INLAND REVENUE ORDINANCE - CHAPTER 112 INLAND REVENUE ORDINANCE - LONG TITLE Long title VerDate:30/06/1997 To impose a tax on property, earnings and profits. (Amended 26 of 1969 s. 2; 17 of 1989 s. 2) [3 May 1947] (Originally 20 of 1947 (Cap 112 1950)) INLAND REVENUE ORDINANCE - SECT 1 Short title VerDate:30/06/1997 PART I INTRODUCTORY This Ordinance may be cited as the Inland Revenue Ordinance. INLAND REVENUE ORDINANCE - SECT 2 Interpretation VerDate:12/02/2010 "active partner" (積極參與的合夥人) "agent" (代理人) "approved charitable donation" (認可慈善捐款) "arrangement" (安排) "assessable income" (應評稅入息) "net assessable income" (應評稅入息實額) "assessable profits" (應評稅利潤) "assessor" (評稅主任) "assistant commissioner" (助理局長) "authorized representative" (獲授權代表) "basis period" (評稅基期) "bill of sale" (賣據) "Board of Review" (稅務上訴委員會) "body of persons" (團體) "business" (業務) "certificate of deposit" (存款證) "prescribed instrument" (訂明的票據) "Commissioner" (局長) "common parts" (公用部分) "conditional sale agreement" (有條件售賣協議) "corporation" (法團) "debenture" (債權證) "deposit" (存款) "deputy commissioner" (副局長) "digital signature" (數碼簽署) "electronic record" (電子紀錄) "executor" (遺囑執行人) "financial institution" (財務機構) "grandparent or grandparent of his or her spouse" (該人的或其配偶的祖父母或外祖父母) "hire-purchase agreement" (租購協議) "Hong Kong currency" (港幣) "husband" (丈夫) "incapacitated person" (無行為能力的人) "inspector" (稅務督察) "lease" (租約) "limited partnership" (有限責任合夥) "mandatory contributions" (強制性供款) "mandatory provident fund scheme" (強制性公積金計劃) "marriage" (婚姻) "married" (結婚) "mortgage" (按揭) "net chargeable income" (應課稅入息實額) "occupational retirement scheme" (職業退休計劃) "owner" (擁有人) "parent or parent of his or her spouse" (該人的或其配偶的父或母) "password" (通行密碼) "person" (人、人士) "precedent partner" (首合夥人) "profits arising in or derived from Hong Kong" (於香港產生或得自香港的利潤) "receiver" (接管人) "recognized certificate" (認可證書) "recognized occupational retirement scheme" (認可職業退休計劃) "recognized retirement scheme" (認可退休計劃) "return" (報稅表) "river trade limits" (內河航限) "specified form" (指明的格式) "spouse" (配偶) "standard rate" (標準稅率) "tax" (稅、稅款、稅項) "telefiling system" (電話報稅系統) "trade" (行業、生意) "trustee" (受託人) "voluntary contributions" (自願性供款) "wife" (妻子) "year of assessment" (課稅年度) "year preceding a year of assessment" (任何課稅年度的上一年) "associated corporation" (相聯法團) "control" (控制) (1) In this Ordinance, unless the context otherwise requires- "active partner" (積極參與的合夥人), in relation to a partnership, means a partner who takes an active part in the control, management, or conduct of the trade or business of such partnership; "agent" (代理人), in relation to a non-resident person or to a partnership in which any partner is a non-resident person, includes- (a) the agent, attorney, factor, receiver, or manager in Hong Kong of such person or partnership, and (b) any person in Hong Kong through whom such person or partnership is in receipt of any profits or income arising in or derived from Hong Kong; "approved charitable donation" (認可慈善捐款) means a donation of money to any charitable institution or trust of a public character which is exempt from tax under section 88 or to the Government, for charitable purposes; (Replaced 13 of 1971 s. 2. Amended 76 of 1975 s. 2; 74 of 1981 s. 4; 30 of 1990 s. 2; 78 of 1999 s. 7) "arrangement" (安排) includes- (a) any agreement, arrangement, understanding, promise or undertaking, whether express or implied, and whether or not enforceable or intended to be enforceable, by legal proceedings; and (b) any scheme, plan, proposal, action or course of action or course of conduct; (Added 32 of 1998 s. 3) "assessable income" (應評稅入息) means the assessable income of a person in any year of assessment as ascertained in accordance with sections 11B, 11C and 11D; and "net assessable income" (應評稅入息實額) means assessable income as adjusted in accordance with section 12; (Replaced 71 of 1983 s. 2) "assessable profits" (應評稅利潤) means the profits in respect of which a person is chargeable to tax for the basis period for any year of assessment, calculated in accordance with the provisions of Part IV; (Replaced 28 of 1964 s. 2) "assessor" (評稅主任) means an assessor appointed under this Ordinance; "assistant commissioner" (助理局長) means an assistant commissioner of Inland Revenue appointed under this Ordinance; "authorized representative" (獲授權代表) means a person authorized in writing by any other person to act on his behalf for the purposes of this Ordinance; (Replaced 7 of 1975 s. 2) "basis period" (評稅基期) for any year of assessment is the period on the income or the profits of which tax for that year ultimately falls to be computed; (Amended 36 of 1955 s. 3) "bill of sale" (賣據) means a bill of sale registrable under the Bills of Sale Ordinance (Cap 20); "Board of Review" (稅務上訴委員會) means the Board of Review referred to in section 65; (Added 4 of 2010 s. 2) "body of persons" (團體) means any body politic, corporate or collegiate and any company, fraternity, fellowship and society of persons whether corporate or not corporate; (Added 36 of 1955 s. 3) "business" (業務) includes agricultural undertaking, poultry and pig rearing and the letting or sub-letting by any corporation to any person of any premises or portion thereof, and the sub-letting by any other person of any premises or portion of any premises held by him under a lease or tenancy other than from the Government; (Replaced 35 of 1965 s. 2. Amended 19 of 1996 s. 15) "certificate of deposit" (存款證) means a document relating to money, in any currency, which has been deposited with the issuer or some other person, being a document which recognizes an obligation to pay a stated amount to bearer or to order, with or without interest, and being a document by the delivery of which, with or without endorsement, the right to receive that stated amount, with or without interest, is transferable, and, in the case of any such document which is a prescribed instrument by virtue of paragraph (a) of the definition of "prescribed instrument" (訂明的票據) in section 137B of the Banking Ordinance (Cap 155), includes any right or interest referred to in paragraph (b) of that definition in respect of such document; (Added 30 of 1981 s. 2. Amended 94 of 1993 s. 36) "Commissioner" (局長) means the Commissioner of Inland Revenue appointed under this Ordinance; (Replaced 26 of 1969 s. 3) "common parts" (公用部分), in relation to any land or buildings or land and buildings- (a) means the whole of the land or buildings or land and buildings, except such parts as have been specified or designated in an instrument registered in the Land Registry as being for the exclusive use, occupation or enjoyment of an owner; and (b) includes, unless so specified or designated in the instrument mentioned in paragraph (a), those parts of a building specified in Schedule 1 to the Building Management Ordinance (Cap 344); (Added 4 of 2010 s. 2) "conditional sale agreement" (有條件售賣協議) means an agreement for the sale of goods under which the purchase price or part of the purchase price is payable by instalments, and the property in the goods remains in the seller (notwithstanding that the buyer is to be in possession of the goods) until such conditions as to the payment of instalments or otherwise as may be specified in the agreement are fulfilled; (Added 32 of 1998 s. 3) "corporation" (法團) means any company which is either incorporated or registered under any enactment or charter in force in Hong Kong or elsewhere but does not include a co-operative society or a trade union; (Amended 2 of 1971 s. 2) "debenture" (債權證) means a debenture as defined in section 2(1) of the Companies Ordinance (Cap 32); "deposit" (存款) means a deposit as defined in section 2(1) of the Banking Ordinance (Cap 155); (Added 29 of 1982 s. 2. Amended 27 of 1986 s. 137) "deputy commissioner" (副局長) means a deputy commissioner of Inland Revenue appointed under this Ordinance; (Amended 48 of 1995 s. 2) "digital signature" (數碼簽署) has the same meaning as in section 2(1) of the Electronic Transactions Ordinance (Cap 553); (Added 5 of 2003 s. 2) "electronic record" (電子紀錄) has the same meaning as in section 2(1) of the Electronic Transactions Ordinance (Cap 553); (Added 5 of 2003 s. 2) "executor" (遺囑執行人) means any executor, administrator, or other person administering the estate of a deceased person, and includes a trustee acting under a trust created by the last will of the author of the trust; "financial institution" (財務機構), means- (a) an authorized institution within the meaning of section 2 of the Banking Ordinance (Cap 155); (b) any associated corporation of such an authorized institution which, being exempt by virtue of section 3(2)(a) or (b) or (c) of the Banking Ordinance (Cap 155), would have been liable to be authorized as a deposit-taking company or restricted licence bank under that Ordinance had it not been so exempt; (Replaced 27 of 1986 s. 137. Amended 3 of 1990 s. 55; 49 of 1995 s. 53) "grandparent or grandparent of his or her spouse" (該人的或其配偶的祖父母或外祖父母), in relation to any person, means- (a) a natural grandfather or grandmother of the person or his or her spouse; (b) an adoptive grandparent of the person or his or her spouse (whether an adoptive parent of a natural parent, adoptive parent or step parent of the person or his or her spouse, or a natural parent of an adoptive parent of the person or his or her spouse); (c) a step grandparent of the person or his or her spouse (whether a step parent of a natural parent, adoptive parent or step parent of the person or his or her spouse, or a natural parent of a step parent of the person or his or her spouse); or (d) in the case of a deceased spouse, a person who would have been the grandparent of the person's spouse by reason of any of the provisions of paragraphs (a) to (c) if the spouse had not died; (Added 31 of 1998 s. 3) "hire-purchase agreement" (租購協議) means an agreement for the bailment of goods under which the bailee may buy the goods, or under which the property in the goods will or may pass to the bailee; (Added 32 of 1998 s. 3) "Hong Kong currency" (港幣) means money which is legal tender in Hong Kong; (Added 29 of 1982 s. 2) "husband" (丈夫) means a married man whose marriage is a marriage within the meaning of this section; (Added 43 of 1989 s. 2) "incapacitated person" (無行為能力的人) means any minor, lunatic, idiot, or person of unsound mind; "inspector" (稅務督察) means an inspector appointed under this Ordinance; (Added 36 of 1955 s. 3) "lease" (租約), in relation to any machinery or plant, includes- (a) any arrangement under which a right to use the machinery or plant is granted by the owner of the machinery or plant to another person; and (b) any arrangement under which a right to use the machinery or plant, being a right derived directly or indirectly from a right referred to in paragraph (a), is granted by a person to another person, but does not include a hire-purchase agreement or a conditional sale agreement unless, in the opinion of the Commissioner, the right under the agreement to purchase or obtain the property in the goods would reasonably be expected not to be exercised; (Added 32 of 1998 s. 3) "limited partnership" (有限責任合夥) has the same meaning as in section 3 of the Limited Partnerships Ordinance (Cap 37); (Added 47 of 1992 s. 2) "mandatory contributions" (強制性供款), in relation to a mandatory provident fund scheme, means mandatory contributions paid to the scheme in accordance with the Mandatory Provident Fund Schemes Ordinance (Cap 485); (Added 4 of 1998 s. 6) "mandatory provident fund scheme" (強制性公積金計劃) means a provident fund scheme registered under the Mandatory Provident Fund Schemes Ordinance (Cap 485); (Added 4 of 1998 s. 6) "marriage" (婚姻) means- (a) any marriage recognized by the law of Hong Kong; or (b) any marriage, whether or not so recognized, entered into outside Hong Kong according to the law of the place where it was entered into and between persons having the capacity to do so, but shall not, in the case of a marriage which is both potentially and actually polygamous, include marriage between a man and any wife other than the principal wife, and "married" (結婚) shall be construed accordingly; (Added 43 of 1989 s. 2) "mortgage" (按揭) means a security by way of mortgage or equitable mortgage for the payment of any definite and certain sum of money advanced or lent at the time, or previously due and owing, or forborne to be paid, being payable, or for the repayment of money thereafter to be lent, advanced or paid, or which may become due upon an account current, together with any sum already advanced or due, or without, as the case may be, and includes- (a) conditional surrender by way of mortgage, or further charge, of or affecting any property whatsoever; and (b) any conveyance of any property whatsoever in trust to be sold or otherwise converted into money, intended only as a security, and redeemable before the sale or other disposal thereof, either by express stipulation or otherwise; and (c) any instrument for defeating or making redeemable, or explaining or qualifying any conveyance, transfer or disposition of any property whatsoever, apparently absolute, but intended only as a security; and (d) any instrument relating to the deposit of any title deeds or instruments constituting or being evidence of the title to any property whatsoever or creating a charge on any property whatsoever; and (e) any mortgage by an equitable owner of his equitable rights; and (f) any warrant of attorney to enter up judgment; (Replaced 79 of 1979 s. 2) [cf. 1891 c. 39 s. 86 U.K.] "net chargeable income" (應課稅入息實額) means net chargeable income calculated in accordance with section 12B; (Added 71 of 1983 s. 2) "occupational retirement scheme" (職業退休計劃) has the meaning assigned to it by section 2(1) of the Occupational Retirement Schemes Ordinance (Cap 426); (Added 76 of 1993 s. 2) "owner" (擁有人), in respect of land or buildings or land and buildings, includes- (a) a person holding the land or buildings or land and buildings directly from the Government; (b) a beneficial owner; (c) a tenant for life; (d) a mortgagor; (e) a mortgagee in possession; (f) a person with adverse title to land receiving rent from buildings or other structures erected on that land; (g) a person who is making payments to a co-operative society registered under the Co-operative Societies Ordinance (Cap 33) for the purpose of the purchase of the land or buildings or land and buildings; (h) a person who holds land or buildings or land and buildings subject to a ground rent or other annual charge; (i) (in so far as common parts are concerned) a corporation registered under section 8 of the Building Management Ordinance (Cap 344) or a person who, on the person's own behalf or on behalf of another person, receives any consideration, in money or money's worth, in respect of the right of use of any common parts solely or with another; and (j) an executor of the estate of an owner; (Replaced 4 of 2010 s. 2) "parent or parent of his or her spouse" (該人的或其配偶的父或母), in relation to any person, means- (a) a parent of whose marriage the person or his or her spouse is the child; (b) the natural father or mother of the person or his or her spouse; (c) a parent by whom the person or his or her spouse was adopted; (d) a step parent of the person or his or her spouse; or (e) in the case of a deceased spouse, a person who would have been the parent of the person's spouse by reason of any of the provisions of paragraphs (a) to (d) if the spouse had not died; (Added 31 of 1998 s. 3) "password" (通行密碼) means any combination of letters, characters, numbers or other symbols selected by a person and approved by the Commissioner for use in systems designated by the Commissioner for the purpose of authenticating the person's identification in communicating with the Commissioner in relation to a return required to be furnished under this Ordinance; (Added 5 of 2003 s. 2) "person" (人、人士) includes a corporation, partnership, trustee, whether incorporated or unincorporated, or body of persons; (Amended 2 of 1971 s. 2; 30 of 1981 s. 2) "precedent partner" (首合夥人) means the partner who, of the active partners resident in Hong Kong- (a) is first named in the agreement of partnership; or (b) if there is no agreement, is specified by name or initials singly or with precedence to the other partners in the usual name of the partnership; or (c) is first named in any statutory statement of the names of the partners; "profits arising in or derived from Hong Kong" (於香港產生或得自香港的利潤) for the purposes of Part IV shall, without in any way limiting the meaning of the term, include all profits from business transacted in Hong Kong, whether directly or through an agent; "receiver" (接管人) includes any receiver or liquidator, and any assignee, trustee, or other person having the possession or control of the property of any person by reason of insolvency or bankruptcy; "recognized certificate" (認可證書) has the same meaning as in section 2(1) of the Electronic Transactions Ordinance (Cap 553); (Added 5 of 2003 s. 2) "recognized occupational retirement scheme" (認可職業退休計劃) means an occupational retirement scheme- (a) which, prior to the commencement* of section 2 of the Inland Revenue (Amendment) (No. 5) Ordinance 1993 (76 of 1993), was a retirement scheme approved by the Commissioner under section 87A where such approval has not subsequently been withdrawn; (b) registered for the time being under section 18 of the Occupational Retirement Schemes Ordinance (Cap 426); (c) in respect of which an exemption certificate has been issued under section 7(1) of the Occupational Retirement Schemes Ordinance (Cap 426) and has not been withdrawn; (d) which is operated by an employer who is- (i) the government of a country or territory outside Hong Kong; or (ii) any agency or undertaking of or by such a government which is not operated for the purpose of gain; or (Amended 19 of 1996 s. 3) (e) contained in or otherwise established by an Ordinance other than the Mandatory Provident Fund Schemes Ordinance (Cap 485); (Added 76 of 1993 s. 2. Amended 4 of 1998 s. 6) "recognized retirement scheme" (認可退休計劃) means- (a) a recognized occupational retirement scheme; or (b) a mandatory provident fund scheme; (Added 31 of 1998 s. 3) "return" (報稅表) includes any return furnished under section 51AA, irrespective of the manner in which that return is furnished; (Added 5 of 2003 s. 2) "river trade limits" (內河航限) has the same meaning as in the Merchant Shipping Ordinance (Cap 281); (Added 47 of 1992 s. 2) "specified form" (指明的格式) means a form specified under section 86; (Added 43 of 1989 s. 2. Amended 5 of 2003 s. 2) "spouse" (配偶) means a husband or wife; (Added 43 of 1989 s. 2) "standard rate" (標準稅率) means the rate specified in Schedule 1; (Added 30 of 1950 Schedule) "tax" (稅、稅款、稅項) except for the purposes of Parts XII and XIII, means any tax imposed by this Ordinance (including provisional salaries tax charged under Part XA, provisional profits tax charged under Part XB and provisional property tax charged under Part XC) other than additional tax, but for the purposes of Parts XII and XIII "tax" (稅、稅款、稅項) includes additional tax; (Replaced 26 of 1969 s. 3. Amended 8 of 1973 s. 2; 7 of 1975 s. 2; 8 of 1983 s. 2) "telefiling system" (電話報稅系統) means a system that enables a person to furnish to the Commissioner certain returns or information by using a telephone; (Added 5 of 2003 s. 2) "trade" (行業、生意) includes every trade and manufacture, and every adventure and concern in the nature of trade; "trustee" (受託人) includes any trustee, guardian, curator, manager, or other person having the direction, control, or management of any property on behalf of any person, but does not include an executor; "voluntary contributions" (自願性供款), in relation to a mandatory provident fund scheme, means voluntary contributions paid to the scheme in accordance with section 11 of the Mandatory Provident Fund Schemes Ordinance (Cap 485); (Added 4 of 1998 s. 6) "wife" (妻子) means a married woman whose marriage is a marriage within the meaning of this section; (Replaced 43 of 1989 s. 2) "year of assessment" (課稅年度) means the period of 12 months commencing on 1 April in any year; (Replaced 30 of 1950 Schedule) "year preceding a year of assessment" (任何課稅年度的上一年) means the period of 12 months ending on 31 March immediately prior to such year of assessment. (Amended 36 of 1955 s. 3; 9 of 1958 s. 2; 26 of 1969 s. 3; 7 of 1986 s. 12; 76 of 1993 s. 2; 12 of 1999 s. 3) (2) For the purposes of the definition of "financial institution" (財務機構) in subsection (1)- "associated corporation" (相聯法團), in relation to an authorized institution, means- (a) a corporation over which the institution has control; (b) a corporation which has control over the institution; or (c) a corporation which is under the control of the same person as is the institution; (Replaced 49 of 1995 s. 53) "control" (控制), in relation to a corporation, means the power of a person to secure- (a) by means of the holding of shares or the possession of voting power in or in relation to that or any other corporation; or (b) by virtue of any powers conferred by the articles of association or other document regulating that or any other corporation, that the affairs of the first-mentioned corporation are conducted in accordance with the wishes of that person. (Added 73 of 1978 s. 2) (2A) For the purposes of the definition of "recognized occupational retirement scheme" (認可職業退休計劃) in subsection (1)- (a) a scheme which is registered for the time being under section 18 of the Occupational Retirement Schemes Ordinance (Cap 426) shall upon registration be regarded as a recognized occupational retirement scheme as from- (i) the date on which the application for such registration was made; or (ii) the date on which the terms of the scheme came into effect, whichever is the earlier; and (b) a scheme in respect of which an exemption certificate has been issued under section 7(1) of the Occupational Retirement Schemes Ordinance (Cap 426) and has not been withdrawn shall upon the issue of the certificate be regarded as a recognized occupational retirement scheme as from- (i) the date on which the application for the certificate was made; or (ii) the date on which the terms of the scheme came into effect, whichever is the earlier: Provided that if such date is earlier than the first commencement date of the Occupational Retirement Schemes Ordinance (Cap 426), the scheme shall be regarded as a recognized occupational retirement scheme as from such commencement date. (Added 76 of 1993 s. 2) (3) For the purposes of this Ordinance a husband and wife shall be deemed to be living apart when they are living apart- (a) under a decree or order of a competent court in or outside Hong Kong; (b) under a duly executed deed of separation or any instrument of similar effect; or (c) in such circumstances that the Commissioner is of the opinion the separation is likely to be permanent. (Added 43 of 1989 s. 2) (4) Whether or not a person who is or was formerly a member of a mandatory provident fund scheme has permanently departed from Hong Kong is, for the purposes of this Ordinance, to be determined by reference to regulations in force under the Mandatory Provident Fund Schemes Ordinance (Cap 485). (Added 4 of 1998 s. 6) (5) In this Ordinance, a reference to the act of signing a return required to be furnished under this Ordinance includes a reference to- (a) the affixing of a digital signature to; or (Amended 14 of 2004 s. 29) (b) the inclusion of a password with, the return for the purpose of authenticating or approving it. (Added 5 of 2003 s. 2) (6) For the purposes of subsection (5)(a), a digital signature shall be- (a) supported by a recognized certificate; (b) generated within the validity of that certificate; and (c) used in accordance with the terms of that certificate. (Added 14 of 2004 s. 29) (7) For the purposes of subsection (6)(a), a digital signature is taken to be supported by a recognized certificate if it is taken to be supported by that certificate under section 2(2) of the Electronic Transactions Ordinance (Cap 553). (Added 14 of 2004 s. 29) (8) In subsection (6)(b), "within the validity of that certificate" (在該證書的有效期內) has the meaning assigned to it by section 6(2) of the Electronic Transactions Ordinance (Cap 553). (Added 14 of 2004 s. 29) ___________________________________________________________________________ ___ Note: * Commencement date: 19 November 1993. INLAND REVENUE ORDINANCE - SECT 3 Establishment of Board of Inland Revenue. Power of Chief Executive to appoint a Commissioner and other officers VerDate:01/07/1997 Adaptation amendments retroactively made-see 12 of 1999 s. 3 (1) (a) There shall be a Board of Inland Revenue composed of the Financial Secretary and 4 other members appointed by the Chief Executive, of whom not more than one shall be an official in the employment of the Government. A member so appointed shall hold office until he shall resign or be removed from office by the Chief Executive. (Amended 12 of 1999 s. 3) (aa) The Board of Inland Revenue shall have a secretary who shall be a deputy commissioner. (Added 8 of 1983 s. 3. Amended 48 of 1995 s. 3) (b) 3 members of the Board of Inland Revenue shall form a quorum for the transaction of business and when the Financial Secretary is present he shall be the chairman. (c) All matters coming before the Board of Inland Revenue shall be decided by a majority of votes, and in the case of an equality of votes the chairman or presiding member shall have a second or a casting vote. (d) The Board of Inland Revenue may transact any of its business by the circulation of papers without meeting; and a resolution signed by a majority of the members shall be as valid and effective as if it had been passed at a meeting by the votes of the members so signing. (Added 8 of 1983 s. 3) (2) For the purposes of this Ordinance, the Chief Executive may appoint a Commissioner, deputy commissioners, assistant commissioners, assessors and inspectors. (Amended 36 of 1955 s. 4; 48 of 1995 s. 3; 12 of 1999 s. 3) (3) An assistant commissioner exercising or performing any power, duty, or function of the Commissioner under this Ordinance shall be deemed for all purposes to be authorized to exercise or perform the same until the contrary is proved. (4) All powers conferred upon an assessor by this Ordinance may be exercised by an assistant commissioner. INLAND REVENUE ORDINANCE - SECT 3A Exercise of powers and duties VerDate:30/06/1997 (1) Where under this Ordinance any power is conferred or any duty is imposed on the Commissioner and so long as it is not provided that the power or duty shall be exercised or performed by the Commissioner personally, such power may be exercised or such duty may be performed by a deputy commissioner or by an assistant commissioner. (Amended 48 of 1995 s. 4) (2) Except where a provision of this Ordinance provides that a power or duty shall be exercised or performed by the Commissioner personally, the Commissioner may, subject to such limitations as he may think fit, authorize in writing any public officer to exercise any power or perform any duty conferred or imposed upon him by this Ordinance. (Added 26 of 1969 s. 4) INLAND REVENUE ORDINANCE - SECT 4 Official secrecy VerDate:01/07/1997 Adaptation amendments retroactively made-see 12 of 1999 s. 3 (1) Except in the performance of his duties under this Ordinance, every person who has been appointed under or who is or has been employed in carrying out or in assisting any persons to carry out the provisions of this Ordinance shall preserve and aid in preserving secrecy with regard to all matters relating to the affairs of any person that may come to his knowledge in the performance of his duties under this Ordinance, and shall not communicate any such matter to any person other than the person to whom such matter relates or his executor or the authorized representative of such person or such executor, nor suffer or permit any person to have access to any records in the possession, custody or control of the Commissioner. (Amended 9 of 1958 s. 3) (2) Every person appointed under or employed in carrying out the provisions of this Ordinance, shall before acting under this Ordinance take and subscribe before a commissioner for oaths an oath of secrecy in such form as the Board of Inland Revenue may specify. (Amended 39 of 1969 s. 2; 47 of 1997 s. 10) (3) No person appointed under or employed in carrying out the provisions of this Ordinance shall be required to produce in any court any return, document, or assessment, or to divulge or communicate to any court any matter or thing coming under his notice in the performance of his duties under this Ordinance, except as may be necessary for the purpose of carrying into effect the provisions of this Ordinance. (4) Notwithstanding anything contained in this section, the Commissioner or any officer of the Inland Revenue Department authorized by the Commissioner in that behalf may communicate any matter which comes to his knowledge, including a copy of any return, accounts or other document submitted to him in connection with this Ordinance- (a) to the Commissioner of Rating and Valuation, to the Collector of Stamp Revenue, or to the Estate Duty Commissioner, or (Amended 20 of 1948 s. 4) (b) (Repealed 12 of 1999 s. 3) (c) to the Secretary for Justice, or any public officer authorized by him, for the purpose of reporting under section 68(5) an appeal to the Board of Review, or (Added 2 of 1971 s. 3. Amended 79 of 1992 s.10; L.N. 362 of 1997) (d) to any person appointed under or employed in carrying out the provisions of the Business Registration Ordinance (Cap 310), as regards any matter required to be notified to the Commissioner pursuant to section 8(1) or (2) of that Ordinance by the person submitting such return, accounts or other document. (Added 79 of 1992 s. 10) (5) Notwithstanding anything contained in this section, the Commissioner may permit the Director of Audit or any officer of that department duly authorized by the Director of Audit in that behalf to have such access to any records or documents as may be necessary for the performance of his official duties. The Director of Audit or any officer so authorized shall be deemed to be a person employed in carrying out the provisions of this Ordinance for the purpose of subsection (2). (6) Notwithstanding anything contained in this section, where the Commissioner is of the opinion that any tax deemed to be in default under the provisions of section 71(1) has for the time being become irrecoverable, he may communicate to the Financial Secretary the names and descriptions of the persons charged with such tax together with particulars of the tax in default. (Added 9 of 1958 s. 3) (Amended 9 of 1958 s. 3) INLAND REVENUE ORDINANCE - SECT 5 Charge of property tax VerDate:30/06/1997 PART II PROPERTY TAX (1) Property tax shall, subject to the provisions of this Ordinance, be charged for each year of assessment on every person being the owner of any land or buildings or land and buildings wherever situate in Hong Kong and shall be computed at the standard rate on the net assessable value of such land or buildings or land and buildings for each such year. (Amended 35 of 1965 s. 3; 76 of 1975 s. 3; 8 of 1983 s. 4; 7 of 1986 s. 12) Provided that- (a) (Repealed 76 of 1975 s. 3) (b) where the owner of the land is not the owner of the buildings thereon, separate assessments shall be made for the land and for the buildings; (c) (Repealed 26 of 1969 s. 5) (d) (Repealed 76 of 1975 s. 3) (e) (Repealed 56 of 1993 s. 2) (Replaced 36 of 1955 s. 6) (1A) In subsection (1), "net assessable value" (應評稅淨值) means the assessable value of land or buildings or land and buildings, ascertained in accordance with section 5B- (a) (Repealed 56 of 1993 s. 2) (b) less- (i) where the owner agrees to pay the rates in respect of the land or buildings or land and buildings, those rates paid by him; and (ii) an allowance for repairs and outgoings of 20% of that assessable value after deduction of any rates under subparagraph (i). (Added 76 of 1975 s. 3. Amended 8 of 1983 s. 4; 56 of 1993 s. 2) (1B) The percentage allowance specified in subsection (1A) may be amended by resolution of the Legislative Council. (Added 76 of 1975 s. 3) (2) (a) Notwithstanding subsection (1), any corporation carrying on a trade, profession or business in Hong Kong shall, on application made in writing to the Commissioner and on proof of the facts to the satisfaction of the Commissioner, be entitled to exemption from the property tax for any year of assessment in respect of any land or buildings of land and buildings owned by the corporation where the corporation would be entitled under section 25 to a set-off of the property tax which, if exemption were not granted under this subsection, would be paid by the corporation; and the property shall be and remain exempted from property tax for each year of assessment in which the circumstances are such as to qualify the property for such exemption for that year. (Amended 7 of 1986 s. 12; 56 of 1993 s. 2) (b) (Repealed 56 of 1993 s. 2) (c) Every corporation exempted from property tax under this subsection in respect of any land or buildings or land and buildings shall, within 30 days after the event, notify the Commissioner in writing of any change in the ownership or use thereof or in any other circumstances affecting such exemption. (Added 35 of 1965 s. 3) (2A)-(5) (Repealed 56 of 1993 s. 2) "net assessable value" (應評稅淨值) INLAND REVENUE ORDINANCE - SECT 5A (Repealed) VerDate:30/06/1997 (Repealed 56 of 1993 s. 3) INLAND REVENUE ORDINANCE - SECT 5B Ascertainment of assessable value on or after 1 April 1983 VerDate:30/06/1997 (1) This section shall apply to any year of assessment commencing or after 1 April 1983. (Amended 56 of 1993 s. 4) (2) The assessable value of land or buildings or land and buildings for each year of assessment shall be the consideration, in money or money's worth, payable in that year to, to the order of, or for the benefit of, the owner in respect of the right of use of that land or buildings or land and buildings. (3) Any consideration payable before the year of assessment commencing on 1 April 1983 in respect of a period of the right of use which starts after, or extends beyond, 1 April 1983 shall, for the purposes of this section, be deemed to be payable in equal monthly instalments during the period of the right of use or during a period of 3 years ending on 31 March 1986, whichever is the shorter. (4) Any consideration payable in respect of a period of the right of use which is not contained within any one year of assessment shall, for the purposes of this section, be deemed to be payable in equal monthly instalments during the period of the right of use or during a period of 3 years commencing at the start of the period of the right of use to which the consideration relates, whichever is the shorter. (5) (Repealed 56 of 1993 s. 4) (6) In this section, "consideration" (代價) includes any consideration payable in respect of the provision of any services or benefits connected with or related to the right of use. (Added 8 of 1983 s. 6) "consideration" (代價) INLAND REVENUE ORDINANCE - SECT 6 (Repealed) VerDate:30/06/1997 (Repealed 8 of 1983 s. 7) INLAND REVENUE ORDINANCE - SECT 7 (Repealed) VerDate:30/06/1997 (Repealed 56 of 1993 s. 5) INLAND REVENUE ORDINANCE - SECT 7A Interpretation VerDate:30/06/1997 In this Part- "buildings" (建築物), except for the purposes of section 5(2), includes any part of a building; (Replaced 35 of 1965 s. 4. Amended 56 of 1993 s. 6) "land or buildings or land and buildings" (土地或建築物或土地連建築物) includes piers, wharves and other structures; "occupied" (佔用), in relation to land or buildings or land and buildings, means land or buildings or land and buildings which are being put to beneficial use. (Replaced 76 of 1975 s. 6) (Added 36 of 1955 s. 9) "buildings" (建築物) "land or buildings or land and buildings" (土地或建築物或土地連建築物) "occupied" (佔用) INLAND REVENUE ORDINANCE - SECT 7B (Repealed) VerDate:30/06/1997 (Repealed 56 of 1993 s. 7) INLAND REVENUE ORDINANCE - SECT 7C Bad debts VerDate:30/06/1997 (1) In ascertaining the assessable value of any land or buildings or land and buildings under this Part for any year of assessment commencing on or after 1 April 1983, there shall be deducted any consideration in money or money's worth, payable or deemed to be payable on or after 1 April 1983 to, to the order of, or for the benefit of, the owner in respect of the right of use of that land or buildings or that land and buildings and proved to the satisfaction of the assessor to have become irrecoverable during that year of assessment. (2) Consideration previously deducted as irrecoverable and recovered during any year of assessment shall be treated as consideration mentioned in section 5B(2) payable in that year of assessment in respect of the right of use of the land or buildings or land and buildings in respect of which that consideration was payable. (3) Notwithstanding section 70, where a person is entitled to deduct any consideration under subsection (1) but the land or buildings or land and buildings has no or insufficient assessable value from which to deduct that consideration in the year of assessment in which, under that subsection, that consideration is deductible, that consideration, or that consideration to the extent to which it cannot be deducted in that year, shall be deducted from the assessable value of that land or buildings or that land and buildings in the latest year of assessment in which that assessable value is sufficient. (Added 8 of 1983 s. 9) INLAND REVENUE ORDINANCE - SECT 8 Charge of salaries tax VerDate:01/12/2000 PART III SALARIES TAX (Amended 36 of 1955 s. 10) (1) Salaries tax shall, subject to the provisions of this Ordinance, be charged for each year of assessment on every person in respect of his income arising in or derived from Hong Kong from the following sources- (a) any office or employment of profit; and (b) any pension. (1A) For the purposes of this Part, income arising in or derived from Hong Kong from any employment- (a) includes, without in any way limiting the meaning of the expression and subject to paragraph (b), all income derived from services rendered in Hong Kong including leave pay attributable to such services; (Amended 69 of 1987 s. 2) (b) excludes income derived from services rendered by a person who- (i) is not employed by the Government or as master or member of the crew of a ship or as commander or member of the crew of an aircraft; and (ii) renders outside Hong Kong all the services in connection with his employment; and (Added 2 of 1971 s. 5. Amended 69 of 1987 s. 2) (c) excludes income derived by a person from services rendered by him in any territory outside Hong Kong where- (i) by the laws of the territory where the services are rendered, the income is chargeable to tax of substantially the same nature as salaries tax under this Ordinance; and (ii) the Commissioner is satisfied that that person has, by deduction or otherwise, paid tax of that nature in that territory in respect of the income. (Added 69 of 1987 s. 2) (1B) In determining whether or not all services are rendered outside Hong Kong for the purposes of subsection (1A) no account shall be taken of services rendered in Hong Kong during visits not exceeding a total of 60 days in the basis period for the year of assessment. (Added 2 of 1971 s. 5) (2) In computing the income of any person for the purposes of subsection (1) there shall be excluded the following- (a) (Repealed 130 of 1997 s. 2) (b) the official emoluments of consuls, vice-consuls and persons employed on the staff of any consulate, who are subjects or citizens of the state which they represent; (c) subject to subsection (4) any sum received by way of commutation of pension under- (i) a recognized occupational retirement scheme upon termination of service, death, incapacity or retirement; (ii) the Pensions Ordinance (Cap 89); (iii) the Pension Benefits Ordinance (Cap 99); or (iv) the Pension Benefits (Judicial Officers) Ordinance (Cap 401); (Replaced 76 of 1993 s. 3) (ca) in the case of a pension attributable to services rendered in any office or employment, other than employment by the Government, so much of the pension as is not attributable to services rendered in Hong Kong; (Added 2 of 1971 s. 5) (cb) so much of accrued benefits received from the approved trustee of a mandatory provident fund scheme on a person's retirement from employment, death or incapacity or permanent departure from Hong Kong as is attributable to mandatory contributions; (Replaced 4 of 1998 s. 6) (cc) subject to subsections (4) and (5)- (i) any sum (not being a pension) withdrawn from a recognized occupational retirement scheme on retirement, death, incapacity or termination of service; and (ii) a sum equal to so much of the accrued benefit received from the approved trustee of a mandatory provident fund scheme on retirement, death, incapacity, termination of service, or taken to have been received from the approved trustee of such a scheme as provided by subsection (9), as is attributable to voluntary contributions paid to the scheme by an employer; (Added 4 of 1998 s. 6) (d) the emoluments payable by the Governments of the members of the Commonwealth, other than the Government of Hong Kong, to members of Her Majesty's forces and to persons in the permanent service of those Governments in Hong Kong in respect of their offices under those Governments; (e) wound and disability pensions granted to members of Her Majesty's forces; (f) gratuities granted to members of Her Majesty's forces in respect of services rendered during war; (fa) the Hong Kong War Memorial Pensions and additional benefits paid under the Hong Kong War Memorial Pensions Ordinance (Cap 386); (Added 51 of 1991 s. 24) (g) any amount arising from a scholarship, exhibition, bursary, or other similar educational endowment held by that person where he is receiving full time instruction at a university, college, school, or other similar educational establishment; (Replaced 26 of 1969 s. 9. Amended 1 of 1991 s. 2) (h) the emoluments payable by the Central People's Government to persons in the temporary service of that Government who are in the opinion of the Commissioner serving in Hong Kong on Mainland of China based terms whereby they are normally employed in the Mainland of China but are liable for service elsewhere or are recruited in the Mainland of China specially for service in Hong Kong; (Added 26 of 1969 s. 9. Amended 23 of 1998 s. 2; 12 of 1999 s. 3) (i) any amount received by way of periodical payments in the nature of alimony or maintenance by a person from his or her spouse or former spouse; (Added 35 of 1965 s. 5. Amended 2 of 1971 s. 5; 19 of 1991 s. 2) (j) income derived from services rendered as master or member of the crew of a ship or as commander or member of the crew of an aircraft by a person who was present in Hong Kong on not more than- (i) a total of 60 days in the basis period for that year of assessment; and (ii) a total of 120 days falling partly within each of the basis periods for 2 consecutive years of assessment, one of which is that year of assessment; (Added 2 of 1971 s. 5. Amended 7 of 1986 s. 3) (k) any salary or other remuneration paid by another person who is chargeable to profits tax under Part IV which, but for section 17(2), would be deductible in computing the profits or losses of such other person for the purposes of that Part. (Added 7 of 1986 s. 3) (3) For the purposes of subsection (2)(c) and (cc)- (Amended 4 of 1998 s. 6) "retirement" (退休) means- (a) a retirement from the service of the employer at some specified age of not less than 45 years; or (b) a retirement after some specified period of service with the employer of not less than 10 years; or (c) the attainment of the age of 60 years or some specified age of retirement, whichever is the later; "termination of service" (服務終止) means a termination of employment with the employer other than upon retirement, death or incapacity. (Added 76 of 1993 s. 3) (4) For the purposes of paragraphs (c) and (cc) of subsection (2), an amount that a person- (a) has received from a recognized occupational retirement scheme on the person's termination of service; or (b) has received, or is taken to have received, from a mandatory provident fund scheme on termination of service, may be excluded under those paragraphs to the extent that it is attributable to voluntary contributions made by the person's employer and does not exceed the proportionate benefit calculated in accordance with subsection (5). However, where, in the case of a recognized occupational retirement scheme approved by the Commissioner under section 87A before its repeal by the Inland Revenue (Amendment) (No. 5) Ordinance 1993 (76 of 1993), an amount payable on termination of service in accordance with the rules of the scheme (as approved by the Commissioner before that repeal) exceeds the proportionate benefit so calculated, that amount is to be taken to be the proportionate benefit. (Replaced 4 of 1998 s. 6) (5) For the purposes of subsection (4), the formula for calculating the proportionate benefit is- CMS PB = x AB 120 where- PB is the proportionate benefit to be calculated; CMS is the number of completed months of service that the person has completed with the employer; and AB the amount of the person's accrued benefit. (Added 4 of 1998 s. 6) (6) In subsection (5), "accrued benefit" (累算權益), in relation to a person, means- (a) if the person is a member of a recognized occupational retirement scheme, the maximum benefit that the person would have been entitled to receive from the scheme for the person's service recognized for the purposes of the scheme if, at the date on which the person's employment was terminated, the person had retired (within the meaning of subsection (3)); and (b) if the person is a member of a mandatory provident fund scheme, the person's accrued benefits attributable to voluntary contributions paid to the scheme in respect of the person for that service. (Added 4 of 1998 s. 6) (7) If- (a) the recognized occupational retirement scheme referred to in subsection (2)(cc)(i) is established by an employer who is not chargeable to tax under Part IV; or (b) the employer who contributes to the mandatory provident fund scheme referred to in subsection (2)(cc)(ii) is not so chargeable, the sum excluded by subsection (2)(cc) must not, with respect to the part of the sum that is attributable to the employer's voluntary contributions to the scheme, exceed the amount calculated in accordance with subsection (8). (Added 4 of 1998 s. 6) (8) For the purposes of subsection (7), the formula is- A = (EI x 15 ) x YCS] - RAB [ ( 100) ] where- A is the amount to be calculated; EI is the employee's income from the employee's office or employment for the period of 12 months preceding the date on which the relevant benefit is received or taken to have been received; YCS is the employee's completed years of service with the employee's employer; RAB is- (a) in the case of a recognized occupational retirement scheme, zero; or (b) in the case of a mandatory provident fund scheme, so much of the relevant accrued benefit that the employee has received from the scheme as is attributable to mandatory contributions paid to the scheme by the person's employer. (Added 4 of 1998 s. 6) (9) If- (a) the service of a person in respect of whom an employer has paid voluntary contributions to a mandatory provident fund scheme is terminated; and (b) the accrued benefit attributable to those contributions is retained within the scheme or is transferred to another mandatory provident fund scheme, the person is, for the purposes of subsection (2)(cc), taken to have received from the scheme on the date of termination of service such part of the person's accrued benefit as is attributable to those contributions. (Added 4 of 1998 s. 6) (10) Subsection (4) does not apply to a part of a person's accrued benefit in a mandatory provident fund scheme that has previously been taken to have been paid to the person because of the operation of subsection (9). (Added 4 of 1998 s. 6) (Replaced 36 of 1955 s. 11. Amended 15 of 1966 s. 2; 7 of 1986 s. 12) "retirement" (退休) "termination of service" (服務終止) "accrued benefit" (累算權益) INLAND REVENUE ORDINANCE - SECT 9 Definition of income from employment VerDate:04/07/2003 (1) Income from any office or employment includes- (a) any wages, salary, leave pay, fee, commission, bonus, gratuity, perquisite, or allowance, whether derived from the employer or others, except- (i)-(iii) (Repealed 24 of 2003 s. 3) (iv) subject to subsection (2A), any amount paid by the employer to or for the credit of a person other than the employee in discharge of a sole and primary liability of the employer to that other person, not being a liability for which any person was surety; (Added 1 of 1991 s. 3) (aa) so much of any amount (other than a pension falling under section 8(1)(b)) received by an employee before or after his employment ceases, whether by way of commutation or otherwise, from a pension or provident fund, scheme or society, other than a recognized occupational retirement scheme or mandatory provident fund scheme, as is attributable to the employer's contributions to that fund, scheme or society; (Added 2 of 1971 s. 6. Amended 76 of 1993 s. 4; 4 of 1998 s. 6) (ab) so much of any amount (other than a pension falling under section 8(1)(b)) received by an employee, whether by way of commutation or otherwise, under a recognized occupational retirement scheme- (i) otherwise than because of termination of service, death, incapacity or retirement of the employee as is attributable to the employer's contributions under the scheme in respect of the employee; or (ii) by reason of termination of service as is attributable to such part of the employer's contributions under the scheme in respect of the employee that exceeds the proportionate benefit calculated in accordance with section 8(5); (Added 76 of 1993 s. 4. Amended 4 of 1998 s. 6) (ac) any payment received by an employee pursuant to a judgment given under section 57(3)(b) of the Occupational Retirement Schemes Ordinance (Cap 426) that is attributable to his employer's contributions to the occupational retirement scheme in respect of which the judgment was given; (Added 76 of 1993 s. 4) (ad) so much of the accrued benefit that an employee has received, or is taken to have received, from a mandatory provident fund scheme (otherwise than on retirement, death, incapacity or termination of service) as is attributable to contributions paid to the scheme by the employee's employer; (Added 4 of 1998 s. 6) (ae) so much of the accrued benefit that an employee has received, or is taken to have received, from a mandatory provident fund scheme as is attributable to voluntary contributions paid to the scheme by the employee's employer that exceeds the proportionate benefit calculated in accordance with section 8(5); (Added 4 of 1998 s. 6) (b) the rental value of any place of residence provided rent-free by the employer or an associated corporation; (Amended 38 of 1975 s. 2) (c) where a place of residence is provided by an employer or an associated corporation at a rent less than the rental value, the excess of the rental value over such rent; (Amended 2 of 1971 s. 6; 38 of 1975 s. 2) (d) any gain realized by the exercise of, or by the assignment or release of, a right to acquire shares or stock in a corporation obtained by a person as the holder of an office in or an employee of that or any other corporation. (Added 2 of 1971 s. 6) (1A) (a) Notwithstanding subsection (1)(a), where an employer or an associated corporation- (i) pays all or part of the rent payable by the employee; or (ii) refunds all or part of the rent paid by the employee, such payment or refund shall be deemed not to be income; (Replaced 1 of 1991 s. 3) (b) a place of residence in respect of which an employer or associated corporation has paid or refunded all the rent therefor shall be deemed for the purposes of subsection (1) to be provided rent free by the employer or associated corporation; (c) a place of residence in respect of which an employer or associated corporation has paid or refunded part of the rent therefor shall be deemed for the purposes of subsection (1) to be provided by the employer or associated corporation for a rent equal to the difference between the rent payable or paid by the employee and the part thereof paid or refunded by the employer or associated corporation. (Added 36 of 1954 s. 2. Amended 38 of 1975 s. 2; 1 of 1991 s. 3) (2) The rental value of any place of residence provided by the employer or an associated corporation shall be deemed to be 10% of the income as described in subsection (1)(a) derived from the employer for the period during which a place of residence is provided after deducting the outgoings, expenses and allowances provided for in section 12(1)(a) and (b) to the extent to which they are incurred during the period for which the place of residence is provided and any lump sum payment or gratuity paid or granted upon the retirement or termination of employment of the employee: (Amended 35 of 1965 s. 6; 26 of 1969 s. 10; 7 of 1975 s. 3; 38 of 1975 s. 2) Provided that- (a) if such place of residence be a hotel, hostel or boarding house the rental value shall be deemed to be 8% of the income aforesaid where the accommodation consists of not more than 2 rooms and 4% where the accommodation consists of not more than one room; (Replaced 10 of 1950 s. 3. Amended 38 of 1975 s. 2) (b) if such place of residence be other than a hotel, hostel or boarding house any person may elect to have, in respect of the years of assessment commencing on or after 1 April 1983, the rateable value included in the valuation list prepared under section 12 of the Rating Ordinance (Cap 116) or, if the place of residence is not so included, the rateable value ascertained in accordance with Part III of that Ordinance, substituted for rental value at 10% as aforesaid. (Replaced 19 of 1996 s. 4) (2A) Subsection (1)(a)(iv) shall not operate to exclude- (a) any benefit that is- (i) provided by an employer otherwise than in connection with a holiday journey; and (ii) capable of being converted into money by the recipient; (Replaced 24 of 2003 s. 3) (b) any amount paid by an employer in connection with the education of a child of an employee; or (Amended 24 of 2003 s. 3) (c) any amount paid by an employer in connection with a holiday journey, (Added 24 of 2003 s. 3) from income from any office or employment. (Added 1 of 1991 s. 3) (3) A pension shall include a pension which is voluntary or is capable of being discontinued. (Replaced 36 of 1955 s. 13) (4) For the purposes of subsection (1)- (a) the gain realized by the exercise at any time of such a right as is referred to in paragraph (d) of that subsection shall be taken to be the difference between the amount which a person might reasonably expect to obtain from a sale in the open market at that time of the shares or stock acquired and the amount or value of the consideration given whether for them or for the grant of the right or for both; and (b) the gain realized by the assignment or release of such a right as is referred to in paragraph (d) of that subsection shall be taken to be the difference between the amount or value of the consideration for the assignment or release and the amount or value of the consideration given for the grant of the right, (a just apportionment being made of any entire consideration given for the grant of the right to acquire the said shares or stock and other shares or stock or otherwise for the grant of the right to acquire those shares or stock and for something beside): Provided that neither the consideration given for the grant of the right nor any such entire consideration shall be taken to include the performance of any duties in or in connection with the office or employment by reason of which the right was granted, and no part of the amount or value of the consideration given for the grant shall be deducted more than once under this subsection. (Replaced 2 of 1971 s. 6) (5) Where salaries tax may by virtue of subsection (1)(d) become chargeable in respect of any gain which may be realized by the exercise of a right, salaries tax shall not be chargeable under any other provision of this Ordinance in respect of the receipt of the right. (Added 2 of 1971 s. 6. Amended L.N. 65 of 1986) (6) For the purposes of this section- "accrued benefit" (累算權益) has the same meaning as in section 8(6); (Added 4 of 1998 s. 6) "associated corporation" (相聯法團) means- (a) a corporation over which the employer has control; (b) if the employer is a corporation- (i) a corporation which has control over the employer; or (ii) a corporation which is under the control of the same person as is the employer; "child of an employee" (僱員的子女) means any child of an employee or of his or her spouse or former spouse, whether or not born in wedlock, and includes the adopted or step child of either or both of them; (Added 1 of 1991 s. 3) "control" (控制), in relation to a corporation, means the power of a person to secure- (a) by means of the holding of shares or the possession of voting power in or in relation to that or any other corporation; or (b) by virtue of any powers conferred by the articles of association or other document regulating that or any other corporation, that the affairs of the first-mentioned corporation are conducted in accordance with the wishes of that person; (Added 38 of 1975 s. 2) "employee" (僱員) includes a holder of an office; (Added 1 of 1991 s. 3) "holiday journey" (度假旅程) means- (a) a journey taken for holiday purposes; or (b) where a journey is taken for holiday and other purposes, the part of the journey taken for holiday purposes; (Added 24 of 2003 s. 3) "place of residence" (居住地方) includes a residence provided by an employer or an associated corporation notwithstanding that the employee is required to occupy that place of residence by or under his terms of employment and whether or not by doing so he can better perform his duties; (Added 48 of 1979 s. 2. Amended 76 of 1993 s. 4) "retirement" (退休) and "termination of service" (服務終止) have the same meaning as in section 8(3). (Added 76 of 1993 s. 4) ___________________________________________________________________________ __ Note: The amendments made by 24 of 2003 to section 9(1)(a)(i) to (iii), (2A)(a) and (c) and (6) apply in relation to the year of assessment commencing on 1 April 2003 and to all subsequent years of assessment. (Please see 24 of 2003 s. 2) "accrued benefit" (累算權益) "associated corporation" (相聯法團) "child of an employee" (僱員的子女) "control" (控制) "employee" (僱員) "holiday journey" (度假旅程) "place of residence" (居住地方) "retirement" (退休) and "termination of service" (服務終止) INLAND REVENUE ORDINANCE - SECT 9A Remuneration under certain agreements treated as being income derived from an employment of profit VerDate:30/06/1997 (1) Where a person ("relevant person") carrying on (or deemed under this Ordinance to be carrying on) a trade, profession or business, or prescribed activity, has entered into an agreement, whether before, on or after the appointed day, under which any