purpose

The guide aims to help levy payers understand that repair and maintenance of electrical and mechanical works (E&M works) are subject to construction levy under the Construction Industry Council Ordinance Cap 587 (“CICO”) and the Industrial Training (Construction Industry) Ordinance Cap 317 (“ITCIO”) (the amended edition in force as of 1 June 2004 and is now repealed).

Legislation History

E&M works were originally excluded from the scope of construction levy. It was the subsequent revision of the ITCIO that included them in the definition of “construction operations” under Schedule 1 of the ITCIO. The enforcement date was 1 June 2004.
When the original ITCIO was first drafted in 1975, the scope of “construction works” did not include E&M works such as installation, repair and maintenance of any air-conditioning plant, electricity supply system, lift, escalator, fire services installation etc.
Since then, the scale of E&M works has been growing in importance in the construction industry. It was recommended that construction levy should also be imposed on the E&M works.
Therefore, a new definition of “construction operations” was introduced in the ITCIO to encompass the E&M works ¹.

Provisions of the CICO and ITCIO

Before the amalgamation of Construction Industry Council and the former Construction Industry Training Authority on 1 January 2008, construction levy was assessed under the provisions of the ITCIO on construction works/operations carried out in Hong Kong.
Under the CICO and ITCIO, construction levy is imposed on all “construction operations” carried out in Hong Kong. The term “construction operations” has the meaning assigned to it in the respective Schedule 1 of the CICO and ITCIO.
The definitions of “construction operations” in Schedule 1 of both CICO and ITCIO are essentially identical and cover, among other items, the E&M works.
For simplicity, where the interpretation below contains reference to the provisions of the CICO, it should be equally applicable to the equivalent provisions of the ITCIO.

Interpretation

There is clear legislation intent that the existing definition of “construction operations” under Schedule 1 of the CICO was intended to cover E&M works previously excluded under the ITCIO².
Under Schedule 1 of the CICO, repair and maintenance works are included in the definition under Section 1(c)(i) “construction, alteration, repair, maintenance, extension, demolition or dismantling of any buildings, or other temporary or permanent structures forming, or to form, part of land;”.
It is considered that the wordings “repair, maintenance of any buildings or other temporary or permanent structures forming, or to form, part of land” are equally applicable to any repair and maintenance of the E&M works installed in any buildings or structures forming, or to form part of land.
It is considered that E&M works, once installed, should form part of the buildings, structures or lands and therefore come within the scope of “construction operations” as repair and maintenance of “any buildings, or structures” forming part of the land.
Therefore, “repair” and “maintenance” of the E&M works constitute the “construction operations” of repairing and maintaining the buildings and/or structures forming part of the land after the installation of the subject E&M works.

Conclusion

Accordingly, the E&M repair and maintenance works fall into the meaning of “construction operations” under both Section 1(c)(i) of Schedule 1 of the CICO and Section 1(c)(i)(A) of Schedule 1 of ITCIO – "repair, maintenance of any buildings or structures forming, or to form, part of the land" and are subject to construction levy.

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^{1 Speech by Secretary for Education and Manpower on Second Reading of the Construction Industry Levy (Miscellaneous Amendments) Bill 2003 dated 9 April 2003.}

^{2 Legco paper "Extension of Construction Industry levy to Cover Electrical and Mechanical Works in the Construction Industry" (LC Paper No. CB(2)2557/01-02(03)).}