Hong Kong Ordinances

INLAND REVENUE ORDINANCE - SECT 61A

Transactions designed to avoid liability for tax

(1) This section shall apply where any transaction has been entered into or
effected after the commencement* of the Inland Revenue (Amendment) Ordinance
1986 (7 of 1986) (other than a transaction in pursuance of a legally
enforceable obligation incurred prior to such commencement) and that
transaction has, or would have had but for this section, the effect of
conferring a tax benefit on a person (in this section referred to as

"the relevant person"), and, having regard to- (*Commencement date-14 March
1986)

   (a)  the manner in which the transaction was entered into or carried out;

   (b)  the form and substance of the transaction;

   (c)  the result in relation to the operation of this Ordinance that, but
        for this section, would have been achieved by the transaction;

   (d)  any change in the financial position of the relevant person that has
        resulted, will result, or may reasonably be expected to result, from
        the transaction;

   (e)  any change in the financial position of any person who has, or has
        had, any connection (whether of a business, family or other nature)
        with the relevant person, being a change that has resulted or may
        reasonably be expected to result from the transaction;

   (f)  whether the transaction has created rights or obligations which would
        not normally be created between persons dealing with each other at
        arm's length under a transaction of the kind in question; and

   (g)  the participation in the transaction of a corporation resident or
        carrying on business outside Hong Kong, it would be concluded that the
        person, or one of the persons, who entered into or carried out the
        transaction, did so for the sole or dominant purpose of enabling
        the relevant person, either alone or in conjunction with other
        persons, to obtain a tax benefit.

(2) Where subsection (1) applies, the powers conferred upon an assessor under
Part X shall be exercised by an assistant commissioner, and such
assistant commissioner shall, without derogation from the powers which he may
exercise under that Part, assess the liability to tax of the  relevant person-

   (a)  as if the transaction or any part thereof had not been entered into or
        carried out; or

   (b)  in such other manner as the assistant commissioner considers
        appropriate to counteract the tax benefit which would otherwise be
        obtained.

(3) In this section-

"tax benefit" (稅項利益) means the avoidance or postponement of the
liability to pay tax or the reduction in the amount thereof;

"transaction" (交易) includes a transaction, operation or scheme whether or
not such transaction, operation or scheme is enforceable, or intended to be
enforceable, by legal proceedings. (Added 7 of 1986 s. 10)

"tax benefit" (稅項利益)

"transaction" (交易)