remuneration for any services carried out under the agreement on or after that day by an individual ("relevant individual") for the relevant person or any other person is paid or credited on or after that day to- (a) a corporation controlled by- (i) the relevant individual; (ii) an associate or associates of the relevant individual; or (iii) the relevant individual together with an associate or associates of the relevant individual; (b) a trustee of a trust estate under which the relevant individual or an associate or associates of the relevant individual is a beneficiary, or are beneficiaries, as the case may be, under the trust; or (c) a corporation controlled by such a trustee, then, subject to subsections (3) and (4), for the purposes of this Ordinance- (i) the relevant individual shall be treated as having an employment of profit with the relevant person- (A) commencing on- (I) in the case of the trade, profession or business, the day the relevant individual commenced to carry out any of those services or the appointed day, whichever is the later; (II) in the case of the prescribed activity, the day the notice concerned under subsection (6) commenced or the day the relevant individual commenced to carry out any of those services, whichever is the later; (B) until the agreement terminates without the relevant individual continuing to carry out any of those services as an employee of the relevant person; (ii) the relevant individual shall be treated as an employee of the relevant person, and the relevant person shall be treated as the employer of the relevant individual, whilst the relevant individual is treated, under paragraph (i), as having an employment of profit with the relevant person; and (iii) any such remuneration shall be treated as being- (A) income derived by the relevant individual from an employment of profit with the relevant person; and (B) received by and accrued to the relevant individual at the time that it is paid or credited to the corporation or trustee concerned referred to in paragraph (a), (b) or (c), and the other provisions of this Ordinance (including section 52) shall be construed accordingly. (2) Where an agreement referred to in subsection (1) does not specify or otherwise identify the amount of any remuneration referred to in that subsection which is from time to time to be paid or credited to the corporation or trustee referred to in paragraph (a), (b) or (c) of that subsection, then any sum which under that agreement is paid or credited to that corporation or trustee, as the case may be, shall be deemed to be such remuneration (and the other provisions of this Ordinance, including that subsection, shall apply accordingly) except any such sum or part thereof in respect of which the relevant individual concerned or the relevant person establishes to the satisfaction of the Commissioner that it was not in substance remuneration for any services carried out under that agreement on or after the appointed day by the relevant individual for the relevant person or any other person. (3) Paragraphs (i), (ii) and (iii) of subsection (1) shall not apply where- (a) neither the agreement referred to in that subsection nor any related undertaking (and whether or not the agreement refers to that undertaking) provides for any remuneration for any of those services to include or to be the provision of annual leave, passage allowance, sick leave, pension entitlements, medical payments or accommodation, or any similar benefit, or any benefit (including money) in lieu thereof; (b) if the agreement referred to in that subsection or any related undertaking (and whether or not the agreement refers to that undertaking) requires any of the services referred to in that subsection to be carried out personally by the relevant individual, the relevant individual carries out the same or similar services- (i) for persons other than any person for whom those first-mentioned services are carried out under that agreement; and (ii) during the term of that agreement or undertaking, as the case may be; (c) the performance by the relevant individual of any of those services is not subject to any control or supervision- (i) which may be commonly exercised by an employer in relation to the performance of his employee's duties; and (ii) by any person (including the relevant person) other than the corporation or trustee concerned referred to in subsection (1)(a), (b) or (c); (d) the remuneration referred to in that subsection is not paid or credited periodically and calculated on a basis commonly used in relation to the payment or crediting and calculation of remuneration under a contract of employment; (e) the relevant person does not have the right to cause any of those services to cease to be carried out in a manner, or for a reason, commonly provided for in relation to the dismissal of an employee under a contract of employment; and (f) the relevant individual is not held out to the public to be an officer or employee of the relevant person. (4) Paragraphs (i), (ii) and (iii) of subsection (1) shall not apply where the relevant individual establishes to the satisfaction of the Commissioner that at all relevant times the carrying out of the services referred to in that subsection was not in substance the holding by him of an office or employment of profit with the relevant person. (5) It is hereby declared that where, by virtue of the operation of this section, the relevant individual is chargeable to salaries tax on remuneration referred to in subsection (1), then- (a) the corporation or trustee concerned referred to in paragraph (a), (b) or (c) of that subsection to whom that remuneration is paid or credited is not chargeable to tax thereon; and (b) the relevant individual is not chargeable to tax on any remuneration paid or credited to him by that corporation or trustee, as the case may be- (i) in respect of any office or employment of profit he has with that corporation or trustee, as the case may be; and (ii) to the extent that the remuneration referred to in this paragraph is attributable to any of the services referred to in that subsection. (6) The Commissioner may, by notice in the Gazette, prescribe an activity for the purposes of this section. (7) For the avoidance of doubt, it is hereby declared that- (a) where there are 2 or more relevant individuals under an agreement referred to in subsection (1), then that subsection shall apply to them individually and not collectively, and the other provisions of this section (including subsection (2)) shall be construed accordingly; (b) paragraphs (i), (ii) and (iii) of subsection (1) shall not apply where under an agreement referred to in that subsection- (i) the relevant person is also the relevant individual; or (ii) the relevant person is a partnership and the relevant individual is a partner of the partnership. (8) In this section- "appointed day" (指定日期) means the day appointed under section 1(2) of the Inland Revenue (Amendment) (No. 2) Ordinance 1995 (54 of 1995); "associate" (相聯者), in relation to the relevant individual, means- (a) a relative of the relevant individual; (b) a partner of the relevant individual and any relative of that partner; (c) a partnership in which the relevant individual is a partner; (d) any corporation controlled by the relevant individual, by a partner of the relevant individual or by a partnership in which the relevant individual is a partner; (e) any director or principal officer of a corporation referred to in paragraph (d); (f) another relevant individual who is such an individual under the agreement referred to in subsection (1) under which the first-mentioned relevant individual is also such an individual; "beneficiary" (受益人), in relation to a trust estate, means any person who benefits or is capable (whether by the exercise of a power of appointment or otherwise) of benefiting under the trust estate, either directly or through any interposed person, or who is able or might reasonably be expected to be able, whether directly or indirectly, to control the activities of the trust estate or the application of its corpus or income; "control" (控制), in relation to a corporation, means the power of a person to secure- (a) by means of the holding of shares or the possession of voting power in or in relation to that or any other corporation; or (b) by virtue of any powers conferred by the articles of association or other document regulating that or any other corporation, that the affairs of the first-mentioned corporation are conducted in accordance with the wishes of that person; "prescribed activity" (訂明活動) means any activity prescribed in a notice under subsection (6); "principal officer" (主要職員) means- (a) a person employed by a corporation who, either alone or jointly with one or more other persons, is responsible under the immediate authority of the directors for the conduct of the business of the corporation; or (b) a person so employed who, under the immediate authority of a director of the corporation or a person to whom paragraph (a) applies, exercises managerial functions in respect of the corporation; "relative" (親屬) means the spouse, parent, child, brother or sister of the person concerned, and, in deducing such a relationship, an adopted child shall be deemed to be a child both of the natural parents and the adopting parent and a step child to be the child of both the natural parents and of any step parent. (Added 54 of 1995 s. 2) "appointed day" (指定日期) "associate" (相聯者) "beneficiary" (受益人) "control" (控制) "prescribed activity" (訂明活動) "principal officer" (主要職員) "relative" (親屬) INLAND REVENUE ORDINANCE - SECT 10 Salaries tax on spouses to be paid separately unless they elect to be jointly assessed VerDate:17/04/1998 (1) In the case of a husband and wife, unless an election is made under subsection (2), salaries tax shall be payable on the net chargeable income of each spouse ascertained under this Part by the spouse to whom the income has accrued. (2) Where in any year of assessment a husband and wife, not being a wife living apart from her husband, both have assessable income and- (a) either the husband or wife is entitled to deductions under Part IVA and allowances under Part V which, in aggregate, are in excess of his or her net assessable income; or (Amended 31 of 1998 s. 4) (b) both also have a net chargeable income and the aggregate of the salaries tax which would be payable by them if subsection (1) applies exceeds the salaries tax which would be payable if an election is made under this subsection, an election may be made by them, subject to section 11, to be assessed to salaries tax in the manner specified in subsection (3). (3) Where an election is made by a husband and wife under subsection (2) salaries tax shall be payable on their aggregated net chargeable income as ascertained under section 12B(2) and in the case of an election- (a) under subsection (2)(a), the spouse who would have been chargeable to salaries tax in the absence of such an election; (b) under subsection (2)(b), the spouse who is nominated by them, shall be chargeable to salaries tax in respect of such aggregated net chargeable income. (4) Where a husband or wife is deceased an executor shall have the same right to make an election under subsection (2) as the deceased would have had if the deceased had not died. (5) For the purposes of subsection (3), where an election is made under subsection (2) by a husband and wife who married one another in the year of assessment to which the election relates, they shall be deemed, for the purposes of ascertaining their aggregated net chargeable income for that year, to have married at the commencement of that year. (Replaced 43 of 1989 s. 3) INLAND REVENUE ORDINANCE - SECT 11 The time and manner in which an election or the withdrawal of an election for joint assessment is to be made VerDate:30/06/1997 (1) An election shall be made in the specified form jointly by the husband and wife and, subject to subsection (3), may be withdrawn by them jointly by notice in writing given to the Commissioner. (2) An election shall relate to the year of assessment specified in such form and it, and any withdrawal thereof under this section, may be made at any time- (a) within that year of assessment or the following year of assessment; or (b) before the expiration of a period of one month following the time when the assessment for the year of assessment becomes final and conclusive under section 70, whichever is the later, or within such further time, if any, as the Commissioner may allow as being reasonable in the circumstances. (3) Where an election is withdrawn under this section it shall, for the purpose of assessing the net chargeable income of the husband and wife, be deemed never to have been made and any assessment made prior to such withdrawal on the basis of the election may be adjusted by the Commissioner to take account of the withdrawal. (4) A husband and wife who under this section have withdrawn an election may not again make an election in relation to the year of assessment to which the withdrawn election relates. (5) In this section "election" (選擇) means an election made under section 10(2) and, where a nomination under section 10(3)(b) is required, includes such nomination. (Added 43 of 1989 s. 3) "election" (選擇) INLAND REVENUE ORDINANCE - SECT 11A (Repealed) VerDate:30/06/1997 (Repealed 71 of 1983 s. 4) INLAND REVENUE ORDINANCE - SECT 11B Ascertainment of assessable income VerDate:30/06/1997 The assessable income of a person in any year of assessment shall be the aggregate amount of income accruing to him from all sources in that year of assessment. (Added 8 of 1973 s. 5. Amended 71 of 1983 s. 5) INLAND REVENUE ORDINANCE - SECT 11C Office or employment of profit VerDate:30/06/1997 For the purpose of section 11B, a person shall be deemed to commence or cease, as the case may be, to derive income from a source whenever and as often as he commences or ceases- (a) to hold any office or employment of profit; or (b) to become entitled to a pension. (Replaced 71 of 1983 s. 6) INLAND REVENUE ORDINANCE - SECT 11D Receipt of income VerDate:30/06/1997 For the purpose of section 11B- (a) income which has accrued to a person during the basis period for a year of assessment but which has not been received by him in such basis period shall not be included in his assessable income for that year of assessment until such time as he shall have received such income, when notwithstanding anything contained in this Ordinance, an additional assessment shall be raised in respect of such income: Provided that for the purposes of this paragraph income which has either been made available to the person to whom it has accrued or has been dealt with on his behalf or according to his directions shall be deemed to have been received by such person; (b) income accrues to a person when he becomes entitled to claim payment thereof: Provided that- (i) any lump sum payment received on or after 1 April 1966, being a lump sum payment or gratuity paid or granted upon the retirement from or termination of any office or employment or any contract of employment of an employee or a lump sum payment of deferred pay or arrears of pay arising from an award of salary or wages, whether such a payment is paid by an employer to a person during employment or after that person has left his employ, shall upon the application in writing of the person entitled to claim payment thereof within 2 years after the end of the year of assessment in which the payment is made be related back and shall then be deemed to be income which has accrued during the periods in which the services or employment, in respect of which the payment was made, were performed or exercised, or, if the relevant periods of service or employment exceed 3 years, the payment shall be deemed to be income accruing at a constant rate over the 3 years ending on the date on which the person became entitled to claim payment thereof or ending on the last day of employment, whichever is the earlier; and, notwithstanding section 70, an application made by any person under this proviso for the adjustment of an assessment shall, to that extent, be regarded as a valid objection to the assessment under section 64; and (ii) subject to proviso (i), any payment made by an employer to a person after that person has ceased or been deemed to cease to derive income which, if it had been made on the last day of the period during which he derived income, would have been included in that person's assessable income for the year of assessment in which he ceased or is deemed to cease to derive income from that employment, shall be deemed to have accrued to that person on the last day of that employment. (Added 8 of 1973 s. 5. Amended 71 of 1983 s. 7) INLAND REVENUE ORDINANCE - SECT 12 Adjustments to assessable income VerDate:25/06/2004 (1) In ascertaining the net assessable income of a person for any year of assessment, there shall be deducted from the assessable income of that person- (a) all outgoings and expenses, other than expenses of a domestic or private nature and capital expenditure, wholly, exclusively and necessarily incurred in the production of the assessable income; (b) allowances calculated in accordance with Part VI in respect of capital expenditure on machinery or plant the use of which is essential to the production of the assessable income; (c) the amount of any excess carried forward to that year of assessment in accordance with section 12A(3); (d) the amount of any excess required by subsection (3) to be deducted; (e) the amount of the expenses of self-education paid in the year of assessment not exceeding the amount prescribed in subsection (6). (Added 24 of 1996 s. 3) (2) Where any machinery or plant is not used wholly and exclusively in the production of assessable income, the amount of the allowances provided for in subsection (1)(b) shall be reduced in the proportion considered by the assessor to be fair and reasonable. (3) If in the case of a husband and wife who have made an election under section 10(2), the aggregate of deductions claimed for any year of assessment by either spouse under subsection (1)(a), (b) and (c) exceeds the assessable income of that spouse in that year, the excess shall be deducted from the assessable income of the other spouse for the purpose of determining the net assessable income of that other spouse in that year. (Amended 43 of 1989 s. 4) (4) (Repealed 71 of 1983 s. 8) (5) The amount of assessable income for any year of assessment of a person shall, for the purposes of ascertaining his net assessable income, be increased by the amount of any balancing charge directed to be made under Part VI on that person in respect of the machinery or plant used in the production of the assessable income. (6) For the purposes of subsection (1)(e)- (a) the total amount that may be deducted in any year of assessment shall not exceed the amount specified in relation to that year in Schedule 3A; (Amended 42 of 1997 s. 3) *(b) "expenses of self-education" (個人進修開支) means expenses paid by the taxpayer as- (i) fees, including tuition and examination fees, in connection with a prescribed course of education undertaken by the taxpayer; or (ii) fees in respect of an examination set by an education provider or a trade, professional or business association, and undertaken by the taxpayer to gain or maintain qualifications for use in any employment, but does not include- (A) expenses for which a deduction is allowable or has been allowed to the taxpayer in any year of assessment under any other provision of this Ordinance; or (B) expenses to the extent to which they have been reimbursed or are reimbursable to the taxpayer by his employer or any other person unless the reimbursement has been or will be included in the assessable income of the taxpayer; (Replaced 12 of 2004 s. 4) *(c) "prescribed course of education" (訂明教育課程) means a course undertaken to gain or maintain qualifications for use in any employment and being- (i) a course of education provided by an education provider; (ii) a training or development course provided by a trade, professional or business association; or +(iii) a training or development course accredited or recognized by an institution specified in Schedule 13; (Replaced 12 of 2004 s. 4) *(d) "education provider" (教育提供者) means- (i) a university, university college or technical college; (ii) a place of education to which the Education Ordinance (Cap 279) does not apply by virtue of section 2 of that Ordinance; (iii) a school registered under section 13(a) of the Education Ordinance (Cap 279); (iv) a school exempted from registration under section 9(1) of the Education Ordinance (Cap 279); (v) an institution approved by the Commissioner for the purposes of section 16C; or (vi) an institution approved by the Commissioner under paragraph (e); (Replaced 12 of 2004 s. 4) *(e) the Commissioner may in writing approve an institution as an education provider and the approval may operate from a date, whether before or after the date of approval, specified in the instrument of approval and may be withdrawn at any time; (Added 12 of 2004 s. 4) +(f) the Secretary for Financial Services and the Treasury may by order amend Schedule 13. (Added 12 of 2004 s. 4) (Replaced 7 of 1975 s. 4. Amended 71 of 1983 s. 8) __________________________________________________________________________ Notes: * Section 12(6)(b), (c)(except paragraph (c)(iii)), (d) and (e) applies in relation to the year of assessment 2000/01 and to all subsequent years of assessment. (Please see 12 of 2004 s. 2(1)) + Section 12(6)(c)(iii) and (f) applies in relation to the year of assessment 2004/05 and to all subsequent years of assessment. (Please see 12 of 2004 s. 2(4)) "expenses of self-education" (個人進修開支) "prescribed course of education" (訂明教育課程) "education provider" (教育提供者) INLAND REVENUE ORDINANCE - SECT 12A Treatment of losses VerDate:30/06/1997 (1) Where in any year of assessment the aggregate of the outgoings, expenses and allowances deductible under section 12(1)(a) and (b) from the assessable income of a person exceeds the amount of his assessable income, the amount of the excess shall, subject to subsection (4), be carried forward and set off against his assessable income in subsequent years of assessment. (2) The aggregate amount set off against a person's assessable income in subsequent years of assessment shall not exceed the amount of any excess under subsection (1). (3) Subject to subsection (4), a set off by a person under this section shall first be made against his assessable income for the year of assessment next succeeding the year of assessment in respect of which the excess occurred and, so far as it cannot be so made, against his assessable income for the next year of assessment and so on until the excess has been completely set off. (4) Where in any year of assessment the net chargeable incomes of the husband and wife are aggregated by reason of an election made under section 10(2), any excess carried forward into that year under this section shall- (a) be set off primarily against the assessable income of the spouse whose deductions resulted in the excess and then, so far as it cannot be so set off, against the assessable income of the other spouse; and (b) then, and so far as it cannot be set off in accordance with paragraph (a)- (i) where no election is made under section 10(2) in respect of the following year of assessment, in accordance with subsection (3); or (ii) where an election is made under section 10(2) in respect of the following year of assessment, in accordance with paragraph (a), and so on from year to year until the excess has been completely set off. (Replaced 43 of 1989 s. 5) (Replaced 7 of 1975 s. 4. Amended 71 of 1983 s. 9) INLAND REVENUE ORDINANCE - SECT 12B Ascertainment of net chargeable income VerDate:17/04/1998 (1) The net chargeable income of a person for any year of assessment shall, subject to subsection (2), be such amount as is arrived at after deducting from his net assessable income- (a) such deductions as are under Part IVA allowable to that person; and (Replaced 31 of 1998 s. 5) (b) such allowances as are under Part V permitted for that person. (Amended 43 of 1989 s. 6) (2) In the case of a person chargeable to salaries tax under section 10(3), that person and his or her spouse shall have but one net chargeable income, and it shall be the amount arrived at after deducting from the aggregate of their net assessable incomes- (a) such deductions as are under Part IVA allowable to them; and (Replaced 31 of 1998 s. 5) (b) such allowances as are under Part V permitted in their case. (Replaced 43 of 1989 s. 6) (3) (Repealed 43 of 1989 s. 6) (Replaced 71 of 1983 s. 10) INLAND REVENUE ORDINANCE - SECT 12BA (Repealed 31 of 1998 s. 6) VerDate:17/04/1998 INLAND REVENUE ORDINANCE - SECT 13 Calculation of salaries tax VerDate:01/06/2007 (1) Subject to subsection (2), salaries tax shall be charged at the rates specified in Schedule 2 on the net chargeable income of a person for each year of assessment ascertained in accordance with this Part. (Amended L.N. 350 of 1990) (2) The amount of salaries tax so charged shall not exceed the amount which would have been chargeable had the standard rate been charged on the whole of- (a) the net assessable income as reduced by such deductions as are under Part IVA allowable to the person; or (b) in the case of a spouse chargeable to salaries tax under section 10(3), the aggregate amount of his or her net assessable income and that of his or her spouse as reduced by such deductions as are under Part IVA allowable to them. (Amended 31 of 1998 s. 7) (3) Notwithstanding subsections (1) and (2), the amount of salaries tax charged under this section for the year of assessment commencing on 1 April 2006 shall be reduced by an amount equivalent to- (a) 50% of the amount of the tax as computed under subsection (1) read together with subsection (2); or (b) $15000, whichever is the less. (Added 10 of 2007 s. 3) (Replaced 43 of 1989 s. 8) INLAND REVENUE ORDINANCE - SECT 14 Charge of profits tax VerDate:30/06/1997 PART IV PROFITS TAX (1) Subject to the provisions of this Ordinance, profits tax shall be charged for each year of assessment at the standard rate on every person carrying on a trade, profession or business in Hong Kong in respect of his assessable profits arising in or derived from Hong Kong for that year from such trade, profession or business (excluding profits arising from the sale of capital assets) as ascertained in accordance with this Part. (Replaced 2 of 1971 s. 9. Amended 7 of 1986 s. 12; 56 of 1993 s. 8) (2) In the case of- (a) a corporation; and (b) a corporation ("relevant corporation") to which a share of the assessable profits of a partnership is apportioned under section 22A and is charged in the partnership name under section 22, profits tax shall be charged on the assessable profits of that corporation, or on that share of the assessable profits of that relevant corporation, as the case may be, at the rate specified in Schedule 8. (Added 56 of 1993 s. 8) INLAND REVENUE ORDINANCE - SECT 14A Qualifying debt instruments VerDate:14/11/2003 (1) For the purposes of this Part the assessable profits of a person for sums received by or accrued to the person as- (a) interest paid or payable on a medium term debt instrument; and (b) any gain or profit on the sale or other disposal or on the redemption on maturity or presentment of the medium term debt instrument, are chargeable to tax under this Part at one-half of the rate specified in Schedule 1 or Schedule 8, as the case may be. (2)-(3) (Repealed 32 of 1998 s. 4) (4) In this section- (Amended 34 of 2003 s. 3) "debt instrument" (債務票據) means an instrument specified in Part I of Schedule 6 that- (Amended 34 of 2003 s. 3) (a) is in respect of a debt issue which in its entirety has been lodged with and cleared by the Central Moneymarket Unit operated by the Monetary Authority; (b) subject to subsection (5), is issued by a person and has at all relevant times a credit rating acceptable to the Monetary Authority from a credit rating agency recognized by the Monetary Authority; (c) (Repealed 34 of 2003 s. 3) (d) subject to subsection (5), has- (i) where it is issued before 1 April 1999, a minimum denomination of $500000 or its equivalent in a foreign currency; or (ii) where it is issued on or after 1 April 1999, a minimum denomination of $50000 or its equivalent in a foreign currency; (Replaced L.N. 90 of 1999 and 44 of 1999 s. 11) (e) is issued to the public in Hong Kong; (f) if it is a scripless instrument, it is one that would qualify in the terms of this definition if it were in a physical form; (Amended 34 of 2003 s. 3) (g) is issued on or after the commencement of this section; (Amended 34 of 2003 s. 3) "medium term debt instrument" (中期債務票據) means- (a) a debt instrument that- (i) is issued before 5 March 2003; (ii) has an original maturity of not less than 5 years or is undated; and (iii) cannot be redeemed within 5 years from the date of its issue; or (b) a debt instrument that- (i) is issued on or after 5 March 2003; (ii) has an original maturity of less than 7 years but not less than 3 years or is undated; and (iii) can be redeemed within 7 years from the date of its issue but not within the first 3 years. (Added 34 of 2003 s. 3) (5) For the purposes of the definition of "debt instrument" in subsection (4), the Financial Secretary may by order- (a) declare that the provisions relating to a credit rating mentioned in paragraph (b) of that definition do not apply; (b) fix an amount of minimum denomination different from the amount mentioned in paragraph (d)(i) or (ii), as the case may be, of that definition, (Amended L.N. 90 of 1999 and 44 of 1999 s. 11) in respect of a debt instrument issued by such person as may be specified in the order. (Added 25 of 1996 s. 2. Amended 34 of 2003 s. 3 ) ___________________________________________________________________________ __ Note: The amendments made by 34 of 2003 to section 14A(1)(a) and (b), (4) and (5) apply in relation to the year of assessment commencing on 1 April 2003 and to all subsequent years of assessment. (Please see 34 of 2003 s. 2) "debt instrument" (債務票據) “medium term debt instrument” (中期債務票據) INLAND REVENUE ORDINANCE - SECT 14B Qualifying reinsurance business VerDate:17/04/1998 (1) For the purposes of this Part, the assessable profits of a corporation, to the extent that they are the assessable profits of the corporation derived from the business of reinsurance of offshore risks as a professional reinsurer within the meaning of section 23A(2) are, subject to subsection (2), chargeable to tax under this Part at one-half of the rate specified in Schedule 8. (2) (a) Subsection (1) shall only apply to a corporation where the corporation has elected in writing that the subsection shall so apply to it. (b) An election under paragraph (a), once made, is irrevocable. (Added 32 of 1998 s. 5) INLAND REVENUE ORDINANCE - SECT 15 Certain amounts deemed trading receipts VerDate:25/06/2004 (1) For the purposes of this Ordinance, the sums described in the following paragraphs shall be deemed to be receipts arising in or derived from Hong Kong from a trade, profession or business carried on in Hong Kong- (a) sums, not otherwise chargeable to tax under this Part, received by or accrued to a person from the exhibition or use in Hong Kong of cinematograph or television film or tape, any sound recording, or any advertising material connected with such film, tape or recording; (b) sums, not otherwise chargeable to tax under this Part, received by or accrued to a person for the use of or right to use in Hong Kong any patent, design, trademark, copyright material, secret process or formula or other property of a similar nature, or for imparting or undertaking to impart knowledge directly or indirectly connected with the use in Hong Kong of any such patent, design, trademark, copyright material, secret process or formula or other property; (Replaced 12 of 2004 s. 5) (ba) sums, not otherwise chargeable to tax under this Part, received by or accrued to a person for the use of or right to use outside Hong Kong any patent, design, trademark, copyright material, secret process or formula or other property of a similar nature, or for imparting or undertaking to impart knowledge directly or indirectly connected with the use outside Hong Kong of any such patent, design, trademark, copyright material, secret process or formula or other property, which are deductible in ascertaining the assessable profits of a person under this Part; (Added 12 of 2004 s. 5) (c) sums received by or accrued to a person by way of grant, subsidy or similar financial assistance in connection with the carrying on of a trade, profession or business in Hong Kong, other than sums in connection with capital expenditure made or to be made by the person; (d) sums received by or accrued to a person by way of hire, rental or similar charges for the use of movable property in Hong Kong or the right to use movable property in Hong Kong; (e) (Repealed 7 of 1975 s. 7) (f) sums received by or accrued to a corporation carrying on a trade, profession or business in Hong Kong by way of interest derived from Hong Kong; (Replaced 19 of 1986 s. 2) (g) sums received by or accrued to a person, other than a corporation, carrying on a trade, profession or business in Hong Kong by way of interest derived from Hong Kong which interest is in respect of the funds of the trade, profession or business; (Replaced 19 of 1986 s. 2. Amended 17 of 1989 s. 4) (h) sums received by or accrued to a person as a refund to the person of- (i) contributions paid as an employer to a recognized occupational retirement scheme; or (ii) voluntary contributions paid as an employer to a mandatory provident fund scheme, but only to the extent that the sums are allowed as deductions in ascertaining the person's assessable profits under this Part; (Replaced 4 of 1998 s. 6) (i) sums, not otherwise chargeable to tax under this Part, received by or accrued to a financial institution by way of interest which arises through or from the carrying on by the financial institution of its business in Hong Kong, notwithstanding that the moneys in respect of which the interest is received or accrues are made available outside Hong Kong; (Added 73 of 1978 s. 3) (j) sums received by or accrued to a corporation carrying on a trade, profession or business in Hong Kong by way of gains or profits arising in or derived from Hong Kong from the sale or other disposal or on the redemption on maturity or presentment of a certificate of deposit or bill of exchange; (Replaced 19 of 1986 s. 2) (k) sums received by or accrued to a person, other than a corporation, carrying on a trade, profession or business in Hong Kong by way of gains or profits arising in or derived from Hong Kong from the sale or other disposal or on the redemption on maturity or presentment of a certificate of deposit or bill of exchange where such gains or profits are in respect of the funds of the trade, profession or business; (Replaced 19 of 1986 s. 2. Amended 28 of 1987 s. 3; 17 of 1989 s. 4) (l) sums, not otherwise chargeable to tax under this Part, received by or accrued to a financial institution by way of gains or profits arising through or from the carrying on by the financial institution of its business in Hong Kong from the sale or other disposal or on the redemption on maturity or presentment of a certificate of deposit or bill of exchange notwithstanding that- (i) the moneys laid out for the acquisition of the certificate or bill were made available outside Hong Kong; or (ii) the sale, disposal or redemption is effected outside Hong Kong; and (Added 19 of 1986 s. 2. Amended 28 of 1987 s. 3) (m) sums received or receivable by a person as consideration in respect of the transfer of a right to receive income, as provided for in section 15A. (Added 28 of 1987 s. 3) (1A) Subsection (1)(j) or (k) shall not apply to gains or profits arising in or derived from Hong Kong, other than gains or profits received by or accrued to a person whose trade, profession or business comprises or includes trading in certificates of deposit or bills of exchange, to the extent to which such gains or profits relate to a period prior to 1 April 1981; and gains or profits received by or accrued to any person from the sale or other disposal or on the redemption on maturity or presentment, on or after 1 April 1981, of a certificate of deposit or bill of exchange purchased or otherwise acquired by that person before that date, shall be determined by reference to such amount as the Commissioner may consider such certificate of deposit or bill of exchange would have realized if it had been sold in the open market at the close of business on 31 March 1981 and not by reference to the amount, if any, paid by that person in so purchasing or otherwise acquiring such certificate of deposit or bill of exchange. (Added 30 of 1981 s. 3) (1B) (Repealed 36 of 1984 s. 3) (2) Where, in ascertaining for the purposes of this Part the profits of a trade, profession or business carried on in Hong Kong, a deduction has been allowed for any debt incurred for the purposes of the trade, profession or business, then, if the whole or any part of that debt is thereafter released, the amount released shall be deemed to be a receipt of the trade, profession or business arising in or derived from Hong Kong at the time when the release was effected. (3) Where in the basis period for any year of assessment a financial institution was not a financial institution for the whole of that period, in that, if the institution is a bank it was not licensed for the whole of that period or if the institution is a deposit-taking company it was not registered for the whole of that period, then subsection (1)(i) and (l) shall apply only in respect of such part of the basis period during which the bank or deposit-taking company was licensed or registered, as the case may be. (Added 73 of 1978 s. 3. Amended 19 of 1986 s. 2) (4) The amendments to this section effected by the Inland Revenue (Amendment) Ordinance 1984 (36 of 1984) shall not have the effect of rendering chargeable to tax sums received or accrued to any person prior to 1 April 1984 which were not chargeable to tax immediately prior to the coming into force of that Ordinance. (Added 36 of 1984 s. 3) (5) The amendments to this section effected by the Inland Revenue (Amendment) (No. 2) Ordinance 1986 (19 of 1986) shall apply to sums received or accrued by way of interest, gains or profits on or after 1 April 1986, and the provisions of this section in force immediately prior to the coming into force of that Ordinance shall continue to apply to such sums received or accrued prior to 1 April 1986 as if such amendments had not been enacted. (Added 19 of 1986 s. 2) (6) The amendment made to subsection (1) by section 5(a)(ii) of the Inland Revenue (Amendment) Ordinance 2004 (12 of 2004) does not apply to sums described in subsection (1)(ba) which were received by or which accrued to a person before the commencement* of that Ordinance. (Added 12 of 2004 s. 5) (Replaced 2 of 1971 s. 9. Amended 7 of 1986 s. 12) ___________________________________________________________________________ ___ Note: * Commencement date: 25 June 2004. INLAND REVENUE ORDINANCE - SECT 15A Transfer of right to receive income VerDate:30/06/1997 (1) Subject to subsection (3) where- (a) a right to receive income from property is transferred by a person to another person; and (b) consideration has been received or is receivable in respect of the transfer, the amount of the consideration shall, notwithstanding the exclusion relating to the sale of capital assets contained in section 14, be treated as a trading receipt arising in or derived from Hong Kong by the transferor from a trade, profession or business carried on in Hong Kong. (2) The reference in subsection (1) to the amount of consideration shall, in the case where consideration is paid or given otherwise than in cash, be construed as a reference to the money value of the consideration. (3) Subsection (1) shall not apply in relation to a transfer of a right to receive income from property where the right arose from the ownership by the transferor of a legal or equitable estate or interest in the property and, before or at the time of that transfer, the transferor also transferred that estate or interest to the transferee. (4) In this section- "income" (入息) means any profits, rent, interest or royalty chargeable to tax under Part IV; "property" (財產) means any property whatsoever; "right to receive income from property" (從財產收取入息的權利) means a right to have income that will or may be derived from property paid to, or applied or accumulated for the benefit of, the person owning the right. (5) This section shall apply to any agreement made for the transfer of a right to receive income from property within the meaning of subsection (4) entered into or effected after 25 February 1987 other than an agreement made in pursuance of a legally enforceable obligation incurred on or before that date. (Added 28 of 1987 s. 4) "income" (入息) "property" (財產) "right to receive income from property" (從財產收取入息的權利) INLAND REVENUE ORDINANCE - SECT 15B (Repealed) VerDate:30/06/1997 (Repealed 71 of 1983 s. 13) INLAND REVENUE ORDINANCE - SECT 15C Valuation of trading stock on cessation of business VerDate:30/06/1997 Where a person ceases to carry on a trade or business in Hong Kong the trading stock of the trade or business at the date of cessation shall be valued for the purpose of computing the profits in respect of which that person is chargeable to tax under this Part as follows- (Amended 28 of 1964 s. 6; 26 of 1969 s. 12) (a) in the case of any such trading stock- (i) which is sold or transferred for valuable consideration to a person who carries on or intends to carry on a trade or business in Hong Kong; and (ii) the cost whereof may be deducted by the purchaser as an expense in computing the profits from such trade or business in respect of which such purchaser is chargeable to tax under this Part, the value thereof shall be taken to be the amount realized on the sale or the value of the consideration given for the transfer; (Amended 28 of 1964 s. 6) (b) in the case of any other such trading stock, the value thereof shall be taken to be the amount which it would have realized if it had been sold in the open market at the date of cessation. (Added 36 of 1955 s. 22. Amended 7 of 1986 s. 12) INLAND REVENUE ORDINANCE - SECT 15D Post-cessation receipts and payments VerDate:30/06/1997 (1) Where a person who has ceased to carry on a trade, profession or business in Hong Kong, receives any sum which, if it had been received before such cessation, would have been included in the profits of the trade, profession or business in respect of which the person is chargeable to tax under this Part, then to the extent to which the sum has not already been included in such profits that sum shall be deemed to be profits of the trade, profession or business for the year of assessment in which the cessation occurred. (2) Where a person who has ceased to carry on a trade, profession or business in Hong Kong pays any sum which, if it had been paid before such cessation, would have been deductible in computing the profits of the trade, profession or business in respect of which the person is chargeable to tax under this Part, then to the extent to which the sum has not already been deducted in computing such profits, that sum shall be deducted in ascertaining his profits for the year of assessment in which the cessation occurred. (Added 26 of 1969 s. 13. Amended 7 of 1986 s. 12) INLAND REVENUE ORDINANCE - SECT 15E Stock borrowing and lending VerDate:01/04/2003 (1) This section applies where- (a) in relation to a stock borrowing under a stock borrowing and lending agreement, the borrower has used the borrowed stock obtained from a lender for one or more than one specified purpose and has effected a stock return; (b) if any distribution is made or a right or option is issued in respect of the borrowed stock during the borrowing period, regardless of whether that event occurs before or after the borrowed stock is disposed of by the borrower to a third party, the lender receives from the borrower the distribution or identical property, the right or option or an identical right or option, or a compensatory payment equal to the value of the distribution or the value of the right or option; (c) the lender does not dispose of, whether by transfer, declaration of trust or otherwise, the right to receive any part of the total consideration payable or to be given by the borrower under the stock borrowing and lending agreement; (d) both the borrower and the lender were dealing with each other at arm's length in relation to the stock borrowing and the stock return; and (e) the lender does not enter into the stock borrowing with the purpose, or main purpose, of avoiding or deferring the inclusion of any amount in profits in respect of which the lender is chargeable to tax under this Part. (2) For the purpose of determining whether an amount, other than any fee payable under a stock borrowing and lending agreement, should be taken into account in ascertaining the profits in respect of which a lender is chargeable to tax under this Part in respect of a stock borrowing or a stock return, the lender is to be treated as if- (a) the stock borrowing, to the extent of the quantity and description of the borrowed stock in respect of which the stock return is subsequently made, had not been entered into; (b) the stock return had not been made; (c) the lender had, at all times during the relevant borrowing period, held the borrowed stock in respect of which the stock return is made; and (d) the stock which is the subject of the stock return were the borrowed stock in respect of which the stock return made. (3) Where- (a) a lender receives from a borrower in relation to the borrowed stock a distribution or identical property or a right or option or identical property; and (b) had the borrowed stock continued to be held by the lender at all times during the borrowing period an amount would have been included or excluded, as the case may be, in ascertaining for a year of assessment the profits in respect of which the lender is chargeable to tax under this Part in respect of the distribution or the right or option, then an equal amount shall be likewise treated in ascertaining the chargeable profits of the lender for that year of assessment. (4) Where a lender receives from a borrower in relation to the borrowed stock a compensatory payment in respect of a distribution made or right or option issued during the borrowing period, then in determining whether an amount is to be included or excluded, as the case may be, in ascertaining for a year of assessment the profits in respect of which the lender is chargeable to tax under this Part in respect of the compensatory payment, the lender is to be treated as if- (a) the distribution had been made, or the right or option had been issued directly to him in respect of the borrowed stock; and (b) he had disposed of the distribution or right or option immediately after its making or issue, as the case may be, for a consideration equal to that compensatory payment. (5) In determining the amount, if any, other than a fee payable under a stock borrowing and lending agreement, to be taken into account in ascertaining the profits in respect of which a borrower is chargeable to tax under this Part in respect of a stock borrowing or a stock return, the borrower is to be treated as if the stock borrowing and the stock return respectively had been carried out for a consideration equal to the market value of the borrowed stock at the time of the relevant stock borrowing. (6)Where a person has entered into a stock borrowing and lending agreement under which a stock borrowing has been effected, and at the time of making an assessment of profits tax on that person for any year of assessment the assessor is of the opinion that the requirements specified in subsection (1) have been or will be satisfied, the assessor may make the assessment on the basis that this section is applicable. (7) Where- (a) an assessment has been made on the basis that this section is applicable; and (b) after the making of the assessment, the assessor becomes satisfied that this section is not applicable, then the assessor may accordingly adjust the assessment. (8) In this section- "borrower" (借用人), "borrowed stock" (被借用證券), "lender" (借出人), "recognized stock market" (認可證券市場), "specified purpose" (指明用途), "stock borrowing" (證券借 用), "stock borrowing and lending agreement" (證券借用及借出協議) and "stock return" (證券交還), subject to subsection (9), have the same meanings as in the Stamp Duty Ordinance (Cap 117); (Amended 56 of 1996 s. 2; 5 of 2002 s. 407) "borrowing period" (借用期間) , in relation to any borrowed stock, means the period commencing when that stock was borrowed under a stock borrowing and ending when a stock return is effected in relation to that stock; "distribution" (派發) includes- (a) an interest payment; (b) a dividend; (c) a share issued by a company to a shareholder in the company where the share is issued as a bonus share; (d) an amount credited by the trustee of a unit trust to a unit holder other than by way of redemption, realization or liquidation; (e) a unit issued by the trustee of a unit trust; "option" (認購權) includes- (a) in relation to a company, an option to acquire shares in the company; (b) in relation to a unit trust, an option to acquire units in the unit trust; "right" (權利) includes- (a) in relation to a company, a right to acquire shares in the company or to acquire an option; (b) in relation to a unit trust, a right to acquire units in the unit trust or to acquire an option; "specified securities" (指明證券) means any of the following, not being Hong Kong stock the sale and purchase of which in Hong Kong are subject to the rules and practices of a recognized stock market- (Amended 5 of 2002 s. 407) (a) any shares, stocks, debentures, loan stocks, funds, bonds or notes of or issued by any body, whether corporate or unincorporate, or any government or local government authority, or any other similar investment of any description; (b) any units under a unit trust scheme; (c) any right, option or interest in or in respect of any security referred to in paragraph (a) or (b), which the Commissioner may specify in writing, either generally or in any particular case, for the purposes of this section. (Added 56 of 1996 s. 2) (9) For the purposes of construing a term by reference to the Stamp Duty Ordinance (Cap 117) in subsection (8), a reference in the corresponding term in the Stamp Duty Ordinance (Cap 117) to "Hong Kong stock" or to "Hong Kong stock the sale and purchase of which in Hong Kong are subject to the rules and practices of a recognized stock market", is construed as including a reference to specified securities that the Commissioner has specified under subsection (8). (Added 56 of 1996 s. 2. Amended 5 of 2002 s. 407) (10) For the purpose of the definition of "specified securities" in subsection (8), the terms "Hong Kong stock", "unit" and "unit trust scheme" have the same meanings as in the Stamp Duty Ordinance (Cap 117). (Added 56 of 1996 s. 2) (Added 71 of 1994 s. 2) "borrower" (借用人), "borrowed stock" (被借用證券), "lender" (借出人), "recognized stock market" (認可證券市場), "specified purpose" (指明用途), "stock borrowing" (證券借 用), "stock borrowing and lending agreement" (證券借用及借出協議) and "stock return" (證券交還) "borrowing period" (借用期間) "distribution" (派發) "option" (認購權) "right" (權利) "specified securities" (指明證券) INLAND REVENUE ORDINANCE - SECT 16 Ascertainment of chargeable profits VerDate:12/02/2010 (1) In ascertaining the profits in respect of which a person is chargeable to tax under this Part for any year of assessment there shall be deducted all outgoings and expenses to the extent to which they are incurred during the basis period for that year of assessment by such person in the production of profits in respect of which he is chargeable to tax under this Part for any period, including- (a) where the condition for the application of this paragraph is satisfied under subsection (2), and subject to subsections (2A), (2B) and (2C), sums payable by such person by way of interest on any money borrowed by him for the purpose of producing such profits, and sums payable by such person by way of legal fees, procuration fees, stamp duties and other expenses in connection with such borrowing; (Replaced 2 of 1971 s. 11. Amended 36 of 1984 s. 4, 12 of 2004 s. 6) (b) rent paid by any tenant of land or buildings occupied by him for the purpose of producing such profits, but not exceeding, in the case of rent paid to the tenant's spouse, or by a partnership to one or more of the partners thereof or to a spouse of any such partner, an amount equal to the assessable value of the land or buildings; (Amended 76 of 1975 s. 8; 8 of 1983 s. 11; 71 of 1983 s. 14) (c) tax of substantially the same nature as tax imposed under this Ordinance, proved to the satisfaction of the Commissioner to have been paid elsewhere, whether by deduction or otherwise, by any corporation or by a person other than a corporation who carries on a trade, profession or business in Hong Kong, during the basis period for the year of assessment in respect of profits chargeable to tax by virtue of section 15(1)(f), (g), (i), (j), (k) or (l): (Amended 7 of 1986 s. 12; 19 of 1986 s. 3; 63 of 1997 s. 2(a)) Provided that no deduction shall be made under this paragraph if the corporation or person concerned is eligible for relief under Part VIII in respect of such profits; (Added 73 of 1978 s. 4. Amended 36 of 1984 s. 4) (d) bad debts incurred in any trade, business or profession, proved to the satisfaction of the assessor to have become bad during the basis period for the year of assessment, and doubtful debts to the extent that they are respectively estimated to the satisfaction of the assessor to have become bad during the said basis period notwithstanding that such bad or doubtful debts were due and payable prior to the commencement of the said basis period: Provided that- (i) deductions under this paragraph shall be limited to debts which were included as a trading receipt in ascertaining the profits, in respect of which the person claiming the deduction is chargeable to tax under this Part, of the period within which they arose, and debts in respect of money lent, in the ordinary course of the business of the lending of money within Hong Kong, by a person who carries on that business; (Amended 7 of 1986 s. 12) (ii) all sums recovered during the said basis period on account of amounts previously allowed in respect of bad or doubtful debts shall for the purposes of this Ordinance be treated as part of the profits of the trade, business or profession for that basis period; (e) expenditure incurred in the repair of any premises, plant, machinery, implement, utensil or article employed in the production of such profits; (f) expenditure incurred in the replacement of any implement, utensil or article employed in the production of such profits: Provided that no allowances have been or shall be made under the provisions of Part VI in respect of such implement, utensil or article; (g) notwithstanding section 17, a sum expended for the registration of a trade mark or design, or the registration or grant of a patent, used in the trade, profession or business which produces such profits; (Replaced 26 of 1969 s. 14. Amended 52 of 1997 s. 160) *(ga) the payments and expenditure specified in sections 16AA, 16B, 16C, 16E, 16F and 16G as provided therein; (Added 35 of 1965 s. 9. Amended 56 of 1993 s. 9; 31 of 1998 s. 8; 32 of 1998 s. 6) (h) such other deductions as may be prescribed by any rule made under this Ordinance. (2) The condition for the application of subsection (1)(a) is satisfied if- (Amended 12 of 2004 s. 6) (a) the money has been borrowed by a financial institution; (b) the money has been borrowed by a public utility company specified in the Schedule 3 at a rate of interest not exceeding the rate specified by the Financial Secretary by notice in the Gazette; (Amended 17 of 1989 s. 5) (c) the money has been borrowed from a person other than a financial institution or an overseas financial institution and the sums payable by way of interest are chargeable to tax under this Ordinance; (d) the money has been borrowed from a financial institution or an overseas financial institution; (Replaced 12 of 2004 s. 6) (e) the money has been borrowed wholly and exclusively to finance- (i) capital expenditure incurred by the borrower on the provision of- (A) any machinery or plant, where the expenditure qualifies for an allowance under Part VI; (B) any machinery or plant for research and development, where the expenditure may be deducted under section 16B; (C) a prescribed fixed asset (as defined in section 16G(6)), where the expenditure may be deducted under section 16G; or (D) any environmental protection machinery (as defined in section 16H(1)), where the expenditure may be deducted under section 16I; or (Replaced 4 of 2010 s. 4) (ii) the purchase of trading stock by the borrower, where the trading stock purchased is used by the borrower in the production of profits chargeable to tax under this Part, and- (iii) the lender is not an associate of the borrower; and (iv) where the lender is a trustee of a trust estate or a corporation controlled by such a trustee, neither the trustee nor the corporation nor any beneficiary under the trust is the borrower or an associate of the borrower; or (Replaced 12 of 2004 s. 6) (f) the borrower is a corporation and the deduction claimed is in respect of interest payable by it- (i) on debentures listed on a stock exchange in Hong Kong or on any other stock exchange recognized by the Commissioner for the purposes of this subparagraph; (ii) on instruments (other than debentures described in subparagraph (i))- (A) issued bona fide and in the course of carrying on business and marketed in Hong Kong or in a major financial centre outside Hong Kong recognized by the Commissioner for the purposes of this sub-subparagraph; or (B) issued pursuant to any agreement or arrangements, where the issue of an advertisement, invitation or document in respect of the agreement or arrangements has been authorized by the Securities and Futures Commission under section 105 of the Securities and Futures Ordinance (Cap 571), and the advertisement, invitation or document has been issued to the public; or (iii) on money borrowed from an associated corporation of the borrower, where the money borrowed in the hands of the associated corporation arises entirely from the proceeds of an issue by the associated corporation of debentures described in subparagraph (i) or of instruments described in subparagraph (ii), in an amount not exceeding the interest payable by the associated corporation to the holders of such debentures or instruments. (Replaced 12 of 2004 s. 6) (2A) Where- (a) the condition for the application of subsection (1)(a) is satisfied under subsection (2)(c), (d) or (e); (b) at any time during the basis period of the borrower for the year of assessment concerned, the payment of any sum payable by way of principal or interest in respect of the money borrowed is secured or guaranteed, whether wholly or in part and whether directly or indirectly, by a deposit or loan made by the borrower or an associate of the borrower with or to- (i) the lender or an associate of the lender; (ii) a financial institution or an associate of a financial institution; or (iii) an overseas financial institution or an associate of an overseas financial institution; and (c) any sum payable by way of interest on the deposit or loan is not chargeable to tax under this Ordinance, the amount of the deduction which, but for this subsection and subsections (2B) and (2C), would have been allowed under subsection (1)(a) for the year of assessment concerned in respect of sums payable by the borrower by way of interest on the money borrowed shall be reduced, having regard to the sum payable by way of interest on the deposit or loan, by an amount calculated on such basis as is most reasonable and appropriate in the circumstances of the case. (Added 12 of 2004 s. 6) (2B) Where- (a) the condition for the application of subsection (1)(a) is satisfied under subsection (2)(c), (d) or (e); and (b) at any time during the basis period of the borrower for the year of assessment concerned, arrangements are in place, whether between the borrower and the lender or otherwise, whereby any sum payable by way of interest on the money borrowed or on any part of the money borrowed is payable, whether directly or through any interposed person, to the borrower or to a person (other than the lender) who is connected with the borrower and in either case the borrower or the person, as the case may be, is not an excepted person as defined in subsection (2E)(c), the amount of the deduction which, but for this subsection and subsections (2A) and (2C), would have been allowed under subsection (1)(a) for the year of assessment concerned in respect of sums payable by the borrower by way of interest on the money borrowed or on the relevant part of the money borrowed, as the case may be, shall be reduced by an amount calculated in accordance with the following formula- A B x C where: A means the total number of days during the basis period of the borrower for the year of assessment concerned, at the end of each of which the principal in respect of the money borrowed or in respect of the relevant part of the money borrowed, as the case may be, is outstanding and the arrangements are in place; B means the total number of days during the basis period of the borrower for the year of assessment concerned, at the end of each of which the principal in respect of the money borrowed or in respect of the relevant part of the money borrowed, as the case may be, is outstanding; and C means the total amount of sums payable by the borrower by way of interest on the money borrowed or on the relevant part of the money borrowed, as the case may be, which, but for this subsection and subsections (2A) and (2C), would have been deductible under subsection (1)(a) for the year of assessment concerned. (Added 12 of 2004 s. 6) (2C) Subject to subsection (2G), where- (a) the condition for the application of subsection (1)(a) is satisfied under subsection (2)(f); and (b) at any time during the basis period of the borrower for the year of assessment concerned, arrangements are in place, whether between the borrower and the holders of the debentures or instruments concerned or otherwise, whereby any sum payable by way of interest on the debentures or instruments concerned or on any interest in the debentures or instruments concerned is payable, whether directly or through any interposed person, to the borrower or to a person who is connected with the borrower and in either case the borrower or the person, as the case may be, is not an excepted person as defined in subsection (2F)(c), the amount of the deduction which, but for this subsection and subsections (2A) and (2B), would have been allowed under subsection (1)(a) for the year of assessment concerned in respect of- (c) (where the condition for the application of subsection (1)(a) is satisfied under subsection (2)(f)(i) or (ii)) the sum payable by the borrower by way of interest on the debentures or instruments concerned or on the relevant interest in the debentures or instruments concerned, as the case may be; or (d) (where the condition for the application of subsection (1)(a) is satisfied under subsection (2)(f)(iii)) the sum payable by the borrower by way of interest on money borrowed from the associated corporation, being money arising entirely from the proceeds of the issue of the debentures or instruments concerned or of the relevant interest in the debentures or instruments concerned, as the case may be, shall be reduced by an amount calculated in accordance with the following formula- X Y x Z where: X means the total number of days during the basis period of the borrower for the year of assessment concerned, at the end of each of which the principal in respect of the debentures or instruments concerned or in respect of the relevant interest in the debentures or instruments concerned, as the case may be, is outstanding and the arrangements are in place; Y means the total number of days during the basis period of the borrower for the year of assessment concerned, at the end of each of which the principal in respect of the debentures or instruments concerned or in respect of the relevant interest in the debentures or instruments concerned, as the case may be, is outstanding; and Z means the total amount of sums referred to in paragraph (c) or (d), as the case may be, which, but for this subsection and subsections (2A) and (2B), would have been deductible under subsection (1)(a) for the year of assessment concerned. (Added 12 of 2004 s. 6) (2D) For the purposes of subsection (2A), if a deposit or loan is made by a trustee of a trust estate or a corporation controlled by such a trustee, the deposit or loan shall be deemed to have been made by each of the trustee, the corporation and the beneficiary under the trust. (Added 12 of 2004 s. 6) (2E) For the purposes of subsection (2B)- (a) any reference in that subsection to any sum payable by way of interest on the money borrowed or on any part of the money borrowed, however described, shall be construed as including a reference to any sum payable by way of principal or interest in respect of any other loan, where the payment of such sum is- (i) secured or guaranteed, whether wholly or in part and whether directly or indirectly, by any sum payable by way of principal or interest in respect of the money borrowed or in respect of any part of the money borrowed; or (ii) conditional, whether wholly or in part and whether directly or indirectly, on the payment of any sum payable by way of principal or interest in respect of the money borrowed or in respect of any part of the money borrowed; (b) if any sum payable by way of interest on the money borrowed or on any part of the money borrowed, as construed in accordance with paragraph (a), is payable, whether directly or through any interposed person, to a trustee of a trust estate or a corporation controlled by such a trustee, such sum shall be deemed to be so payable to each of the trustee, the corporation and the beneficiary under the trust; and (c) "excepted person" (除外人士) means- (i) a person who is chargeable to tax under this Ordinance in respect of any sum payable by way of interest on the money borrowed or on any part of the money borrowed, as construed in accordance with paragraph (a); (ii) in the case of a person (other than the lender) who is connected with the borrower- (A) a person who is entitled to any sum referred to in subparagraph (i) in the capacity of- (I) a person acting as a trustee of a trust estate or holding property belonging to others pursuant to the terms of a contract, where the person is not beneficially entitled to the sum in question; (II) a beneficiary of a unit trust to which section 26A(1A)(a)(i) or (ii) applies, where the sum in question is payable to a trustee of the unit trust in respect of a specified investment scheme referred to in section 26A(1A)(b); or (III) a member of a retirement scheme which is either a recognized retirement scheme or a substantially similar retirement scheme established outside Hong Kong, where the Commissioner is satisfied that the latter scheme complies with the requirements of a supervisory authority within an acceptable regulatory regime; (B) a public body; (C) a body corporate, where the Government owns beneficially more than half in nominal value of the issued share capital of that body corporate for the time being; or (D) a financial institution or an overseas financial institution. (Added 12 of 2004 s. 6) (2F) For the purposes of subsection (2C)- (a) any reference in that subsection to any sum payable by way of interest on the debentures or instruments concerned or on any interest in the debentures or instruments concerned, however described, shall be construed as including a reference to any sum payable by way of principal or interest in respect of any other loan, where the payment of such sum is- (i) secured or guaranteed, whether wholly or in part and whether directly or indirectly, by any sum payable by way of principal or interest in respect of the debentures or instruments concerned or in respect of any interest in the debentures or instruments concerned; or (ii) conditional, whether wholly or in part and whether directly or indirectly, on the payment of any sum payable by way of principal or interest in respect of the debentures or instruments concerned or in respect of any interest in the debentures or instruments concerned; (b) if any sum payable by way of interest on the debentures or instruments concerned or on any interest in the debentures or instruments concerned, as construed in accordance with paragraph (a), is payable, whether directly or through any interposed person, to a trustee of a trust estate or a corporation controlled by such a trustee, such sum shall be deemed to be so payable to each of the trustee, the corporation and the beneficiary under the trust; and (c) "excepted person" (除外人士) means- (i) a person who is chargeable to tax under this Ordinance in respect of any sum payable by way of interest on the debentures or instruments concerned or on any interest in the debentures or instruments concerned, as construed in accordance with paragraph (a); (ii) in the case of a person who is connected with the borrower- (A) a person who is entitled to any sum referred to in subparagraph (i) in the capacity of- (I) a person acting as a trustee of a trust estate or holding property belonging to others pursuant to the terms of a contract, where the person is not beneficially entitled to the sum in question; (II) a beneficiary of a unit trust to which section 26A(1A)(a)(i) or (ii) applies, where the sum in question is payable to a trustee of the unit trust in respect of a specified investment scheme referred to in section 26A(1A)(b); or (III) a member of a retirement scheme which is either a recognized retirement scheme or a substantially similar retirement scheme established outside Hong Kong, where the Commissioner is satisfied that the latter scheme complies with the requirements of a supervisory authority within an acceptable regulatory regime; (B) a public body; (C) a body corporate, where the Government owns beneficially more than half in nominal value of the issued share capital of that body corporate for the time being; or (D) a financial institution or an overseas financial institution. (Added 12 of 2004 s. 6) (2G) Subsection (2C) shall not apply where under the relevant arrangements, the relevant sum payable by way of interest on the debentures or instruments concerned or on any interest in the debentures or instruments concerned is payable to a market maker who, in the ordinary course of conduct of his trade, profession or business in respect of market making, holds such debentures or instruments or such interest for the purpose of providing liquidity thereof. (Added 12 of 2004 s. 6) (2H) In subsection (2G), "market maker" (市場莊家) means a person who- (a) is licensed or registered for dealing in securities under the Securities and Futures Ordinance (Cap 571) or authorized to do so by a regulatory authority in a major financial centre outside Hong Kong recognized by the Commissioner for the purposes of subsection (2)(f)(ii)(A); (b) in the ordinary course of conduct of his trade, profession or business in respect of market making holds himself out as being willing to buy and sell securities for his own account and on a regular basis; and (c) is actively involved in market making in securities issued by a wide range of unrelated institutions. (Added 12 of 2004 s. 6) (3) In this section- (Amended 12 of 2004 s. 6) "associate" (相聯者), in relation to a person, means- (a) where the person is a natural person- (i) a relative of the person; (ii) a partner of the person and any relative of that partner; (iii) a partnership in which the person is a partner; (iv) any corporation controlled by the person, by a partner of the person or by a partnership in which the person is a partner; (v) an director or principal officer of any such corporation as is referred to in subparagraph (iv); (b) where the person is a corporation- (i) any associated corporation; (ii) any person who controls the corporation and any partner of such person, and, where either such person is a natural person, any relative of such person; (iii) any director or principal officer of that corporation or of any associated corporation and any relative of any such director or officer; (iv) any partner of the corporation and, where such partner is a natural person, any relative of such partner; (c) where the person is a partnership- (i) any partner of the partnership and where such partner is a partnership any partner of that partnership, any partner with the partnership in any other partnership and where such partner is a partnership any partner of that partnership and where any partner of, or with, or in any of the partnerships mentioned in this subparagraph is a natural person, any relative of such partner; (ii) any corporation controlled by the partnership or by any partner thereof or, where such a partner is a natural person, any relative of such partner; (iii) any corporation of which any partner is a director or principal officer; (iv) any director or principal officer of a corporation referred to in subparagraph (ii); "associated corporation" (相聯法團), in relation to a person, means- (a) a corporation over which the person has control; (b) if the person is a corporation- (i) a corporation which has control over the person; or (ii) a corporation which is under the control of the same person as is the first-mentioned person; "beneficiary under the trust" (信託的受益人) means any person who benefits or is capable (whether by the exercise of a power of appointment or otherwise) of benefiting under a trust estate, either directly or through any interposed person, or who is able or might reasonably be expected to be able, whether directly or indirectly, to control the activities of the trust estate or the application of its corpus or income; "overseas financial institution" (海外財務機構) means a person carrying on the business of banking or deposit-taking outside Hong Kong other than a person whom the Commissioner has, in accordance with the powers vested in him by subsection (4), determined shall not be recognized for the purposes of this section as an overseas financial institution; (Amended 12 of 2004 s. 6) "principal officer" (主要職員) means- (a) a person employed by a corporation who, either alone or jointly with one or more other persons, is responsible under the immediate authority of the directors for the conduct of the business of the corporation; or (b) a person so employed who, under the immediate authority of a director of the corporation or a person to whom paragraph (a) applies, exercises managerial functions in respect of the corporation; "relative" (親屬) means the spouse, parent, child, brother or sister of the relevant person, and, in deducing such a relationship, an adopted child shall be deemed to be a child both of the natural parents and the adopting parent and a step child to be the child of both the natural parents and of any step parent. (Replaced 63 of 1997 s. 2) (3A) In this section- (a) a corporation shall be regarded as being controlled by a person if the person has the power to secure- (i) by means of the holding of shares or the possession of voting power in or in relation to that or any other corporation; or (ii) by virtue of any power conferred by the articles of association or any other document regulating that or any other corporation, that the affairs of the first-mentioned corporation are conducted in accordance with his wishes; and (b) a person (other than a corporation) shall be regarded as being controlled by another person if the first-mentioned person is accustomed or under an obligation, whether express or implied, and whether or not enforceable or intended to be enforceable by legal proceedings, to act, in relation to his investment or business affairs, in accordance with the directions, instructions or wishes of that other person. (Added 12 of 2004 s. 6) (3B) In this section, a person shall be regarded as being connected with a borrower if the person is- (a) an associated corporation of the borrower; (b) a person (other than a corporation)- (i) who controls the borrower; (ii) who is controlled by the borrower; or (iii) who is under the control of the same person as is the borrower. (Added 12 of 2004 s. 6) (4) The Commissioner may for the purposes of this section determine that a person shall not be recognized as an overseas financial institution if he is of the opinion that that person's banking or deposit-taking business is not adequately supervised by a supervisory authority. (Added 36 of 1984 s. 4. Amended 12 of 2004 s. 6) (5) The amendments to this section effected by the Inland Revenue (Amendment) Ordinance 1984 (36 of 1984) shall not have the effect of disallowing any deduction under subsection (1)(a) which could lawfully have been made immediately prior to the coming into force of that Ordinance where the deduction is in respect of sums payable prior to 1 April 1984. (Added 36 of 1984 s. 4. Amended 7 of 1986 s. 4) (5A) The amendments made to this section by section 6(a), (b), (c), (d), (e) and (f) of the Inland Revenue (Amendment) Ordinance 2004 (12 of 2004) ("the Amendment Ordinance") do not apply to sums described in subsection (1)(a) which were incurred- (a) before the commencement# of the Amendment Ordinance; (b) under a transaction which was the subject of an application for advance clearance made to the Commissioner before 1 April 1998, and the Commissioner has before the commencement# of the Amendment Ordinance expressed the opinion that the transaction would not fall within the terms of section 61A; or (c) under an arrangement which was the subject of an application made to the Commissioner under section 88A, and the Commissioner has before the commencement# of the Amendment Ordinance made a ruling under that section that the arrangement would not fall within the terms of section 61A. (Added 12 of 2004 s. 6) (6) The Chief Executive in Council may, by notice in the Gazette, amend Schedule 3. (Added 17 of 1989 s. 5. Amended 12 of 1999 s. 3) (Replaced 28 of 1964 s. 7. Amended 35 of 1965 s. 9; 12 of 2004 s. 6) ___________________________________________________________________________ ___ Notes: * The amendment made by Ord. No. 31 of 1998 to section 16(1)(ga) applies in relation to the year of assessment commencing on 1 April 2000 and to all subsequent years of assessment. (31 of 1998 s. 2(2); L.N. 175 of 2000) # Commencement date: 25 June 2004. "excepted person" (除外人士) "market maker" (市場莊家) "associate" (相聯者) "associated corporation" (相聯法團) "beneficiary under the trust" (信託的受益人) "overseas financial institution" (海外財務機構) "principal officer" (主要職員) "relative" (親屬) INLAND REVENUE ORDINANCE - SECT 16A Special payment under an approved retirement scheme allowable as a deduction VerDate:01/12/2000 (1) Subject to section 17(1)(k), where a person carrying on a trade, profession or business in Hong Kong makes a payment which is either- (Amended 7 of 1986 s. 12) (a) a contribution, other than an ordinary annual contribution, to a fund duly established under a recognized occupational retirement scheme; or (b) a premium, other than an ordinary annual premium, in respect of a contract of insurance under a recognized occupational retirement scheme; or (Amended 4 of 1998 s. 6) (c) a contribution, other than regular contributions, paid to a mandatory provident fund scheme, (Added 4 of 1998 s. 6) such payment shall, to the extent that it is made in respect of individuals employed by such person for the purposes of producing profits in respect of which he is chargeable to tax under this Part and that it is not excessive in view of all the relevant circumstances, be deemed to be an expense wholly and exclusively incurred in the production of such profits and shall be allowed as a deduction therefrom in accordance with subsection (2). (Amended 76 of 1993 s. 6) (2) For the purpose of making the deduction provided for in subsection (1), one fifth part of the payment shall be deemed to have been expended during the basis period in which the payment was actually made and the remaining 4 parts shall be deemed to have been expended at the rate of one part in the basis period for each of the succeeding 4 years of assessment: Provided that in no case shall the total amount of the deductions exceed the amount of the payment. (3) For the purposes of subsection (1)(c), contributions are regular contributions if they are made to the mandatory provident fund scheme at regular intervals and are either of similar or substantially similar amounts or of amounts calculated by reference to a scale or a fixed percentage of a person's salary or other remuneration. (Added 4 of 1998 s. 6) (Replaced 49 of 1956 s. 12) INLAND REVENUE ORDINANCE - SECT 16AA Mandatory contributions in self-employment cases allowable as a deduction VerDate:17/04/1998 (1) Subject to subsection (2), where a person carrying on a trade, profession or business in Hong Kong as a sole proprietor or as a partner in a partnership pays any mandatory contributions in the basis period for any year of assessment in respect of any liability of himself to pay such contributions as a self-employed person under the Mandatory Provident Fund Schemes Ordinance (Cap 485), the payment shall be deemed to be an expense wholly and exclusively incurred in the production of the profits of that trade, profession or business chargeable to tax under this Part and shall be allowed as a deduction from such profits for that year of assessment. (2) A deduction shall not be allowable to a person under subsection (1) for any year of assessment- (a) in respect of any sum which is allowable as a deduction under any other sections of this Part or section 26G; (b) in excess of the amount specified in Schedule 3B in relation to that year of assessment, as reduced by the amount of any sum which is allowable to that person as a deduction under any other sections of this Part or section 26G. (Added 31 of 1998 s. 9) ___________________________________________________________________________ ___ Note: Section 16AA applies in relation to the year of assessment commencing on 1 April 2000 and to all subsequent years of assessment. (31 of 1998 s. 2(2); L.N. 175 of 2000) INLAND REVENUE ORDINANCE - SECT 16B Expenditure on research and development VerDate:21/05/2004 (1) Notwithstanding anything in section 17, in ascertaining the profits from any trade, profession or business in respect of which a person is chargeable to tax under this Part for any year of assessment there shall, subject to subsection (2), be deducted the following payments made, and expenditure incurred, by such person during the basis period for that year of assessment (other than any amount which is allowable as a deduction apart from this section), namely- (a) payments to- (i) an approved research institute for research and development related to that trade, profession or business; or (ii) an approved research institute, the object of which is the undertaking of research and development related to the class of trade, profession or business to which that trade, profession or business belongs; and (b) expenditure on research and development related to that trade, profession or business, including capital expenditure except to the extent that it is expenditure on land or buildings or on alterations, additions or extensions to buildings. (2) Where any payment or expenditure to which this section refers is made or incurred outside Hong Kong and the trade, profession or business in relation to which it is so made or incurred is carried on partly in and partly out of Hong Kong, the deduction allowable under this section shall be such part of the amount which would otherwise be allowable as is reasonable in the circumstances. (Amended 7 of 1986 s. 12) (3) (a) Where any plant or machinery, representing research and development expenditure of a capital nature which pursuant to subsection (1)(b) has been allowed as a deduction in ascertaining the profits from a trade, profession or business, ceases to be used by the person carrying on the trade, profession or business for research and development related to that trade, profession or business and is then or thereafter sold by him, the proceeds of sale shall, to the extent that they are not otherwise chargeable to tax under this Part and do not exceed the amount of the deduction, be treated as a trading receipt arising in or derived from Hong Kong of the trade, profession or business accruing at the time of the sale or, if the sale occurs on or after the date on which the trade, profession or business is permanently discontinued, accruing immediately before the discontinuance. (b) Where any such plant or machinery is destroyed, it shall for the purposes of paragraph (a) be treated as if it had been sold immediately before the destruction thereof and any insurance moneys or other compensation of any description received by the person carrying on the trade, profession or business in respect of the destruction and any money received by him in respect of the remains of the plant or machinery shall be treated as if they were proceeds of that sale. (c) The reference in paragraph (a) to the time of sale shall be construed as a reference to the time of completion or the time when possession is given, whichever is the earlier. (d) Where, prior to the commencement* of section 2 of the Revenue Ordinance 2004 (9 of 2004), expenditure represented by any plant or machinery has been allowed as a deduction in ascertaining the profits from a trade, profession or business pursuant to the provisions of subsection (1)(b) in force immediately before that commencement*, then, for the purposes of paragraph (a)- (i) such plant or machinery shall be treated as plant or machinery representing research and development expenditure of a capital nature which had been allowed as a deduction in ascertaining the profits from the trade, profession or business pursuant to subsection (1)(b); and (ii) the reference in that paragraph to the amount of the deduction in respect of expenditure represented by such plant or machinery shall be construed as a reference to the aggregate of- (A) the amount of the deduction allowed in respect of expenditure represented by such plant or machinery pursuant to the provisions of subsection (1)(b) in force immediately before that commencement*; and (B) the amount of the deduction allowed in respect of research and development expenditure of a capital nature represented by such plant or machinery pursuant to subsection (1)(b) after that commencement*. (Added 9 of 2004 s. 2) (3A) (a) Notwithstanding the exclusion relating to the sale of capital assets contained in section 14, where any rights in, or arising out of, research and development the expenditure on which has been allowed as a deduction under this section in ascertaining the profits of any person from a trade, profession or business for the year of assessment commencing on 1 April 1998 or any subsequent year of assessment are thereafter sold by him- (Amended 9 of 2004 s. 2) (i) subject to subparagraph (ii), the proceeds of sale; (ii) if the deduction has been allowed in accordance with subsection (2), such part of the proceeds of sale as is proportionate to the extent to which the expenditure on the research and development to which the rights relate has been allowed as a deduction in accordance with that subsection, shall, to the extent that the proceeds of sale or the part of the proceeds of sale, as the case may be, is not otherwise chargeable to tax under this Part and does not exceed the amount of the deduction, be treated as a trading receipt of the trade, profession or business accruing at the time of the sale or, if the sale occurs on or after the date on which the trade, profession or business is permanently discontinued, accruing immediately before the discontinuance. (b) For the purposes of this subsection- (i) without prejudice to subsection (3), a reference to the proceeds of sale shall be construed as a reference to such part of the proceeds of sale as is not attributable to the sale of plant or machinery; (ii) the reference to the time of the sale, in relation to any rights, shall be construed as a reference to the time of completion of the sale of the rights. (Added 32 of 1998 s. 7) (c) Where, prior to the commencement* of section 2 of the Revenue Ordinance 2004 (9 of 2004), expenditure to which any rights relate has been allowed as a deduction in ascertaining the profits from a trade, profession or business under the provisions of this section in force immediately before that commencement*, then, for the purposes of paragraph (a)- (i) such rights shall be treated as rights in, or arising out of, research and development the expenditure on which had been allowed as a deduction in ascertaining the profits from the trade, profession or business under this section; and (ii) the reference in that paragraph to the amount of the deduction in respect of expenditure to which such rights relate shall be construed as a reference to the aggregate of- (A) the amount of the deduction allowed in respect of expenditure to which such rights relate under the provisions of this section in force immediately before that commencement*; and (B) the amount of the deduction allowed in respect of expenditure on research and development to which such rights relate under this section after that commencement*. (Added 9 of 2004 s. 2) (4) (a) In this section- "an approved research institute" (認可研究機構) means any university, college, institute, association or organization which is approved in writing for the purposes of this section by the Commissioner as an institute, association or organization for undertaking research and development which is or may prove to be of value to Hong Kong; (Amended 7 of 1986 s. 12; 24 of 1996 s. 5; 9 of 2004 s. 2) "research and development" (研究和開發) means- (a) any activities in the fields of natural or applied science for the extension of knowledge; (b) any systematic, investigative or experimental activities carried on for the purposes of any feasibility study or in relation to any market, business or management research; (c) any original and planned investigations undertaken with the prospect of gaining new scientific or technical knowledge and understanding; or (d) the application of any research findings or other knowledge to a plan or design for the production or introduction of new or substantially improved materials, devices, products, processes, systems or services prior to the commencement of their commercial production or use. (Added 9 of 2004 s. 2) (b) An approval for the purposes of paragraph (a) may- (i) operate as from a date, whether before or after the date of approval, specified in the instrument of approval; and (ii) be withdrawn at any time. (Amended 9 of 2004 s. 2) (5) In this section- (a) references to expenditure incurred on research and development do not include any expenditure incurred in the acquisition of rights in, or arising out of, research and development, but, save as aforesaid and subject to subsection (1)(b), include all expenditure incurred for the prosecution of, or the provision of facilities for the prosecution of, research and development; and (b) references to research and development related to a trade, profession or business or class of trade, profession or business shall be read as including a reference to- (Amended 9 of 2004 s. 2) (i) any research and development which may lead to or facilitate an extension, or an improvement in the technical efficiency, of that trade, profession or business, or, as the case may be, of trades, professions or businesses of that class; and (ii) any research and development of a medical nature which is of special relation to the welfare of workers employed in that trade, profession or business or, as the case may be, in trades, professions or businesses of that class; and (c) a reference to rights shall be construed as including a reference to a share or interest in such rights. (Added 32 of 1998 s. 7) (6) For the purposes of this section- (a) expenditure shall not be regarded as incurred by a person in so far as it is, or is to be, met directly or indirectly by the Government of Hong Kong or by any government or public or local authority, whether in Hong Kong or elsewhere, or by any person other than the first-mentioned person; and (Amended 7 of 1986 s. 12; 19 of 1996 s. 5) (b) any expenditure of a capital nature incurred on research and development related to any trade, profession or business by a person about to carry on that trade, profession or business shall be treated as if it had been incurred by that person on the first day upon which he does carry on that trade, profession or business. (7) The same sums paid, or expenditure incurred, shall not be taken into account for any of the purposes of this section in relation to more than one trade, profession or business. (Added 35 of 1965 s. 10. Amended 32 of 1998 s. 7; 9 of 2004 s. 2) ___________________________________________________________________________ ___ Note: The amendments made to this section by 9 of 2004 apply in relation to the year of assessment commencing on 1 April 2004 and to all subsequent years of assessment. (Please see 9 of 2004 s. 1(2)) * Commencement date: 21 May 2004. "an approved research institute" (認可研究機構) "research and development" (研究和開發) INLAND REVENUE ORDINANCE - SECT 16C Payments for technical education VerDate:17/04/1998 (1) Notwithstanding anything in section 17, where a person carrying on a trade, profession or business in Hong Kong makes any payment to be used for the purposes of technical education related to that trade, profession or business at any university, university college, technical college or other similar institution which is approved in writing for the purposes of this section by the Commissioner (being an amount which is not otherwise allowable as a deduction under this Ordinance), the payment shall be deducted as an expense in ascertaining the profits from that trade, profession or business for the year of assessment in the basis period of which the payment was made. (Amended 7 of 1986 s. 12; 24 of 1996 s. 6) (2) For the purposes of this section, technical education shall be deemed to be related to a trade, profession or business, if, and only if, it is technical education of a kind specially requisite for persons employed in the class of trade, profession or business to which that trade, profession or business belongs. (3) An approval for the purposes of subsection (1) may- (a) operate as from a date, whether before or after the date of approval, specified in the instrument of approval; and (b) be withdrawn at any time. (Added 35 of 1965 s. 10. Amended 32 of 1998 s. 8) INLAND REVENUE ORDINANCE - SECT 16D Approved charitable donations (Part IV)* VerDate:27/06/2008 (1) Subject to subsection (2), a person chargeable to tax under this Part may deduct the aggregate of approved charitable donations made by that person in the basis period for a year of assessment, if such aggregate is not less than $100, from what would otherwise have been the assessable profits of such person for that year of assessment. (2) A person shall not be entitled under subsection (1) to deduct- (Amended 21 of 2008 s. 3) (a) for any year of assessment, any sum which is allowable as a deduction under section 16, 16B, or 16C; (Amended 56 of 1993 s. 11; 31 of 1998 s. 10; 21 of 2008 s. 3) (aa) for any year of assessment, any sum which is allowable as a deduction under Part IVA; (Added 31 of 1998 s. 10. Amended 21 of 2008 s. 3) (b) for any year of assessment up to and including the year of assessment commencing on 1 April 2002, a sum in excess of 10% of the balance of that person’s assessable profits after making any adjustment for the allowances and charges provided under Part VI; (Replaced 21 of 2008 s. 3) (c) for the year of assessment commencing on 1 April 2003 or any subsequent year of assessment up to and including the year of assessment commencing on 1 April 2007, a sum in excess of 25% of the balance of that person’s assessable profits after making any adjustment for the allowances and charges provided under Part VI; (Added 21 of 2008 s. 3) (d) for any year of assessment commencing on or after 1 April 2008, a sum in excess of 35% of the balance of that person’s assessable profits after making any adjustment for the allowances and charges provided under Part VI. (Added 21 of 2008 s. 3) (Added 7 of 1975 s. 10) ___________________________________________________________________________ _____________ Note: * (Amended 21 of 2008 s. 3) INLAND REVENUE ORDINANCE - SECT 16E Purchase and sale of patent rights, etc. VerDate:30/06/1997 (1) Notwithstanding anything in section 17, in ascertaining the profits from any trade, profession or business in respect of which a person is chargeable to tax under this Part for any year of assessment there shall, subject to subsections (2) and (6), be deducted any expenditure incurred by such person during the basis period for that year of assessment (other than any amount which is allowable as a deduction apart from this section) on the purchase of patent rights or rights to any know-how, for use in Hong Kong in the trade, profession or business in the production of such profits. (Amended 7 of 1986 s. 12; 15 of 1992 s. 2) (2) Where any rights of a kind referred to in subsection (1) are purchased partly for use in Hong Kong and partly for use outside Hong Kong the deduction allowable under this section shall be such part of the expenditure referred to in subsection (1) as is, having regard to the extent of the use in Hong Kong, reasonable and appropriate in the circumstances of the case. (Amended 7 of 1986 s. 12) (2A) No deduction is allowable under subsection (1) in respect of patent rights or rights to any know-how purchased by a person wholly or partly from an associate. (Added 15 of 1992 s. 2) (2B) For the purposes of subsection (2A), rights of a kind referred to in subsection (1) that are purchased or sold by a trustee of a trust estate or a corporation controlled by such a trustee shall be deemed to have been purchased or sold, as the case may be, by each of the trustee, the corporation and the beneficiary under the trust. (Added 15 of 1992 s. 2) (3) Where any rights of a kind referred to in subsection (1) in respect of which a deduction has been allowed to any person under this section in ascertaining the profits from a trade, profession or business are thereafter sold by him- (a) the proceeds of sale; or (b) if the deduction was one to which subsection (2) applied, such part of the proceeds of sale as relates to the rights in respect of which a deduction was allowed under that subsection, not being an amount otherwise chargeable to tax under this Part, shall, notwithstanding the exclusion relating to the sale of capital assets contained in section 14, be treated as a trading receipt of the trade, profession or business accruing at the time of sale, or if the sale occurs on or after the date on which the trade, profession or business is permanently discontinued, accruing immediately before the discontinuance. (4) In this section- "associate" (相聯者) , in relation to a person who purchases (including a person who is deemed to have purchased) rights of a kind referred to in subsection (1), means- (a) where the purchaser is a natural person- (i) a relative of the purchaser; (ii) a partner of the purchaser and any relative of that partner; (iii) a partnership in which the purchaser is a partner; (iv) any corporation controlled by the purchaser, by a partner of the purchaser or by a partnership in which the purchaser is a partner; (v) any director or principal officer of any such corporation as is referred to in subparagraph (iv); (b) where the purchaser is a corporation- (i) any associated corporation; (ii) any person who controls the corporation and any partner of such person, and, where either such person is a natural person, any relative of such person; (iii) any director or principal officer of that corporation or any associated corporation and any relative of any such director or officer; (iv) any partner of the corporation and, where such partner is a natural person, any relative of such partner; (c) where the purchaser is a partnership- (i) any partner of the partnership and where such partner is a partnership any partner of that partnership, any partner with the partnership in any other partnership and where such partner is a partnership any partner of that partnership and where any partner of, or with, or in any of the partnerships mentioned in this subparagraph is a natural person, any relative of such partner; (Replaced 65 of 1993 s. 2) (ii) (Repealed 65 of 1993 s. 2) (iii) any corporation controlled by the partnership or by any partner thereof or, where such a partner is a natural person, any relative of such partner; (iv) any corporation of which any partner is a director or principal officer; (v) any director or principal officer of a corporation referred to in subparagraph (iii); "associated corporation" (相聯法團) means- (a) a corporation over which a person who purchases (including a person who is deemed to have purchased) rights of a kind referred to in subsection (1) has control; (b) a corporation which has control over such a purchaser, being a corporation; or (c) a corporation which is under the control of the same person as such a purchaser, being a corporation; "beneficiary under the trust" (信託受益人) means any person who benefits or is capable (whether by the exercise of a power of appointment or otherwise) of benefiting under a trust estate, either directly or through any interposed person, or who is able or might reasonably be expected to be able, whether directly or indirectly, to control the activities of the trust estate or the application of its corpus or income; "control" (控制) , in relation to a corporation, means the power of a person to secure- (a) by means of the holding of shares or the possession of voting power in or in relation to that or any other corporation; or (b) by virtue of any powers conferred by the articles of association or other document regulating that or any other corporation, that the affairs of the first-mentioned corporation are conducted in accordance with the wishes of that person; "know-how" (工業知識) means any industrial information or techniques likely to assist in the manufacture or processing of goods or materials; "patent rights" (專利權) means the right to do or authorize the doing of anything which would, but for that right, be an infringement of a patent; "principal officer" (主要職員) means- (a) a person employed by a corporation who, either alone or jointly with one or more other persons, is responsible under the immediate authority of the directors for the conduct of the business of the corporation; or (b) a person so employed who, under the immediate authority of a director of the body corporate or a person to whom paragraph (a) applies, exercises managerial functions in respect of the body corporate; "relative" (親屬) means the spouse, parent, child, brother or sister of the relevant person, and, in deducting such a relationship, an adopted child shall be deemed to be a child both of the natural parents and the adopting parent and a step child to be the child of both the natural parents and of any step parent. (Replaced 15 of 1992 s. 2) (5) In this section, a reference to the purchase or sale of rights of a kind referred to in subsection (1) includes a reference to the purchase or sale of a share or interest in any such rights. (Added 15 of 1992 s. 2) (6) The amendments made to this section by the Inland Revenue (Amendment) Ordinance 1992 (15 of 1992) apply to patent rights or rights to any know-how purchased under contracts entered into on or after 18 April 1991 and the provisions of this section that were in force immediately before the commencement of that Ordinance continue to apply to patent rights or rights to any trade mark or design purchased under contracts entered into before 18 April 1991 and also to proceeds received from the sale of those rights whether before or after 18 April 1991 as if the amendments had not been enacted. (Added 15 of 1992 s. 2) "associate" (相聯者) "associated corporation" (相聯法團) "beneficiary under the trust" (信託受益人) "control" (控制) "know-how" (工業知識) "patent rights" (專利權) "principal officer" (主要職員) "relative" (親屬) INLAND REVENUE ORDINANCE - SECT 16F Expenditure on building refurbishment VerDate:17/04/1998 (1) Notwithstanding anything in section 17, in the basis period for any year of assessment, a person who incurs capital expenditure on the renovation or refurbishment of a building or structure other than a domestic building or structure may claim the expenditure as an outgoing or expense, to the extent that it is incurred in the production of profits chargeable to tax under this Part, as an expense incurred in the production of profits and a deduction from those profits is allowed in accordance with this section. (Amended 32 of 1998 s. 9) (2) For the purposes of subsection (1), a deduction is allowed for one-fifth of the expenditure in the basis period in which the expenditure was actually incurred and the remaining part is to be allowed by 4 equal deductions, one in each of the basis periods for the next succeeding 4 years of assessment. (3) The person is not entitled to the allowances under Part VI for any capital expenditure incurred on the renovation or refurbishment of a building or structure where a deduction for the expenditure is allowed under this section. (Amended 32 of 1998 s. 9) (4) This section does not apply to- (a) capital expenditure incurred for a building or structure which is used or intended to be used as a domestic building or structure; (b) capital expenditure incurred by a person to enable a building or structure to be first used substantially by the person for the production of profits in respect of which the person is chargeable to tax under this Part; (c) capital expenditure incurred by a person to enable a building or structure to be used for a purpose different from that for which it was used immediately before the capital expenditure was incurred. (Replaced 32 of 1998 s. 9) (5) In this section- "building or structure" (建築物或構築物) includes part of a building or structure; "domestic building or structure" (住用建築物或構築物) means any building or structure used for habitation, but does not include any building or structure used as a hotel or guesthouse, or any part of a hotel or guesthouse; "hotel" and "guesthouse" (旅館) have the same meaning as in the Hotel and Guesthouse Accommodation Ordinance (Cap 349). (Replaced 32 of 1998 s. 9) (Added 24 of 1996 s. 7) "building or structure" (建築物或構築物) "domestic building or structure" (住用建築物或構築物) "hotel" and "guesthouse" (旅館) INLAND REVENUE ORDINANCE - SECT 16G Capital expenditure on the provision of a prescribed fixed asset VerDate:17/04/1998 (1) Notwithstanding anything in section 17, in ascertaining the profits of a person from any trade, profession or business in respect of which the person is chargeable to tax under this Part for any year of assessment, there shall, subject to subsections (2) and (3), be deducted any specified capital expenditure incurred by the person during the basis period for that year of assessment. (2) Where a prescribed fixed asset in respect of which any specified capital expenditure is incurred is used partly in the production of profits chargeable to tax under this Part and partly for any other purposes, the deduction allowable under this section shall be such part of the specified capital expenditure as is proportionate to the extent of the use of the asset in the production of the profits so chargeable to tax under this Part. (3) (a) Notwithstanding the exclusion relating to the sale of capital assets contained in section 14, where any prescribed fixed asset in respect of which any specified capital expenditure has been allowed as a deduction to any person under this section in ascertaining the profits from a trade, profession or business is thereafter sold by him- (i) subject to subparagraph (ii), the proceeds of sale; (ii) if the deduction has been allowed in accordance with subsection (2), such part of the proceeds of sale as is proportionate to the extent to which the specified capital expenditure has been allowed as a deduction in respect of that asset in accordance with that subsection, shall, to the extent that the proceeds of sale or the part of the proceeds of sale, as the case may be, is not otherwise chargeable to tax under this Part and does not exceed the amount of the deduction, be treated as a trading receipt arising in or derived from Hong Kong of the trade, profession or business accruing at the time of the sale or, if the sale occurs on or after the date on which the trade, profession or business is permanently discontinued, accruing immediately before the discontinuance. (b) For the purposes of paragraph (a), where any prescribed fixed asset in respect of which any specified capital expenditure has been allowed as a deduction to any person under this section in ascertaining the profits from a trade, profession or business is thereafter destroyed, the asset shall be treated as if it had been sold immediately before the destruction thereof, and any insurance moneys or other compensation of any description received by the person in respect of the destruction and any moneys received by him in respect of the remains of the asset shall be treated as if they were proceeds of that sale. (c) Where, in relation to the sale of a prescribed fixed asset, which is referred to in paragraph (a)- (i) the buyer is a person over whom the seller has control; (ii) the seller is a person over whom the buyer has control; (iii) both the seller and the buyer are persons over both of whom some other person has control; or (iv) the sale is between a husband and his wife, not being a wife living apart from her husband, the Commissioner shall, if he is of the opinion that the sale price of the asset does not represent its true market value at the time of the sale, determine such true market value, and the amount so determined shall, for the purposes of this subsection, be deemed to be the proceeds of sale of the asset. (d) For the purposes of this subsection, the reference to the time of the sale, in relation to a prescribed fixed asset, shall be construed as a reference to the time of completion of the sale of the asset, or the time when possession of the asset is given, whichever is earlier. (4) (a) Subject to paragraph (c), where, immediately prior to the commencement of this section, a person owned and had in use any machinery or plant which is a prescribed fixed asset, that person shall, for the purposes of this section, be deemed to have incurred, at the time of the commencement of this section, specified capital expenditure in relation to that machinery or plant. (b) The specified capital expenditure deemed to have been incurred by a person in relation to any machinery or plant under paragraph (a) shall be the capital expenditure incurred on the provision of that machinery or plant, as reduced by the aggregate of- (i) the amount of the initial allowances, if any, under section 37(1), 37A(1) or 39B(1); and (ii) the amount of the annual allowances, if any, under section 37(2), 37A(3) or 39B(2), made to the person in respect of the capital expenditure in all prior years of assessment. (c) (i) Paragraph (a) shall only apply to a person where the person has elected in writing that the paragraph shall so apply to him, at any time before the expiration of one month after the date on which a notice of the assessment made in respect of the person for the year of assessment commencing on 1 April 1998 under section 59 is given under section 62. (ii) An election under subparagraph (i), once made, is irrevocable. (5) For the purposes of this section, any specified capital expenditure incurred for the purposes of a trade, profession or business by a person about to carry on such trade, profession or business shall be treated as if it had been incurred by that person on the first day on which he does carry on such trade, profession or business. (6) In this section- "excluded fixed asset" (例外固定資產) means a fixed asset in which any person holds rights as a lessee under a lease; "prescribed fixed asset" (訂明固定資產) means- (a) such of the machinery or plant specified in items 16, 20, 24, 26, 28, 29, 31, 33 and 35 of the First Part of the Table annexed to rule 2 of the Inland Revenue Rules (Cap 112 sub. leg. A) as is used specifically and directly for any manufacturing process; (b) computer hardware, other than that which is an integral part of any machinery or plant; (c) computer software and computer systems, but does not include an excluded fixed asset; "specified capital expenditure" (指明資本開支), in relation to a person, means any capital expenditure incurred by the person on the provision of a prescribed fixed asset, but does not include- (a) capital expenditure that may be deducted under any other section in this Part; (b) capital expenditure incurred under a hire-purchase agreement. (Added 32 of 1998 s. 10) "excluded fixed asset" (例外固定資產) "prescribed fixed asset" (訂明固定資產) "specified capital expenditure" (指明資本開支) INLAND REVENUE ORDINANCE - SECT 16H Definitions and general provisions applicable to this section and sections 16I, 16J and 16K VerDate:27/06/2008 (1) In this section and sections 16I, 16J and 16K— “building or structure” (建築物或構築物) means— (a) any commercial building or structure as defined in section 40(1); or (b) any industrial building or structure as defined in section 40(1); “capital expenditure” (資本開支) has the meaning assigned to it by section 40(1); *“commencement date” (生效日期) means the date on which section 16I comes into operation; “environmental protection facility” (環保設施) means— (a) any environmental protection machinery; or (b) any environmental protection installation; “environmental protection installation” (環保裝置) means any installation, or part of any installation, that is specified in Part 2 of Schedule 17 and forms a building or structure; “environmental protection machinery” (環保機械)— (a) means any machinery or plant that is specified in Part 1 of Schedule 17; but (b) does not include any machinery or plant in which any person holds rights as a lessee under a lease; “relevant interest” (有關權益) has the meaning assigned to it by section 40(1); “relevant proceeds of sale” (有關售賣得益), in relation to an environmental protection facility in respect of which a deduction has been allowed under section 16I, means— (a) if section 16I(4) does not apply, the proceeds of sale of the facility; or (b) if section 16I(4) applies, such part of the proceeds of sale of the facility as is proportionate to the extent to which the deduction has been allowed; “residue of expenditure” (開支剩餘額) has the meaning assigned to it by section 40(1); “specified capital expenditure” (指明資本開支)— (a) means any capital expenditure incurred on— (i) the provision of any environmental protection machinery; or (ii) the construction of any environmental protection installation; but (b) does not include— (i) any capital expenditure that may be deducted under any other section of this Part; or (ii) any capital expenditure incurred under a hire-purchase agreement; “unallowed amount” (未獲容許扣除款額), in relation to an environmental protection installation in respect of which a deduction has been allowed under section 16I and which is subsequently sold, means— (a) if section 16I(4) does not apply, the amount of specified capital expenditure incurred in relation to the installation that is still unallowed as at the time of the sale; or (b) if section 16I(4) applies, such part of the amount referred to in paragraph (a) as is proportionate to the extent to which the deduction has been allowed. (2) In this section and section 16K— (a) a reference to capital expenditure incurred on the provision of any environmental protection machinery or any machinery or plant includes capital expenditure incurred on alterations to an existing building incidental to the installation of that environmental protection machinery or that machinery or plant, as the case may be; and (b) a reference to capital expenditure incurred on the construction of any environmental protection installation or any building or structure does not include any expenditure incurred on the acquisition of, or of rights in or over, any land. (3) The Secretary for Financial Services and the Treasury may, after consultation with the Director of Environmental Protection, by notice published in the Gazette, amend Schedule 17. (Added 21 of 2008 s. 4) ______________________________________________________________________ Note: * Commencement date: 27 June 2008. “building or structure” (建築物或構築物) “capital expenditure” (資本開支) “commencement date” (生效日期) “environmental protection facility” (環保設施) “environmental protection installation” (環保裝置) “environmental protection machinery” (環保機械) “relevant interest” (有關權益) “relevant proceeds of sale” (有關售賣得益) “residue of expenditure” (開支剩餘額) “specified capital expenditure” (指明資本開支) “unallowed amount” (未獲容許扣除款額) INLAND REVENUE ORDINANCE - SECT 16I Deductions for specified capital expenditure incurred in relation to environmental protection facilities VerDate:27/06/2008 (1) Notwithstanding section 17, this section applies in ascertaining the profits from any trade, profession or business in respect of which a person is chargeable to tax under this Part for any year of assessment (referred to in this section as “that year of assessment”). (2) Any specified capital expenditure incurred by the person during the basis period for that year of assessment in relation to any environmental protection machinery shall be deducted. (3) Any specified capital expenditure incurred by the person during the basis period for that year of assessment in relation to any environmental protection installation shall be deducted as follows— (a) 20% shall be deducted for that year of assessment; and (b) the remaining part shall be deducted by 4 equal amounts, one for each of the next succeeding 4 years of assessment, so long as the installation has not been sold at the end of the basis period for the year of assessment concerned. (4) If an environmental protection facility is used partly in the production of profits chargeable to tax under this Part and partly for any other purposes, the amount that shall be deducted under subsection (2) or (3) is the amount of specified capital expenditure that is proportionate to the extent of the use of the facility in the production of those profits. (5) A person is not entitled to the allowances under Part VI in respect of any specified capital expenditure if a deduction for any part of the expenditure is allowed under this section. (6) For the purposes of this section, any specified capital expenditure incurred for the purposes of a trade, profession or business by a person about to carry on the trade, profession or business shall be treated as if it had been incurred by that person on the first day on which he carries on the trade, profession or business. (Added 21 of 2008 s. 4) INLAND REVENUE ORDINANCE - SECT 16J Proceeds of sale of environmental protection facilities to be treated as trading receipts VerDate:27/06/2008 (1) This section applies notwithstanding the exclusion relating to the sale of capital assets in section 14. (2) If any environmental protection machinery in respect of which a deduction has been allowed under section 16I in ascertaining the profits from a trade, profession or business is subsequently sold, the relevant proceeds of sale shall, to the extent that they are not chargeable to tax under any other section of this Part and do not exceed the amount of the deduction, be treated as a trading receipt of the trade, profession or business, arising in or derived from Hong Kong and accruing— (a) at the time of the sale; or (b) if the sale occurs on or after the date on which the trade, profession or business is permanently discontinued, immediately before the date of discontinuance. (3) If any environmental protection installation in respect of which a deduction has been allowed under section 16I in ascertaining the profits from a trade, profession or business is subsequently sold— (a) if there is an unallowed amount that exceeds the relevant proceeds of sale, the excess shall be deducted for the year of assessment in the basis period for which the sale occurs; (b) if there is an unallowed amount but the relevant proceeds of sale exceed that amount, the excess shall, to the extent that it is not chargeable to tax under any other section of this Part and does not exceed the amount of the deduction, be treated as a trading receipt of the trade, profession or business, arising in or derived from Hong Kong and accruing— (i) at the time of the sale; or (ii) if the sale occurs on or after the date on which the trade, profession or business is permanently discontinued, immediately before the date of discontinuance; or (c) if there is not an unallowed amount, the relevant proceeds of sale shall, to the extent that they are not chargeable to tax under any other section of this Part and do not exceed the amount of the deduction, be treated as a trading receipt of the trade, profession or business, arising in or derived from Hong Kong and accruing— (i) at the time of the sale; or (ii) if the sale occurs on or after the date on which the trade, profession or business is permanently discontinued, immediately before the date of discontinuance. (4) If, in relation to the sale of an environmental protection facility as referred to in subsection (2) or (3)— (a) the buyer is a person over whom the seller has control; (b) the seller is a person over whom the buyer has control; (c) both the seller and the buyer are persons over both of whom some other person has control; or (d) the sale is between a husband and his wife, not being a wife living apart from her husband, the Commissioner shall, if he is of the opinion that the sale price of the facility does not represent its true market value at the time of the sale, determine such true market value, and the amount so determined shall, for the purposes of subsection (2) or (3), as the case may be, be treated as the proceeds of that sale. (5) For the purposes of subsections (2) and (3), if an environmental protection facility in respect of which a deduction has been allowed to a person under section 16I is subsequently destroyed— (a) the facility shall be treated as if it had been sold immediately before the destruction; and (b) any insurance money or other compensation of any description received by the person in respect of the destruction and any money received by him in respect of the remains of the facility shall be treated as the proceeds of that sale. (6) For the purposes of this section, a reference to the time of the sale, in relation to an environmental protection facility, shall be construed as a reference to the time of completion of the sale of the facility, or the time when possession of the facility is given, whichever is the earlier. (Added 21 of 2008 s. 4) INLAND REVENUE ORDINANCE - SECT 16K Environmental protection facilities owned as at commencement date VerDate:27/06/2008 (1) Subject to subsection (7), if, immediately before the commencement date, a person owned and had in use any machinery or plant that is environmental protection machinery, that person shall, for the purposes of section 16I, be deemed to have incurred, on the commencement date, specified capital expenditure in relation to that machinery or plant. (2) Subject to subsection (7), if, immediately before the commencement date, a person owned and had in use any machinery or plant that would otherwise have qualified as environmental protection machinery but for the fact that that machinery or plant does not comply with the registration or other requirements under Part 1 of Schedule 17, that person shall, for the purposes of section 16I, be deemed to have incurred specified capital expenditure in relation to that machinery or plant on the date on which the registration or other requirements are complied with. (3) The specified capital expenditure deemed to have been incurred by a person in relation to any machinery or plant under subsection (1) or (2) shall be the capital expenditure incurred on the provision of that machinery or plant reduced by the aggregate of— (a) the amount of the initial allowances, if any, under section 37(1), 37A(1) or 39B(1); and (b) the amount of the annual allowances, if any, under section 37(2), 37A(3) or 39B(2), made to the person in respect of the capital expenditure in all prior years of assessment. (4) Subject to subsection (7), if— (a) immediately before the commencement date, a person is entitled to an interest in any building or structure that is an environmental protection installation; and (b) that interest is the relevant interest in relation to the capital expenditure incurred on the construction of that building or structure, that person shall, for the purposes of section 16I, be deemed to have incurred, on the commencement date, specified capital expenditure in relation to that building or structure. (5) Subject to subsection (7), if— (a) immediately before the commencement date, a person is entitled to an interest in any building or structure that would otherwise have qualified as an environmental protection installation but for the fact that that building or structure does not comply with the registration requirement under Part 2 of Schedule 17; and (b) that interest is the relevant interest in relation to the capital expenditure incurred on the construction of that building or structure, that person shall, for the purposes of section 16I, be deemed to have incurred specified capital expenditure in relation to that building or structure on the date on which the registration requirement is complied with. (6) The specified capital expenditure deemed to have been incurred in relation to any building or structure under subsection (4) or (5) shall be the residue of expenditure in relation to that building or structure immediately before the commencement date, or the residue of expenditure in relation to that building or structure immediately before the date on which the registration requirement under Part 2 of Schedule 17 is complied with, whichever is applicable. (7) Where a person is deemed to have incurred specified capital expenditure under any of subsections (1), (2), (4) and (5) (referred to in this subsection as “the relevant provision”) in the basis period for any year of assessment, the relevant provision applies to him only if he, at any time within one month after the date on which a notice of the assessment made in respect of that year of assessment under section 59 is given under section 62, elects in writing that the relevant provision shall so apply to him. (8) An election under subsection (7), once made, is irrevocable. (Added 21 of 2008 s. 4) INLAND REVENUE ORDINANCE - SECT 17 Deductions not allowed VerDate:01/12/2000 (1) For the purpose of ascertaining profits in respect of which a person is chargeable to tax under this Part no deduction shall be allowed in respect of- (Amended 36 of 1955 s. 25; 49 of 1956 s. 13) (a) domestic or private expenses, including- (i) the cost of travelling between the person's residence and place of business; and *(ii) subject to section 16AA, contributions made to a mandatory provident fund scheme in the person's capacity as a member of the scheme; (Replaced 4 of 1998 s. 6. Amended 31 of 1998 s. 25) *(b) subject to section 16AA, any disbursements or expenses not being money expended for the purpose of producing such profits; (Amended 36 of 1955 s. 25; 31 of 1998 s. 11) (c) any expenditure of a capital nature or any loss or withdrawal of capital; (d) the cost of any improvements; (e) any sum recoverable under an insurance or contract of indemnity; (f) rent of, or expenses in connection with, any premises or part of premises not occupied or used for the purpose of producing such profits; (Amended 36 of 1955 s. 25) (g) any tax paid or payable under this Ordinance other than salaries tax paid in respect of employees' remuneration; (Replaced 3 of 1949 s. 7. Amended 35 of 1955 s. 25) (h) any sums that the person has, as an employer, paid in respect of an employee as- (i) an ordinary annual contribution to a fund established under a recognized occupational retirement scheme; or (ii) an ordinary annual premium for a contract of insurance under such a scheme; or (iii) regular contributions paid to a mandatory provident fund scheme, to the extent that the total of the payments exceeds 15 per cent of the total emoluments of the employee for the period to which the payments relate; (Replaced 4 of 1998 s. 6) (i) any provision made for the payment in respect of an employee of any sum referred to in paragraph (h), to the extent that the aggregate of such provision and any such payment as is referred to in that paragraph exceeds 15% of the total emoluments of that employee for the period in respect of which the provision is made; (Added 7 of 1986 s. 5. Amended 76 of 1993 s. 7) (j) any provision made in respect of an occupational retirement scheme other than for the payment of any sum referred to in paragraph (h); (Added 7 of 1986 s. 5. Amended 76 of 1993 s. 7) (k) any sum that the person has, as an employer, paid in respect of an employee as- (i) a contribution to a fund established under a recognized occupational retirement scheme; or (ii) a premium for a contract of insurance under such a scheme; or (iii) a contribution to a mandatory provident fund scheme, where provision for payment of the sum has been made in a prior year of assessment and a deduction has been allowed for the provision in that or another prior year of assessment; or (Replaced 4 of 1998 s. 6) (l) any- (i) contribution that the person has, as an employer, made to the funds of; or (ii) payment that that person has made as an employer for the purposes of the operation of, an occupational retirement scheme other than a recognized occupational retirement scheme. (Added 76 of 1993 s. 7. Amended 4 of 1998 s. 6) (2) In computing the profits or losses of a person carrying on a trade, profession or business, no deduction is allowable for- (a) salaries or other remuneration of the person's spouse; or (b) interest on capital or loans provided by that spouse; or (c) a contribution made to a mandatory provident fund scheme in respect of that spouse; or (d) in the case of a partnership- (i) salaries or other remuneration of a partner or a partner's spouse; or (ii) interest on capital or loans provided by a partner or by a partner's spouse; or *(iii) subject to section 16AA, a contribution made to a mandatory provident fund scheme in respect of a partner or a partner's spouse. (Replaced 4 of 1998 s. 6. Amended 31 of 1998 s. 25) (3) In this section- "regular contributions" (固定供款) has the same meaning as in section 16A(3). (Added 4 of 1998 s. 6) ___________________________________________________________________________ ___ Note: * The amendments made by Ord. No. 31 of 1998 to section 17(1)(a)(ii) and (b) and (2)(d)(iii) apply in relation to the year of assessment commencing on 1 April 2000 and to all subsequent years of assessment. (31 of 1998 s. 2(2); L.N. 175 of 2000) "regular contributions" (固定供款) INLAND REVENUE ORDINANCE - SECT 18 Basis for computing profits VerDate:30/06/1997 (1) Save as provided in this section, the assessable profits for any year of assessment from any trade, profession or business carried on in Hong Kong shall be computed on the full amount of the profits therefrom arising in or derived from Hong Kong during the year preceding the year of assessment. (2) Where the Commissioner is satisfied that the accounts of a trade, profession or business carried on in Hong Kong are usually made up to some day other than 31 March, he may direct that the assessable profits from that source be computed on the amount of the profits therefrom arising in or derived from Hong Kong during the year ending on that day in the year preceding the year of assessment. Where, however, the assessable profits from any trade, profession or business have been computed by reference to an account made up to a certain day, and no account is made up to the corresponding day in the year following, the assessable profits from that source both for the year of assessment in which such failure occurs and for the 2 years of assessment following shall be computed on such basis as the Commissioner in his discretion thinks fit. (3) Subject to section 18C, where a person commences to carry on a trade, profession or business in Hong Kong on a day within a year of assessment, the assessable profits from that source for such year of assessment shall be computed on the amount of the profits therefrom arising in or derived from Hong Kong during the period beginning on the date of commencement and ending on the last day of that year of assessment. (Amended 7 of 1975 s. 11) (4) Where a person has commenced to carry on a trade, profession or business in Hong Kong on a day within the year preceding a year of assessment, the assessable profits from that source for that year of assessment shall be computed on the amount of the profits therefrom arising in or derived from Hong Kong for 1 year from such day: Provided that such person may claim, by giving notice in writing to the Commissioner, to have the assessable profits from the source for that year of assessment and for the following year of assessment (but not for one or other of those years) recomputed on the basis of the actual profits therefrom arising in or derived from Hong Kong during each such year respectively, but where the commencement is in the year of assessment commencing on 1 April 1973, such claim for recomputation shall relate only to the year of assessment commencing on 1 April 1974. (Amended 7 of 1975 s. 11) (5) Where a person ceases to carry on a trade, profession or business in Hong Kong the assessable profits from that source for the year of assessment in which the cessation occurs shall be computed on the amount of the profits therefrom arising in or derived from Hong Kong during the period beginning on 1 April in that year and ending on the date of cessation: Provided that where the profits arising in or derived from Hong Kong from that source during the year of assessment immediately preceding the year in which the cessation occurs exceed what would otherwise have been the assessable profits from that source for that preceding year such assessable profits shall be recomputed on the basis of the actual profits therefrom arising in or derived from Hong Kong during that preceding year and an additional assessment shall be made accordingly. (6) Notwithstanding the provisions of section 70 a claim made for an adjustment of any assessment because of a change in the basis period required or authorized under the provisions of this section shall be entertained if it is made in writing within 2 years after the end of the relevant year of assessment or, where the claim has been made under the proviso to subsection (4), within 2 years after the end of the second of the 2 years of assessment referred to in such proviso. A claim so made shall be regarded as an objection to an assessment under section 64 for the purposes of Part XI. (Amended 35 of 1965 s. 11) (7) This section shall apply to the years of assessment up to and including the year of assessment commencing on 1 April 1974. (Replaced 7 of 1975 s. 11) (Replaced 49 of 1956 s. 14. Amended 7 of 1986 s. 12) INLAND REVENUE ORDINANCE - SECT 18A Assessable profits for the year of assessment 1974/5 VerDate:30/06/1997 (1) Where the assessable profits for the year of assessment commencing on 1 April 1974 from any trade, profession or business fall to be computed under section 18(1) but the actual profits from that source for that year of assessment exceed those assessable profits as so computed, then, notwithstanding section 18, the assessable profits for the year of assessment commencing on 1 April 1974 shall be computed on the basis of those actual profits. (2) Where the assessable profits for the year of assessment commencing on 1 April 1974 from any trade, profession or business fall to be computed under section 18(2) on the amount of profits from that source for the year ending on a day other than 31 March in the year preceding that year of assessment but the actual profits from that source- (a) for the year ending on the corresponding day in the year of assessment; or (b) if the accounts for that trade, profession or business were made up to more than 1 day in the year of assessment, for the year ending on such of those days as the Commissioner may direct, exceed those assessable profits as so computed, then, notwithstanding section 18, the assessable profits for the year of assessment commencing on 1 April 1974 shall be computed on the basis of those actual profits. (3) Where the assessable profits for the year of assessment commencing on 1 April 1974 from any trade, profession or business fall to be computed under section 18(4) but the lesser of the actual profits from that source for- (a) the year ending on the day in that year of assessment to which the accounts of that trade, profession or business were made up; or (b) that year of assessment, exceed those assessable profits as so computed, then notwithstanding section 18, the assessable profits for the year of assessment commencing on 1 April 1974 shall be computed on the basis of those actual profits. (4) For the purposes of applying this section there shall be disregarded any loss brought forward to the year of assessment commencing on 1 April 1974 under section 19(2). (Added 7 of 1975 s. 12) INLAND REVENUE ORDINANCE - SECT 18B Basis for computing assessable profit for years of assessment commencing on 1 April 1975 VerDate:30/06/1997 (1) Subject to subsection (2) and to sections 18C, 18D and 18E, the assessable profits for any year of assessment commencing on or after 1 April 1975 from any trade, profession or business carried on in Hong Kong shall be computed on the full amount of the profits therefrom arising in or derived from Hong Kong during the year of assessment. (2) Subject to sections 18C, 18D and 18E, where the Commissioner is satisfied that the accounts of a trade, profession or business carried on in Hong Kong are made up to some day other than 31 March, he may direct that the assessable profits from that source for any year of assessment be computed on the full amount of profits therefrom arising in or derived from Hong Kong during the year ending on that day in the year of assessment. (Added 7 of 1975 s. 12. Amended 7 of 1986 s. 12) INLAND REVENUE ORDINANCE - SECT 18C Commencement of source of profits in years of assessment commencing on or after 1 April 1974 VerDate:30/06/1997 (1) Subject to subsection (2) where a person commences to carry on a trade, profession or business in Hong Kong within any year of assessment commencing on or after 1 April 1974 and the Commissioner is satisfied that the first accounts of such trade, profession or business after its commencement are made up to some day other than 31 March, the assessable profits from that source for that year of assessment shall- (a) if the first accounts are made up to a day within that year of assessment, be computed on the full amount of the profits from that source arising in or derived from Hong Kong during the period beginning on the day of commencement and ending on the day to which the accounts are made up; or (b) if the first accounts are for a period in excess of a year and are made up to a day within a year of assessment following that in which the commencement occurred, be computed on such basis as the Commissioner thinks fit. (Amended 7 of 1986 s. 12) (2) Where the first accounts of a trade, profession or business commenced in any year of assessment commencing on or after 1 April 1974 are for a period of 1 year or less and are made up to a day within the year of assessment following that in which the commencement occurred, there shall be deemed to be no assessable profits for the year of assessment in which the commencement occurred. (Added 7 of 1975 s. 12) INLAND REVENUE ORDINANCE - SECT 18D Cessation of source of profits in years of assessment commencing on 1 April 1975 VerDate:12/02/2010 (1) Save as provided in this section, where, in any year of assessment commencing on or after 1 April 1975, a person ceases to carry on a trade, profession or business in Hong Kong, the assessable profits from that source for the year of assessment in which the cessation occurs shall be computed on the amount of the profits therefrom arising in or derived from Hong Kong during the period beginning on the day following the end of the basis period for the year preceding the year of assessment and ending on the date of cessation. (2) Where in any year of assessment commencing on or after 1 April 1975 a person ceases to carry on a trade, profession or business in Hong Kong which was commenced by him in Hong Kong before 1 April 1974, the assessable profits from that source for the year of assessment in which the cessation occurs shall be computed on the amount of the profits therefrom arising in or derived from Hong Kong during the period beginning on 1 April in that year and ending on the date of cessation: Provided that where a person ceases to carry on such trade, profession or business in Hong Kong other than by reason of the death of an individual previously carrying on a trade, profession or business as the sole proprietor thereof, and the trade, profession or business, or any part thereof, is transferred to or carried on by any other person as his trade, profession or business, this subsection shall not apply, but the cessation shall be deemed to be a cessation for the purposes of subsection (1). (Amended 71 of 1983 s. 16; 4 of 2010 s. 5) (2A) Where a person ceases to carry on a relevant trade, profession or business on or after 1 April 1979, the following amount shall be treated as assessable profits therefrom for the year of assessment in which the cessation occurs and shall be in addition to the assessable profits therefrom which, apart from this subsection, fall to be computed for that year of assessment- (a) in the case of an excepted trade, profession or business, the amount, if any, by which the relevant profits therefrom arising in or derived from Hong Kong during the relevant period exceed the transitional amount; (b) in the case of any other relevant trade, profession or business, the full amount of any relevant profits therefrom arising in or derived from Hong Kong during the relevant period, and, for the purposes of this subsection, profits are "relevant profits" if, but for subsection (2) and apart from Part VI, the assessable profits for that year of assessment would have included those profits, and- "excepted trade, profession or business" (特定行業、專業或業務) means a relevant trade, profession or business referred to in the definition in this subsection of "transitional amount"; "relevant period" (有關期間) means the period beginning on the day next following the end of the basis period for the year preceding the year of assessment in which the cessation occurs and ending on 31 March in the year preceding the year of assessment in which the cessation occurs; "relevant trade, profession or business" (有關行業、專業或業務) means a trade, profession or business to which subsection (2) applies and in the case of which the basis period for the year preceding the year of assessment in which the cessation occurs ends on a day other than 31 March; "transitional amount" (過渡期款額) means- (a) where the assessable profits from a relevant trade, profession or business for the year of assessment commencing on 1 April 1974 fell to be computed under section 18(2) on the amount of profits therefrom for the year ending on a day other than 31 March in the year preceding that year of assessment, the amount of profits from the relevant trade, profession or business arising in or derived from Hong Kong during the period beginning on the day next following the corresponding day in that year of assessment and ending on 31 March 1975; (b) where the assessable profits from a relevant trade, profession or business for the year of assessment commencing on 1 April 1974 fell to be computed under section 18A(2), the amount of profits from the relevant trade, profession or business arising in or derived from Hong Kong during the period beginning on the day next following the end of the basis period for that year of assessment and ending on 31 March 1975, and where a loss was incurred in the carrying on of a relevant trade, profession or business referred to in paragraph (a) or (b) of this definition during the period therein referred to, "transitional amount", in relation to that trade, profession or business, shall be construed to mean a nil amount. (Added 34 of 1980 s. 2) (3)-(4) (Repealed 56 of 1993 s. 12) (5) Where a person who commenced to carry on a trade, profession or business in Hong Kong in a year of assessment commencing on or after 1 April 1975- (a) ceases to carry on such trade, profession or business in the year of assessment following that in which such commencement occurred; and (b) by virtue of section 18C(2), there has been deemed to be no assessable profits for the year of assessment in which the commencement occurred, the assessable profits for the year of assessment in which the cessation occurs shall be recomputed on the basis of the actual profits arising in or derived from Hong Kong from the date of the commencement to the date of cessation. (6)-(7) (Repealed 19 of 1996 s. 6) (Added 7 of 1975 s. 12. Amended 7 of 1986 s. 12) "excepted trade, profession or business" (特定行業、專業或業務) "relevant period" (有關期間) "relevant trade, profession or business" (有關行業、專業或業務) "transitional amount" (過渡期款額) INLAND REVENUE ORDINANCE - SECT 18E Change of accounting date and apportionments VerDate:30/06/1997 (1) Where the assessable profits of a person from any trade, profession or business carried on in Hong Kong have been computed by reference to an account made up to a certain day in any year of assessment and either- (Amended 7 of 1986 s. 12) (a) that person fails to make up an account to the corresponding day in the following year of assessment; or (b) that person makes up accounts to more than one day in the following year of assessment, then- (i) the assessable profits from that source for the year of assessment in which the circumstances described in either paragraph (a) or (b) prevail shall be computed on such basis as the Commissioner thinks fit; and (ii) the assessable profits for the year preceding that year of assessment shall be recomputed on such basis as the Commissioner thinks fit. (2) For the purposes of subsection (1)- (a) where the accounts of any trade, profession or business are made up to the end of the Lunar year, the Commissioner may accept those accounts as being made up to a corresponding day in each year of assessment; and (b) in the case of a trade, profession or business which was commenced on or after 1 April 1974, the Commissioner may, if he considers it necessary, make a computation under subsection (1) in respect of a basis period which exceeds 12 months. (3) For the purposes of this Part, where in the case of a trade, profession or business it is necessary in order to arrive at the assessable profits or the losses for any year of assessment to divide or apportion to specific periods the profits and losses for any period for which accounts have been made up, or to aggregate any such profits or losses or any apportioned parts thereof, it shall be lawful to make such division and apportionment or aggregation, and any such apportionment shall be made in proportion to the number of days or months in the respective periods unless the Commissioner, having regard to any special circumstances, otherwise directs. (4) For the purposes of section 18D(2A), where in the case of a trade, profession or business it is necessary in order to arrive at the profits or losses for any period to divide or apportion to specific periods the profits and losses for any period for which accounts have been made up, or to aggregate any such profits or losses or any apportioned parts thereof, the Commissioner may make such division and apportionment or aggregation as he may deem proper in that case. (Added 34 of 1980 s. 3) (Added 7 of 1975 s. 12) INLAND REVENUE ORDINANCE - SECT 18F Adjustment of assessable profits VerDate:30/06/1997 (1) The amount of assessable profits for any year of assessment of a person chargeable to tax under this Part shall be increased by the amount of any balancing charge directed to be made on that person under Part VI and decreased by the allowances made to that person under Part VI for that year of assessment to the extent to which the relevant assets are used in the production of the assessable profits. (2) When in any year of assessment the amount of the allowances made under Part VI to any person chargeable to tax under this Part exceeds the total amount of that person's assessable profits, as increased by any balancing charge, the amount of such excess shall, for the purposes of section 19C, be deemed to be a loss of that person for that year of assessment. (3) This section shall apply to the year of assessment commencing on 1 April 1975 and to subsequent years of assessment. (Added 7 of 1975 s. 12) INLAND REVENUE ORDINANCE - SECT 19 Treatment of losses VerDate:17/04/1998 (1) Where a loss is incurred in any year of assessment up to and including the year of assessment commencing on 1 April 1974 by a person chargeable to tax under this Part the amount of such loss attributable to activities in Hong Kong shall notwithstanding the provisions of section 70 be set off against what would otherwise have been the assessable profits of such person for that year of assessment. (Amended 49 of 1956 s. 15; 7 of 1975 s. 13; 7 of 1986 s. 12; 32 of 1998 s. 11) (2) Where the amount of loss which may set off under subsection (1) is such that it cannot be wholly set off against the assessable profits of a person chargeable to tax under this Part for the year of assessment in which the loss occurred, the amount not so set off shall be carried forward and shall be set off against what would otherwise have been assessable profits of that person for the future years of assessment in succession: Provided that- (a) the amount of any such loss allowed to be set off in computing the assessable profits for any year of assessment shall not be set off in computing the assessable profits for any other year of assessment; and (b) where a loss is set off under this subsection in respect of the year of assessment commencing on 1 April 1975 or any subsequent year of assessment, that loss shall be set off before the set off of any loss under section 19C. (Replaced 7 of 1975 s. 13) (3)-(4) (Repealed 56 of 1993 s. 13) (Replaced 36 of 1955 s. 28) INLAND REVENUE ORDINANCE - SECT 19A (Repealed) VerDate:30/06/1997 (Repealed 56 of 1993 s. 14) INLAND REVENUE ORDINANCE - SECT 19B (Repealed) VerDate:30/06/1997 (Repealed 56 of 1993 s. 15) INLAND REVENUE ORDINANCE - SECT 19C Treatment of losses after 1 April 1975 VerDate:14/12/2007 (1) Subject to section 19CB, where in any year of assessment- (a) an individual sustains a loss in any trade, profession or business carried on by him; and (b) the individual or, in the case of a husband and wife, not being a wife living apart from her husband, the husband or wife does not elect for personal assessment under section 41 for that year of assessment, the amount of that loss shall be carried forward and set off against the amount of his assessable profits from that trade, profession or business for subsequent years of assessment. (Amended 71 of 1983 s. 17; 43 of 1989 s. 9) (2) Subject to section 19CB, where in any year of assessment- (a) an individual incurs a share of a loss of a partnership in any trade, profession or business carried on by that partnership; and (b) the individual or, in the case of a husband and wife, not being a wife living apart from her husband, the husband or wife does not elect for personal assessment under section 41 for that year of assessment, the amount of that share of the loss shall be carried forward and set off against the amount of his share of assessable profits of the partnership from that trade, profession or business for subsequent years of assessment: (Amended 71 of 1983 s. 17; 43 of 1989 s. 9) Provided that where at the end of the year of assessment commencing on 1 April 1983 a share of a loss to be carried forward under this subsection is one that was incurred by a husband and wife, not being a wife living apart from her husband, in partnership with each other, whether or not also with other persons- (i) the share of the loss shall be deemed to be apportioned between the husband and wife in the proportions in which they were entitled to share profits between themselves as at the last day of the basis period for that year of assessment; and (ii) each such portion of the share of the loss shall be carried forward and set off against the husband's or, as the case may be, the wife's respective share of assessable profits of the partnership from that trade, profession or business for subsequent years of assessment. (Added 71 of 1983 s. 17) (3) Subject to subsection (3A), where in any year of assessment an individual has sustained a loss or has incurred a share of a loss of a partnership and- (a) is personally assessed under Part VII; or (b) in the case of a husband and wife, not being a wife living apart from her husband, the husband or wife is personally assessed under Part VII, (Replaced 43 of 1989 s. 9) the amount of the loss or share of the loss shall be dealt with in accordance with that Part. (Replaced 71 of 1983 s. 17) (3A) For the purposes of Part VII, where the loss or the share of the loss referred to in subsection (3) consists solely of the balance of an unabsorbed loss calculated in accordance with section 19CA(2)(b), the amount of the loss or the share of the loss shall be deemed to be the amount arrived at by dividing such balance by the adjustment factor within the meaning of section 19CA. (Added 32 of 1998 s. 12) (4) Subject to section 19CB, where in any year of assessment a corporation or a person, who is not an individual, a partnership or a corporation, carrying on a trade, profession or business sustains a loss in that trade, profession or business, the amount of that loss shall be set off against the assessable profits of the corporation or person (including its share of the assessable profits of a partnership in which it is a partner) for that year of assessment and to the extent not so set off, shall be carried forward and set off against the corporation's or the person's assessable profits and its share of assessable profits of such a partnership for subsequent years of assessment. (5) Subject to section 19CB, where- (a) a trade, profession or business is carried on in Hong Kong by persons in partnership and any one of those persons is a corporation or is a person who is not an individual, a partnership or a corporation; and (Amended 7 of 1986 s. 12) (b) in any year of assessment a loss is incurred in that trade, profession or business, then the corporation's or the person's share of that loss shall be set off against the assessable profits of the corporation or the person for the year of assessment in which the loss was incurred and to the extent not so set off, be carried forward and, for subsequent years of assessment, be set off first against the corporation's or the person's share of the assessable profits of such partnership and, to the extent not so set off, then against the assessable profits of the corporation or the person. (6) For the purposes of this section- (a) the amount of any loss set off in computing the assessable profits for any year of assessment shall not be set off in computing the assessable profits for any other year of assessment; (b) the amount of any loss carried forward to any year of assessment to be set off against the assessable profits for that year shall not be set off more than once in that year of assessment; (c) the total amount set off against assessable profits shall not exceed the amount of the loss; (d) the amount of any loss to be set off under this section shall be the loss attributable to activities in Hong Kong; (Amended 30 of 1981 s. 4; 7 of 1986 s. 12) (e) the amount of any loss sustained in any trade, profession or business carried on for the benefit of a trust by a person in his capacity as trustee shall not be available for set off except against the assessable profits of that trust from that trade, profession or business for subsequent years of assessment. (Added 30 of 1981 s. 4) (7) (Repealed 30 of 2004 s. 3) (8) This section shall apply to the year of assessment commencing on 1 April 1975 and to subsequent years of assessment. (Added 7 of 1975 s. 16. Amended 32 of 1998 s. 12) INLAND REVENUE ORDINANCE - SECT 19CA Treatment of losses: concessionary trading receipts VerDate:17/04/1998 (1) This section shall apply to any person who derives concessionary trading receipts and normal trading receipts for any year of assessment. (2) Where, for any year of assessment, there is an unabsorbed loss in respect of the concessionary trading receipts of a person to whom this section applies, and the person has chargeable normal trading receipts for that year of assessment, the unabsorbed loss shall be treated in accordance with the following provisions- (a) where the amount of the unabsorbed loss does not exceed the amount of the chargeable normal trading receipts as multiplied by the adjustment factor, the amount of the chargeable normal trading receipts shall, for the purpose of ascertaining the assessable profits of the person, be deemed to be reduced by an amount arrived at by dividing the amount of the unabsorbed loss by the adjustment factor, and the amount of the unabsorbed loss shall, for any other purposes, be deemed to be nil; (b) in any other case, the amount of the unabsorbed loss shall, for the purpose of ascertaining the loss sustained by the person, be deemed to be reduced by an amount arrived at by multiplying the amount of the chargeable normal trading receipts by the adjustment factor, and the balance of the unabsorbed loss so reduced shall be dealt with in accordance with sections 19C and 19CB, and the amount of the chargeable normal trading receipts shall, for any other purposes, be deemed to be nil. (3) Where, for any year of assessment, there is an unabsorbed loss in respect of the normal trading receipts of a person to whom this section applies, and the person has chargeable concessionary trading receipts for that year of assessment, the unabsorbed loss shall be treated in accordance with the following provisions- (a) where the amount of the unabsorbed loss does not exceed the amount of the chargeable concessionary trading receipts as divided by the adjustment factor, the amount of the chargeable concessionary trading receipts shall, for the purpose of ascertaining the assessable profits of the person, be deemed to be reduced by an amount arrived at by multiplying the amount of the unabsorbed loss by the adjustment factor, and the amount of the unabsorbed loss shall, for any other purposes, be deemed to be nil; (b) in any other case, the amount of the unabsorbed loss shall, for the purpose of ascertaining the loss sustained by the person, be deemed to be reduced by an amount arrived at by dividing the amount of the chargeable concessionary trading receipts by the adjustment factor, and the balance of the unabsorbed loss so reduced shall be dealt with in accordance with sections 19C and 19CB, and the amount of the chargeable concessionary trading receipts shall, for any other purposes, be deemed to be nil. (4) In this section, "adjustment factor" (調整分數), in relation to any year of assessment, means the factor ascertained in accordance with the following formula: A B where: A means the rate specified in Schedule 1 or 8, as the case may be, for that year of assessment; and B, in relation to any concessionary trading receipts, means the rate specified in section 14A or 14B, as the case may be, for that year of assessment. (5) In this section- "chargeable concessionary trading receipts" (應課稅的獲特惠的營業收入), in relation to any person for any year of assessment, means- (a) where the concessionary trading receipts are of a kind in respect of which assessable profits are chargeable to tax at the rate specified in section 14A, the amount of such concessionary trading receipts as- (i) reduced by the aggregate of- (A) the amount of any outgoings and expenses deductible under this Part to the extent to which they are incurred during the basis period for that year of assessment by the person in the production of the concessionary trading receipts; and (B) the amount of any allowances made under Part VI for that year of assessment to the person to the extent to which the relevant assets are used during the basis period for that year of assessment in the production of the concessionary trading receipts; and (ii) increased by the amount of any balancing charge directed to be made on that person under Part VI for that year of assessment to the extent to which the relevant assets are used in the production of the concessionary trading receipts; (b) where the concessionary trading receipts are of a kind in respect of which assessable profits are chargeable to tax at the rate specified in section 14B, the amount of the assessable profits ascertained in accordance with section 23A(2); "chargeable normal trading receipts" (應課稅的一般營業收入), in relation to any person for any year of assessment, means the amount of the normal trading receipts as- (a) reduced by the aggregate of- (i) the amount of any outgoings and expenses deductible under this Part to the extent to which they are incurred during the basis period for that year of assessment by the person in the production of the normal trading receipts; and (ii) the amount of any allowances made under Part VI for that year of assessment to the person to the extent to which the relevant assets are used during the basis period for that year of assessment in the production of the normal trading receipts; and (b) increased by the amount of any balancing charge directed to be made on that person under Part VI for that year of assessment to the extent to which the relevant assets are used in the production of the normal trading receipts; "concessionary trading receipts" (獲特惠的營業收入) means the trading receipts and other sums in respect of which assessable profits are chargeable to tax at the rate specified in section 14A or 14B; "normal trading receipts" (一般營業收入) means the trading receipts and other sums in respect of which assessable profits are chargeable to tax at the rate specified in Schedule 1 or 8; "unabsorbed loss in respect of the concessionary trading receipts" (關乎獲特惠的營 業收入的未吸納虧損), in relation to any person for any year of assessment, means- (a) where the concessionary trading receipts are of a kind in respect of which assessable profits are chargeable to tax at the rate specified in section 14A, the loss ascertained by- (i) adding to the amount of the concessionary trading receipts the amount of any balancing charge directed to be made on that person under Part VI for that year of assessment to the extent to which the relevant assets are used in the production of the concessionary trading receipts; and (ii) reducing from the resulting amount the aggregate of- (A) the amount of any outgoings and expenses deductible under this Part to the extent to which they are incurred during the basis period for that year of assessment by the person in the production of the concessionary trading receipts; and (B) the amount of any allowances made under Part VI for that year of assessment to the person to the extent to which the relevant assets are used during the basis period for that year of assessment in the production of the concessionary trading receipts; (b) where the concessionary trading receipts are of a kind in respect of which assessable profits are chargeable to tax at the rate specified in section 14B, the loss arrived at in accordance with sections 23A(2) and 19D; "unabsorbed loss in respect of the normal trading receipts" (關乎一般營業收入的未吸納虧 損), in relation to any person for any year of assessment, means the loss ascertained by- (a) adding to the amount of the normal trading receipts the amount of any balancing charge directed to be made on that person under Part VI for that year of assessment to the extent to which the relevant assets are used in the production of the normal trading receipts; and (b) reducing from the resulting amount the aggregate of- (i) the amount of any outgoings and expenses deductible under this Part to the extent to which they are incurred during the basis period for that year of assessment by the person in the production of the normal trading receipts; and (ii) the amount of any allowances made under Part VI for that year of assessment to the person to the extent to which the relevant assets are used during the basis period for that year of assessment in the production of the normal trading receipts. (Added 32 of 1998 s. 13) "adjustment factor" (調整分數) "chargeable concessionary trading receipts" (應課稅的獲特惠的營業收入) "chargeable normal trading receipts" (應課稅的一般營業收入) "concessionary trading receipts" (獲特惠的營業收入) "normal trading receipts" (一般營業收入) "unabsorbed loss in respect of the concessionary trading receipts" (關乎獲特惠的營 業收入的未吸納虧損) "unabsorbed loss in respect of the normal trading receipts" (關乎一般營業收入的未吸納虧 損) INLAND REVENUE ORDINANCE - SECT 19CB Set off: concessionary trading receipts VerDate:17/04/1998 (1) Where, in accordance with section 19C(1), (2), (4) or (5), a loss is to be set off against assessable profits for any year of assessment, this section shall apply for the purpose of ascertaining the amount of the loss set off and the resulting reduction in the assessable profits. (2) Where the loss is in respect of concessionary trading receipts and it is to be set off against the assessable profits in respect of normal trading receipts- (a) where the amount of the loss does not exceed the amount of the assessable profits in respect of normal trading receipts as multiplied by the adjustment factor, the amount of the assessable profits in respect of normal trading receipts shall, for the purpose of ascertaining the assessable profits of the person, be deemed to be reduced by the amount arrived at by dividing the amount of the loss by the adjustment factor, and the loss shall, for any other purposes, be deemed to have been fully set off; (b) in any other case, the loss shall, for the purpose of the set off, be deemed to have been set off to the extent of the amount arrived at by multiplying the amount of the assessable profits in respect of normal trading receipts by the adjustment factor, and the amount of the assessable profits in respect of normal trading receipts shall, for any other purposes, be deemed to be nil. (3) Where the loss is in respect of normal trading receipts and it is to be set off against the assessable profits in respect of concessionary trading receipts- (a) where the amount of the loss does not exceed the amount of the assessable profits in respect of concessionary trading receipts as divided by the adjustment factor, the amount of the assessable profits in respect of concessionary trading receipts shall, for the purpose of ascertaining the assessable profits of the person, be deemed to be reduced by the amount arrived at by multiplying the amount of the loss by the adjustment factor, and the loss shall, for any other purposes, be deemed to have been fully set off; (b) in any other case, the loss shall, for the purpose of the set off, be deemed to have been set off to the extent of the amount arrived at by dividing the amount of the assessable profits in respect of concessionary trading receipts by the adjustment factor, and the amount of the assessable profits in respect of concessionary trading receipts shall, for any other purposes, be deemed to be nil. (4) In this section- "adjustment factor" (調整分數), "concessionary trading receipts" (獲特惠的營業收入) and "normal trading receipts" (一般營業收入) have the meanings respectively assigned to them in section 19CA(4) and (5); "loss" (虧損) includes part of a loss. (Added 32 of 1998 s. 13) "adjustment factor" (調整分數), "concessionary trading receipts" (獲特惠的營業收入) and "normal trading receipts" (一般營業收入) "loss" (虧損) INLAND REVENUE ORDINANCE - SECT 19D Computation of losses after 1 April 1975 VerDate:30/06/1997 (1) For the purposes of section 19C, the amount of loss incurred by a person chargeable to tax under this Part for any year of assessment shall be computed in like manner and for such basis period as the assessable profits for that year of assessment would have been computed. (2) This section shall apply to the year of assessment commencing on 1 April 1975 and to subsequent years of assessment. (Added 7 of 1975 s. 16) INLAND REVENUE ORDINANCE - SECT 19E Adjustment of losses VerDate:30/06/1997 (1) For the purposes of section 19D, the amount of loss for any year of assessment of any person chargeable to tax under this Part shall be increased by the allowances made to that person under Part VI for that year of assessment to the extent to which the relevant assets are used in the production of the losses and decreased by the amount of any balancing charge directed to be made on that person under Part VI. (2) Where in any year of assessment the amount of the balancing charge made under Part VI to a person chargeable to tax under this Part exceeds the total amount of that person's losses, as increased by any allowances, the amount of such excess shall be deemed to be assessable profits of that person for that year of assessment. (3) This section shall apply to the year of assessment commencing on 1 April 1975 and to subsequent years of assessment. (Added 7 of 1975 s. 16) INLAND REVENUE ORDINANCE - SECT 20 Liability of certain non-resident persons VerDate:30/06/1997 (1) For the purposes of this section- (a) a person is closely connected with another person where the Commissioner in his discretion considers that such persons are substantially identical or that the ultimate controlling interest of each is owned or deemed under this section to be owned by the same person or persons; (b) the controlling interest of a company shall be deemed to be owned by the beneficial owners of its shares, whether held directly or through nominees, and shares in one company held by or on behalf of another company shall be deemed to be held by the shareholders of the last-mentioned company. (2) Where a non-resident person carries on business with a resident person with whom he is closely connected and the course of such business is so arranged that it produces to the resident person either no profits which arise in or derive from Hong Kong or less than the ordinary profits which might be expected to arise in or derive from Hong Kong, the business done by the non-resident person in pursuance of his connection with the resident person shall be deemed to be carried on in Hong Kong, and such non-resident person shall be assessable and chargeable with tax in respect of his profits from such business in the name of the resident person as if the resident person were his agent, and all the provisions of this Ordinance shall apply accordingly. (Amended 36 of 1955 s. 29; 7 of 1986 s. 12) INLAND REVENUE ORDINANCE - SECT 20A Persons chargeable on behalf of a non-resident VerDate:30/06/1997 (1) A non-resident person shall be chargeable to tax either directly or in the name of his agent in respect of all his profits arising in or derived from Hong Kong from any trade, profession or business carried on in Hong Kong whether such agent has the receipt of the profits or not, and the tax so charged whether directly or in the name of the agent shall be recoverable by all means provided in this Ordinance out of the assets of the non-resident person or from the agent. Where there are more agents than one they may be charged to tax jointly or severally in respect of the profits of the non-resident person and shall be jointly and severally liable for the tax thereon. (Amended 7 of 1986 s. 12) (2) Every person chargeable to tax as agent, or from whom tax is recoverable in respect of the profits of another person, shall retain out of any assets coming into his possession or control on behalf of such other person or in his capacity as agent so much thereof as shall be sufficient to produce the amount of such tax, and he shall be and is hereby indemnified against any person whomsoever in respect of his retention of such assets. (3) Notwithstanding anything contained in subsections (1) and (2), any person who sells any goods in Hong Kong on behalf of a non-resident person shall furnish quarterly to the Commissioner a return showing the gross proceeds from such sales and shall at the same time pay to the Commissioner a sum equal to 1% of such proceeds or such lesser sum as may have been agreed with the Commissioner. On receipt of such sum the Commissioner shall issue a certificate in the form specified by the Board of Inland Revenue: (Amended 39 of 1969 s. 3; 7 of 1986 s. 12) Provided that the Commissioner may exempt any such person from the provisions of this subsection on such conditions as he may consider fit. (Added 49 of 1956 s. 17) INLAND REVENUE ORDINANCE - SECT 20AA Persons not treated as agents VerDate:01/04/2003 (1) For the purposes of section 20A, the following persons are deemed not to be an agent of a non-resident person- (a) where profits are chargeable to tax under this Part by reference to so much of any trade, profession or business as relates to transactions carried out through a broker and falling within subsection (2), the broker; (b) where profits are chargeable to tax under this Part by reference to so much of any trade, profession or business as relates to transactions carried out through an approved investment adviser and falling within subsection (3), the approved investment adviser. (2) Where any profits are chargeable to tax under this Part by reference to so much of any trade, profession or business as relates to a transaction carried out through a broker, the transaction is taken, in relation to the profits (the "taxable profits"), to fall within this subsection if- (a) at the time of the transaction, the broker was carrying on the business of a broker; (b) the transaction was carried out by the broker for the non-resident person in the ordinary course of the business; (c) the remuneration that the broker received for providing the services of a broker to the non-resident person for the transaction was at a rate not less than the one customary for the class of business; (d) the non-resident person does not fall (apart from this paragraph) to be treated as having the broker as his agent in relation to any other profits not included in the taxable profits under this subsection or subsection (3) but chargeable to tax under this Part for the same year of assessment; and (e) the broker was not an associate of the non-resident person during the year of assessment. (3) Where any profits are chargeable to tax under this Part by reference to so much of any trade, profession or business as relates to a transaction carried out through an approved investment adviser, the transaction is taken, in relation to the profits (the "taxable profits"), to have been carried out through the approved investment adviser and to fall within this subsection if- (a) (Repealed 32 of 1998 s. 14) (b) at the time of the transaction, the approved investment adviser was carrying on the business of an approved investment adviser; (c) the transaction was carried out by the approved investment adviser for the non-resident person in the ordinary course of the business; (d) the remuneration that the approved investment adviser received for providing the services of an approved investment adviser to the non-resident person for the transaction was at a rate not less than the one customary for the class of business; (e) the non-resident person does not fall (apart from this paragraph) to be treated as having the approved investment adviser as his agent in relation to any other profits not included in the taxable profits under this subsection or subsection (2) but chargeable to tax under this Part for the same year of assessment; (f) the approved investment adviser was not an associate of the non-resident person during the year of assessment; and (g) the approved investment adviser, when he acted for the non-resident person in the transaction, did so in an independent capacity. (4) This section applies to a person who acts as a broker or provides services as an approved investment adviser as part only of a business and as if that part is a separate business. (5) For the purposes of this section, an approved investment adviser is not regarded as acting in an independent capacity when acting on behalf of the non-resident person unless, having regard to the legal, financial and commercial characteristics of the relationship between them, it is a relationship between persons carrying on independent businesses dealing with each other at arm's length. (6) In this section- "approved investment adviser" (認可投資顧問) means- (a) a corporation licensed to carry on a business in advising on securities or asset management under Part V of the Securities and Futures Ordinance (Cap 571); or (b) an authorized financial institution registered for carrying on such a business under that Part, only to the extent that the institution carries on such a business; (Replaced 5 of 2002 s. 407) "associate" (相聯者), in relation to a non-resident person, means- (a) where the person is a natural person- (i) a relative of the person; (ii) a partner of the person and any relative of that partner; (iii) a partnership in which the person is a partner; (iv) any corporation controlled by the person, by a partner of the person or by a partnership in which the person is a partner; (v) any director or principal officer of any such corporation as is referred to in subparagraph (iv); (b) where the person is a corporation- (i) any associated corporation; (ii) any person who controls the corporation and any partner of such person, and, where either such person is a natural person, any relative of such person; (iii) any director or principal officer of that corporation or of any associated corporation and any relative of any such director or officer; (iv) any partner of the corporation and, where such partner is a natural person, any relative of such partner; (c) where the person is a partnership- (i) any partner of the partnership and where such partner is a partnership any partner of that partnership, any partner with the partnership in any other partnership and where such partner is a partnership any partner of that partnership and where any partner of, or with, or in any of the partnerships mentioned in this subparagraph is a natural person, any relative of such partner; (ii) any corporation controlled by the partnership or by any partner thereof or, where such a partner is a natural person, any relative of such partner; (iii) any corporation of which any partner is a director or principal officer; (iv) any director or principal officer of a corporation referred to in subparagraph (ii); "associated corporation" (相聯法團) in relation to a person means- (a) a corporation over which the person has control; (b) a corporation which has control over such a person, being a corporation; or (c) a corporation which is under the control of the same person, being a corporation; "broker" (經紀) means- (a) a corporation licensed to carry on a business in dealing in securities under Part V of the Securities and Futures Ordinance (Cap 571); or (b) an authorized financial institution registered for carrying on such a business under that Part, only to the extent that the institution carries on such a business; (Replaced 5 of 2002 s. 407) "control" (控制), in relation to a corporation, means the power of a person to secure- (a) by means of the holding of shares or the possession of voting power in or in relation to that or any other corporation; or (b) by virtue of any powers conferred by the articles of association or other document regulating that or any other corporation, that the affairs of the first-mentioned corporation are conducted in accordance with the wishes of that person; "principal officer" (主要職員) means- (a) a person employed by a corporation who, either alone or jointly with one or more other persons, is responsible under the immediate authority of the directors for the conduct of the business of the corporation; or (b) a person so employed who, under the immediate authority of a director of the body corporate or a person to whom paragraph (a) applies, exercises managerial functions in respect of the body corporate; "relative" (親屬) means the spouse, parent, child, brother or sister of the relevant person, and, in deducing such a relationship, an adopted child shall be deemed to be a child both of the natural parents and the adopting parent and a step child to be the child of both the natural parents and of any step parent. (Amended 32 of 1998 s. 14) (Added 56 of 1996 s. 3) "approved investment adviser" (認可投資顧問) "associate" (相聯者) "associated corporation" (相聯法團) "broker" (經紀) "control" (控制) "principal officer" (主要職員) "relative" (親屬) INLAND REVENUE ORDINANCE - SECT 20AB Interpretation of sections 20AC, 20AD and 20AE and Schedule 15 VerDate:10/03/2006 (1) This section applies to the interpretation of sections 20AC, 20AD and 20AE and Schedule 15. (2) In relation to any year of assessment, a person is to be regarded as a resident person if— (a) where the person is a natural person who is not a trustee of a trust estate, the person— (i) ordinarily resides in Hong Kong in that year of assessment; or (ii) stays in Hong Kong for a period or a number of periods amounting to more than 180 days during that year of assessment or for a period or a number of periods amounting to more than 300 days in 2 consecutive years of assessment one of which is that year of assessment; (b) where the person is a corporation that is not a trustee of a trust estate, the central management and control of the corporation is exercised in Hong Kong in that year of assessment; (c) where the person is a partnership that is not a trustee of a trust estate, the central management and control of the partnership is exercised in Hong Kong in that year of assessment; or (d) where the person is a trustee of a trust estate, the central management and control of the trust estate is exercised in Hong Kong in that year of assessment. (3) In relation to any year of assessment, a person is a non-resident person if he is not a resident person in relation to that year of assessment. (4) A person is to be regarded as having a direct beneficial interest in another person if— (a) where the other person is a corporation that is not a trustee of a trust estate, the person holds any of the issued share capital (however described) of the corporation; (b) where the other person is a partnership that is not a trustee of a trust estate, the person, as a partner in the partnership, is entitled to any of the profits of the partnership; or (c) where the other person is a trustee of a trust estate, the person— (i) benefits under the trust estate; or (ii) not being a trustee of the trust estate or, where the trustee is a corporation, a director of the trustee, is able or might reasonably be expected to be able to control the activities of the trust estate or the application of its corpus or income, otherwise than through another person. (5) A person (“the first person”) is to be regarded as having an indirect beneficial interest in another person (“the second person”) if— (a) where the second person is a corporation that is not a trustee of a trust estate, the first person is interested in any of the issued share capital (however described) of the corporation; (b) where the second person is a partnership that is not a trustee of a trust estate, the first person is entitled to any of the profits of the partnership; or (c) where the second person is a trustee of a trust estate, the first person— (i) benefits under the trust estate; or (ii) not being a trustee of the trust estate or, where the trustee is a corporation, a director of the trustee, is able or might reasonably be expected to be able to control the activities of the trust estate or the application of its corpus or income, through another person (“interposed person”) or through a series of 2 or more interposed persons who is or are related to the first person and the second person in the manner described in subsections (6) and (7). (6) Where there is one interposed person— (a) the first person has a direct beneficial interest in the interposed person; and (b) the interposed person has a direct beneficial interest in the second person. (7) Where there is a series of 2 or more interposed persons— (a) the first person has a direct beneficial interest in the first interposed person in the series; (b) each interposed person (other than the last interposed person) in the series has a direct beneficial interest in the next interposed person in the series; and (c) the last interposed person in the series has a direct beneficial interest in the second person. (8) A reference to an entitlement to the profits of a partnership is, in the case where the partners in a partnership are not entitled to its profits but are only entitled to a distribution of its assets upon its dissolution, to be construed as a reference to an entitlement to a distribution of the assets of the partnership upon its dissolution. (9) A reference to the issued share capital of a corporation does not include a reference to the shares comprised in the issued share capital that do not entitle their holders to receive dividends, whether in cash or in kind, and a distribution of the corporation’s assets upon its dissolution other than a return of capital. (Added 4 of 2006 s. 2) INLAND REVENUE ORDINANCE - SECT 20AC Certain profits of non-resident persons exempt from tax VerDate:10/03/2006 (1) Subject to subsections (3) and (4), a non-resident person is exempt from tax chargeable under this Part in respect of his assessable profits, for any year of assessment commencing on or after 1 April 1996, from— (a) transactions falling within subsection (2); and (b) transactions incidental to the carrying out of the transactions referred to in paragraph (a). (2) A transaction falls within this subsection if it— (a) is a transaction specified in Schedule 16; and (b) has been carried out through or arranged by a specified person. (3) Subsection (1) does not apply to a non-resident person in a year of assessment if, at any time in that year of assessment, the person carries on any trade, profession or business in Hong Kong involving any transaction other than a transaction referred to in that subsection. (4) Subsection (1)(b) does not apply to a non-resident person in a year of assessment if, in that year of assessment, his trading receipts from the incidental transactions referred to in that subsection exceed 5% of the total trading receipts from the transactions referred to in subsection (1)(a) and (b). (5) The Commissioner may by notice published in the Gazette amend Schedule 16. (6) In subsection (2), a “specified person” (指明人士) means— (a) in relation to a transaction carried out before 1 April 2003— (i) a bank within the meaning of section 2(1) of the Banking Ordinance (Cap 155); (ii) a person registered as a dealer or commodity trading adviser under Part IV of the Commodities Trading Ordinance (Cap 250) repealed under section 406 of the Securities and Futures Ordinance (Cap 571); (iii) a person registered as a dealer or an investment adviser under Part VI, or as a securities margin financier under Part XA, of the Securities Ordinance (Cap 333) repealed under section 406 of the Securities and Futures Ordinance (Cap 571); or (iv) a person licensed as a leveraged foreign exchange trader under Part IV of the Leveraged Foreign Exchange Trading Ordinance (Cap 451) repealed under section 406 of the Securities and Futures Ordinance (Cap 571); or (b) in relation to a transaction carried out on or after 1 April 2003, a corporation licensed under Part V of the Securities and Futures Ordinance (Cap 571) to carry on, or an authorized financial institution registered under that Part for carrying on, a business in any regulated activity within the meaning of Part 1 of Schedule 5 to that Ordinance. (Added 4 of 2006 s. 2) “specified person” (指明人士) INLAND REVENUE ORDINANCE - SECT 20AD Loss from transactions referred to in section 20AC(1) not available for set off VerDate:10/03/2006 Notwithstanding anything in this Part, any loss sustained by a non-resident person from a transaction referred to in section 20AC(1) in a year of assessment in which he has not at any time carried on any trade, profession or business in Hong Kong involving any transaction other than a transaction referred to in that section is not available for set off against any of his assessable profits for any subsequent year of assessment. (Added 4 of 2006 s. 2) INLAND REVENUE ORDINANCE - SECT 20AE Assessable profits of non-resident persons regarded as assessable profits of resident persons VerDate:10/03/2006 (1) Where, in the year of assessment following the year of assessment in which the Revenue (Profits Tax Exemption for Offshore Funds) Ordinance 2006 (4 of 2006) commences* or in any subsequent year of assessment— (a) a resident person has, during any period of time, a beneficial interest, whether direct or indirect or both, in a non-resident person to the extent set out in subsection (2); and (b) the non-resident person is exempt from tax under section 20AC, the assessable profits of the non-resident person for that period of time that would have been chargeable to tax under this Part but for that section are to be regarded as the assessable profits arising in or derived from Hong Kong of the resident person for that year of assessment from a trade, profession or business carried on by the resident person in Hong Kong. (2) The extent of a resident person’s beneficial interest in a non-resident person referred to in subsection (1) is that the resident person, either alone or jointly with any of his associates (whether a resident person or not)— (a) where the non-resident person is a corporation that is not a trustee of a trust estate, holds or is interested in not less than 30% of the issued share capital (however described) of the corporation; (b) where the non-resident person is a partnership that is not a trustee of a trust estate, is entitled to not less than 30% of the profits of the partnership; or (c) where the non-resident person is a trustee of a trust estate, is interested in not less than 30% in value of the trust estate. (3) Where, in the year of assessment following the year of assessment in which the Revenue (Profits Tax Exemption for Offshore Funds) Ordinance 2006 (4 of 2006) commences or in any subsequent year of assessment— (a) a resident person has, during any period of time, a beneficial interest, whether direct or indirect or both, in a non-resident person who is exempt from tax under section 20AC; and (b) the non-resident person is an associate of the resident person, the assessable profits of the non-resident person for that period of time that would have been chargeable to tax under this Part but for that section are to be regarded as the assessable profits arising in or derived from Hong Kong of the resident person for that year of assessment from a trade, profession or business carried on by the resident person in Hong Kong. (4) Subsections (1) and (3) apply in relation to a resident person irrespective of whether the person has received, or will receive, directly or indirectly, from the non-resident person concerned any money or other property representing the profits of the non-resident person for the relevant year of assessment. (5) A resident person who has a direct or indirect beneficial interest in a trustee of a trust estate by reason of the fact that he is able or might reasonably be expected to be able to control the activities of the trust estate or the application of its corpus or income is, for the purposes of this section, to be regarded as being interested in 100% in value of the trust estate. (6) The extent of a resident person’s beneficial interest in a non-resident person is to be determined in accordance with the provisions in Part 2 of Schedule 15. (7) The amount regarded as the assessable profits of a resident person for a year of assessment under subsection (1) or (3) is to be ascertained in accordance with the provisions in Schedule 15. (8) Subsection (1) or (3) does not apply in relation to a resident person who has a direct or indirect beneficial interest in a non-resident person if the Commissioner is satisfied that beneficial interests in the non-resident person are bona fide widely held. (9) Where a resident person is liable to tax under subsection (1) or (3) in respect of the profits of a non-resident person by reason of his having an indirect beneficial interest in the non-resident person through an interposed person or through a series of 2 or more interposed persons, if the interposed person or any of the interposed persons is a resident person who is also liable to tax under that subsection in respect of the same profits, the first-mentioned resident person is discharged from his liability to tax under that subsection in respect of those profits. (10) In this section— “associate” (相聯者), in relation to a person, means— (a) where the person is a natural person— (i) a relative of the person; (ii) a partner of the person and any relative of that partner; (iii) a partnership in which the person is a partner; (iv) any corporation controlled by the person, by a partner of the person or by a partnership in which the person is a partner; (v) any director or principal officer of a corporation referred to in subparagraph (iv); (b) where the person is a corporation— (i) any associated corporation; (ii) any person who controls the corporation and any partner of such person, and, where either such person is a natural person, any relative of such person; (iii) any director or principal officer of the corporation or of any associated corporation and any relative of any such director or officer; (iv) any partner of the corporation and, where such partner is a natural person, any relative of such partner; (c) where the person is a partnership— (i) any partner of the partnership and where such partner is a partnership any partner of that partnership, any partner with the partnership in any other partnership and where such partner is a partnership any partner of that partnership and where any partner of, or with, or in any of the partnerships mentioned in this subparagraph is a natural person, any relative of such partner; (ii) any corporation controlled by the partnership or by any partner of the partnership or, where such a partner is a natural person, any relative of such partner; (iii) any corporation of which any partner of the partnership is a director or principal officer; (iv) any director or principal officer of a corporation referred to in subparagraph (ii); “associated corporation” (相聯法團), in relation to a person, means— (a) a corporation over which the person has control; (b) a corporation which has control over such a person, being a corporation; or (c) a corporation which is under the control of the same person, being a corporation; “control” (控制), in relation to a corporation, means the power of a person to secure— (a) by means of the holding of shares or the possession of voting power in or in relation to that or any other corporation; or (b) by virtue of any powers conferred by the articles of association or other document regulating that or any other corporation, that the affairs of the first-mentioned corporation are conducted in accordance with the wishes of that person; “principal officer” (主要職員), in relation to a corporation, means— (a) a person employed by the corporation who, either alone or jointly with one or more other persons, is responsible under the immediate authority of the directors for the conduct of the business of the corporation; or (b) a person so employed who, under the immediate authority of a director of the corporation or a person to whom paragraph (a) applies, exercises managerial functions in respect of the corporation; “relative” (親屬), in relation to a person, means the spouse, parent, child, brother or sister of the person, and, in deducing such a relationship, an adopted child is to be regarded as a child both of the natural parents and the adopting parent and a step child as the child of both the natural parents and of any step parent. (Added 4 of 2006 s. 2) ___________________________________________________________________________ _____ Note: * Commencement date: 10 March 2006. “associate” (相聯者) “associated corporation” (相聯法團) “control” (控制) “principal officer” (主要職員) “relative” (親屬) INLAND REVENUE ORDINANCE - SECT 20B Persons chargeable in respect of certain profits of a non-resident VerDate:25/06/2004 (1) Without prejudice to section 20A, this section applies in respect of a non-resident person who is chargeable to tax in respect of- (a) sums deemed by virtue of section 15(1)(a), (b) or (ba) to be receipts arising in or derived from Hong Kong from a trade, profession or business carried on in Hong Kong; or (Amended 12 of 2004 s. 7) (b) sums received in respect of, or which in any way derive directly or indirectly from, the performance in Hong Kong by a non-resident entertainer or sportsman (whether or not he is the non-resident person who is so chargeable) of an activity in his character as entertainer or sportsman on or in connection with a commercial occasion or event, including- (i) any appearance of the entertainer or sportsman by way of or in connection with the promotion of any such occasion or event; and (ii) any participation by the entertainer or sportsman in or for sound recording, films, videos, radio, television or other similar transmissions (whether live or recorded). (2) Where this section applies, the non-resident person is chargeable to tax in respect of the sums described in subsection (1) in the name of any person in Hong Kong who paid or credited those sums to that or any other non-resident person, and the tax so charged shall be recoverable by all means provided in this Ordinance from that person in Hong Kong. (3) Where a person in Hong Kong from whom tax is recoverable by virtue of this section pays or credits to a non-resident person (whether or not he is the non-resident person who is chargeable to tax) sums described in subsection (1) he shall, at the time he makes the payment or credit, deduct from those sums so much thereof as is sufficient to produce the amount of such tax, and he is hereby indemnified against any person in respect of his deduction of such sum. (4) In this section- "commercial occasion or event" (商業場合或事項) includes any description of occasion or event- (a) for which an entertainer or sportsman (or other person) might, by virtue of his performance of the activity, receive or become entitled to receive anything by way of cash or any other form of property; or (b) which is designed to promote commercial sales or activity by advertising, the endorsement of goods or services, sponsorship, or other promotional means of any kind; "entertainer or sportsman" (演藝人員或運動員) means a person, other than a corporation, who gives performances (whether alone or with others) in his character as entertainer or sportsman in any kind of entertainment or sport, including any activity of a physical kind which (whether in a live or recorded form) the public or any section of the public is or may be permitted (whether for payment or not) to see or hear. (Added 4 of 1989 s. 2) "commercial occasion or event" (商業場合或事項) "entertainer or sportsman" (演藝人員或運動員) INLAND REVENUE ORDINANCE - SECT 21 Assessable profits of certain businesses to be computed on a percentage of the turnover VerDate:30/06/1997 Where the true amount of the assessable profits arising in or derived from Hong Kong of a non-resident person in respect of a trade, profession or business carried on in Hong Kong cannot be readily ascertained, such assessable profits may be computed on a fair percentage of the turnover of that trade or business in Hong Kong. (Amended 36 of 1955 s. 30; 7 of 1975 s. 17; 7 of 1986 s. 12) INLAND REVENUE ORDINANCE - SECT 21A Computation of assessable profits from cinematograph films, patents, trademarks, etc. VerDate:25/06/2004 (1) The assessable profits of a person arising in or derived from Hong Kong in respect of a sum deemed by section 15(1)(a), (b) or (ba) to be a receipt arising in or derived from Hong Kong from a trade, profession or business carried on in Hong Kong shall, for the purposes of this Ordinance and notwithstanding any other provisions of this Part, be taken to be- (Amended 12 of 2004 s. 7) (a) 100% of the sum in the case of a sum derived from an associate: Provided that this paragraph shall not apply in the case where the Commissioner is satisfied that no person carrying on a trade, profession or business in Hong Kong has at any time wholly or partly owned the property in respect of which the sum is paid; or (b) the following percentages of the sum in any other case, including any case of the description mentioned in the proviso to paragraph (a)- (i) for any sum received by or accrued to the person before 1 April 2003, 10%; (ii) for any sum received by or accrued to the person on or after 1 April 2003, 30%. (Replaced 24 of 2003 s. 5) (2) For the purpose of ascertaining whether a sum was derived from an associate in the application of subsection (1), where the sum was derived from or by a trustee of a trust estate or a corporation controlled by such a trustee, that sum shall be deemed to have been derived from or by, as the case may be, each of the trustee, the corporation and the beneficiary under the trust. (3) In this section- "associate" (相聯者), in relation to a person, means- (a) where the person is a natural person- (i) a relative of the person; (ii) a partner of the person and any relative of that partner; (iii) a partnership in which the person is a partner; (iv) any corporation controlled by the person, by a partner of the person or by a partnership in which the person is a partner; (v) any director or principal officer of any such corporation as is referred to in subparagraph (iv); (b) where the person is a corporation- (i) any associated corporation; (ii) any person who controls the corporation and any partner of such person, and, where either such person is a natural person, any relative of such person; (iii) any director or principal officer of that corporation or of any associated corporation and any relative of any such director or officer; (iv) any partner of the corporation and, where such partner is a natural person, any relative of such partner; (c) where the person is a partnership- (i) any partner of the partnership and where such partner is a partnership any partner of that partnership, any partner with the partnership in any other partnership and where such partner is a partnership any partner of that partnership and where any partner of, or with, or in any of the partnerships mentioned in this subparagraph is a natural person, any relative of such partner; (ii) any corporation controlled by the partnership or by any partner thereof or, where such a partner is a natural person, any relative of such partner; (iii) any corporation of which any partner is a director or principal officer; (iv) any director or principal officer of a corporation referred to in subparagraph (ii); "associated corporation" (相聯法團), in relation to a person, means- (a) a corporation over which the person has control; (b) if the person is a corporation- (i) a corporation which has control over the person; or (ii) a corporation which is under the control of the same person as is the first-mentioned person; "beneficiary under the trust" (信託的受益人) means any person who benefits or is capable (whether by the exercise of a power of appointment or otherwise) of benefiting under a trust estate, either directly or through any interposed person, or who is able or might reasonably be expected to be able, whether directly or indirectly, to control the activities of the trust estate or the application of its corpus or income; "control" (控制), in relation to a corporation, means the power of a person to secure- (a) by means of the holding of shares or the possession of voting power in or in relation to that or any other corporation; or (b) by virtue of any powers conferred by the articles of association or other document regulating that or any other corporation, that the affairs of the first-mentioned corporation are conducted in accordance with the wishes of that person; "principal officer" (主要職員) means- (a) a person employed by a corporation who, either alone or jointly with one or more other persons, is responsible under the immediate authority of the directors for the conduct of the business of the corporation; or (b) a person so employed who, under the immediate authority of a director of the corporation or a person to whom paragraph (a) applies, exercises managerial functions in respect of the corporation; "relative" (親屬) means the spouse, parent, child, brother or sister of the relevant person, and, in deducing such a relationship, an adopted child shall be deemed to be a child both of the natural parents and the adopting parent and a step child to be the child of both the natural parents and of any step parent. (Replaced 65 of 1993 s. 3) "associate" (相聯者) "associated corporation" (相聯法團) "beneficiary under the trust" (信託的受益人) "control" (控制) "principal officer" (主要職員) "relative" (親屬) INLAND REVENUE ORDINANCE - SECT 21B Transitional VerDate:30/06/1997 (1) Subject to subsection (2), the amendments to section 21A effected by the Inland Revenue (Amendment) (No. 4) Ordinance 1993 (65 of 1993) shall apply to any sum received by or accrued to any person on or after 4 March 1993. (2) The provisions of section 21A in force immediately prior to the coming into operation of the Inland Revenue (Amendment) (No. 4) Ordinance 1993 (65 of 1993) shall continue to apply to any sum received by or accrued to any person prior to 4 March 1993 as if that Ordinance had not been enacted. (Added 65 of 1993 s. 3) INLAND REVENUE ORDINANCE - SECT 22 Assessment of partnerships VerDate:30/06/1997 (1) Where a trade, profession or business is carried on by 2 or more persons jointly the assessable profits therefrom shall be computed in one sum and the tax in respect thereof shall be charged in the partnership name. (Replaced 36 of 1955 s. 31) (2) The precedent partner shall make and deliver a statement of the profits or losses of such trade, profession or business, on behalf of the partnership, ascertained in accordance with the provisions of this Part relating to the ascertainment of profits. Where no active partner is resident in Hong Kong the return shall be furnished by the manager or agent of the partnership in Hong Kong. (Amended 7 of 1986 s. 12) (3) If a change occurs in a partnership of persons carrying on any trade, profession or business, by reason of retirement or death, or the dissolution of the partnership as to one or more of the partners, or the admission of a new partner, in such circumstances that one or more of the persons who until that time were engaged in the trade, profession or business continue to be engaged therein, or if a person previously engaged in any trade, profession or business on his own account continues to be engaged in it, but as a partner in a partnership, the tax payable by the person or persons who carry on the trade, profession or business after that time shall, notwithstanding the change be computed on what would otherwise have been the assessable profits of such person or persons or the aggregation of such assessable profits as if no such change had occurred. (Amended 30 of 1950 Schedule; 36 of 1955 s. 31; 49 of 1956 s. 18; 7 of 1975 s. 19; 56 of 1993 s. 16) (4) Tax upon the partnership shall be recoverable by all means provided in this Ordinance out of the assets of the partnership, or from any partner. (Amended 36 of 1955 s. 31) (5) Tax may be assessed on the profits of a partnership notwithstanding the cessation or dissolution of such partnership and shall be recoverable from the former partners and from the assets of the partnership at the time of its cessation. INLAND REVENUE ORDINANCE - SECT 22A Ascertainment of share of partnership profits or losses VerDate:14/12/2007 (1) In order to ascertain the share of a partner of the assessable profits or losses of a partnership, such assessable profits or losses for the relevant year of assessment shall be apportioned amongst the persons who were partners during the basis period in the ratio in which the profits or losses of the basis period for that year of assessment were divided; and the profits or losses as so apportioned shall constitute the shares of the assessable profits and losses of the individual partners for that year of assessment. (2) For the purposes of subsection (1), there shall be excluded from the assessable profits of a partnership any loss brought forward under section 19C. (3) (Repealed 30 of 2004 s. 3) (Added 7 of 1975 s. 20) INLAND REVENUE ORDINANCE - SECT 22B Limited partner loss relief VerDate:30/06/1997 (1) In this section- "limited partner" (有限責任合夥人) means a person who is a partner in a partnership which is carrying on a trade, profession or business and that person is- (a) a limited partner in a limited partnership registered under the Limited Partnerships Ordinance (Cap 37); (b) a general partner in a partnership in which he is not entitled to or does not take part in the management of the partnership but is entitled to have his liabilities, or his liabilities beyond a certain limit, for debts or obligations incurred by the partnership for the purposes of the trade, profession or business discharged or reimbursed by some other person; or (c) under the law of any place outside Hong Kong, not entitled to or does not take part in the management of the partnership and is not liable beyond a certain limit for debts or obligations incurred by the partnership for the purposes of the trade, profession or business; "relevant sum" (有關款項) means the amount of the person's contribution to the partnership as at the end of the relevant year of assessment in which the loss is sustained, except that where the person ceased to be a partner in the partnership during that year of assessment it is the time when he so ceased. (2) For the purposes of this section, a person's contribution to the partnership at any time is the aggregate of- (a) the amount which he has contributed to it as capital less the sum of- (i) the amounts of capital that he has directly or indirectly drawn out or received back; and (ii) anything that he is or may be entitled at any time while the partnership carries on the trade, profession or business to draw out, receive back or be reimbursed from another person, whether or not the entitlement is enforceable or is pursuant to an unenforceable undertaking or practice; and (b) the amount of any profits or gains of the partnership to which he is entitled but which he has not received in money or money's worth. (3) Notwithstanding section 19C, where in any year of assessment a person who is a limited partner in a partnership has incurred a share of a loss of that partnership the amount of the loss which may be set off against the assessable profits of the person is limited to the lesser of- (a) the amount of the loss; or (b) the relevant sum. (4) This section applies to years of assessment that commence on or after 1 April 1991 and to that part of any basis period for a year of assessment that occurs on or after 15 November 1990 but before 1 April 1991 but does not apply in respect of a share of a loss incurred under a transaction which was the subject of an application for advance clearance made to the Commissioner before 15 November 1990 and the Commissioner before or after that date expressed the opinion that the transaction would not fall within the terms of section 61A or, where no such application was made in respect of a loss incurred under a transaction entered into before that date, the transaction is, in the Commissioner's opinion, of the same type as any for which, in the circumstances prevailing as at 14 November 1990, he would have expressed the opinion that the transaction would not fall within the terms of section 61A. (Added 15 of 1992 s. 3) "limited partner" (有限責任合夥人) "relevant sum" (有關款項) INLAND REVENUE ORDINANCE - SECT 22C Transitional: partnerships consisting of more than 20 members VerDate:14/12/2007 Where a partnership, which immediately before the commencement* of sections 6, 7, 8 and 9 of Part 2 of Schedule 4 to the Companies (Amendment) Ordinance 2004 (30 of 2004), was a person, but was not an individual, a corporation or a partnership as defined in sections 19C(7) and 22A(3) that were in force immediately before that commencement, has any losses brought forward under section 19C(4), then, notwithstanding section 22A(2)— (a) any such losses shall be used to set off against the assessable profits of that partnership in the subsequent years of assessment the basis periods of which are ended after that commencement until those losses are fully utilized; and (b) the assessable profits of that partnership for a year of assessment the basis period of which is ended after that commencement shall be reduced by the amount of loss set off mentioned in paragraph (a) before they are apportioned amongst the partners of that partnership in accordance with section 22A(1). (Added 30 of 2004 s. 3) ______________________________________________________________________ Note: * Commencement date: 14 December 2007. INLAND REVENUE ORDINANCE - SECT 23 Ascertainment of assessable profits of life insurance corporations VerDate:30/06/1997 (1) The assessable profits for any year of assessment of a corporation, whether mutual or proprietary, from the business of life insurance, shall- (a) be deemed to be 5% of the premiums from life insurance business in Hong Kong of the corporation during the basis period for that year; or (Amended 7 of 1986 s. 12) (b) should the corporation so elect, be that part of the adjusted surplus ascertained in accordance with the provisions of subsections (2) to (7) deemed to arise in the basis period for that year less any dividend received which is required to be excluded by virtue of section 26(a): (Amended 49 of 1956 s. 19) Provided that- (i) any such election once made shall be irrevocable and in addition shall be deemed to apply to all future years of assessment; and (Added 49 of 1956 s. 19) (ii) until such part of the adjusted surplus is ascertained, the assessable profits shall be calculated provisionally in accordance with paragraph (a) of this subsection, and tax charged and collected as if no such election had been made. (Amended 49 of 1956 s. 19) (2) A corporation which elects to be assessed in the manner provided in subsection (1)(b) shall submit to the Commissioner a certified true copy of the latest abstract of the report of the actuary submitted to the Insurance Authority under section 18 of the Insurance Companies Ordinance (Cap 41) or, in the case of a corporation to which section 52(3) of that Ordinance applies, a copy of the latest such abstract submitted under that section. (Replaced 11 of 1985 s. 2) (3) An election under subsection (1)(b) shall be effective only if the actuarial report is submitted not later than 2 years after the end of the period in respect of which it is made. Where an effective election has been made it shall be lawful to give effect to such election notwithstanding the provisions of section 70. (Amended 49 of 1956 s. 19) (4) (a) The surplus shall be the amount by which the life insurance fund exceeds the estimated liability of the corporation on the life insurance fund at the end of the period in respect of which any actuarial report is made. (b) The adjusted surplus shall be ascertained by adding to the surplus- (i) any deficit in respect of a period prior to the period in respect of which the relevant actuarial report is made where such deficit is included in such report; (ii) any outgoing or expense charged against the life insurance fund in the relevant actuarial report which is not such that it would be allowed as a deduction in ascertaining assessable profits under the provisions of section 16; (iii) any expense disbursement or loss charged against the life insurance fund in the relevant actuarial report which is such that it would not be allowed as a deduction in ascertaining assessable profits by reason of the provisions of section 17; (iv) any income or profits of the corporation arising in the period in respect of which the relevant actuarial report is made, not being profits from the business of insurance other than life insurance, and not credited to the life insurance fund in such report; (v) any appropriations of profits or transfers to reserve charged against the fund during the period in respect of which the relevant actuarial report is made, other than appropriations or transfers to policy holders in their capacity as such; (va) the amount of a balancing charge directed to be made under Part VI; (Added 7 of 1975 s. 21) and by deducting therefrom- (vi) any surplus disclosed by a previous actuarial report which has been retained in the life insurance fund in the relevant actuarial report; (vii) any transfer or appropriation to policy holders in their capacity as such, effected during the period in respect of which the relevant actuarial report is made where such transfer or appropriation has not been charged against the life insurance fund in such report; (viii) any outgoing or expenses not charged against the life insurance fund during the period in respect of which the relevant actuarial report is made which is such that it would be deducted in ascertaining assessable profits under the provisions of section 16; (ix) any receipt of a capital nature, or transfer from reserve, credited to the life insurance fund during the period in respect of which the relevant actuarial report is made; (Amended 7 of 1975 s. 21) (x) the allowances provided by Part VI to the extent to which the relevant assets are used in the production of the adjusted surplus. (Added 7 of 1975 s. 21) (5) Notwithstanding anything contained in subsection (4) the adjusted surplus of a corporation which transacts life insurance business both within Hong Kong and elsewhere shall be the adjusted surplus ascertained in accordance with the provisions of the said subsection (4) less that portion of such adjusted surplus as is not deemed under the provisions of subsection (6) to be profits arising in or derived from Hong Kong. (Amended 7 of 1986 s. 12) (6) Where a corporation transacts life insurance business both within Hong Kong and elsewhere, the portion of the adjusted surplus ascertained in accordance with the provisions of subsection (4) which shall be deemed to be profits arising in or derived from Hong Kong is the amount which bears the same proportion to the adjusted surplus so ascertained as the aggregate of the premiums from life insurance business in Hong Kong for the period of the relevant actuarial report bears to the aggregate of the premiums from the whole of the corporation's life insurance business for that period. (Amended 7 of 1986 s. 12) (7) Any adjusted surplus ascertained in accordance with the foregoing provisions shall be deemed to arise during the years or other periods which make up the period in respect of which the relevant actuarial report is made in the proportion which the aggregate of the premiums from life insurance business in Hong Kong in each such period bears to the aggregate of such premiums for the total period in respect of which the relevant actuarial report is made. (Amended 49 of 1956 s. 19; 7 of 1986 s. 12) (8) (a) Where the making of the adjustments required by subsection (4) results in a deficit, such deficit shall be deemed to be the loss sustained by the corporation during the period in respect of which the relevant actuarial report is made. (b) In ascertaining for the purposes of sections 19 and 19C what part of such loss so calculated is attributable to activities in Hong Kong the provisions of subsections (5) and (6) shall apply mutatis mutandis. (Amended 11 of 1985 s. 2) (c) Any such loss attributable to activities in Hong Kong shall be deemed to have been sustained during the years which make up the period in respect of which the relevant actuarial report is made in the proportion which the aggregate of the premiums from life insurance business in Hong Kong in each such year bears to the aggregate of such premiums for the total period in respect of which the relevant actuarial report is made. (Amended 49 of 1956 s. 19; 7 of 1986 s. 12) (9) In this section- "actuarial report" (精算師報告) means any abstract referred to in subsection (2); (Added 11 of 1985 s. 2) "life insurance business" (人壽保險業務) means business of the following classes as specified in Part 2 of Schedule 1 to the Insurance Companies Ordinance (Cap 41)- A Life and annuity; B Marriage and birth; C Linked long term; E Tontines, and references to a "life insurance fund" (人壽保險基金) shall be construed accordingly; (Replaced 11 of 1985 s. 2) "premiums from life insurance business in Hong Kong" (從在香港經營人壽保險業務所得的保費) includes- (a) all premiums received or receivable in Hong Kong from both residents and non-residents; and (b) all premiums receivable outside Hong Kong from residents of Hong Kong where such premiums are in respect of policies the proposals for which were received by the corporation in Hong Kong; Provided that any such premiums returned to the insured and any corresponding premiums paid on reinsurance shall be deducted from the premiums so receivable. (Amended 7 of 1986 s. 12) (Replaced 36 of 1955 s. 32) "actuarial report" (精算師報告) "life insurance business" (人壽保險業務) "life insurance fund" (人壽保險基金) "premiums from life insurance business in Hong Kong" (從在香港經營人壽保險業務所得的保費) INLAND REVENUE ORDINANCE - SECT 23A Ascertainment of assessable profits of insurance corporations other than life insurance corporations VerDate:17/04/1998 (1) The assessable profits of a corporation, whether mutual or proprietary, from the business of insurance other than life insurance, shall be ascertained by taking the gross premiums from such insurance business in Hong Kong less any such premiums returned to the insured and any premiums paid on corresponding reinsurance and adding thereto any interest or other income arising in or derived from Hong Kong and the amount of any balancing charge directed to be made under Part VI, and deducting therefrom a reserve for unexpired risks at the percentage adopted by that corporation in relation to its operations as a whole for such risks at the end of the period for which such profits are ascertained, and adding thereto a reserve similarly calculated for unexpired risks outstanding at the commencement of such period, and from the amount so arrived at deducting the actual losses less the amount recoverable in respect thereof under reinsurance, the agency expenses in Hong Kong and the allowances provided under Part VI to the extent to which the relevant assets are used in the production of such profits, and a fair proportion of the expenses of the head office of the corporation: (Amended 49 of 1956 s. 20; 7 of 1975 s. 22) Provided that where the Commissioner is satisfied that, by reason of the limited extent of such business transacted in Hong Kong by a non-resident insurance corporation it would be unreasonable to require such corporation to furnish the particulars necessary for the application of this section, he may permit the assessable profits of the corporation to be ascertained by reference to the proportion of the total profits and income of the corporation corresponding to the proportion which its premiums from insurance business in Hong Kong bear to its total premiums or on any other basis which appears to him to be equitable. (2) Where a corporation to which subsection (1) applies carries on the business of reinsurance of offshore risks as a professional reinsurer, the assessable profits of the corporation derived from the business of reinsurance of offshore risks as a professional reinsurer for a year of assessment shall be ascertained in accordance with the following formula: B A= C X D where: A means such assessable profits; B means the assessable profits of that corporation during the basis period for that year of assessment as calculated in accordance with subsection (1); C means the aggregate of the total income earned by or accrued to that corporation during that basis period for that year of assessment; and D means the aggregate of offshore reinsurance income earned by or accrued to that corporation during that basis period for that year of assessment. (Replaced 32 of 1998 s. 15) (3) For the purposes of this section- "additional amount for unexpired risks" (未過期風險的額外款額), "claims outstanding" (未決申索), "fund" (基金) and "unearned premiums" (未滿期保費) have the meanings respectively assigned to them in paragraph 1(1) of Part 1 of the Third Schedule to the Insurance Companies Ordinance (Cap 41); "gains or profits from offshore reinsurance investments" (得自離岸再保險投資的收益或利潤) means any sums derived from, attributable to, or in respect of gains or profits arising from the sale or other disposal of, or on the redemption on maturity or presentment of, and any interest received on- (a) investments made with premiums from reinsurance of offshore risks; (b) investments representing the whole or any part of the technical reserves of a professional reinsurer referable to premiums from reinsurance of offshore risks; "offshore reinsurance income" (離岸再保險入息) means any sums derived from, attributable to, or in respect of- (a) premiums from reinsurance of offshore risks; (b) gains or profits from offshore reinsurance investments; "permanent establishment" (永久機構) means a branch, management or other place of business, but does not include an agency unless the agent has, and habitually exercises, a general authority to negotiate and conclude contracts on behalf of his principal; "premiums from insurance business in Hong Kong" (得自香港保險業務的保費) includes- (a) all premiums in respect of contracts of insurance, other than life insurance, made in Hong Kong; and (b) all premiums on contracts of insurance, other than life insurance, the proposals for which were made to a corporation in Hong Kong; "premiums from reinsurance of offshore risks" (得自離岸風險的再保險的保費) means premiums received by a professional reinsurer in respect of the reinsurance of any risk outside Hong Kong or in transit in Hong Kong, and- (a) in relation to facultative general reinsurance, the reinsured is not a person resident in Hong Kong or a permanent establishment maintained in Hong Kong; (b) in relation to treaty general reinsurance, not less than 75% of the total risk in terms of gross premiums is outside Hong Kong or is in transit in Hong Kong; "professional reinsurer" (專業再保險人) means a company authorized to carry on in or from Hong Kong reinsurance business only, under section 8 of the Insurance Companies Ordinance (Cap 41); "technical reserves" (技術性儲備)- (a) subject to paragraph (b), means reserves for- (i) additional amounts for unexpired risks; (ii) claims outstanding; and (iii) unearned premiums; (b) in relation to a class of general business which is accounted for on a fund accounting basis, means the fund. (Added 32 of 1998 s. 15) (Added 36 of 1955 s. 33. Amended 7 of 1986 s. 12) "additional amount for unexpired risks" (未過期風險的額外款額), "claims outstanding" (未決申索), "fund" (基金) and "unearned premiums" (未滿期保費) "gains or profits from offshore reinsurance investments" (得自離岸再保險投資的收益或利潤) "offshore reinsurance income" (離岸再保險入息) "permanent establishment" (永久機構) "premiums from insurance business in Hong Kong" (得自香港保險業務的保費) "premiums from reinsurance of offshore risks" (得自離岸風險的再保險的保費) "professional reinsurer" (專業再保險人) "technical reserves" (技術性儲備) INLAND REVENUE ORDINANCE - SECT 23AA Mutual insurance corporations VerDate:30/06/1997 For the purposes of this Part, a mutual insurance corporation shall be deemed to carry on an insurance business the surplus from which shall be ascertained in the manner provided in sections 23 and 23A for ascertaining assessable profits and shall be deemed to be assessable profits chargeable to tax under section 14. (Added 26 of 1969 s. 15) INLAND REVENUE ORDINANCE - SECT 23B Ascertainment of the assessable profits of a ship-owner carrying on business in Hong Kong VerDate:17/04/1998 (1) Where a person carries on a business as an owner of ships and- (a) the business is normally controlled or managed in Hong Kong; or (b) the person is a company incorporated in Hong Kong, that person shall be deemed to be carrying on that business in Hong Kong. (2) Subject to subsection (6), where a person to whom subsection (1) does not apply carries on a business as an owner of ships, and any ship owned by that person calls at any location within the waters of Hong Kong, that person shall be deemed to be carrying on that business in Hong Kong. (3) Subject to subsections (4) and (5), where a person is deemed to be carrying on a business as an owner of ships in Hong Kong under subsection (1) or (2), as the case may be, the assessable profits of that person from that business for a year of assessment shall be the sum bearing the same ratio to the aggregate of the relevant sums earned by or accrued to that person during the basis period for that year of assessment as that person's total shipping profits for the basis period bear to the aggregate of the total shipping income earned by or accrued to that person during that basis period for that year of assessment. (4) Subject to subsection (5), where in the opinion of the assessor the provisions in subsection (3) for computing assessable profits cannot for any reason be satisfactorily applied in the case of a person to whom subsection (2) applies, the assessable profits of that person for any year of assessment may instead be computed on a fair percentage of the aggregate of the relevant sums earned by or accrued to that person during the basis period for that year of assessment. (4A) For the purposes of this section, where a person who is deemed to be carrying on a business as an owner of ships in Hong Kong under subsection (2) is resident in any territory outside Hong Kong, he shall be regarded as having a reciprocity status, if the Commissioner is satisfied that any profits earned by or accrued to a person to whom subsection (1) applies from a business carried on in the territory as an owner of ships are, under the laws of that territory, exempt from a tax which is of substantially the same nature as the tax chargeable under this Part. (Added 32 of 1998 s. 16) (5) Notwithstanding section 70, where the assessable profits of any person have been computed for any year of assessment in accordance with subsection (4), the person shall, upon the submission to the assessor of accounts computed in accordance with the provisions of this Part relating to the ascertainment of assessable profits, be entitled to elect at any time within 2 years from the end of the year of assessment that his assessable profits for that year be re-computed in accordance with subsection (3). (6) Where the Commissioner is satisfied that the call at any location within the waters of Hong Kong of any ship owned by a person to whom subsection (2) applies is of a casual natural, and that further calls at any location within those waters by that or any other ship in the same ownership are improbable, he may in his discretion direct that that person shall be deemed not to be carrying on a business as an owner of ships in Hong Kong under subsection (2) by reason of the casual call of that ship and accordingly, in the event of his making such a direction, that person shall be so deemed not to be carrying on that business. (7) For the purposes of this section, it is declared that where a ship is operated during the basis period for a year of assessment by a person deemed to be carrying on a business as an owner of ships in Hong Kong under subsection (1) or (2), as the case may be- (a) if the ship is a registered ship (in respect of which paragraph (a) of the definition of "exempt sums" (豁免款項) applies) at any time during that basis period, only losses incurred by that person in respect of the operation of that ship while it is not such a registered ship shall be set off against the assessable profits of that person in accordance with section 19C; (Amended 32 of 1998 s. 16) (b) sections 18F and 19E shall apply in respect of the operation of the ship (treated as machinery or plant for the purposes of Part VI) by that person, and- (i) subject to subsections (8) or (9), in the case of any initial allowance or annual allowance, as the case may be, that may be made to that person under Part VI, that allowance shall only be made in respect of that portion of the basis period during which the ship is not a registered ship (in respect of which paragraph (a) of the definition of "exempt sums" (豁免款項) applies) to the extent that that ship is operated in that portion of that basis period for that year of assessment for the purpose of producing assessable profits; (Amended 32 of 1998 s. 16) (ii) in the case of any balancing allowance or balancing charge, as the case may be, that may be made to that person under Part VI, that allowance or charge shall be limited to a sum which is in the same proportion as the aggregate of the initial and annual allowances made to that person in computing his assessable profits since the acquisition of the ship bears to the aggregate of the initial and annual allowances that would have been made had the ship been operated by that person at all times since its acquisition for the purpose of producing assessable profits. (8) Where in the basis period for any year of assessment a registered ship (in respect of which paragraph (a) of the definition of "exempt sums" (豁免款項) applies) ceases to be a registered ship, any allowances that may be made under Part VI in respect of the operation of that ship (treated as machinery or plant for the purposes of that Part) for that year of assessment and subsequent years, shall be computed on the reducing value of the ship after taking into account the amounts of- (Amended 32 of 1998 s. 16) (a) any initial allowance made under section 37(1), 37A(1) or 39B(1); and (b) subject to subsection (9), any annual allowance that would have been made under section 37(2), 37A(2) or 39B(2) had the ship, since its acquisition by a person deemed to be carrying on a business as an owner of ships in Hong Kong under subsection (1) or (2), as the case may be, been operated for the purpose of producing assessable profits. (9) For the purposes of subsections (7)(b)(i) and (8)(b)- (a) in the case of subsection (7)(b)(i), the reference to Part VI (which Part contains sections 37(2) and 37A(2) amongst others); and (b) in the case of subsection (8)(b), the reference to sections 37(2) and 37A(2), shall, in both cases, be construed as if the words "at the end of the basis period" (在評稅基期結束時) (in the first place where they appear in section 37(2), and where they appear in section 37A(2)) read "during the basis period" (在該評稅基期內). (10) For the purposes of this section, any sums earned by or accrued to the owner of a ship under a charter-party that does not, or does not purport to, extend to the whole of that ship shall, to the extent that those sums are derived from, attributable to, or in respect of, any voyage or voyages of that ship commencing from any location within the waters of Hong Kong, be deemed to be derived from, attributable to, or in respect of, any relevant carriage shipped in Hong Kong. (11) A copy of, or extract from, the register of ships in legible from issued and certified under the Merchant Shipping (Registration) Ordinance (Cap 415) shall- (a) in relation to any year of assessment, be proof that a ship was a registered ship or was not a registered ship, or be proof that a ship had commenced to be a registered ship or had ceased to be a registered ship, as the case may be; and (b) in relation to the date of the provisional registration of that ship under that Ordinance, be proof that that registered ship was so registered from that date of provisional registration. (12) In this section- "bill of lading" (提單) has the same meaning as in the Import and Export Ordinance (Cap 60), but does not include a bill of lading which describes any port or other location within the waters of Hong Kong as the port of origin or the port of destination; "business as an owner of ships" (以船舶擁有人身分經營業務) means a business of chartering or operating ships, but does not include dealing in ships or agency business in connection with shipping; "charter hire" (租船費) means any sums earned by or accrued to an owner of a ship under a charter-party in respect of the operation of the ship, but does not include any sums so earned or accrued where that charter-party does not, or does not purport to, extend to the whole of that ship; "exempt sums" (豁免款項)- (a) means any sums derived from, attributable to, or in respect of- (i) any relevant carriage shipped aboard a registered ship at any location within the waters of Hong Kong and proceeding to sea from that location or any other location within those waters; or (ii) any towage operation undertaken by a registered ship proceeding to sea from any location within the waters of Hong Kong; (b) in relation to a person who has a reciprocity status, means any sums derived from, attributable to, or in respect of- (i) any relevant carriage shipped aboard a ship at any location within the waters of Hong Kong and proceeding to sea from that location or any other location within those waters; or (ii) any towage operation undertaken by a ship proceeding to sea from any location within the waters of Hong Kong; (Replaced 32 of 1998 s. 16) "goods" (貨品) includes livestock and mails; "goods in transit" (過境貨品), in relation to the shipment of goods aboard a ship, means goods- (a) specified in a bill of lading; (b) brought to Hong Kong by sea solely for the purpose of the onward carriage of those goods; and (c) in respect of which any freight charges for that onward carriage are not paid or payable in Hong Kong; "operation" (營運), in relation to a ship, includes the use or possession of the ship, and "operated" (運作) shall be construed accordingly; "owner" (擁有人), in relation to a ship, includes a charterer of the ship under a charter-party; "passengers" (乘客) does not include re-embarking passengers; "re-embarking passengers" (重新登船的乘客), in relation to a voyage of a ship, means passengers whose passenger tickets in respect of the voyage do not specify Hong Kong as the place of departure or as the place of destination; "registered ship" (註冊船舶) means a ship registered under the Merchant Shipping (Registration) Ordinance (Cap 415); "relevant carriage" (有關運載), in relation to a ship, means the carriage by sea of passengers or goods, or both passengers and goods, as the case may be, but does not include the carriage of goods in transit; "relevant limited partnership" (有關的有限責任合夥) means a limited partnership- (a) registered in accordance with the provisions of the Limited Partnerships Ordinance (Cap 37) on or before 2 December 1990 and continuing to be so registered after that date; and (b) whose principal assets include any ship, or any interest therein, acquired by or on behalf of that partnership on or before that date; "relevant sums" (有關款項) means- (a) any sums derived from, attributable to, or in respect of- (i) any relevant carriage shipped in Hong Kong; (ii) any towage operation undertaken by a ship within the waters of Hong Kong, or any towage operation undertaken by that ship commencing from any location within those waters, as the case may be; (iii) any dredging operation undertaken by a ship within the waters of Hong Kong; (iv) any charter hire in respect of- (A) the operation of a ship navigating solely or mainly within the waters of Hong Kong; or (B) a charter-party where one of the parties thereto is a relevant limited partnership; (b) one half of any sums derived from, attributable to, or in respect of, any charter hire in respect of the operation of a ship navigating between any location within the waters of Hong Kong and any location within river trade waters, but does not include exempt sums; "river trade waters" (內河貿易水域) means the waters contained within river trade limits other than the waters of Hong Kong contained within those limits; "sea" (海), except in relation to relevant carriage, means the waters of the sea other than those contained within river trade limits; "ship" (船舶) includes any dynamically supported craft within the meaning of the Shipping and Port Control Ordinance (Cap 313); "shipped" (裝運), in the case of passengers, means embarked; "shipped in Hong Kong" (在香港裝運的), in relation to the shipment of relevant carriage, means shipped aboard a ship at any location within the waters of Hong Kong; "total shipping income" (總航運入息), in relation to any basis period, means the worldwide income of a person from the person's business as an owner of ships, and indicated as such by that person's accounts for that period; "total shipping profits" (總航運利潤), in relation to any basis period, means the worldwide profits of a person from the person's business as an owner of ships, and indicated as such by that person's accounts for that period. (Replaced 47 of 1992 s. 3) ___________________________________________________________________________ ___ Note: As to the operation of this section, see 47 of 1992 s. 1(3). "bill of lading" (提單) "business as an owner of ships" (以船舶擁有人身分經營業務) "charter hire" (租船費) "exempt sums" (豁免款項) "goods" (貨品) "goods in transit" (過境貨品) "operation" (營運) "operated" (運作) "owner" (擁有人) "passengers" (乘客) "re-embarking passengers" (重新登船的乘客) "registered ship" (註冊船舶) "relevant carriage" (有關運載) "relevant limited partnership" (有關的有限責任合夥) "relevant sums" (有關款項) "river trade waters" (內河貿易水域) "sea" (海) "ship" (船舶) "shipped" (裝運) "shipped in Hong Kong" (在香港裝運的) "total shipping income" (總航運入息) "total shipping profits" (總航運利潤) INLAND REVENUE ORDINANCE - SECT 23C Ascertainment of the assessable profits of a resident aircraft-owner VerDate:30/06/1997 (1) Where a person carries on a business as an owner of aircraft and- (a) the business is normally controlled or managed in Hong Kong; or (b) the person is a company incorporated in Hong Kong, that person shall be deemed to be carrying on that business in Hong Kong. (2) Where a person is deemed to be carrying on a business as an owner of aircraft in Hong Kong under this section the assessable profits from that business for any year of assessment shall be the sum bearing the same ratio to the aggregate of the relevant sums earned by or accrued to that person during the basis period for that year of assessment as that person's total aircraft profits for the basis period bear to the aggregate of the total aircraft income earned by or accrued to that person during that the basis period for that year of assessment. (2A) For the purposes of subsection (2) and the expression "relevant sums" in that subsection and in subsection (5), where any arrangement for relief from double taxation has effect by virtue of section 49 in respect of any person of the description mentioned in subsection (1), the relevant sums earned by or accrued to that person shall include any sums derived from, attributable to, or in respect of any relevant carriage shipped in an arrangement territory, any relevant charter hire attributable to an arrangement territory and charter hire in respect of the operation of an aircraft flying between aerodromes or airports within an arrangement territory. (Added 19 of 1996 s. 7) (2B) Where any arrangement for relief from double taxation has effect in the circumstances mentioned in subsection (2A), then in determining the relevant sums earned by or accrued to a person for the purposes of that subsection- (a) subsections (3) and (4), the definitions "air waybill", "goods in transit", "passengers in transit", "post office delivery bill", and paragraph (a) of the definition "relevant charter hire" in subsection (5) shall apply as though in those subsections and definitions and in that paragraph, the words "an arrangement territory" were substituted for the expression "Hong Kong"; and (b) the remainder of the definition "relevant charter hire" in subsection (5) shall apply as though in that definition the words "outside an arrangement territory" were substituted for the words "outside Hong Kong". (Added 19 of 1996 s. 7) (2C) The provisions relating to paragraph (a) of the definition "relevant charter hire" in subsection (2B) shall not be construed so as to exclude from the definition "relevant sums" in subsection (5), any sum derived from, or attributable to, or in respect of any charter hire in respect of the operation of an aircraft flying between aerodromes or airports within Hong Kong. (Added 19 of 1996 s. 7) (2D) Subsection (2A) shall not apply to any sums derived from, attributable to, or in respect of any relevant carriage shipped in an arrangement territory and any relevant charter hire attributable to an arrangement territory where such sums are chargeable to tax in an arrangement territory. (Added 19 of 1996 s. 7) (3) For the purposes of this section, any sums earned by or accrued to the owner of an aircraft under a charter-party (whether by demise or not) that does not, or does not purport to, extent to the whole of that aircraft shall, to the extent that those sums are derived from, attributable to, or in respect of, any outward flight or flights of that aircraft commencing from any aerodrome or airport within Hong Kong, be deemed to be derived from, attributable to, or in respect of, any relevant carriage shipped in Hong Kong. (4) For the purposes of this section, the following sums earned by or accrued to an owner of aircraft under a charter-party otherwise that by demise shall be deemed to be derived from, attributable to, or in respect of, any relevant carriage shipped in Hong Kong- (a) in the case of a charter-party which is a flight charter, any sums earned by or accrued to that owner under that charter-party and derived from, attributable to, or in respect of, any outward flight or flights of that aircraft commencing from any aerodrome or airport within Hong Kong; (b) in the case of a charter-party which is a time charter, the sum bearing the same ratio to the aggregate of the sums earned by or accrued to that owner under that charter-party as the total number of flying hours of that aircraft flown in respect of all outward flights of that aircraft commencing from any aerodrome or airport within Hong Kong to the final destinations of those flights bear to the aggregate of the total number of flying hours of that aircraft flown in respect of all flights of that aircraft under that charter-party. (5) In this section- "aerodrome or airport" (機坪或飛機場) includes any helipad; "air waybill" (空運路單) has the same meaning as in the Import and Export Ordinance (Cap 60), but does not include an air waybill which describes any aerodrome or airport in Hong Kong as the aerodrome or airport of departure or the aerodrome or airport of destination; "aircraft" (飛機) includes a helicopter; *"arrangement territory" (安排地區), in relation to an arrangement for the relief of double taxation, means any territory outside Hong Kong where an arrangement for the relief of double taxation has effect by virtue of section 49 in respect of any person of the description mentioned in subsection (1), deemed to be carrying on a business as an owner of aircraft in Hong Kong; (Added 19 of 1996 s. 7) "business as an owner of aircraft" (以飛機擁有人身分經營業務) means a business of chartering or operating aircraft, but does not include dealing in aircraft or agency business in connection with air transport; "charter hire" (租機費) means any sums earned by or accrued to an owner of an aircraft under a charter-party by demise in respect of the operation of the aircraft, but does not include any sums so earned or accrued where that charter-party does not, or does not purport to, extend to the whole of that aircraft; "goods" (貨品) includes livestock and mails; "goods in transit" (過境貨品), in relation to the shipment of goods aboard an aircraft, means goods- (a) specified in an air waybill (issued by or on behalf of an owner of aircraft) or a post office delivery bill; (b) brought to Hong Kong by air solely for the purpose of the onward carriage of those goods; and (c) in respect of which any freight charges for that onward carriage are not paid or payable in Hong Kong; "operation" (營運), in relation to an aircraft, includes the use or possession of the aircraft; "owner" (擁有人), in relation to an aircraft, includes a charterer of the aircraft under a charter-party; "passengers" (乘客) does not include passengers in transit; "passengers in transit" (過境乘客), in relation to a flight of an aircraft, means passengers- (a) whose passenger tickets in respect of the flight do not specify Hong Kong as the place of departure or as the place of destination; or (b) who- (i) travel to Hong Kong in any aircraft owned by an owner of aircraft and leave Hong Kong in that or any other aircraft in the same ownership; and (ii) not more than 24 hours after travelling to an arriving at Hong Kong, leave Hong Kong for a destination other than the one from which they had travelled; "permanent establishment" (永久機構) means a branch, management or other place of business, but does not include an agency unless the agent has, and habitually exercises, a general authority to negotiate and conclude contracts on behalf of his principal; "post office delivery bill" (郵政局交接清單), in relation to the carriage of mails, means any document (whether referred to as an "AV7 bill" or otherwise) which does not describe Hong Kong, or the General Post Office of Hong Kong, as the office of origin or the office of destination in respect of those mails; "relevant carriage" (有關運載), in relation to an aircraft, means the carriage by air of passengers or goods, or both passengers and goods, as the case may be, but does not include the carriage of goods in transit; "relevant charter hire" (有關的租機費) means charter hire other than charter hire attributable to a permanent establishment maintained outside Hong Kong by a person deemed to be carrying on a business as an owner of aircraft in Hong Kong under this section, but does not include- (a) charter hire in respect of the operation of an aircraft flying between aerodromes or airports within Hong Kong; or (b) charter hire in respect of the operation of an aircraft flying between any aerodrome or airport within Hong Kong and any aerodrome or airport within Macau; "relevant sums" (有關款項) means- (a) any sums derived from, attributable to, or in respect of- (i) any relevant carriage shipped in Hong Kong; (ii) any relevant charter hire; (iii) any charter hire in respect of the operation of an aircraft flying between aerodromes or airports within Hong Kong; (b) one half of any sums derived from, attributable to, or in respect of, any charter hire in respect of the operation of an aircraft flying between any aerodrome or airport within Hong Kong and any aerodrome or airport within Macau; "shipped" (裝運), in the case of passengers, means embarked; "shipped in an arrangement territory" (在安排地區裝運的), in relation to the shipment of relevant carriage, means shipped aboard an aircraft at any aerodrome or airport within an arrangement territory; (Added 19 of 1996 s. 7) "shipped in Hong Kong" (在香港裝運的), in relation to the shipment of relevant carriage, means shipped aboard an aircraft at any aerodrome or airport within Hong Kong; "total aircraft income" (總空運入息), in relation to any basis period, means the worldwide income of a person from the person's business as an owner of aircraft, and indicated as such by that person's accounts for that period. "total aircraft profits" (總空運利潤), in relation to any basis period, means the worldwide profits of a person from the person's business as an owner of aircraft, and indicated as such by that person's accounts for that period. (Replaced 47 of 1992 s. 3) ___________________________________________________________________ Note: * For application of s. 23C(2A), (2B), (2C) and (2D) in respect of any arrangement with an arrangement territory, please note s. 2 of 19 of 1996, the text of which is reproduced below- "2. Application of amendments affected by section 7 Notwithstanding section 1(2), the amendments to section 23C of the principal Ordinance effected by section 7 of this Ordinance shall, in respect of any arrangement with an arrangement territory as defined in section 23C of the principal Ordinance following its amendment by this Ordinance, be deemed to apply and to have always applied in accordance with the terms specified in that arrangement.". "aerodrome or airport" (機坪或飛機場) "air waybill" (空運路單) "aircraft" (飛機) *"arrangement territory" (安排地區) "business as an owner of aircraft" (以飛機擁有人身分經營業務) "charter hire" (租機費) "goods" (貨品) "goods in transit" (過境貨品) "operation" (營運) "owner" (擁有人) "passengers" (乘客) "passengers in transit" (過境乘客) "permanent establishment" (永久機構) "post office delivery bill" (郵政局交接清單) "relevant carriage" (有關運載) "relevant charter hire" (有關的租機費) "relevant sums" (有關款項) "shipped" (裝運) "shipped in an arrangement territory" (在安排地區裝運的) "shipped in Hong Kong" (在香港裝運的) "total aircraft income" (總空運入息) "total aircraft profits" (總空運利潤) INLAND REVENUE ORDINANCE - SECT 23D Ascertainment of the assessable profits of a non-resident aircraft-owner VerDate:30/06/1997 (1) Subject to subsection (5), where a person to whom section 23C does not apply carries on a business as an owner of aircraft, and any aircraft owned by that person lands at any aerodrome or airport within Hong Kong, that person shall be deemed to be carrying on that business in Hong Kong. (2) Subject to subsections (3) and (4), where a person is deemed to be carrying on a business as an owner of aircraft under this section the assessable profits of that person from that business for any year of assessment shall be the sum bearing the same ratio to the aggregate of the relevant sums earned by or accrued to that person during the basis period for that year of assessment as that person's total aircraft profits for the basis period bear to the aggregate of the total aircraft income earned by or accrued to that person during that basis period for that year of assessment. (3) Subject to subsection (4), where in the opinion of the assessor the provisions in subsection (2) for computing assessable profits cannot for any reason be satisfactorily applied in the case of a person to whom this section applies, the assessable profits of that person for any year of assessment may instead be computed on a fair percentage of the aggregate of the relevant sums earned by or accrued to that person during the basis period for that year of assessment. (4) Notwithstanding section 70, where the assessable profits of any person have been computed for any year of assessment in accordance with subsection (3), the person shall, upon the submission to the assessor of accounts computed in accordance with the provisions of this Part relating to the ascertainment of assessable profits, be entitled to elect at any time within 2 years from the end of the year of assessment that his assessable profits for that year be re-computed in accordance with subsection (2). (5) Where the Commissioner is satisfied that the landing at any aerodrome or airport within Hong Kong of any aircraft owned by a person to whom this section applies is of a casual nature, and that further landings at any aerodrome or airport within Hong Kong by that or any other aircraft in the same ownership are improbable, he may in his discretion direct that that person shall be deemed not to be carrying on a business as an owner of aircraft in Hong Kong under this section by reason of the casual landing of that aircraft and accordingly, in the event of his making such a direction, that person shall be so deemed not to be carrying on that business. (6) For the purposes of this section, any sums earned by or accrued to the owner of an aircraft under a charter-party (whether by demise or not) that does not, or does not purport to, extend to the whole of that aircraft shall, to the extent that those sums are derived from, attributable to, or in respect of, any outward flight or flights of that aircraft commencing from any aerodrome or airport within Hong Kong, be deemed to be derived from, attributable to, or in respect of, any relevant carriage shipped in Hong Kong. (7) For the purposes of this section, the following sums earned by or accrued to an owner of an aircraft under a charter-party otherwise than by demise shall be deemed to be derived from, attributable to, or in respect of, any relevant carriage shipped in Hong Kong- (a) in the case of a charter-party which is a flight charter, any sums earned by or accrued to that owner under that charter-party and derived from, attributable to, or in respect of, any outward flight or flights of that aircraft commencing from any aerodrome or airport within Hong Kong; (b) in the case of a charter-party which is a time charter, the sum bearing the same ratio to the aggregate of the sums earned by or accrued to that owner under that charter-party as the total number of flying hours of that aircraft flown in respect of all outward flights of that aircraft commencing from any aerodrome or airport within Hong Kong to the final destinations of those flights bear to the aggregate of the total number of flying hours of that aircraft flown in respect of all flights of that aircraft under that charter-party. (8) In this section- "aerodrome or airport" (機坪或飛機場) includes any helipad; "air waybill" (空運路單) has the same meaning as in the Import and Export Ordinance (Cap 60), but does not include an air waybill which describes any aerodrome or airport in Hong Kong as the aerodrome or airport of departure or the aerodrome or airport of destination; "aircraft" (飛機) includes a helicopter; "business as an owner of aircraft" (以飛機擁有人身分經營業務) means a business of chartering or operating aircraft, but does not include dealing in aircraft or agency business in connection with air transport; "charter hire" (租機費) means any sums earned by or accrued to an owner of an aircraft under a charter-party by demise in respect of the operation of the aircraft, but does not include any sums so earned or accrued where that charter-party does not, or does not purport to, extend to the whole of that aircraft; "goods" (貨品) includes livestock and mails; "goods in transit" (過境貨品), in relation to the shipment of goods aboard an aircraft, means goods- (a) specified in an air waybill (issued by or on behalf of an owner or aircraft) or a post office delivery bill; (b) brought to Hong Kong by air solely for the purpose of the onward carriage of those goods; and (c) in respect of which any freight charges for that onward carriage are not paid or payable in Hong Kong; "operation" (營運), in relation to an aircraft, includes the use or possession of the aircraft; "owner" (擁有人), in relation to an aircraft, includes a charterer of the aircraft under a charter-party; "passengers" (乘客) does not include passengers in transit; "passengers in transit" (過境乘客), in relation to a flight of an aircraft, means passengers- (a) whose passenger tickets in respect of the flight do not specify Hong Kong as the place of departure or as the place of destination; or (b) who- (i) travel to Hong Kong in any aircraft owned by an owner of aircraft and leave Hong Kong in that or any other aircraft in the same ownership; and (ii) not more than 24 hours after travelling to and arriving at Hong Kong, leave Hong Kong for a destination other than the one from which they had travelled; "permanent establishment" (永久機構) means a branch, management or other place of business, but does not include an agency unless the agent has, and habitually exercises, a general authority to negotiate and conclude contracts on behalf of his principal; "post office delivery bill" (郵政局交接清單), in relation to the carriage of mails means any document (whether referred to as an "AV7 bill" or otherwise) which does not describe Hong Kong, or the General Post Office of Hong Kong, as the office of origin or the office of destination in respect of those mails; "relevant carriage" (有關運載), in relation to an aircraft, means the carriage by air of passengers or goods, or both passengers and goods, as the case may be, but does not include the carriage of goods in transit; "relevant charter hire" (有關的租機費) means charter hire attributable to a permanent establishment maintained in Hong Kong by a person deemed to be carrying on a business as an owner of aircraft in Hong Kong under this section, but does not include- (a) charter hire in respect of the operation of an aircraft flying between aerodromes or airports within Hong Kong; or (b) charter hire in respect of the operation of an aircraft flying between any aerodrome or airport within Hong Kong and any aerodrome or airport within Macau; "relevant sums" (有關款項) means- (a) any sums derived from, attributable to, or in respect of- (i) any relevant carriage shipped in Hong Kong; (ii) any relevant charter hire; (iii) any charter hire in respect of the operation of an aircraft flying between aerodromes or airports within Hong Kong; (b) one half of any sums derived from, attributable to, or in respect of, any charter hire in respect of the operation of an aircraft flying between any aerodrome or airport within Hong Kong and any aerodrome or airport within Macau; "shipped" (裝運), in the case of passengers, means embarked; "shipped in Hong Kong" (在香港裝運的), in relation to the shipment of relevant carriage, means shipped aboard an aircraft at any aerodrome or airport within Hong Kong; "total aircraft income" (總空運入息), in relation to any basis period, means the worldwide income of a person from the person's business as an owner of aircraft, and indicated as such by that person's accounts for that period; "total aircraft profits" (總空運利潤), in relation to any basis period, means the worldwide profits of a person from the person's business as an owner of aircraft, and indicated as such by that person's accounts for that period. (Added 47 of 1992 s. 3) "aerodrome or airport" (機坪或飛機場) "air waybill" (空運路單) "aircraft" (飛機) "business as an owner of aircraft" (以飛機擁有人身分經營業務) "charter hire" (租機費) "goods" (貨品) "goods in transit" (過境貨品) "operation" (營運) "owner" (擁有人) "passengers" (乘客) "passengers in transit" (過境乘客) "permanent establishment" (永久機構) "post office delivery bill" (郵政局交接清單) "relevant carriage" (有關運載) "relevant charter hire" (有關的租機費) "relevant sums" (有關款項) "shipped" (裝運) "shipped in Hong Kong" (在香港裝運的) "total aircraft income" (總空運入息) "total aircraft profits" (總空運利潤) INLAND REVENUE ORDINANCE - SECT 23E Alternative computation of "total shipping profits" and "total aircraft profits" VerDate:30/06/1997 Where total shipping profits within the meaning of section 23B(12) or total aircraft profits within meaning of section 23C(5) or 23D(8), as the case may be, have been computed on a basis which differs materially from that provided for in this Part for the ascertainment of assessable profits in respect of which a person is chargeable to tax, those profits may be adjusted so as to correspond as nearly as may be to the sum that would have been arrived at had they been computed in accordance with the provisions of this Part relating to the ascertainment of assessable profits in respect of which a person is chargeable to tax. (Added 47 of 1992 s. 3) INLAND REVENUE ORDINANCE - SECT 24 Clubs, trade associations, etc. VerDate:30/06/1997 (1) Where a person carries on a club or similar institution which receives from its members not less than half of its gross receipts on revenue account (including entrance fees and subscriptions), such person shall be deemed not to carry on a business; but where less than half of its gross receipts are received from members, the whole of the income from transactions both with members and others (including entrance fees and subscriptions) shall be deemed to be receipts from a business, and such person shall be chargeable in respect of the profits therefrom. (Amended 36 of 1955 s. 23; 49 of 1956 s. 22) (2) Where a person carries on a trade, professional or business association in such circumstances that more than half its receipts by way of subscriptions are from persons who claim or would be entitled to claim that such sums were allowable deductions for the purposes of section 16, such person shall be deemed to carry on a business, and the whole of the income of such association from transactions both with members and others (including entrance fees and subscriptions) shall be deemed to be receipts from business, and such person shall be chargeable in respect of the profits therefrom. (Amended 36 of 1955 s. 34; 2 of 1971 s. 17; 40 of 1972 s. 3) (3) In this section, "members" (會員) means those persons entitled to vote at a general meeting of the club, or similar institution, or trade, professional or business association. (Replaced 36 of 1955 s. 34. Amended 40 of 1972 s. 3) "members" (會員) INLAND REVENUE ORDINANCE - SECT 25 Deduction of property tax from profits tax VerDate:30/06/1997 Where property tax is payable for any year of assessment under Part II in respect of any land or buildings owned by a person carrying on a trade, profession or business, any profits tax payable by such person in respect of that year of assessment shall be reduced by a sum not exceeding the amount of such property tax paid by him: Provided that- (a) no reduction shall be allowed unless either the profits derived from such property are part of the profits of the trade, profession or business carried on by such person or the property is occupied or used by him for the purposes of producing profits in respect of which he is chargeable to tax under this Part; (Replaced 11 of 1961 s. 5. Amended 35 of 1965 s. 14) (b) if the amount of property tax paid for a year of assessment exceeds the profits tax payable, the amount so paid in excess shall be refunded in accordance with the provisions of section 79; (Replaced 11 of 1961 s. 5) (c) (Repealed 19 of 1996 s. 8) (Replaced 3 of 1949 s. 9) INLAND REVENUE ORDINANCE - SECT 26 Exclusion of certain dividends and profits from the assessable profits of other persons VerDate:30/06/1997 For the purposes of this Part- (a) a dividend from a corporation which is chargeable to tax under this Part shall not be included in the profits in respect of which any other person is chargeable to tax under this Part; and (b) save as otherwise provided no part of the profits or losses of a trade, profession or business carried on by a person who is chargeable to tax under this Part shall be included in ascertaining the profits in respect of which any other person is chargeable to tax under this Part. (Added 2 of 1971 s. 18) (Replaced 16 of 1951 s. 5. Amended 28 of 1964 s. 10; 2 of 1971 s. 18; 7 of 1975 s. 25; 62 of 1975 s. 2) INLAND REVENUE ORDINANCE - SECT 26A Exclusion of certain profits from tax VerDate:14/11/2003 (1) For the purposes of this Part- (a) interest paid or payable on a Tax Reserve Certificate issued by the Commissioner; (b) interest paid or payable on a bond issued under the Loans Ordinance (Cap 61) or the Loans (Government Bonds) Ordinance (Cap 64); (Amended 48 of 1991 s. 2) (c) any profit on the sale or other disposal or on the redemption on maturity or presentment of such a bond; (Amended 48 of 1991 s. 2) (d) interest paid or payable on an Exchange Fund debt instrument; (Added 9 of 1990 s. 2. Amended 17 of 1992 s. 2) (e) any profit on the sale or other disposal or on the redemption on maturity or presentment of such an Exchange Fund debt instrument; (Added 9 of 1990 s. 2) (f) interest paid or payable on a Hong Kong dollar denominated multilateral agency debt instrument; (Added 17 of 1992 s. 2. Amended 34 of 2003 s. 4) (g) any profit on the sale or other disposal or on the redemption or maturity or presentment of such a Hong Kong dollar denominated multilateral agency debt instrument; (Added 17 of 1992 s. 2. Amended 34 of 2003 s. 4) (h) interest paid or payable on a long term debt instrument; and (Added 34 of 2003 s. 4) (i) any gain or profit on the sale or other disposal or on the redemption on maturity or presentment of a long term debt instrument, (Added 34 of 2003 s. 4) shall not be included in the profits of any corporation or other person chargeable to tax under this Part. (Amended 9 of 1990 s. 2) (1A) (a) For the purposes of this Part, there shall not be included in the profits to which a person is chargeable to tax under this Part any sums received or accrued in respect of a specified investment scheme by or to the person as- (i) a person chargeable to tax under this Part in respect of a mutual fund, unit trust or similar investment scheme that is authorized as a collective investment scheme under section 104 of the Securities and Futures Ordinance (Cap 571); or (Replaced 5 of 2002 s. 407) (ii) a person chargeable to tax under this Part in respect of a mutual fund, unit trust or similar investment scheme where the Commissioner is satisfied that the mutual fund, unit trust or investment scheme is a bona fide widely held investment scheme which complies with the requirements of a supervisory authority within an acceptable regulatory regime. (Replaced 5 of 2002 s. 407) (iii)-(v) (Repealed 5 of 2002 s. 407) (b) For the purposes of paragraph (a), a specified investment scheme is an investment scheme carried on- (i) for the purposes for which the investment scheme was stated to be carried on in the constitutive documents approved in respect of the investment scheme by- (A) in the case of paragraph (a)(i), the Commission; (B) in the case of paragraph (a)(ii), the supervisory authority within the acceptable regulatory regime; and (ii) in accordance with- (A) in the case of paragraph (a)(i), the requirements of the Commission; (B) in the case of paragraph (a)(ii), the requirements of the supervisory authority within the acceptable regulatory regime. (Replaced 32 of 1998 s. 17. Amended 5 of 2002 s. 407) (2) In this section- "Commission" (證監會) means the Securities and Futures Commission referred to in section 3(1) of the Securities and Futures Ordinance (Cap 571); (Added 32 of 1998 s. 17. Amended 5 of 2002 s. 407) "computer" (電腦) means any device for storing, processing or retrieving information; "Exchange Fund" (外匯基金) means the fund of that name established under section 3(1) of the Exchange Fund Ordinance (Cap 66); "Exchange Fund debt instrument" (外匯基金債務票據) means any instrument (whether described as an "Exchange Fund Bill" or otherwise) issued under the Exchange Fund Ordinance (Cap 66) evidencing the deposit of a sum of money in Hong Kong currency with the Monetary Authority for the account of the Exchange Fund, being an instrument which recognizes an obligation to pay a stated amount, with or without interest, and which is transferable in a manner specified by that Authority; (Amended 82 of 1992 s. 9) "instrument" (票據) includes- (a) every written document; (b) any information recorded in the form of an entry in a book of account; and (c) any information which is recorded (whether by means of a computer or otherwise) in a non-legible form but is capable of being reproduced in a legible form; "long term debt instrument" (長期債務票據) means a debt instrument as defined in section 14A that- (a) is issued on or after 5 March 2003; (b) has an original maturity of not less than 7 years or is undated; and (c) cannot be redeemed within 7 years from the date of its issue; (Added 34 of 2003 s. 4) "multilateral agency debt instrument" (多邊代理機構債務票據) means an instrument specified in Part I of Schedule 6 issued by a body specified in Part II of that Schedule; (Added 17 of 1992 s. 2) "mutual fund" (互惠基金) means any arrangement made for the purpose, or having the effect, of providing facilities for investment in shares in a corporation which is or hold itself out as being engaged primarily in the business of investing, reinvesting or trading in securities and which is offering for sale or has outstanding any redeemable shares of which it is the issuer; (Added 5 of 2002 s. 407) "unit trust" (單位信託) means any arrangement made for the purpose, or having the effect, of providing facilities for the participation by persons, as beneficiaries under a trust, in profits or income arising from the acquisition, holding, management or disposal of securities or any other property whatsoever. (Replaced 5 of 2002 s. 407) (3) The Legislative Council may by resolution amend Schedule 6. (Added 17 of 1992 s. 2) (Replaced 62 of 1975 s. 3. Amended 32 of 1998 s. 17; 5 of 2002 s. 407) ___________________________________________________________________________ _____ Note: The amendments made by 34 of 2003 to section 26A(1) and (2) apply in relation to the year of assessment commencing on 1 April 2003 and to all subsequent years of assessment. (Please see 34 of 2003 s. 2) "Commission" (證監會) "computer" (電腦) "Exchange Fund" (外匯基金) "Exchange Fund debt instrument" (外匯基金債務票據) "instrument" (票據) “long term debt instrument” (長期債務票據) "multilateral agency debt instrument" (多邊代理機構債務票據) "mutual fund" (互惠基金) "unit trust" (單位信託) INLAND REVENUE ORDINANCE - SECT 26B Concessionary deductions, general provisions VerDate:17/04/1998 PART IVA CONCESSIONARY DEDUCTIONS (1) This Part prescribes the deductions which shall be allowable to persons chargeable to tax under Part III or VII and the circumstances in which such deductions shall be so allowable. (2) Every person who claims a deduction under this Part shall make his claim in the specified form and the person shall be allowed a deduction only if the claim contains such particulars and is supported by such proof as the Commissioner may require. (3) In this Part- "deduction" (扣除) means a deduction allowable under this Part; "person" (人) means a person chargeable to tax under Part III or VII, as the case may be. (Part IVA added 31 of 1998 s. 12) "deduction" (扣除) "person" (人) INLAND REVENUE ORDINANCE - SECT 26C Approved charitable donations (Part IVA)* VerDate:27/06/2008 (1) Subject to the other provisions of this section, where a person or his or her spouse, not being a spouse living apart from the person, makes any approved charitable donations during any year of assessment, a deduction in respect of the aggregate amount of the approved charitable donations shall be allowable to the person for that year of assessment, if in any case such aggregate amount is not less than $100. (2) (a) Subject to paragraph (b), where a person is chargeable to tax under Part III, no deduction shall be allowable to the person under subsection (1) for any year of assessment in respect of- (i) any sum which is allowable as a deduction under Part IV; (ii) any sum by which the aggregate amount of the approved charitable donations within the meaning of subsection (1) is in excess of the percentage specified in subsection (2A) of- (Amended 24 of 2003 s. 6) (A) subject to sub-subparagraph (B), the assessable income of the person for that year of assessment as reduced by the deductions provided for under section 12(1)(a) and (b) for that year of assessment; or (B) where the person and his or her spouse have made an election under section 10(2) for that year of assessment, the aggregate of their assessable incomes for that year of assessment as reduced in each case by the deductions provided for under section 12(1)(a) and (b) for that year of assessment. (b) Where a person has made an election under section 41 in respect of any year of assessment, no deduction shall be allowable to the person under subsection (1) for that year of assessment in respect of- (i) any sum which is allowable as a deduction under Part IV; (ii) any sum which has been allowed as a deduction to his or her spouse against the total income of that spouse that is required to be aggregated with that of the person under section 42A(1); (iii) any sum by which the aggregate amount of the approved charitable donations within the meaning of subsection (1) is, when aggregated with any sum that is allowable as a deduction under section 16D for that year of assessment, in excess of the percentage specified in subsection (2A) of the total amount of- (Amended 24 of 2003 s. 6) (A) the total income of the person for that year of assessment; (B) any sum which is allowable as a deduction under section 16D for that year of assessment; and (C) any sum which is allowable as a deduction under section 12(1)(e) for that year of assessment. (2A) The percentages specified for the purposes of subsection (2)(a)(ii) and (b)(iii) shall be- (a) for any year of assessment up to and including the year of assessment commencing on 1 April 2002, 10%; (b) for the year of assessment commencing on 1 April 2003 or any subsequent year of assessment up to and including the year of assessment commencing on 1 April 2007, 25%; (Replaced 21 of 2008 s. 5) (c) for any year of assessment commencing on or after 1 April 2008, 35%. (Added 21 of 2008 s. 5) (Added 24 of 2003 s. 6) (3) (a) Subject to paragraph (b), the same approved charitable donation shall not be allowable as a deduction under this section in ascertaining the net chargeable income or the total income of more than one person. (b) Where a deduction of the same approved charitable donation is claimed or allowed in ascertaining the net chargeable income or the total income of more than one person, section 33(2) to (4) shall apply with the necessary modifications to such a deduction as it does to a dependent parent allowance, a dependent grandparent allowance, a dependent brother or dependent sister allowance, a child allowance or a disabled dependant allowance; and section 33 shall, where this paragraph applies, be construed as if a reference therein to such an allowance included, in the case of an approved charitable donation so claimed, a reference to an allowance to which section 33(2) applies and, in the case of an approved charitable donation so allowed, a reference to an allowance to which section 33(3) applies. (Part IVA added 31 of 1998 s. 12) ___________________________________________________________________________ __________ Note: * (Amended 21 of 2008 s. 5) INLAND REVENUE ORDINANCE - SECT 26D Elderly residential care expenses VerDate:17/04/1998 (1) Subject to the other provisions of this section, where a person or his or her spouse, not being a spouse living apart from the person, pays during any year of assessment any residential care expenses in respect of a parent or grandparent of the person who at any time in that year of assessment is aged 60 or more or, being under the age of 60, is eligible to claim an allowance under the Government's Disability Allowance Scheme, a deduction in respect of the residential care expenses shall be allowable to that person for that year of assessment. (2) A deduction under subsection (1) is allowable to a person in respect of each parent or grandparent of the person, in so far as any residential care expenses described in that subsection have been paid by the person or his or her spouse in respect of that parent or grandparent. (3) A deduction allowable to a person under subsection (1) in respect of each parent or grandparent of the person for any year of assessment shall not exceed the amount specified in Schedule 3C in relation to that year of assessment. (4) (a) Subject to paragraph (b), a deduction in respect of any residential care expenses shall not be allowable under this section to more than one person for any year of assessment in respect of the same parent or grandparent. (b) Where a deduction in respect of any residential care expenses is claimed by or allowed to more than one person for any year of assessment in respect of the same parent or grandparent, section 33(2) to (4) shall apply with the necessary modifications to such a deduction as it does to a dependent parent allowance, a dependent grandparent allowance, a dependent brother or dependent sister allowance, a child allowance or a disabled dependant allowance; and section 33 shall, where this paragraph applies, be construed as if a reference therein to such an allowance included, in the case of any residential care expenses so claimed, a reference to an allowance to which section 33(2) applies and, in the case of any residential care expenses so allowed, a reference to an allowance to which section 33(3) applies. (5) In this section- "parent or grandparent" (父母或祖父母), in relation to any person, means- (a) a parent or parent of his or her spouse; or (b) a grandparent or grandparent of his or her spouse; "residential care expenses" (住宿照顧開支) means any expenses payable in respect of the residential care received at a residential care home and paid to that residential care home or any other person acting on its behalf; "residential care home" (安老院) means any premises- (a) in respect of which a licence issued or renewed under the Residential Care Homes (Elderly Persons) Ordinance (Cap 459) is for the time being in force; (b) in respect of which a certificate of exemption issued or renewed under that Ordinance is for the time being in force; (c) to which that Ordinance does not apply by virtue of section 3 of that Ordinance; or (d) which is a nursing home in respect of which any person has been registered under section 3 of the Hospitals, Nursing Homes and Maternity Homes Registration Ordinance (Cap 165). (Part IVA added 31 of 1998 s. 12) "parent or grandparent" (父母或祖父母) "residential care expenses" (住宿照顧開支) "residential care home" (安老院) INLAND REVENUE ORDINANCE - SECT 26E Home loan interest VerDate:12/02/2010 (1) Subject to the other provisions of this section and to section 26F, where a person pays during any year of assessment any home loan interest for the purposes of a home loan obtained in respect of a dwelling which is used at any time in that year of assessment by the person exclusively or partly as his place of residence, a deduction in respect of the home loan interest shall be allowable to that person for that year of assessment. (2) (a) Subject to paragraphs (b) and (c) and subsection (3), a deduction allowable to a person under subsection (1) in respect of any home loan interest paid by the person during any year of assessment shall be- (i) (A) where the dwelling is used by the person exclusively as his place of residence during the whole of that year of assessment, the amount of the home loan interest paid; or (B) in any other case, such amount (whether representing the full amount of the home loan interest paid or any part thereof) as is reasonable in the circumstances of the case; or (ii) the amount specified in Schedule 3D in relation to that year of assessment, whichever is of the lesser amount. (b) For the purposes of this section, where a dwelling is held by a person otherwise than as a sole owner, the amount of the home loan interest paid referred to in paragraph (a)(i) shall be regarded as having been paid- (i) where the dwelling is held by the person as a joint tenant, by the joint tenants each in proportion to the number of the joint tenants; or (ii) where the dwelling is held by the person as a tenant in common, by the tenants in common each in proportion to his or her share in the ownership in the dwelling. (c) For the purposes of paragraph (a), where a dwelling is held by a person otherwise than as a sole owner, the relevant amount specified in Schedule 3D referred to in paragraph (a)(ii) shall be regarded as having been reduced- (i) where the dwelling is held by the person as a joint tenant, in proportion to the number of the joint tenants; or (ii) where the dwelling is held by the person as a tenant in common, between the tenants in common each in proportion to his or her share in the ownership in the dwelling. (3) (a) Where any home loan interest is paid by a person during any year of assessment for the purposes of a home loan obtained in respect of a dwelling which is used at any time in that year of assessment by that person exclusively or partly as his place of residence, but the loan was not applied wholly for the acquisition of the dwelling, the deduction allowable to the person under subsection (1) for that year of assessment in respect of the home loan interest paid shall be such part of the amount of the home loan interest paid as is reasonable in the circumstances of the case. (b) Where any home loan interest is paid by a person during any year of assessment for the purposes of a home loan obtained in respect of a dwelling which is used at any time in that year of assessment by that person exclusively or partly as his place of residence, but the person has paid during that year of assessment any other home loan interest for the purposes of a home loan obtained in respect of any other dwelling which is also used at any time in that year of assessment by that person exclusively or partly as his place of residence, a deduction shall, subject to subsection (4), be allowable to the person under subsection (1) for that year of assessment in respect of both the first-mentioned home loan interest and the second-mentioned home loan interest, and the deduction so allowable shall be such amount (whether representing the full amount of the aggregate of the respective amounts of the first-mentioned home loan interest and the second-mentioned home loan interest or any part thereof) as is reasonable in the circumstances of the case. (4) A deduction shall not be allowable under this section to a person in respect of any home loan interest paid during any year of assessment for the purposes of a home loan obtained in respect of a dwelling where- (a) the sum representing the home loan interest is allowable as a deduction under any other section of this Ordinance; (b) any other home loan interest paid in respect of any other dwelling has been allowed to the person as a deduction for that year of assessment under this section other than by virtue of subsection (3)(b); or (c) a deduction has been allowed to the person under this section, whether in respect of the same dwelling or in respect of any other dwelling, for 10 years of assessment (whether continuous or not). (Amended 9 of 2004 s. 3; 13 of 2006 s. 2) (5) For the purposes of subsection (4)(c), where a deduction allowable to a person under this section has been taken into account in any year of assessment in ascertaining- (a) subject to paragraphs (b) and (c), the net chargeable income of the person; (b) where the person and his or her spouse have made an election under section 10(2), the aggregated net chargeable income of the person and his or her spouse; or (c) where the person or the person and his or her spouse have made an election under section 41, the amount of the assessment made under section 42A(1) in respect of the person or the person and his or her spouse, the person shall be deemed to have been allowed the deduction under this section for that year of assessment. (6) (a) A claim by a person to a deduction allowable to him under this section may only be revoked by the person by notice in writing to the Commissioner within 6 months after the date on which the deduction is allowed to him under this section. (b) Where a claim is revoked under paragraph (a), the claim shall be deemed not to have been made. (6A) If a person revokes a claim under subsection (6) after 6 years from the expiration of the year of assessment to which the claim relates, an assessor may, within 2 years after the revocation, make an additional assessment of the tax payable in consequence of the revocation and for this purpose, section 60(1) applies to the additional assessment as if it were an assessment made under that section. (Added 4 of 2010 s. 7) (7) The Commissioner may, for the purposes of this section, approve in writing any organization or association as a recognized organization or association. *(8) For the purposes of this section, where a person pays any home loan interest for the purposes of a home loan obtained in respect of a dwelling which is used by that person exclusively or partly as his place of residence in the circumstances described in subsection (1), and the home loan was applied also for the acquisition of a car parking space, the car parking space shall be deemed- (Amended 12 of 2004 s. 8) (a) to be part and parcel of the dwelling; and (b) to be used by that person in the same manner and to the same extent as the dwelling is used as his place of residence. (9) In this section- "dwelling" (住宅) means any building or any part of a building- (a) which is designed and constructed for use exclusively or partly for residential purposes; and (b) the rateable value of which is separately estimated under section 10 of the Rating Ordinance (Cap 116); "home loan" (居所貸款), in relation to a person claiming a deduction under this section for any year of assessment, means a loan of money which is- (a) applied wholly or partly for the acquisition of a dwelling which- (i) during any period of time in that year of assessment is held by the person as a sole owner, or as a joint tenant or tenant in common; and (ii) during that period of time is used by the person exclusively or partly as his place of residence; and (b) secured during that period of time by a mortgage or charge over that dwelling or any other property in Hong Kong; "home loan interest" (居所貸款利息), in relation to a person claiming a deduction in respect of a dwelling under this section, means interest paid by the person as a sole owner, or as a joint tenant or tenant in common of the dwelling for the purposes of a home loan to- (a) the Government; (b) a financial institution; (c) a credit union registered under the Credit Unions Ordinance (Cap 119); (d) a money lender licensed under the Money Lenders Ordinance (Cap 163); (e) the Hong Kong Housing Society; (f) an employer of the person; or (g) any recognized organization or association; "place of residence" (居住地方), in relation to a person who has more than one place of residence, means his principal place of residence; "recognized organization or association" (認可組織或協會) means any organization or association approved as such by the Commissioner under subsection (7). (10) For the avoidance of doubt, where any person has been allowed a deduction under the provisions of this section in force immediately before 1 April 2003 or in force immediately before 1 April 2005, or has been regarded as having been allowed such deduction by virtue of section 26F(2)(b), for any year of assessment, that year of assessment shall be regarded as a year of assessment for which a deduction has been allowed for the purposes of subsection (4)(c). (Added 9 of 2004 s. 3. Amended 13 of 2006 s. 2) (Part IVA added 31 of 1998 s. 12) ___________________________________________________________________________ _____ Notes: * The amendment made by 12 of 2004 to this subsection applies in relation to the year of assessment 1998/99 and to all subsequent years of assessment. (Please see 12 of 2004 s. 2(2)) "dwelling" (住宅) "home loan" (居所貸款) "home loan interest" (居所貸款利息) "place of residence" (居住地方) "recognized organization or association" (認可組織或協會) INLAND REVENUE ORDINANCE - SECT 26F Nomination for purposes of section 26E VerDate:17/04/1998 (1) Where- (a) a deduction is allowable to a person under section 26E for any year of assessment; and (b) the person has no income, property or profits chargeable to tax under this Ordinance for that year of assessment, the person may nominate his or her spouse, being a spouse not living apart from the person, to claim the deduction for that year of assessment. (2) Where a person has in accordance with subsection (1) made a nomination in respect of a deduction allowable to him under section 26E for any year of assessment- (a) (i) the deduction shall cease to be allowable to that person; and (ii) the deduction shall be allowable to the spouse of that person; and (b) subject to subsection (4)(b), the person but not that spouse shall, for the purposes of section 26E(4)(c), be regarded as having been allowed the deduction under section 26E for that year of assessment. (3) Where a person has in accordance with subsection (1) made a nomination in respect of a deduction allowable to the person under section 26E for any year of assessment, and the deduction has been allowed to his or her spouse for that year of assessment, the Commissioner shall give written notification thereof to the person making the nomination. (4) (a) A nomination made by a person under subsection (1) in respect of a deduction allowable to him under section 26E may only be revoked by the person by notice in writing to the Commissioner within 6 months after the date on which the Commissioner has given notification to the person in respect of the deduction in accordance with subsection (3). (b) Where a nomination is revoked under paragraph (a), the nomination shall be deemed not to have been made. (Part IVA added 31 of 1998 s. 12) INLAND REVENUE ORDINANCE - SECT 26G Contributions to recognized retirement schemes VerDate:17/04/1998 (1) Subject to the other provisions of this section, where a person pays any contributions to a recognized retirement scheme during any year of assessment, a deduction in respect of the contributions shall be allowable to that person for that year of assessment. (2) A deduction shall not be allowable to a person under subsection (1) for any year of assessment- (a) in respect of any sum which is allowable as a deduction under Part IV; (b) in excess of the amount specified in Schedule 3B in relation to that year of assessment. (3) Subject to subsection (2), the amount of the deduction allowable under this section in respect of any contributions to a recognized retirement scheme, in relation to a person, shall be- (a) in the case of a recognized occupational retirement scheme- (i) the amount of the contributions paid by the person as an employee to the scheme; or (ii) the amount of the mandatory contributions that the person would have been required to pay as an employee if at all times whilst an employee during the year of assessment in question he had contributed as a participant in a mandatory provident fund scheme. whichever is of the lesser amount; (b) in the case of a mandatory provident fund scheme, the amount of the mandatory contributions paid by the person as an employee. (Part IVA added 31 of 1998 s. 12) ___________________________________________________________________________ _____ Note: Section 26G applies in relation to the year of assessment commencing on 1 April 2000 and to all subsequent years of assessment. (31 of 1998 s. 2(2); L.N. 175 of 2000) INLAND REVENUE ORDINANCE - SECT 27 Allowances, general provisions VerDate:30/06/1997 PART V ALLOWANCES (1) This Part prescribes the allowances which shall be granted to persons chargeable to tax under Parts III and VII and the circumstances in which such allowances are grantable. (2) Every person who claims an allowance under this Part shall make his claim in the specified form and an allowance shall be granted only if the claim contains such particulars and is supported by such proof as the Commissioner may require. (3) In this Part- "adopted" (領養) means adopted in any manner recognized by the laws of Hong Kong; "allowance" (免稅額) means an allowance granted under this Part; "child" (子女) means any child of a person chargeable to tax or of his or her spouse or former spouse whether or not born in wedlock and includes the adopted or step child of either or both of them; "person" (人) means a person chargeable to tax under Part III or, as the case may be, Part VII; "prescribed amount" (訂明款額) and "prescribed percentage" (訂明百分率) mean the amount and percentage specified in the second column of Schedule 4 in relation to the provisions of this Part specified in the first column of that Schedule. (Amended 48 of 1995 s. 6) "adopted" (領養) "allowance" (免稅額) "child" (子女) "person" (人) "prescribed amount" (訂明款額) and "prescribed percentage" (訂明百分率) INLAND REVENUE ORDINANCE - SECT 28 Basic allowance VerDate:17/04/1998 (1) The following allowance ("basic allowance") shall be granted in any year of assessment- (a) an allowance of the prescribed amount; (b) (Repealed 31 of 1998 s. 13) (2) No person may be granted- (a) both a basic allowance and a married person's allowance; or (b) a basic allowance where his or her spouse has claimed a married person's allowance. INLAND REVENUE ORDINANCE - SECT 29 Married person's allowance VerDate:17/04/1998 (1) An allowance ("married person's allowance") shall be granted under this section in any year of assessment if a person is, at any time during that year, married and- (a) the spouse of that person did not have assessable income in the year of assessment; or (b) that person and his or her spouse have made, in relation to the year of assessment, and election under section 10(2); or (c) that person has elected to be assessed under Part VII. (2) Where an election has been made under section 10(2) a married person's allowance shall be granted to the person chargeable to salaries tax under section 10(3). (3) A married person's allowance grantable under this section is- (a) an allowance of the prescribed amount; (b) (Repealed 31 of 1998 s. 14) (4) Where husband and wife are living apart a married person's allowance shall only be granted where the spouse claiming the allowance is maintaining or supporting the other. (5) Where a married person's allowance is granted in respect of a husband and wife living apart, the husband and wife shall be treated as not living apart for the purposes of Part VII. (6) Any claim to an allowance to which subsection (4) applies may be revoked by the claimant within the year of assessment in respect of which it was made or within 6 years after the expiration of that year. INLAND REVENUE ORDINANCE - SECT 30 Dependent parent allowance VerDate:17/06/2005 (1AA) In this section, “dependent parent allowance” means an allowance granted under subsection (1) or (1A). (Added 8 of 2005 s. 3) (1) An allowance shall be granted in any year of assessment to a person— (a) if— (i) the person; or (ii) his or her spouse who is not living apart from that person, maintains a parent or a parent of his or her spouse in that year; and (b) if that parent— (i) was ordinarily resident in Hong Kong; and (ii) was— (A) aged 60 or more; or (B) under the age of 60 and was eligible to claim an allowance under the Government’s Disability Allowance Scheme, at any time in that year. (Replaced 8 of 2005 s. 3) (1A) An allowance shall be granted in any year of assessment to a person— (a) if— (i) the person; or (ii) his or her spouse who is not living apart from that person, maintains a parent or a parent of his or her spouse in that year; and (b) if that parent— (i) at any time in that year was ordinarily resident in Hong Kong; (ii) at any time in that year was aged 55 or more but was under the age of 60; (iii) did not attain the age of 60 in that year; and (iv) was, throughout that year, not eligible to claim an allowance under the Government’s Disability Allowance Scheme. (Added 8 of 2005 s. 3) (2) A dependent parent allowance may be granted in respect of each such parent who is so maintained. (3) A dependent parent allowance grantable in respect of a parent under subsection (1) is— (Amended 8 of 2005 s. 3) (a) an allowance of the prescribed amount; (b) an additional allowance of the prescribed amount if that parent resided, otherwise than for full valuable consideration, with the person who is eligible to claim the allowance under paragraph (a) for a year of assessment continuously throughout that year. (Amended 8 of 2005 s. 3) (3A) A dependent parent allowance grantable in respect of a parent under subsection (1A) is— (a) an allowance of the prescribed amount; (b) an additional allowance of the prescribed amount if that parent resided, otherwise than for full valuable consideration, with the person who is eligible to claim the allowance under paragraph (a) for a year of assessment continuously throughout that year. (Added 8 of 2005 s. 3) (4) For the purposes of this section— (a) a parent shall only be treated as being maintained by a person or his or her spouse if— (i) the parent resides, otherwise than for full valuable consideration, with that person and his or her spouse for a continuous period of not less than 6 months in the year of assessment; or (ii) the person or his or her spouse contributes not less than the prescribed amount in money towards the maintenance of that parent in the year of assessment; (b) (Repealed 31 of 1998 s. 15) (5) Where a deduction has been allowed to a person under section 26D for any year of assessment in respect of a parent or parent of his or her spouse, no person shall be granted a dependent parent allowance under this section for that year of assessment in respect of the same parent. (Added 31 of 1998 s. 15) (Added 43 of 1989 s. 10) ________________________________________________________________________ Note: The amendments made by s. 3 of 8 of 2005 to this section apply in relation to the year of assessment commencing on 1 April 2005 and to all subsequent years of assessment. (Please see 8 of 2005 s. 2) INLAND REVENUE ORDINANCE - SECT 30A Dependent grandparent allowance VerDate:17/06/2005 (1AA) In this section, “dependent grandparent allowance” means an allowance granted under subsection (1) or (1A). (Added 8 of 2005 s. 4) (1) An allowance shall be granted in any year of assessment to a person— (a) if— (i) the person; or (ii) his or her spouse who is not living apart from that person, maintains a grandparent or a grandparent of his or her spouse in that year; and (b) if that grandparent— (i) was ordinarily resident in Hong Kong; and (ii) was— (A) aged 60 or more; or (B) under the age of 60 and was eligible to claim an allowance under the Government’s Disability Allowance Scheme, at any time in that year. (Replaced 8 of 2005 s. 4) (1A) An allowance shall be granted in any year of assessment to a person— (a) if— (i) the person; or (ii) his or her spouse who is not living apart from that person, maintains a grandparent or a grandparent of his or her spouse in that year; and (b) if that grandparent— (i) at any time in that year was ordinarily resident in Hong Kong; (ii) at any time in that year was aged 55 or more but was under the age of 60; (iii) did not attain the age of 60 in that year; and (iv) was, throughout that year, not eligible to claim an allowance under the Government’s Disability Allowance Scheme. (Added 8 of 2005 s. 4) (2) A dependent grandparent allowance may be granted in respect of each such grandparent who is so maintained. (3) A dependent grandparent allowance grantable in respect of a grandparent under subsection (1) is— (Amended 8 of 2005 s. 4) (a) an allowance of the prescribed amount; (b) an additional allowance of the prescribed amount if that grandparent resided, otherwise than for full valuable consideration, with the person who is eligible to claim the allowance under paragraph (a) for a year of assessment continuously throughout that year. (Amended 8 of 2005 s. 4) (3A) A dependent grandparent allowance grantable in respect of a grandparent under subsection (1A) is— (a) an allowance of the prescribed amount; (b) an additional allowance of the prescribed amount if that grandparent resided, otherwise than for full valuable consideration, with the person who is eligible to claim the allowance under paragraph (a) for a year of assessment continuously throughout that year. (Added 8 of 2005 s. 4) (4) For the purposes of this section— (a) a grandparent shall only be treated as being maintained by a person or his or her spouse if— (i) the grandparent resides, otherwise than for full valuable consideration, with that person and his or her spouse for a continuous period of not less than 6 months in the year of assessment; or (ii) the person or his or her spouse contributes not less than the prescribed amount in money towards the maintenance of that grandparent in the year of assessment; (b) (Repealed 31 of 1998 s. 16) (5) Where a deduction has been allowed to a person under section 26D for any year of assessment in respect of a grandparent or grandparent of his or her spouse, no person shall be granted a dependent grandparent allowance under this section for that year of assessment in respect of the same grandparent. (Added 31 of 1998 s. 16) (Added 37 of 1994 s. 4) ________________________________________________________________________ Note: The amendments made by s. 4 of 8 of 2005 to this section apply in relation to the year of assessment commencing on 1 April 2005 and to all subsequent years of assessment. (Please see 8 of 2005 s. 2) INLAND REVENUE ORDINANCE - SECT 30B Dependent brother or dependent sister allowance VerDate:30/06/1997 (1) An allowance ("dependent brother or dependent sister allowance") shall be granted under this section in the prescribed amount in any year of assessment if a person or the spouse of the person, not being a spouse living apart from the person, maintains an unmarried brother or unmarried sister, or an unmarried brother or unmarried sister of the spouse of the person, in the year of assessment and the person so maintained at any time in the year of assessment was- (a) under the age of 18 years; (b) of or over the age of 18 years but under the age of 25 years and was receiving full time education at a university, college, school or other similar educational establishment; or (c) of or over the age of 18 years and was, by reason of physical or mental disability, incapacitated for work. (2) A dependent brother or dependent sister allowance may be granted for each brother or sister or brother or sister of the spouse maintained. (3) For the purposes of this section- (a) a brother or sister of the person or a brother or sister of the spouse of the person is only treated as maintained by the person or by the spouse of the person if, at any time during the year, the person or the spouse had sole or predominant care of the brother or sister or of the brother or sister of the spouse; (b) "brother or sister or brother or sister of the spouse" (兄弟姊妹或配偶的 兄弟姊妹) means, in relation to many person- (i) a natural brother or natural sister of the person or the spouse; (ii) an adopted brother or adopted sister of the person or the spouse; (iii) a step brother or step sister of the person or the spouse; (iv) in the case of a deceased spouse, a person who would have been the brother or sister of the spouse under subparagraph (i), (ii) or (iii) if the spouse had not died. (Added 24 of 1996 s. 8) "brother or sister or brother or sister of the spouse" (兄弟姊妹或配偶的兄弟姊妹) INLAND REVENUE ORDINANCE - SECT 31 Child allowance VerDate:01/06/2007 (1) An allowance ("child allowance") shall be granted under this section in the prescribed amount in any year of assessment if the person had living and was maintaining at any time during the year of assessment an unmarried child who was- (a) under the age of 18; (b) of or over the age of 18 years but under the age of 25 years and was receiving full time education at a university, college, school or other similar educational establishment; or (c) of or over the age of 18 years and was, by reason of physical or mental disability, incapacitated for work. (1A) A child allowance granted in respect of a child under subsection (1) shall be increased in the year of assessment in which the child is born by the prescribed amount. (Added 10 of 2007 s. 4) (2) Subject to subsection (3), where more than one person is entitled to claim a child allowance under this section in respect of the same child for the same year of assessment, the allowance due shall be apportioned on such basis as the Commissioner may decide having regard to the contributions made by each individual to the maintenance and education of the child during the year of assessment. (3) In the case of a husband and wife, not being a husband and wife living apart, chargeable to salaries tax under Part III- (a) all child allowances grantable under this section shall be claimed by one spouse; and (b) the claim shall be made by such spouse as the spouses may nominate. (4) A nomination under subsection (3)(b) made in relation to any year of assessment shall not be revoked save with the consent of the Commissioner whose decision in the matter shall be final and not subject to objection or appeal. (5) The total of the child allowances granted to a person in respect of his or her children shall not exceed the prescribed amount. INLAND REVENUE ORDINANCE - SECT 31A Disabled dependant allowance VerDate:17/04/1998 (1) An allowance ("disabled dependant allowance") of the prescribed amount shall be granted in any year of assessment to a person in respect of every dependant of his or hers who is eligible to claim an allowance under the Government's Disability Allowance Scheme. (2) Where a child allowance in respect of a child who is eligible to claim an allowance under the Government's Disability Allowance Scheme is apportioned under section 31(2) and granted to more than one person, the disabled dependant allowance in respect of the child grantable under this section shall be apportioned between the persons on the same basis of apportionment as that used under section 31(2) in relation to the child allowance. (3) In the case of a husband and wife, not being a husband and wife living apart, chargeable to salaries tax under Part III, all disabled dependant allowances grantable under this section in respect of their children shall be claimed by the spouse nominated under section 31(3). (4) For the purposes of this section, "dependant" (受養人), in relation to a person, means- (a) a spouse in respect of whom the person is entitled to be granted an allowance under section 29 for the year of assessment; (b) a parent or a parent of his or her spouse in respect of whom the person is entitled to be granted a deduction under section 26D or an allowance under section 30 for the year of assessment; (Amended 31 of 1998 s. 17) (c) a grandparent or a grandparent of his or her spouse in respect of whom the person is entitled to be granted a deduction under section 26D or an allowance under section 30A for the year of assessment; (Amended 24 of 1996 s. 9; 31 of 1998 s. 17) (d) a child in respect of whom the person is entitled to be granted an allowance under section 31 for the year of assessment; or (Amended 24 of 1996 s. 9) (e) a brother or sister, or a brother or sister of the person's spouse, for whom the person is entitled to be granted an allowance under section 30B for the year of assessment. (Added 24 of 1996 s. 9) (Added 48 of 1995 s. 7) "dependant" (受養人) INLAND REVENUE ORDINANCE - SECT 32 Single parent allowance VerDate:30/06/1997 (1) An allowance ("single parent allowance") of the prescribed amount shall be granted if at any time during the year of assessment the person had the sole or predominant care of a child in respect of whom the person was entitled during the year of assessment to be granted a child allowance. (2) A person shall not be entitled to claim single parent allowance- (a) if at any time during the year of assessment the person was married and not living apart from his or her spouse; (b) by reason only that the person made contributions to the maintenance and education of the child during the year of assessment; or (c) in respect of any 2nd or subsequent child. (3) Where 2 or more persons are entitled to claim single parent allowance in respect of the same child for the same year of assessment, the allowance due shall be apportioned on such basis as the Commissioner may decide- (a) having regard to the respective periods for which each person had the sole or predominant care of the child during the year of assessment; or (b) if, in the opinion of the Commissioner, those periods are uncertain, on such basis as the Commissioner may decide as being just. INLAND REVENUE ORDINANCE - SECT 33 Provisions supplementary to sections 30, 30A, 30B, 31 and 31A VerDate:30/06/1997 (1) Subject to sections 31(2) and 31A(2), a dependent parent allowance, a dependent grandparent allowance, a dependent brother or dependent sister allowance, a child allowance or a disabled dependant allowance shall not be given to more than one person in any year of assessment in respect of the same parent, grandparent, brother, sister or child. (Amended 48 of 1995 s. 8) (1A) In any year of assessment- (a) a dependent parent allowance and a dependent grandparent allowance; or (b) a dependent brother or dependent sister allowance and a child allowance, shall not both be given for the same dependent person. (Replaced 24 of 1996 s. 10) (2) Subject to sections 31(2) and (3) and 31A(2) and (3), where the Commissioner has reason to believe that 2 or more persons are eligible to claim such an allowance in respect of the same parent, grandparent, brother, sister or child for the same year of assessment, the Commissioner shall not consider any claim until he is satisfied that the claimants have agreed which of them shall be entitled to claim in that year. (Amended 48 of 1995 s. 8) (3) Where a dependent parent allowance, a dependent grandparent allowance, a dependent brother or dependent sister allowance, a child allowance or a disabled dependant allowance has been granted- (Amended 48 of 1995 s. 8) (a) otherwise than under section 31(2) or 31A(2) to 2 or more persons in respect of the same parent, grandparent, brother, sister or child; or (Amended 48 of 1995 s. 8) (b) to both a husband and wife, contrary to section 31(3) or 31A(3); or (Amended 48 of 1995 s. 8) (c) to a person and, within 6 months of such allowance being granted, another person appears to the Commissioner to be eligible to be granted that allowance in respect of the same parent, grandparent, brother, sister or child for the same year of assessment, the Commissioner shall invite the persons to whom the allowance has been granted and any other individual who appears to the Commissioner to be eligible to be granted the allowance to agree which of them is to have the allowance (being an agreement consistent with the provisions of this Part) and the Commissioner may in consequence of such agreement, or if the individuals do not so agree within a reasonable time, within the period specified in section 60, raise additional assessments under that section. (3A) Where the Commissioner has reason to believe that there are persons eligible to claim, respectively- (a) a dependent parent allowance and a dependent grandparent allowance; or (b) a dependent brother or dependent sister allowance and a child allowance, in respect of the same dependent person for the same year of assessment, the Commissioner shall not consider any claim until he is satisfied that the claimants have agreed which of the allowances shall be claimed in that year. (Added 37 of 1994 s. 5) (3B) Where- (a) a dependent parent allowance and a dependent grandparent allowance; or (b) a dependent brother or dependent sister allowance and a child allowance, have both been granted in respect of the same dependent person contrary to subsection (1A), the Commissioner shall invite the persons to whom the allowances have been granted to agree which of the allowances is to be given (being an agreement consistent with the provisions of this Part) and the Commissioner may in consequence of such agreement, or if the individuals do not so agree within a reasonable time, within the period specified in section 60, raise additional assessments under that section. (Added 37 of 1994 s. 5) (3C) Where- (a) a dependent parent allowance or a dependent grandparent allowance has been granted for a dependent person; or (b) a dependent brother or dependent sister allowance or a child allowance has been granted for a dependent person, and, within 6 months of the allowance being granted, another person appears to the Commissioner to be eligible to be granted the other allowance for the same dependent person for the same year of assessment, the Commissioner is to invite the person to whom the allowance has been granted and any other person who appears to the Commissioner to be eligible to be granted the other allowance for the same dependent person to agree which of the allowances is to be granted (being an agreement consistent with this Part). (Replaced 24 of 1996 s. 10) (3D) The Commissioner may, in consequence of an agreement under subsection (3C), or, if the persons do not agree under that subsection within a reasonable time, within the time specified in section 60, raise additional assessments under section 60. (Added 24 of 1996 s. 10) (4) The Commissioner shall exercise his powers under this section in such manner as may appear to him to be just having regard to such information only as may be in his possession at the time when he exercises those powers. (Amended 37 of 1994 s. 5; 24 of 1996 s. 10) (Part V added 43 of 1989 s. 10) INLAND REVENUE ORDINANCE - SECT 33A Annual allowances, commercial buildings and structures VerDate:25/06/2004 PART VI DEPRECIATION, ETC. (1) Where any person is, at the end of the basis period for any year of assessment, entitled to an interest in a building or structure which is a commercial building or structure and where that interest is the relevant interest in relation to the capital expenditure incurred on the construction of that building or structure, an allowance for depreciation by wear and tear of that building or structure, to be known as an "annual allowance", of an amount equal to, subject to subsection (2), one-twenty-fifth of the expenditure, shall be made to the person for that year of assessment. (Amended 12 of 2004 s. 9) *(2) Where the interest in a building or structure, which is the relevant interest in relation to any expenditure, is sold and where the building or structure has been used at any time before the sale, whether as a commercial building or structure or otherwise, the annual allowance, in the years of assessment the basis periods for which end after the time of the sale, shall be computed by reference to the residue of expenditure immediately after the sale and shall be the fraction of that residue of expenditure the numerator of which is 1 and the denominator of which is the number of years of assessment comprised in the period which- (Amended 12 of 2004 s. 9) (a) begins with the year of assessment in the basis period for which the sale takes place; and (Replaced 12 of 2004 s. 9) (b) ends with the year of assessment which is- (i) in the case of a building or structure to which subsection (4) applies, the 25th year after the year of assessment commencing on 1 April 1998; (Amended 12 of 2004 s. 9) (ii) in any other case, the 25th year after the year of assessment in which the building or structure was first used, and so on for any subsequent sales. (3) Notwithstanding anything in the preceding provisions of this section, in no case shall the amount of an annual allowance for any year of assessment in respect of any expenditure exceed such amount as, apart from the writing off falling to be made by reason of the making of that allowance, would be the residue of expenditure at the end of the basis period for that year of assessment. (4) For the purposes of this section, where immediately prior to the commencement# of the Inland Revenue (Amendment) (No. 2) Ordinance 1998 (32 of 1998), a person was entitled to an interest in a building or structure which is a commercial building or structure and where that interest is the relevant interest in relation to the capital expenditure incurred on the construction of the building or structure- (Amended 12 of 2004 s. 9) (a) the capital expenditure incurred on the construction of the building or structure shall be deemed to have been reduced by the aggregate of the amount of the rebuilding allowances that would have been made to the person under section 36 in respect of that building or structure in all prior years of assessment if at all times during the period of the person's entitlement to the relevant interest it had been used for the purposes of producing profits chargeable to tax under Part IV; and (b) the year of assessment commencing on 1 April 1998 shall be deemed to be the year of assessment in which the building or structure was first used. (Added 32 of 1998 s. 18) ___________________________________________________________________________ ___ Notes: * The amendments made by 12 of 2004 to this subsection apply in relation to the year of assessment 2004/05 and to all subsequent years of assessment. (Please see 12 of 2004 s. 2(3)) # Commencement date: 17 April 1998. INLAND REVENUE ORDINANCE - SECT 33B (Repealed 12 of 2004 s. 10) VerDate:25/06/2004 ___________________________________________________________________________ ____________ Note: This section was repealed by 12 of 2004. The repeal applies in relation to the year of assessment 2004/05 and to all subsequent years of assessment. (Please see 12 of 2004 s. 2(3)) INLAND REVENUE ORDINANCE - SECT 34 Initial and annual allowances, industrial buildings and structures VerDate:25/06/2004 (1) Where a person incurs capital expenditure on the construction of a building or structure which is to be an industrial building or structure occupied for the purposes of a trade there shall be made to the person who incurred the expenditure for the year of assessment in the basis period for which the expenditure was incurred an allowance to be known as an "initial allowance" equal to one-fifth thereof: (Amended 30 of 1950 Schedule; 35 of 1965 s. 17) Provided that- (a) no initial allowance shall be made for the 8 successive years of assessment commencing on 1 April in each of the years 1957 to 1964; (b) where any initial allowance has been made in relation to capital expenditure on a building or structure under this subsection before such building or structure comes to be used and when it first comes to be used it is not an industrial building or structure, such allowance shall be disallowed and such additional assessments as may be necessary consequent thereon shall be made. (Replaced 35 of 1965 s. 17) (2) (a) Where any person is, at the end of the basis period for any year of assessment, entitled to an interest in a building or structure which is an industrial building or structure and where that interest is the relevant interest in relation to the capital expenditure incurred on the construction of that building or structure, an allowance for depreciation by wear and tear, to be known as an "annual allowance", of an amount equal to, subject to paragraph (b), one-twenty-fifth of that expenditure, shall be made to him for that year of assessment. (Amended 36 of 1955 s. 41; 35 of 1965 s. 17) *(b) Where the interest in a building or structure, which is the relevant interest in relation to any expenditure, is sold and where the building or structure has been used at any time before the sale, whether as an industrial building or structure or otherwise, the annual allowance, in the years of assessment the basis periods for which end after the time of that sale, shall be computed by reference to the residue of expenditure immediately after the sale and shall be the fraction of the said residue the numerator of which is 2, where the building or structure was first used before the commencement of the basis period for the year of assessment commencing on 1 April 1965, and one, where the building or structure was first used on or after the commencement of such basis period, and the denominator of which is the number of years of assessment comprised in the period which- (Amended 12 of 2004 s. 11) #(i) begins with the year of assessment in the basis period for which the sale takes place; and (Replaced 12 of 2004 s. 11) (ii) ends with the year of assessment which, where the building or structure was first used before the commencement of the basis period for the year of assessment commencing on 1 April 1965, is the 50th year after the year of assessment in which the building or structure was first used, and where the building or structure was first used on or after the commencement of such basis period, is the 25th year after the year of assessment in which the building or structure was first used, and so on for any subsequent sales. (Replaced 35 of 1965 s. 17) (c) Notwithstanding anything in the preceding provisions of this section, in no case shall the amount of an annual allowance for any year of assessment in respect of any expenditure exceed such amount as, apart from the writing off falling to be made by reason of the making of that allowance, would be the residue of expenditure at the end of the basis period for that year of assessment. (Amended 12 of 2004 s. 11) __________________________________________________________________________ ______ Notes: * The amendment made by 12 of 2004 to this paragraph applies in relation to the year of assessment 2004/05 and to all subsequent years of assessment. (Please see 12 of 2004 s. 2(3)) # Section 34(2)(b)(i) applies in relation to the year of assessment 2004/05 and to all subsequent years of assessment. (Please see 12 of 2004 s. 2(3)) INLAND REVENUE ORDINANCE - SECT 35 Balancing allowances and charges, buildings and structures VerDate:25/06/2004 (1) Where— (a) any of the following events occurs in relation to a building or structure— (i) the relevant interest in the building or structure is sold; (ii) the relevant interest in the building or structure, being a leasehold interest, comes to an end otherwise than on the person entitled thereto acquiring the interest which is reversionary thereon; or (iii) the building or structure is demolished or destroyed or, without being demolished or destroyed, ceases altogether to be used; and (b) the building or structure has been a commercial building or structure or an industrial building or structure at any time before the occurrence of such event, an allowance, to be known as a “balancing allowance”, or a charge, to be known as a “balancing charge”, shall, in the circumstances mentioned in this section, be made to or, as the case may be, on the person entitled to the relevant interest in the building or structure immediately before the occurrence of such event for the year of assessment in the basis period for which such event occurs. (2) (a) Where— (i) there are no sale, insurance, salvage or compensation moneys arising in respect of the occurrence of an event referred to in subsection (1)(a); or (ii) the residue of expenditure immediately before the occurrence of such event exceeds those moneys, a balancing allowance shall be made and the amount thereof shall be the amount of— (A) in the case of subparagraph (i), the residue of expenditure; or (B) in the case of subparagraph (ii), the excess of the residue of expenditure over those moneys. (b) Notwithstanding anything in this section, a balancing allowance shall not be made to a person where— (i) an event referred to in subsection (1)(a) occurs in relation to a building or structure and the building or structure was not a commercial building or structure or an industrial building or structure immediately before the occurrence of such event; or (ii) a commercial building or structure or an industrial building or structure is demolished for purposes unconnected with, or not in the ordinary course of conduct of, the trade, profession or business for the purposes of which the building or structure was used before the demolition in circumstances qualifying for annual allowances under section 33A or 34(2), as the case may be. (3) (a) Where the sale, insurance, salvage or compensation moneys arising in respect of the occurrence of an event referred to in subsection (1)(a) exceed the residue of expenditure immediately before the occurrence of such event, a balancing charge shall be made and the amount on which it is made shall be an amount equal to the excess of those moneys over the residue of expenditure. (b) Notwithstanding anything in paragraph (a), in no case shall the amount on which a balancing charge is made on a person exceed the aggregate of the allowances, if any, made to him under sections 33A and 34 in respect of the expenditure in question. (Replaced 12 of 2004 s. 12) __________________________________________________________________________ ______ Note: Section 35 applies in relation to the year of assessment 2004/05 and to all subsequent years of assessment. (Please see 12 of 2004 s. 2(3)) INLAND REVENUE ORDINANCE - SECT 35A Special provisions on termination of leasehold interest VerDate:30/06/1997 Where, on the termination of a leasehold interest- (a) a lessee of any building or structure remains in possession thereof with the consent of the lessor without a new lease being granted to him, the leasehold interest shall be deemed for the purposes of this Part to continue so long as he so remains in possession; (b) a new lease is granted to the lessee either by way of regrant or in pursuance of an option available to him under the terms of the first lease, this Part shall have effect as if the second lease were a continuation of the first lease. (Added 2 of 1971 s. 27) INLAND REVENUE ORDINANCE - SECT 35B Buildings and structures bought unused VerDate:30/06/1997 Where capital expenditure is incurred on the construction of a building or structure and, before that building or structure is used, the relevant interest therein is sold- (a) the expenditure actually incurred on the construction thereof shall be left out of account for the purposes of this Part and any initial allowance made under section 34 shall be disallowed and such additional assessments as may be necessary consequent thereon shall be made; but (b) (i) in a case where the person who sells that interest incurred that expenditure and made that sale in the course of a trade which consists, in whole or part, in the construction or development of buildings or structures for the purpose of sale, the person who buys that interest shall be deemed for those purposes to have incurred, on the date when the purchase price becomes payable, capital expenditure on the construction thereof equal to the net price paid by him for that interest; and (ii) in any other case, the person who buys that interest shall be deemed for those purposes to have incurred, on the date when the purchase price becomes payable, capital expenditure on the construction thereof equal to the expenditure actually incurred on the construction of the building or structure or to the net price paid by him for that interest, whichever is the less: (Replaced 29 of 1982 s. 7) Provided that- (a) where in a case to which paragraph (b)(i) applies the relevant interest in the building or structure is sold more than once before the building or structure is used, only the person who buys that interest on the occasion of the last of those sales shall be deemed to have incurred capital expenditure on the construction of the building or structure and that capital expenditure shall be equal to the net price paid on the first sale or the net price paid by him, whichever is the less; (b) where in a case to which paragraph (b)(ii) applies the relevant interest in the building or structure is sold more than once before the building or structure is used, that paragraph shall have effect only in relation to the last of those sales. (Replaced 29 of 1982 s. 7) (Added 2 of 1971 s. 27) INLAND REVENUE ORDINANCE - SECT 36 Rebuilding allowance for a commercial building or structure up to and including the year of assessment commencing on 1 April 1997 VerDate:17/04/1998 (1) Subject to subsection (2), where at the end of the basis period for any year of assessment a person is entitled to an interest in a commercial building or structure and where that interest is the relevant interest in relation to the capital expenditure incurred on the construction of that building or structure, an allowance to be known as a "rebuilding allowance" equal to 2% of the capital expenditure incurred on the construction of such building or structure shall be made to him for that year of assessment. (2) No allowance shall be made to any person under subsection (1) for a year of assessment if the basis period for that year of assessment is subsequent to the basis period for the year of assessment commencing on 1 April 1997. (Added 32 of 1998 s. 20) (Replaced 36 of 1955 s. 42. Amended 26 of 1969 s. 18; 30 of 1990 s. 3; 32 of 1998 s. 20) INLAND REVENUE ORDINANCE - SECT 36A Application of provisions to machinery or plant VerDate:30/06/1997 (1) Except where otherwise provided, in relation to the initial and annual allowances on machinery or plant- (a) sections 37, 37A, 38 and 39 shall apply to the years of assessment up to and including the year of assessment commencing on 1 April 1979; and (b) sections 39B, 39C and 39D shall apply to the year of assessment commencing on 1 April 1980 and to subsequent years of assessment. (2) Where in relation to any machinery or plant the Commissioner is satisfied that in respect of any year of assessment commencing on or after 1 April 1980 the application of any of the provisions of the sections referred to in subsection (1)(b) is impracticable or inequitable, he may direct that the provisions of the sections referred to in subsection (1)(a) shall apply to the extent and for the duration specified in the direction. (3) Where under subsection (2) the Commissioner directs that the provisions of section 37 shall apply to any machinery or plant in respect of- (a) the year of assessment commencing on 1 April 1980, the initial allowance shall be equal to 35% of the expenditure referred to in subsection (1) of that section; (b) any year of assessment commencing on or after 1 April 1981, the initial allowance shall be equal to 55% of the expenditure referred to in subsection (1) of that section. (Replaced 29 of 1982 s. 8) (c) any year of assessment commencing on or after 1 April 1989, the initial allowance shall be equal to 60% of the expenditure referred to in subsection (1) of that section. (Added 56 of 1993 s. 17) (Added 63 of 1980 s. 2) INLAND REVENUE ORDINANCE - SECT 37 Initial and annual allowances, machinery or plant VerDate:17/04/1998 (1) Where a person carrying on a trade, profession or business incurs capital expenditure on the provision of machinery or plant for the purposes of producing profits chargeable to tax under Part IV then, except where such expenditure is expenditure of a kind described in section 16B(1)(b) or 16G, there shall be made to him, for the year of assessment in the basis period for which the expenditure is incurred, an allowance, to be known as an "initial allowance". (Amended 30 of 1950 Schedule; 35 of 1965 s. 19; 26 of 1969 s. 19; 23 of 1974 s. 2; 32 of 1998 s. 21) (1A) For the purposes of subsection (1), the initial allowance shall be- (a) in respect of a year of assessment up to and including the year of assessment commencing on 1 April 1973, equal to one-fifth of the expenditure referred to in subsection (1); and (b) in respect of the year of assessment commencing on 1 April 1974 and all subsequent years of assessment up to and including the year of assessment commencing on 1 April 1979, equal to one-quarter of such expenditure. (Added 23 of 1974 s. 2. Amended 32 of 1981 s. 4) (2) Where at the end of the basis period for any year of assessment a person owns and has in use machinery or plant for the purposes of producing profits chargeable to tax under Part IV there shall be made to him in respect of that year of assessment an allowance to be known "annual allowance" for depreciation by wear and tear of those assets. The allowance shall be calculated at the rates prescribed by the Board of Inland Revenue and shall be computed on the reducing value of the asset, which shall be the cost of the asset reduced by- (a) any initial allowance computed in accordance with the provisions of this section; and (b) the annual allowances computed under the provisions of this section: (Amended 56 of 1993 s. 18) Provided that- (a) (Repealed 32 of 1998 s. 21) (b) the Commissioner may in his discretion allow a higher rate than that prescribed by the Board of Inland Revenue. (Amended 16 of 1951 s. 7; 35 of 1965 s. 19; 26 of 1969 s. 19) (2A) For the purposes of subsection (2), in any case where machinery or plant is owned and used by a person for any period immediately before he uses it for the purposes of producing profits chargeable to tax under Part IV, "cost of the asset" (資產成本) means the sum computed by deducting from the actual cost the notional amount of the annual allowances which would have been made under subsection (2) to the owner if since acquiring the asset he had used it for the purpose of producing profits chargeable to tax under Part IV. (Added 26 of 1969 s. 19) (3) Nothing in subsection (2) shall apply in respect of any machinery or plant owned and used by a person for the purposes of his trade, profession or business where such machinery or plant represents expenditure of a capital nature which pursuant to section 16B(1)(b) or 16G has been allowed as a deduction in ascertaining the profits from such trade, profession or business in respect of which such person in chargeable to tax under Part IV for any year of assessment. (Added 35 of 1965 s. 19. Amended 32 of 1998 s. 21) (4) If a person succeeds to any trade, profession or business which immediately before the succession- (a) was carried on by another person; and (b) made use of machinery or plant for the purpose of producing profits chargeable to tax under Part IV, and, immediately after the succession, such machinery or plant, without being sold to the successor, is in use in that trade, profession or business for the same purpose, the reduced value of such machinery or plant shall, for the purpose of computing annual allowances under subsection (2), be taken to be the reduced value thereof still unallowed to that other person as at the time of the succession. (Added 2 of 1971 s. 28) (5) Notwithstanding subsection (4), no initial allowance shall be made under this Part by virtue of subsection (4). (Added 2 of 1971 s. 28) "cost of the asset" (資產成本) INLAND REVENUE ORDINANCE - SECT 37A Initial and annual allowances in respect of machinery and plant acquired under hire purchase agreement VerDate:21/05/2004 (1) Where a person carrying on a trade, profession or business incurs capital expenditure under a hire purchase agreement on the provision of machinery or plant for the purposes of producing profits chargeable to tax under Part IV then, except where such expenditure is expenditure of a kind described in section 16B(1)(b), there shall be made to him for each year of assessment in the basis period for which he has made an instalment payment under such agreement, an initial allowance. (Amended 35 of 1965 s. 20; 26 of 1969 s. 20; 23 of 1974 s. 3) (1A) For the purposes of subsection (1), the initial allowance shall be- (a) in respect of a year of assessment up to and including the year of assessment commencing on 1 April 1973, equal to one-fifth of the capital portion only of the instalment payment referred to in subsection (1); (b) in respect of the year of assessment commencing on 1 April 1974 and all subsequent years of assessment up to and including the year of assessment commencing on 1 April 1979, equal to one-quarter of the capital portion only of such payment; (c) in respect of the year of assessment commencing on 1 April 1980 equal to 35% of the capital portion only of such payment; and (Replaced 29 of 1982 s. 9) (d) in respect of the year of assessment commencing on 1 April 1981 and all subsequent years of assessment up to and including the year of assessment commencing on 1 April 1988, equal to 55% of the capital portion only of such payment. (Added 29 of 1982 s. 9. Amended 17 of 1989 s. 8) (e) in respect of any year of assessment commencing on or after 1 April 1989, equal to 60% of the capital portion only of such payment. (Added 17 of 1989 s. 8) (2) Where at the end of the basis period for any year of assessment a person has in use for the purposes of producing profits chargeable to tax under Part IV, machinery or plant acquired by him under a hire purchase agreement there shall be made to him in respect of that year of assessment an annual allowance for depreciation by wear and tear on such machinery or plant. (Amended 26 of 1969 s. 20) (3) An annual allowance under this section shall be calculated at rates prescribed by the Board of Inland Revenue and shall be computed on the reducing value of such machinery or plant which shall be the full cost thereof, excluding any interest which may be included in such cost under the terms of the agreement and reduced by any initial or previous annual allowances computed under this section: (Amended 35 of 1965 s. 20) Provided that the Commissioner may in his discretion allow a higher rate than that prescribed by the Board of Inland Revenue. *(4) Nothing in subsection (2) shall apply in respect of any machinery or plant used by a person for the purposes of his trade, profession or business where such machinery or plant represents research and development expenditure of a capital nature which pursuant to section 16B(1)(b) has been allowed as a deduction in ascertaining the profits from such trade, profession or business in respect of which such person is chargeable to tax under Part IV for any year of assessment. (Added 35 of 1965 s. 20. Amended 32 of 1998 s. 22; 9 of 2004 s. 4) (Added 36 of 1955 s. 43) ___________________________________________________________________________ _____ Note: * The amendment made to this section 37A(4) by 9 of 2004 applies in relation to the year of assessment commencing on 1 April 2004 and to all subsequent years of assessment. (Please see 9 of 2004 s. 1(2)) INLAND REVENUE ORDINANCE - SECT 38 Balancing allowances and charges, machinery or plant VerDate:30/06/1997 (1) Where any of the following events occurs in the case of any machinery or plant in respect of which an initial allowance or an annual allowance has been made for any year of assessment to a person carrying on a trade, profession or business, that is to say, either- (Amended 30 of 1950 Schedule) (a) the machinery or plant is sold, whether while still in use or not; or (b) the machinery or plant is destroyed; or (c) the machinery or plant is put out of use as being worn out or obsolete or otherwise useless or no longer required, and the event in question occurs either whilst the person is carrying on his trade, profession or business or at the time when he ceases so to do, an allowance or charge, to be known as a "balancing allowance" or a "balancing charge", shall in the circumstances mentioned in this section, be made to or, as the case may be, on that person for the year of assessment in his basis period for which that event occurs. (Amended 36 of 1955 s. 44) (2) Where there are no sale, insurance, salvage or compensation moneys or where the amount of the capital expenditure of the person in question on the provision of the plant or machinery still unallowed as at the time of the event exceeds those moneys, a balancing allowance shall be made, and the amount thereof shall be the amount of the expenditure still unallowed as aforesaid or, as the case may be, the excess thereof over the said moneys; but in a case where an annual allowance has been computed on the cost of the asset as determined in accordance with section 37(2A), the cost of the asset as computed in accordance with that subsection shall be deemed to be the capital expenditure for the purposes of this subsection and in a case where an annual allowance has been computed in accordance with section 37(4), the reduced value used for the purpose of that subsection shall be deemed to be the capital expenditure for the purposes of this subsection. (Amended 26 of 1969 s. 21; 2 of 1971 s. 29) (3) If the sale, insurance, salvage or compensation moneys exceed the amount, if any, of the said expenditure still unallowed as at the time of the event, a balancing charge shall be made, and the amount on which it is made shall be an amount equal to the excess or, where the said amount still unallowed is nil, to the said moneys. (4) Where by reason of a person ceasing to carry on his trade, profession or business, machinery or plant in respect of which an initial or an annual allowance has been made is put out of use, such person shall be deemed to have received immediately prior to such cessation, sale moneys for such machinery or plant of such an amount as the Commissioner may consider it would have realized had it been sold in the open market at the time of cessation: Provided that if such person sells such machinery or plant within 12 months of the date of cessation he may claim the adjustment of any balancing allowance or charge which may have been made to or on him as if such sale had taken place immediately prior to the date of cessation and notwithstanding the provisions of section 70 an assessor shall make any necessary correction to any assessment. (Added 36 of 1955 s. 44. Amended 35 of 1965 s. 21) (5) Notwithstanding anything contained in this section, in no case shall the amount on which a balancing charge is made on a person exceed the aggregate of the following amounts, that is to say- (Amended 36 of 1955 s. 44) (a) the amount of the initial allowance, if any, made to him in respect of the expenditure in question; (b) the amount of the annual allowances, if any, made to him in respect of the expenditure in question, including any allowance computed under proviso (b) to section 37(2) at a rate higher than that prescribed by the Board of Inland Revenue. (Amended 3 of 1949 s. 13) INLAND REVENUE ORDINANCE - SECT 38A Determination of cost of individual assets sold together for one price VerDate:30/06/1997 Where assets which qualify for initial or annual allowances under this Part are sold together or with other assets in pursuance of one bargain the Commissioner shall for the purposes of the calculation of the allowances and charges provided for in this Part, and having regard to all the circumstances of the transaction allocate a purchase price to each individual asset. (Added 36 of 1955 s. 45) INLAND REVENUE ORDINANCE - SECT 38B Commissioner's power to determine the true value of an asset on sale VerDate:30/06/1997 Where an asset which qualifies for initial or annual allowances is sold, and- (a) the buyer is a person over whom the seller has control; or (b) the seller is a person over whom the buyer has control; or (c) both the seller and the buyer are persons over both of whom some other person has control; or (Amended 71 of 1983 s. 18) (d) the sale is between a husband and wife, not being a wife living apart from her husband, (Added 71 of 1983 s. 18) the Commissioner shall, if he is of the opinion that the sale price of such asset does not represent its true market value at the time of such sale, determine such true market value and the amount so determined shall be deemed to be the sale price of such asset for the purpose of calculating the allowances and charges provided for in this Part. (Added 36 of 1955 s. 45) INLAND REVENUE ORDINANCE - SECT 38C (Repealed) VerDate:30/06/1997 (Repealed 19 of 1996 s. 9) INLAND REVENUE ORDINANCE - SECT 39 Replacement of machinery or plant VerDate:30/06/1997 Where machinery or plant in the case of which any of the events mentioned in section 38(1) has occurred is replaced by the owner thereof and a balancing charge falls to be made on him by reason of that event or, but for the provisions of this section, would have fallen to be made on him by reason thereof, then, if by notice in writing to the Commissioner he so elects, the following provisions shall have effect, that is to say- (Amended 30 of 1950 Schedule) (a) if the amount on which the charge would have been made is greater than the capital expenditure on providing the new machinery or plant- (i) the charge shall be made only on an amount equal to the difference; and (ii) no initial allowance, no balancing allowance and no annual allowance shall be made or allowed in respect of the new machinery or plant or the expenditure on the provision thereof; and (iii) in considering whether any, and, if so, what balancing charge falls to be made in respect of the expenditure on the new machinery or plant, there shall be deemed to have been made in respect of that expenditure an initial allowance equal to the full amount of that expenditure; (b) if the capital expenditure on providing the new machinery or plant is equal to or greater than the amount on which the charge would have been made- (i) the charge shall not be made; and (ii) the amount of any initial allowance in respect of the said expenditure shall be calculated as if the expenditure had been reduced by the amount on which the charge would have been made; and (iii) in considering what annual allowance is to be made in respect of the new machinery or plant, there shall be left out of account a proportion of the machinery or plant equal to the proportion which the amount on which the charge would have been made bears to the amount of the said expenditure; and (iv) in considering whether any and, if so, what balancing allowance or balancing charge falls to be made in respect of the new machinery or plant, the initial allowance in respect thereof shall be deemed to have been increased by an amount equal to the amount on which the charge would have been made. INLAND REVENUE ORDINANCE - SECT 39A Reduction of allowances not to affect calculation of subsequent allowances VerDate:30/06/1997 Where, by virtue of section 12(2), section 18F(1) or section 19E(1), the amount of any allowance provided for under this Part is reduced, such reduction shall not affect the calculation of subsequent allowances which shall be computed in the first place as if the full amount of the allowance had been granted and shall then where appropriate be apportioned in relation to the extent to which the relevant assets are or have been used in the production of assessable income or assessable profits. (Added 7 of 1975 s. 27) INLAND REVENUE ORDINANCE - SECT 39B Initial and annual allowances on machinery or plant under the pooling system VerDate:17/04/1998 (1) Where a person carrying on a trade, profession or business incurs capital expenditure on the provision of machinery or plant for the purposes of producing profits chargeable to tax under Part IV then, except where such expenditure is expenditure of a kind described in section 16B(1)(b) or 16G, there shall be made to him, for the year of assessment in the basis period for which the expenditure is incurred, an allowance, to be known as an "initial allowance". (Amended 32 of 1981 s. 6; 32 of 1998 s. 23) (1A) For the purposes of subsection (1), the initial allowance shall be equal to the following percentages of the expenditure referred to in that subsection- (a) for the year of assessment commencing on 1 April 1980, 35%; (b) for the year of assessment commencing on 1 April 1981 and all subsequent years of assessment up to and including the year of assessment commencing on 1 April 1988, 55%; (Amended 17 of 1989 s. 9) (c) for any year of assessment commencing on or after 1 April 1989, 60%. (Added 17 of 1989 s. 9) (Replaced 29 of 1982 s. 10) (2) Where during the basis period for any year of assessment or during the basis period for any earlier year of assessment a person owns or has owned and has in use or has had in use any machinery or plant for the purposes of producing profits chargeable to tax under Part IV, there shall be made to him in respect of each class of machinery or plant for that year of assessment an allowance, to be known as an "annual allowance", for depreciation by wear and tear of such machinery or plant. (Amended L.N. 262 of 1985) (3) The annual allowance shall be calculated at the rates of depreciation prescribed by the Board of Inland Revenue and shall be computed on the reducing value of each class of machinery or plant. (4) Subject to subsections (5), (6) and (7), the reducing value of a class of machinery or plant shall be the aggregate capital expenditure incurred on the provision of the machinery or plant belonging to that class reduced by- (a) the aggregate of any initial allowances computed in accordance with section 37 in respect of any machinery or plant belonging to that class; (b) the aggregate of any annual allowances computed in accordance with section 37 in respect of any machinery or plant belonging to that class; (c) the aggregate of any initial allowances computed in accordance with this section in respect of any machinery or plant belonging to that class; (d) any annual allowance computed in accordance with this section; (e) any sale, insurance, salvage or compensation moneys received in respect of any machinery or plant belonging to that class; and (f) any reducing value of machinery or plant excluded from the total reducing value of a class of machinery or plant under section 39C(3). (5) Where, prior to the commencement of the Inland Revenue (Amendment)(No. 4) Ordinance 1980 (63 of 1980), any machinery or plant has been the subject of a balancing allowance or balancing charge computed in accordance with section 38, such machinery or plant shall, for the purposes of subsection (4), be excluded from the class of machinery or plant. (6) Where any machinery or plant is owned and used by a person for any period immediately before he uses it for the purposes of producing profits chargeable to tax under Part IV, the capital expenditure incurred on the provision of the machinery or plant for the purposes of subsection (4) shall be computed by deducting from the actual cost the notional amount of the annual allowances which would have been made under section 37 to the owner if since acquiring the machinery or plant he had used it for the purpose of producing profits chargeable to tax under Part IV. (7) If a person succeeds to any trade, profession or business which immediately before the succession- (a) was carried on by another person; and (b) the machinery or plant that was used at any time by that other person for the purpose of producing profits chargeable to tax under Part IV is not sold to the successor, the reducing value of such machinery or plant shall, for the purpose of computing annual allowances under subsection (3) be taken to be the reducing value thereof still unallowed to that other person as at the time of succession. (8) Notwithstanding subsection (7), no initial allowance shall be made under this Part by virtue of subsection (7). (9) No annual allowance shall be made where the reductions made under subsection (4) exceed the aggregate capital expenditure incurred on the provision of the class of machinery or plant. (10) Nothing in subsection (2) shall apply in respect of any machinery or plant owned and used by a person for the purposes of his trade, profession or business where such machinery or plant represents expenditure of a capital nature which pursuant to section 16B(1)(b) or 16G has been allowed as a deduction in ascertaining the profits from such trade, profession or business in respect of which such person is chargeable to tax under Part IV for any year of assessment. (Amended 32 of 1998 s. 23) (11) The Commissioner may in his discretion allow a higher rate of depreciation in respect of any class of machinery or plant than that prescribed by the Board of Inland Revenue. (Added 63 of 1980 s. 3) INLAND REVENUE ORDINANCE - SECT 39C Pooling system when not to apply VerDate:30/06/1997 (1) The provisions of this Part which applied immediately prior to the commencement of the Inland Revenue (Amendment) (No. 4) Ordinance 1980 (63 of 1980) shall continue to apply- (a) subject to subsection (2), in respect of machinery or plant to which section 37A applies; (b) in respect of machinery or plant to which section 39A applies. (2) Where, pursuant to the terms and conditions of a hire purchase agreement, machinery or plant to which section 37A applies passes into the ownership of the person carrying on a trade, profession or business who incurred the capital expenditure under the hire purchase agreement, the reducing value of such machinery or plant computed in accordance with that section shall be included in the class of machinery or plant for the purposes of section 39B for the years of assessment following the year of assessment during the basis period for which the machinery or plant passed into the ownership of that person. (3) Where any machinery or plant which is included in a class of machinery or plant for the purposes of section 39B and which was used wholly and exclusively in the production of profits chargeable to tax under Part IV is subsequently not so used wholly and exclusively in the production of such profits, the provisions of this Part which applied immediately prior to the commencement of the Inland Revenue (Amendment) (No. 4) Ordinance 1980 (63 of 1980) shall apply to such machinery or plant in respect of the year of assessment during the basis period for which the machinery or plant is subsequently not used wholly and exclusively in the production of profits chargeable to tax under Part IV, and the reducing value of such machinery or plant shall be deemed to be such an amount as the Commissioner may consider it would have realized had it been sold in the open market at the time it ceased to be used wholly and exclusively in the production of such profits, and such reducing value shall be excluded from the total reducing value of that class of machinery or plant. (4) For the purposes of subsection (2), in the application of section 37A, subsection (2) of that section shall be read as if "during the basis period" was substituted for "at the end of the basis period". (Added 63 of 1980 s. 3) INLAND REVENUE ORDINANCE - SECT 39D Balancing allowances and charges under the pooling system VerDate:30/06/1997 (1) Where at the end of a basis period for a year of assessment the aggregate reductions made under section 39B(4) in respect of a class of machinery or plant exceed the aggregate capital expenditure incurred by a person on the provision of machinery or plant belonging to that class- (a) a charge, to be known as a "balancing charge", shall be made on him, and the amount on which it is made shall be an amount equal to the excess; and (b) the reducing value at the end of the basis period for that year of assessment shall be nil. (2) Subject to subsection (3) and except where subsection (4) applies, where a person ceases to carry on his trade, profession or business in a year of assessment, the aggregate of the sale, insurance, salvage or compensation moneys, if any, of the machinery or plant in respect of which an initial allowance or annual allowance has been made shall be compared with the amount of the reducing value of the class of machinery or plant at the end of the basis period for that year of assessment and- (a) where there are no sale, insurance, salvage or compensation moneys, or where the amount of the reducing value exceeds the aggregate of such moneys, an allowance, to be known as a "balancing allowance", shall be made to him, and the amount thereof shall be the amount of the reducing value or, as the case may be, the excess thereof over the aggregate of the said moneys; or (b) where there are sale, insurance, salvage or compensation moneys, and the aggregate of such moneys exceeds the amount, if any, of the reducing value, a charge, to be known as a "balancing charge", shall be made on him, and the amount on which it is made shall be an amount equal to the excess or, where the reducing value is nil, to the aggregate of the said moneys. (3) Subsection (2) shall not apply on the occasion on which any machinery or plant, to which section 39B(7) applies, passes by way of succession. (4) Where by reason of a person ceasing to carry on his trade, profession or business machinery or plant in respect of which an initial allowance or annual allowance has been made is put out of use and there are no sale, insurance, salvage or compensation moneys, such person shall, subject to subsection (5), be deemed to have received immediately prior to such cessation, sale moneys for such machinery or plant of such an amount as the Commissioner may consider it would have realized had it been sold in the open market at the time of cessation. (5) If a person sells any machinery or plant referred to in subsection (4) within 12 months of the date of cessation he may claim the adjustment of any balancing allowance or balancing charge which may have been made to or on him as if such sale had taken place immediately prior to the date of cessation and notwithstanding section 70 an assessor shall make any necessary correction to any assessment. (6) Notwithstanding anything contained in this section, where the aggregate of any sale, insurance, salvage or compensation moneys in respect of any machinery or plant exceeds the capital expenditure incurred on the provision of that machinery or plant, the aggregate of such moneys shall- (a) for the purposes of calculating a balancing charge under subsection (2)(b); and (b) in calculating the reducing value of the class of machinery or plant under section 39B(4), not exceed the capital expenditure incurred on the provision of that machinery or plant. (7) For the purposes of subsection (6), the capital expenditure incurred on the provision of the machinery or plant shall be taken as- (Amended 7 of 1986 s. 6) (a) in a case where section 37(2A) applies, the "cost of the asset" computed in accordance with that section; (b) in a case where section 39B(6) applies, the capital expenditure computed in accordance with that section; or (c) in any other case, the aggregate capital expenditure incurred by the person in question on the provision of the machinery or plant for the purposes of producing profits chargeable to tax under Part IV. (Added 63 of 1980 s. 3) INLAND REVENUE ORDINANCE - SECT 39E Allowances under this Part in respect of capital expenditure on leased machinery and plant VerDate:17/04/1998 Adaptation amendments retroactively made - see 12 of 1999 s. 3 (1) Notwithstanding anything to the contrary in this Part, a person (in this section referred to as "the taxpayer") who incurs capital expenditure on the provision of machinery or plant, being machinery or plant acquired by the taxpayer under a contract entered into after the commencement of the Inland Revenue (Amendment) Ordinance 1986 (7 of 1986), for the purpose of producing profits chargeable to tax under Part IV shall not have made to him the initial or annual allowances prescribed in section 37, 37A or 39B if, at a time when the machinery or plant is owned by the taxpayer, a person holds rights as lessee under a lease of the machinery or plant, and- (a) the machinery or plant was, prior to its acquisition by the taxpayer, owned and used by that person (whether alone or with others), or any associate of that person (which person or any such associate is hereinafter referred to as "the end-user"); or (b) the machinery or plant, not being a ship or aircraft or any part thereof, is while the lease is in force- (i) used wholly or principally outside Hong Kong by a person other than the taxpayer; or (Amended 15 of 1992 s. 4) (ii) the whole or a predominant part of the cost of the acquisition or construction of the machinery or plant was financed directly or indirectly by a non-recourse debt; or (c) the machinery or plant is a ship or aircraft or any part thereof and- (i) the person holding rights as lessee is not an operator of a Hong Kong ship or aircraft; or (ii) the whole or a predominant part of the cost of acquisition or construction of the ship or aircraft or the part thereof was financed directly or indirectly by a non-recourse debt. (Replaced 15 of 1992 s. 4) (2) Subsection (1)(a) shall not apply where- (a) the machinery or plant was acquired by the taxpayer on payment from the end-user at not more than the price which the end-user paid to the supplier (not being a supplier who is himself an end-user); and (b) no initial or annual allowances have at any time prior to the acquisition of the machinery or plant by the taxpayer been made under section 37, 37A or 39B to the end-user in respect of such machinery or plant. (3) For the purposes of subsection (2) an allowance shall be deemed not to have been made if the end-user, by notice in writing to the Commissioner within 3 months of the date on which the capital expenditure on the provision of machinery or plant giving rise to the allowance is incurred, or within such further time as the Commissioner may, in any particular case, permit, disclaims such allowance. (4) For the purposes of this section, where a trustee of a trust estate or a corporation controlled by such a trustee owns machinery or plant or holds rights as a lessee under a lease of machinery or plant, the trustee, the corporation and the beneficiary under the trust shall each be deemed to be the owner or holder, as the case may be, of rights as a lessee of the machinery or plant. (Replaced 15 of 1992 s. 4) (5) In this section- "acquisition" (取得) means acquisition by a person as owner and includes holding or hiring under a hire-purchase agreement or, if the hire-purchase agreement is a conditional sale agreement, holding as purchaser; "associate" (相聯者), in relation to a person holding rights as lessee under any lease of machinery or plant (including a person who is deemed to be holding such rights), means- (Amended 15 of 1992 s. 4) (a) where the person holding such rights is a natural person- (i) a relative of the person holding such rights; (ii) a partner of the person holding such rights and any relative of that partner; (iii) a partnership in which the person holding such rights is a partner; (iv) any corporation controlled by the person holding such rights, by a partner of the person holding such rights or by a partnership in which the person holding such rights is a partner; (v) any director or principal officer of any such corporation as is referred to in subparagraph (iv); (b) where the person holding such rights is a corporation- (i) any associated corporation; (ii) any person who controls the corporation and any partner of such person, and, where either such person is a natural person, any relative of such person; (iii) any director or principal officer of that corporation or of any associated corporation and any relative of any such director or officer; (iv) any partner of the corporation and, where such partner is a natural person, any relative of such partner; (c) where the person holding such rights is a partnership- (i) any partner of the partnership and where such partner is a partnership any partner of that partnership, any partner with the partnership in any other partnership and where such partner is a partnership any partner of that partnership and where any partner of, or with, or in any of the partnerships mentioned in this subparagraph is a natural person, any relative of such partner; (Replaced 65 of 1993 s. 4) (ii) (Repealed 65 of 1993 s. 4) (iii) any corporation controlled by the partnership or by any partner thereof or, where such a partner is a natural person, any relative of such partner; (iv) any corporation of which any partner is a director or principal officer; (v) any director or principal officer of a corporation referred to in subparagraph (iii); "associated corporation" (相聯法團) means- (a) a corporation over which the person holding rights under any lease of machinery or plant (including a person who is deemed to be holding such rights) has control; (Amended 15 of 1992 s. 4) (b) a corporation which has control over such person holding rights, being a corporation; (c) a corporation which is under the control of the same person as such person holding rights, being a corporation; "beneficiary under the trust" (信託的受益人) means any person who benefits or is capable (whether by the exercise of a power of appointment or otherwise) of benefiting under a trust estate, either directly or through any interposed person, or who is able or might reasonably be expected to be able, whether directly or indirectly, to control the activities of the trust estate or the application of its corpus or income; (Replaced 15 of 1992 s. 4) "control" (控制), in relation to a corporation, means the power of a person to secure- (a) by means of the holding of shares or the possession of voting power in or in relation to that or any other corporation; or (b) by virtue of any powers conferred by the articles of association or other document regulating that or any other corporation, that the affairs of the first-mentioned corporation are conducted in accordance with the wishes of that person; "end-user" (最終使用者) means any person (whether alone or with others) holding rights as lessee under a lease of machinery or plant or any associate of such person; "held for use" (持有以供使用) includes installed ready for use and held in reserve; "non-recourse debt" (無追索權債項), in relation to the financing of the whole or a predominant part of the cost of the acquisition or construction of any machinery or plant, means a debt where the rights of the creditor in the event of default in the repayment of principal or payment of interest- (a) are limited wholly or predominantly to any or all of the following- (i) rights (including a right to moneys payable) in relation to the machinery or plant or the use of the machinery or plant; (ii) rights (including rights to moneys payable) in relation to goods produced, supplied, carried, transmitted or delivered, or services provided, by means of the machinery or plant; (iii) rights (including a right to moneys payable) in relation to the loss or disposal of the whole or a part of the machinery or plant or of the taxpayer's interest in the machinery or plant; (iv) any conjunction of such rights as are referred to in subparagraphs (i), (ii) and (iii); (v) rights in respect of a mortgage or other security over the machinery or plant; or (vi) rights arising out of any arrangement relating to the financial obligations of the end-user of the machinery or plant towards the taxpayer, being financial obligations in relation to the machinery or plant; (b) are in the opinion of the Commissioner capable of being limited as described in paragraph (a), having regard to either or both of the following- (i) the assets of the taxpayer; (ii) any arrangement to which the taxpayer is a party; or (c) where paragraphs (a) and (b) do not apply, are limited by reason that not all of the assets of the taxpayer (not being assets that are security for a debt of the taxpayer other than a debt arising in relation to the financing of the whole or part of the cost of the acquisition of the machinery or plant) would be available for the purpose of the discharge of the whole of the debt so arising (including the payment of interest) in the event of any action or actions by the creditor or creditors against the taxpayer arising out of the debt; "operator of a Hong Kong aircraft" (香港飛機的經營者) means a person who- (a) holds an air operators' certificate issued under the Air Navigation (Hong Kong) Order 1995 (Cap 448 sub. leg. C); and (Amended 12 of 1999 s. 3) (b) carries on business as an operator of aircraft and the business is controlled and managed in Hong Kong; (Amended 15 of 1992 s. 4) "operator of a Hong Kong ship" (香港船舶的經營者) means a person who- (a) is responsible for defraying all or a substantial portion of the expenses of operating the ship and the ship operates mainly in the waters of Hong Kong or between the waters of Hong Kong and waters within the river trade limits; and (b) carries on business as an operator of ships and the business is controlled and managed in Hong Kong; (Added 15 of 1992 s. 4) "principal officer" (主要職員) means- (a) a person employed by a corporation who, either alone or jointly with one or more other persons, is responsible under the immediate authority of the directors for the conduct of the business of the corporation; or (b) a person so employed who, under the immediate authority of a director of the body corporate or a person to whom paragraph (a) applies, exercises managerial functions in respect of the body corporate; "relative" (親屬) means the spouse, parent, child, brother or sister of the relevant person, and, in deducing such a relationship, an adopted child shall be deemed to be a child both of the natural parents and the adopting parent and a step child to be the child of both the natural parents and of any step parent; "used" (使用) includes held for use. (Amended 32 of 1998 s. 24) (6) The amendments made to this section by section 4(b) and (d)(iv) of the Inland Revenue (Amendment) Ordinance 1992 (15 of 1992) apply to capital expenditure on the provision of machinery or plant under a transaction entered into on or after 15 November 1990 except expenditure under a transaction which was the subject of an application for advance clearance made to the Commissioner before 15 November 1990 and the Commissioner before or after that date expressed the opinion that the transaction would not fall within the terms of section 61A or, where no such application was made in respect of a transaction entered into before 15 November 1990 under which expenditure was incurred on or after 15 November 1990, the transaction under which the expenditure was made is, in the Commissioner's opinion, of the same type as any for which, in the circumstances prevailing as at 14 November 1990, he would have expressed the opinion that the transaction would not fall within the terms of section 61A. (Added 15 of 1992 s. 4) (Added 7 of 1986 s. 7) "acquisition" (取得) "associate" (相聯者) "associated corporation" (相聯法團) "beneficiary under the trust" (信託的受益人) "control" (控制) "end-user" (最終使用者) "held for use" (持有以供使用) "non-recourse debt" (無追索權債項) "operator of a Hong Kong aircraft" (香港飛機的經營者) "operator of a Hong Kong ship" (香港船舶的經營者) "principal officer" (主要職員) "relative" (親屬) "used" (使用) INLAND REVENUE ORDINANCE - SECT 40 Interpretation VerDate:25/06/2004 *(1) In this Part- "basis period" (評稅基期) has the meaning assigned to it by section 2 except that- (a) where 2 basis periods overlap the period common to both shall be deemed to fall in the first basis period only, and (b) where there is an interval between the end of the basis period for one year of assessment and the beginning of the basis period for the next year of assessment the interval shall be deemed to fall in the second basis period but where, in respect of salaries tax, the interval is the year ending on 31 March 1973, that interval shall not be deemed to fall in the second basis period; (Replaced 49 of 1956 s. 28. Amended 8 of 1973 s. 8) "capital expenditure" (資本開支)- (a) includes interest paid and commitment fees incurred in respect of a loan made for the sole purpose of financing the provision of an industrial building or structure or commercial building or structure or machinery or plant; but (b) does not include expenditure which is reimbursed by way of or attributable to any grant, subsidy or similar financial assistance and in relation to the person incurring the expenditure does not include any expenditure which is allowed to be deducted in ascertaining for the purpose of Part IV the profits of a trade, profession or business carried on by that person; (Replaced 30 of 1981 s. 7. Amended 32 of 1998 s. 25) "capital expenditure on the provision of machinery or plant" (在提供機械或工業裝置方面的 資本開支) includes capital expenditure on alterations to an existing building incidental to the installation of that machinery or plant for the purposes of the trade, profession or business; "class of machinery or plant" (該類機械或工業裝置、類別的機械或工業裝置) means the items of machinery or plant for which the same rate of depreciation is prescribed by the Board of Inland Revenue; (Added 63 of 1980 s. 4) "commercial building or structure" (商業建築物或構築物) means any building or structure or part of any building or structure used by the person entitled to the relevant interest for the purposes of his trade, profession or business other than an industrial building or structure; (Replaced 35 of 1965 s. 22. Amended 26 of 1969 s. 22) "industrial building or structure" (工業建築物或構築物) means any building or structure or part of any building or structure used- (a) for the purposes of a trade carried on in a mill, factory or other similar premises; or (b) for the purposes of a transport, tunnel, dock, water, gas or electricity undertaking or a public telephonic or public telegraphic service; or (Amended 39 of 1969 s. 5) (c) for the purposes of a trade which consists of the manufacture of goods or materials or the subjection of goods or materials to any process; or (d) for the purposes of a trade which consists in the storage- (i) of goods or materials which are to be used in the manufacture of other goods or materials; or (ii) of goods or materials which are to be subjected in the course of a trade to any process; or (iii) of goods or materials on their arrival into Hong Kong; or (Amended 7 of 1986 s. 12) (e) for the purposes of the business of farming; (f) for the purposes of research and development related to any trade, profession or business, (Amended 32 of 1998 s. 25; 9 of 2004 s. 5) and, in particular, the said expression includes any building or structure or part of any building or structure used by a person carrying on a trade, undertaking or business specified in paragraphs (a) to (e) of this definition and provided by him for the welfare of workers employed in his trade, undertaking or business and in use for that purpose: Provided that- (i) where part of the whole of a building or structure is, and part thereof is not, an industrial building or structure, and the capital expenditure which has been incurred on the construction of the second mentioned part is not more than one-tenth of the total capital expenditure which has been incurred on the construction of the whole building or structure, the whole building or structure and every part thereof shall be treated as an industrial building or structure; and (ii) subject to the provisions of paragraph (i) of this proviso but notwithstanding anything else contained in the foregoing provisions of this definition, the expression "industrial building or structure" (工業建築物或構 築物) shall not include any building or structure or part of any building or structure used as a dwelling house (other than as a dwelling house for the housing of manual workers), retail shop, showroom, hotel or office; (Replaced 35 of 1965 s. 22) "relevant interest" (有關權益) means, in relation to any expenditure incurred on the construction of a building or structure the interest in that building or structure to which the person who incurred the expenditure was entitled when he incurred it; (Amended 49 of 1956 s. 28) +"residue of expenditure" (開支剩餘額)- (a) in relation to a commercial building or structure- (Amended 12 of 2004 s. 13) (i) subject to subparagraph (ii), means the amount of the capital expenditure incurred on the construction of the building or structure reduced by- (A) the amount of any initial allowance made under section 34(1); (B) the amount of any annual allowance made under section 33A or 34(2); (C) the amount of any balancing allowance made under section 35, or under section 33B or 35 that was in force immediately before the commencement# of the Inland Revenue (Amendment) Ordinance 2004 (12 of 2004), and increased by the amount of any balancing charge made under section 35, or under section 33B or 35 that was in force immediately before the commencement# of the Inland Revenue (Amendment) Ordinance 2004 (12 of 2004); or (ii) where the building or structure is a building or structure to which section 33A(4) applies, means the amount of the capital expenditure incurred on the construction of the building or structure as determined under section 33A(4)(a) reduced by- (A) the amount of any initial allowance made under section 34(1) in respect of any year of assessment commencing on or after 1 April 1998; (B) the amount of any annual allowance made under section 33A or 34(2) in respect of any year of assessment commencing on or after 1 April 1998; (C) the amount of any balancing allowance made under section 35, or under section 33B or 35 that was in force immediately before the commencement# of the Inland Revenue (Amendment) Ordinance 2004 (12 of 2004), in respect of any year of assessment commencing on or after 1 April 1998, and increased by the amount of any balancing charge made under section 35, or under section 33B or 35 that was in force immediately before the commencement# of the Inland Revenue (Amendment) Ordinance 2004 (12 of 2004), in respect of any year of assessment commencing on or after 1 April 1998: Provided that in computing the residue of expenditure there shall be written off, in respect of any year in which no allowance fell to be made under section 33A or 34, an amount of one-twenty-fifth of the capital expenditure, and for the purposes of this proviso "year" (年) means the period which would have comprised a year of assessment commencing on 1 April 1998 or any subsequent year of assessment in respect of which an annual allowance would have fallen to be made under section 33A if the building or structure had been in use as a commercial building or structure; (Added 32 of 1998 s. 25) (b) in relation to an industrial building or structure, means the amount of the capital expenditure incurred on the construction of the building or structure reduced by- (i) the amount of any initial allowance made under section 34(1); (ii) the amount of any annual allowance made under section 33A or 34(2); (iii) the amount of any balancing allowance made under section 35, or under section 33B or 35 that was in force immediately before the commencement# of the Inland Revenue (Amendment) Ordinance 2004 (12 of 2004), and increased by the amount of any balancing charge made under section 35, or under section 33B or 35 that was in force immediately before the commencement# of the Inland Revenue (Amendment) Ordinance 2004 (12 of 2004): Provided that in computing the residue of expenditure there shall be written off, in respect of any year in which no allowance fell to be made under section 33A or 34, an amount of one-fiftieth of the capital expenditure in the case of a year prior to the year of assessment commencing on 1 April 1965, and one-twenty-fifth of the capital expenditure in the case of such or any subsequent year of assessment, and for the purposes of this proviso "year" (年) means the period which would have comprised a year of assessment in respect of which an initial or annual allowance would have fallen to be made under section 34(1) or (2), as the case may be, if the building or structure had then been in use as an industrial building or structure and the provisions of section 34 had then been in force. (Replaced 35 of 1965 s. 22. Amended 32 of 1998 s. 25; 12 of 2004 s. 13) (2) For the purposes of this Part, any capital expenditure incurred for the purposes of a trade, profession or business by a person about to carry on such trade, profession or business shall be treated as if it had been incurred by that person on the first day upon which he does carry on such trade, profession or business. (Added 35 of 1965 s. 22) (3) References in this Part to capital expenditure incurred on the construction of a building or structure do not include any expenditure incurred on the acquisition of, or of rights in or over, any land. (Added 29 of 1982 s. 11) (Replaced 36 of 1955 s. 46) ___________________________________________________________________________ ___ Notes: * The amendment made by 9 of 2004 to section 40(1) applies in relation to the year of assessment commencing on 1 April 2004 and to all subsequent years of assessment. (Please see 9 of 2004 s. 1(2)) + The amendments made by 12 of 2004 to this definition apply in relation to the year of assessment 2004/05 and to all subsequent years of assessment. (Please see 12 of 2004 s. 2(3)) # Commencement date: 25 June 2004. "basis period" (評稅基期) "capital expenditure" (資本開支) "capital expenditure on the provision of machinery or plant" (在提供機械或工業裝置方面的 資本開支) "class of machinery or plant" (該類機械或工業裝置、類別的機械或工業裝置) "commercial building or structure" (商業建築物或構築物) "industrial building or structure" (工業建築物或構築物) "relevant interest" (有關權益) "residue of expenditure" (開支剩餘額) "year" (年) INLAND REVENUE ORDINANCE - SECT 40A (Repealed) VerDate:30/06/1997 (Repealed 56 of 1993 s. 19) INLAND REVENUE ORDINANCE - SECT 40B Interpretation VerDate:17/04/1998 PART VII PERSONAL ASSESSMENT In this Part, unless the context otherwise requires- "adjustment factor" (調整分數) has the same meaning as in section 19CA; (Added 32 of 1998 s. 26) "concessionary trading receipts" (獲特惠的營業收入) has the same meaning as in section 19CA; (Added 32 of 1998 s. 26) "income" (入息), in relation to any person, means income derived beneficially by that person; "individual" (個人) means a person electing or who has elected to be chargeable to tax under this Part; "joint total income" (共同入息總額) means joint total income calculated in accordance with section 42A; "loss" and "losses" (虧損) do not include a loss sustained by a person acting in his capacity as trustee of a trust. (Replaced 43 of 1989 s. 11) "adjustment factor" (調整分數) "concessionary trading receipts" (獲特惠的營業收入) "income" (入息) "individual" (個人) "joint total income" (共同息總額) "loss" and "losses" (虧損) INLAND REVENUE ORDINANCE - SECT 41 Election for personal assessment VerDate:30/06/1997 (1) Subject to subsection (1A), an individual- (a) of or above the age of 18 years, or under that age if both his or her parents are dead; and (b) who is or, if he or she is married, whose spouse is either a permanent or temporary resident, may elect for personal assessment on his or her total income in accordance with this Part. (Replaced 43 of 1989 s. 12) (1A) Where- (a) an individual is married and not living apart from his or her spouse; and (b) both that individual and his or her spouse- (i) have income assessable under this Ordinance; and (ii) are eligible to make an election under subsection (1), then that individual may not make such an election unless his or her spouse does so too. (Added 43 of 1989 s. 12) (2) Where an individual is deceased an executor shall have the same right to elect for personal assessment on the total income of the deceased as the deceased would have if he were alive. (Replaced 35 of 1965 s. 23. Amended 71 of 1983 s. 20; 43 of 1989 s. 12) (2A) Where- (a) a deceased individual, or his executor on his behalf, elected to be personally assessed for the year of assessment in which the deceased died; and (b) that individual was a partner in a partnership; and (c) that individual had a share of the partnership assessable profits or losses in the year of assessment following that in which he died, then his executor may claim to have that share of such assessable profits or losses computed in accordance with Part IV included in the deceased's total income for the year of assessment in which he died. (Added 7 of 1975 s. 29) (3) Any election under this section shall be made in writing and lodged with the Commissioner not later than 2 years after the end of the year of assessment in respect of which the election is made or 1 month after an assessment of income or profits forming part of the individual's total income for such year of assessment becomes final and conclusive under section 70 or within such further period, if any, as the Commissioner may allow as being reasonable in the particular circumstances, whichever is the later. (Amended 2 of 1971 s. 31) (4) In this section- "permanent resident" (永久性居民) means an individual who ordinarily resides in Hong Kong; (Amended 7 of 1986 s. 12) "temporary resident" (臨時居民) means an individual who stays in Hong Kong for a period or a number of periods amounting to more than 180 days during the year of assessment in respect of which the election is made or for a period or periods amounting to more than 300 days in 2 consecutive years of assessment one of which is the year of assessment in respect of which the election is made. (Replaced 36 of 1955 s. 47. Amended 71 of 1983 s. 20; 7 of 1986 s. 12; 56 of 1993 s. 20) "permanent resident" (永久性居民) "temporary resident" (臨時居民) INLAND REVENUE ORDINANCE - SECT 42 Calculation of total income VerDate:14/12/2007 (1) For the purposes of this Part the total income of an individual for any year of assessment shall be the aggregate of the following amounts- (Amended 30 of 2004 s. 3) (a) (i) (Repealed 56 of 1993 s. 21) (ii) in respect of the years of assessment commencing on or after 1 April 1983, the sum equivalent to the net assessable value as ascertained in accordance with sections 5(1A) and 5B; (Added 8 of 1983 s. 12) Provided that where an individual is a joint owner or co-owner of property, that individual's share of the net assessable value shall be computed by apportioning the value ascertained in accordance with section 5(1A) or 5B- (a) in the case of joint ownership, between the joint owners equally; and (b) in the case of ownership in common, between the owners in common each in proportion to his share in such ownership; (Added 52 of 1993 s. 3) (b) the net assessable income of the individual for that year of assessment; and (Replaced 71 of 1983 s. 21) (c) subject to subsection (1A), the assessable profits of the individual for that year of assessment computed in accordance with Part IV: (Amended 32 of 1998 s. 27) (d) (Repealed 17 of 1989 s. 10) Provided that there shall be deducted from that part of the total income arising from paragraph (a) the amount of any interest payable on any money borrowed for the purpose of producing that part of the total income where the amount of such interest has not been allowed and deducted under Part IV. (Amended 17 of 1989 s. 10) (1A) For the purposes of subsection (1)(c), any assessable profits in respect of concessionary trading receipts shall be deemed to be the amount arrived at by dividing such assessable profits by the adjustment factor. (Added 32 of 1998 s. 27) (2) There shall be deducted from the total income of an individual for any year of assessment- (a) such deductions as are under Part IVA allowable to the individual; and (Replaced 31 of 1998 s. 18) (b) the amount of the individual's loss or share of loss for that year of assessment computed in accordance with Part IV. (3)-(4) (Repealed 31 of 1998 s. 18) (5) (a) Where in any year of assessment the aggregate amount of the deductions under subsection (2)(a) and the loss under subsection (2)(b) for an individual exceeds the total income of the individual- (i) subject to subparagraph (ii), that part of the amount of such excess not exceeding the amount of the loss under subsection (2)(b) for the individual for that year of assessment shall be carried forward to be set off against the total income of the individual for future years of assessment; (ii) where the total incomes of the individual and his or her spouse are required to be aggregated under section 42A(1), the amount of such excess shall be reduced as far as can be done by being set off against the total income of his or her spouse for that year of assessment as reduced under subsection (2), and that part of the amount of such excess not exceeding the amount of the loss under subsection (2)(b) for the individual for that year of assessment which is not so reduced shall be carried forward to be set off against the total income of the individual for future years of assessment. (b) Where paragraph (a) does not apply and in any year of assessment the amount of the loss under subsection (2)(b) for an individual exceeds the total income of the individual- (i) subject to subparagraph (ii), the amount of such excess shall be carried forward to be set off against the total income of the individual for future years of assessment; (ii) where the total incomes of the individual and his or her spouse are required to be aggregated under section 42A(1), the amount of such excess shall be reduced as far as can be done by being set off against the total income of his or her spouse for that year of assessment as reduced under subsection (2), and that part of the amount of such excess which is not so reduced shall be carried forward to be set off against the total income of the individual for future years of assessment. (c) Where paragraphs (a) and (b) do not apply and in any year of assessment the amount of the deductions under subsection (2)(a) for an individual exceeds the total income of the individual- (i) subject to subparagraph (ii), the amount of such excess shall not be carried forward to be set off against the total income of the individual for future years of assessment; (ii) where the total incomes of the individual and his or her spouse are required to be aggregated under section 42A(1), the amount of such excess shall be reduced as far as can be done by being set off against the total income of his or her spouse for that year of assessment as reduced under subsection (2), and that part of the amount of such excess which is not so reduced shall not be carried forward to be set off against the total income of the individual for future years of assessment. (Replaced 31 of 1998 s. 18) (6) Subsection (5)(a)(ii) and (b)(ii) shall apply, with any necessary modifications, in relation to an individual who has elected to be personally assessed under this Part and to his or her spouse where- (Amended 31 of 1998 s. 18) (a) by reason of the application of section 41(1A), that individual could not have so elected unless his or her spouse did so too, had his or her spouse had income assessable under this Ordinance; and (b) for this reason only he or she was able so to elect, as if the total income of both spouses had been required to be aggregated under section 42A(1). (Replaced 43 of 1989 s. 13) (7) The amount of any excess set off under subsection (5) against an individual's total income or that of the individual's spouse for any year of assessment shall not be set off for any other year of assessment. (8)-(9) (Repealed 30 of 2004 s. 3) (10) Where an election is made by a husband and wife under section 41(1A) the total income (as reduced under subsections (2) and (5)) of each of them shall be separately calculated under this section before both incomes are aggregated under section 42A. (Replaced 43 of 1989 s. 13) (Replaced 7 of 1975 s. 30. Amended 71 of 1983 s. 21; 43 of 1989 s. 13) INLAND REVENUE ORDINANCE - SECT 42A Assessment to tax VerDate:30/06/1997 (1) In giving effect to an election under section 41 the assessor shall make a single assessment- (a) in the sum of the total income, as reduced under section 42(2) and (5), of the individual making the election; or (b) in the case of an election under section 41(1A), in the sum of the joint total income resulting from the aggregation of the total income of the one spouse, as so reduced, with that of the other, as also so reduced, as reduced in each case by such of the allowances prescribed in Part V as may be appropriate. (2) In the case of an election under section 41(1A) by a husband and wife who married one another in the year of assessment to which the election relates, they shall be deemed for the purpose of ascertaining their joint total income under subsection (1)(b) to have married at the commencement of that year. (Replaced 43 of 1989 s. 14) INLAND REVENUE ORDINANCE - SECT 42B (Repealed) VerDate:30/06/1997 (Repealed 43 of 1989 s. 14) INLAND REVENUE ORDINANCE - SECT 43 Rates of charge VerDate:01/06/2007 (1) Tax shall be charged on the amount of the assessment referred to in section 42A(1) and at the rates specified in Schedule 2- (Amended L.N. 350 of 1990) (a) on the individual; or (b) in the case of a husband and wife making an election under section 41(1A) on both of them subject to apportionment in the manner prescribed by subsection (2B). (Replaced 43 of 1989 s. 15) (1A) Notwithstanding subsection (1), the amount of tax charged under that subsection shall not in any case exceed the amount which would have been chargeable had the standard rate been charged on the total income (as reduced under section 42(2) and (5)) or, as the case may be, the joint total income. (Added 65 of 1970 s. 8. Amended 7 of 1975 s. 32; 71 of 1983 s. 24) (1B) Notwithstanding subsections (1) and (1A), for the year of assessment commencing on 1 April 2006, the amount of tax charged under subsection (1) read together with subsection (1A) shall be reduced by an amount equivalent to- (a) 50% of the amount of the tax as computed under subsection (1) read together with subsection (1A); or (b) $15000, whichever is the less. (Added 10 of 2007 s. 5) (2) Any property tax, any salaries tax and any profits tax paid under the provisions of Parts II, III and IV respectively shall, where the relevant amounts on which such taxes were calculated are included in the total income of the person who paid the tax, be set off for the purposes of collection against the tax charged under this Part on that person. (Replaced 26 of 1969 s. 26. Amended 8 of 1973 s. 11; 8 of 1983 s. 13; 71 of 1983 s. 24; 17 of 1989 s. 12; 43 of 1989 s. 15) (2A) (Repealed 17 of 1989 s. 12) (2B) Any tax chargeable on a husband and wife under subsection (1)(b) in any year of assessment (as reduced, for the year of assessment commencing on 1 April 2006, under subsection (1B)) shall be apportioned between them so that each spouse shall, in respect of that year, be charged such proportion of the tax as the total income of that spouse (as reduced under section 42(2) and (5)) bears to joint total income of the husband and wife. (Replaced 43 of 1989 s. 15. Amended 10 of 2007 s. 5) Provided that where an additional assessment is issued under section 60, the whole of the tax payable shall be charged on the individual assessed in respect of that income under Part II, III or IV. (Added 52 of 1993 s. 4) (2C) (Repealed 43 of 1989 s. 15) (3) Where the aggregate of the taxes which may be set off under subsection (2) exceeds the amount of tax charged under this Part, the Commissioner shall, on receipt of a claim from the person charged in the specified form and on being satisfied that the claim is in order, refund such excess to that person. (Added 36 of 1955 s. 50. Amended 26 of 1969 s. 26; 39 of 1969 s. 8; 30 of 1981 s. 8; 71 of 1983 s. 24; 17 of 1989 s. 12; 43 of 1989 s. 15) INLAND REVENUE ORDINANCE - SECT 43A (Repealed) VerDate:30/06/1997 (Repealed 19 of 1991 s. 4) INLAND REVENUE ORDINANCE - SECT 44 (Repealed) VerDate:30/06/1997 PART VIII DOUBLE TAXATION RELIEF (Amended 49 of 1956 s. 32) (Repealed 49 of 1956 s. 33) INLAND REVENUE ORDINANCE - SECT 45 (Repealed 32 of 1998 s. 28) VerDate:17/04/1998 INLAND REVENUE ORDINANCE - SECT 46 (Repealed 12 of 1999 s. 3) VerDate:01/07/1997 Amendments retroactively made-see 12 of 1999 s. 3 INLAND REVENUE ORDINANCE - SECT 47 (Repealed) VerDate:30/06/1997 (Repealed 49 of 1956 s. 35) INLAND REVENUE ORDINANCE - SECT 48 (Repealed) VerDate:30/06/1997 (Repealed 49 of 1956 s. 35) INLAND REVENUE ORDINANCE - SECT 49 Double taxation arrangements VerDate:15/01/2010 (1) If the Chief Executive in Council by order declares that arrangements specified in the order have been made with the Government of any territory outside Hong Kong with a view to affording relief from double taxation in relation to income tax and any tax of a similar character imposed by the laws of that territory, and that it is expedient that those arrangements should have effect, the arrangements shall have effect in relation to tax under this Ordinance notwithstanding anything in any enactment. (Amended 7 of 1986 s. 12; 12 of 1999 s. 3) (2) (Repealed 49 of 1956 s. 36) (3) (Repealed 32 of 1998 s. 29) (4) Any order made under this section may be revoked by a subsequent order. (5) Where any arrangements have effect by virtue of this section, the obligation as to secrecy imposed by section 4 shall not prevent the disclosure to any authorized officer of the government with which the arrangements are made of such information as is required to be disclosed under the arrangements. (6) The Chief Executive in Council may make rules for carrying out the provisions of any arrangements having effect under this section. (Amended 12 of 1999 s. 3) (7) Rules made under subsection (6) are subject to the approval of the Legislative Council. (Added 1 of 2010 s. 3) (Amended 49 of 1956 s. 36) INLAND REVENUE ORDINANCE - SECT 50 Tax credits VerDate:30/06/1997 (1) The provisions of this section shall have effect where, under arrangements having effect under section 49, tax payable in respect of any income in the territory with the Government of which the arrangements are made is to be allowed as a credit against tax payable in respect of that income in Hong Kong; and in this section the expression "foreign tax" (外地稅 款) means any tax payable in that territory which under the arrangements is to be so allowed and the expression "tax" (稅款) means tax chargeable under this Ordinance. (Amended 7 of 1986 s. 12) (2) The amount of the tax chargeable in respect of the income shall be reduced by the amount of the credit: Provided that credit shall not be allowed against tax for any year of assessment unless the person entitled to the income is resident in Hong Kong for that year. (Amended 7 of 1986 s. 12) (3) The credit shall not exceed the amount which would be produced by computing the amount of the income in accordance with the provisions of this Ordinance and then charging it to tax at a rate ascertained by dividing the tax chargeable (before allowance of credit under any arrangements having effect under section 49) on the total income of the person entitled to the income by the amount of his total income. (4) Without prejudice to the provisions of subsection (3), the total credit to be allowed to a person for any year of assessment for foreign tax under all arrangements having effect under section 49 shall not exceed the total tax payable by him for that year of assessment. (Amended 17 of 1989 s. 13) (5) In computing the amount of the income- (a) no deduction shall be allowed in respect of foreign tax (whether in respect of the same or any other income); (b) where the tax chargeable depends on the amount received in Hong Kong, the said amount shall be increased by the appropriate amount of the foreign tax in respect of the income; (Amended 7 of 1986 s. 12) (c) where the income includes a dividend and under the arrangements foreign tax not chargeable directly or by deduction in respect of dividend is to be taken into account in considering whether any, and if so what, credit is to be given against tax in respect of the dividend the amount of the income shall be increased by the amount of the foreign tax not so chargeable which falls to be taken into account in computing the amount of the credit, but notwithstanding anything in the preceding provisions of this subsection a deduction shall be allowed of any amount by which the foreign tax in respect of the income exceeds the credit therefor. (6) Subsection (5)(a) and (b) (but not the remainder thereof) shall apply to the computation of total income for the purposes of determining the rate mentioned in subsection (3), and shall apply thereto in relation to all income in the case of which credit falls to be given for foreign tax under arrangements for the time being in force under section 49. (7) Where- (a) the arrangements provide, in relation to dividends of some classes, but not in relation to dividends of other classes, that foreign tax not chargeable directly or by deduction in respect of dividends is to be taken into account in considering whether any, and if so what, credit is to be given against tax in respect of the dividends; and (b) a dividend is paid which is not of a class in relation to which the arrangements so provide, then, if the dividend is paid to a company which controls, directly or indirectly not less than one-half of the voting power in the company paying the dividend, credit shall be allowed as if the dividend were a dividend of a class in relation to which the arrangements so provide. (8) Credit shall not be allowed under the arrangements against tax chargeable in respect of the income of any person for any year of assessment if he elects that credits shall not be allowed in the case of his income for that year. (9) Any claim for an allowance by way of credit shall be made not later than 2 years after the end of the year of assessment, and in the event of any dispute as to the amount allowable the claim shall be subject to objection and appeal in like manner as an assessment. (10) Where the amount of a credit given under the arrangement is rendered excessive or insufficient by reason of any adjustment of the amount of any tax payable either in Hong Kong or elsewhere, nothing in this Ordinance limiting the time for the making of assessments or claims for relief shall apply to any assessment or claim to which the adjustment gives rise, being an assessment or claim made not later than 2 years from the time when all such assessments, adjustments and other determinations have been made, whether in Hong Kong or elsewhere, as are material in determining whether any and if so what credit falls to be given. (Amended 7 of 1986 s. 12) "foreign tax" (外地稅款) "tax" (稅款) INLAND REVENUE ORDINANCE - SECT 51 Returns and information to be furnished VerDate:17/04/2003 PART IX RETURNS, ETC. (1) An assessor may give notice in writing to any person requiring him within a reasonable time stated in such notice to furnish any return which may be specified by the Board of Inland Revenue for- (a) property tax, salaries tax or profits tax; or (b) property tax, salaries tax and profits tax, under Parts II, III, IV, XA, XB, and XC. (Replaced 52 of 1993 s. 5. Amended 5 of 2003 s. 7) (2) Every person chargeable to tax for any year of assessment shall inform the Commissioner in writing that he is so chargeable not later than 4 months after the end of the basis period for that year of assessment unless he has already been required to furnish a return under the provisions of subsection (1). (Replaced 49 of 1956 s. 37) (2A) An assessor shall give notice to any individual who has elected to be personally assessed under Part VII requiring that individual within a reasonable time stated in the notice to furnish a return in the specified form of his total income assessable under this Ordinance. (Added 43 of 1989 s. 16) (2B) Where a notice is required to be given under subsection (2A) to an individual who is married and not living apart from his or her spouse- (a) such notice shall be given to both that individual and his or her spouse; and (b) they shall be required to furnish a return of their joint total income assessable under this Ordinance. (Added 43 of 1989 s. 16) (2C) For the purposes of this section, compliance by a person, and his or her spouse when they have jointly elected to be personally assessed, with the requirements of a notice issued under subsection (1) shall be deemed to be compliance with the requirements of a notice issued under subsection (2A) or (2B). (Added 52 of 1993 s. 5) (3) An assessor may give notice in writing to any person when and as often as he thinks necessary requiring him within a reasonable time stated in such notice to furnish fuller or further returns respecting any matter of which a return is required or prescribed by this Ordinance. (4) For the purposes of obtaining full information in regard to any matter which may affect any liability, responsibility or obligation of any person under this Ordinance- (a) an assessor or an inspector may give notice in writing to such person, or to any other person whom he considers may be in possession of information or documents in regard to any such matter as aforesaid, requiring him within such reasonable time as is stated in the notice to furnish all information in his possession respecting any such matter, and to produce for examination any deeds, plans, instruments, books, accounts, trade lists, stock lists, vouchers, bank statements or other documents which the assessor or inspector giving the notice considers are or may be relevant for the purpose aforesaid: Provided that in the case of a notice under this paragraph requiring the production of any account kept by a solicitor and relating to the affairs of any client or clients of his, production of a copy of all relevant entries therein respecting any matter upon which information is sought shall be a sufficient compliance with the aforesaid requirement of the notice if the copy is certified by the solicitor as being a correct copy of all relevant entries in such account respecting the matter aforesaid; (b) an assistant commissioner may give notice in writing to such person, or to such other person, requiring him, at a time and place to be named by the assistant commissioner, to attend and be examined, and upon such examination to answer truthfully all questions put to him, respecting any such matter as aforesaid. (Replaced 35 of 1965 s. 26. Amended 40 of 1972 s. 4) (4A) For the avoidance of doubt it is hereby declared that the powers conferred by subsection (4) include the power to require information from, and to require the attendance for the purpose of being examined of,- (a) any person, or any employee of any person, who was a party to any particular land or property transaction; (b) any person, or any employee of any person, who has acted for or is acting for any party to any particular land or property transaction; (c) any person who either paid or received, directly or indirectly, any consideration, brokerage, commission or fee in respect of or in connection with any particular land or property transaction; and (d) any person, or any employee of any person, who was concerned in the passing of any consideration, brokerage, commission or fee, or in the clearing or collection of any cheque or other instrument of exchange, respecting any particular land or property transaction, as to any of the following matters, that is to say- (i) the full names (including aliases) and addresses of any of the persons referred to in paragraphs (a) to (d) and any other information in his possession which may be helpful in identifying or locating any such persons; (ii) any consideration, brokerage, commission or fee paid or received in respect of or in connection with any such land or property transaction; and (iii) the terms and conditions of any such land or property transaction; and the existence in respect of any communication, whether oral or written, of privilege from disclosure shall not constitute any excuse for the non-disclosure of information as to any of the matters specified in paragraphs (i) to (iii) where disclosure thereof is required from any of the persons referred to in paragraphs (a) to (d), but except as aforesaid nothing in subsection (4) shall require disclosure by counsel or solicitor of any privileged information or communication given or made to him in that capacity. (Added 35 of 1965 s. 26) (4B) (a) Any person who without reasonable excuse, the burden of proof whereof shall lie upon him, fails to comply with the requirements of a notice given to him under subsection (4)(a) or fails to attend in answer to a notice issued under subsection (4)(b) or having attended fails to answer any questions put to him, being questions which under that paragraph may be put to him, shall be liable to a penalty at level 3 recoverable under section 75 as a civil debt due to the Government: (Amended 11 of 1985 s. 3; L.N 338 of 1995; 19 of 1996 s. 15) Provided that- (i) the Commissioner may compound any such penalty and may before judgment in proceedings therefor stay or compound such proceedings, or may refuse to accept payment of such penalty or any part thereof except under a judgment of the court in proceedings for the recovery thereof; (ii) the court before which any proceedings for such penalty are brought may, if it thinks fit, give judgment for a less amount. (b) In addition to giving judgment for the penalty or any less amount as aforesaid, the court may order the person against whom the proceedings were brought to do, within a time specified in the order, the act which he has failed to do. (Added 35 of 1965 s. 26) (5) A return, statement, or form purporting to be furnished under this Ordinance by or on behalf of any person shall for all purposes be deemed to have been furnished by that person or by his authority, as the case may be, unless the contrary is proved, and any person signing any such return, statement, or form shall be deemed to be cognizant of all matters therein. (6) Any person who ceases to carry on any trade, profession or business or who ceases to own any source of income or to be the owner of any land or buildings or land and buildings in respect of which tax is chargeable under the provisions of Part II, III, IV or VII shall so inform the Commissioner in writing within 1 month of such cessation. (Replaced 49 of 1956 s. 37. Amended 8 of 1983 s. 14) (7) Any person chargeable to tax under Part III, IV or VII who is about to leave Hong Kong for any period exceeding 1 month shall give notice in writing to the Commissioner of his expected date of departure, and if he intends to return to Hong Kong the approximate date of his return. Such notice shall be given not later than 1 month before the expected date of departure: Provided that- (a) the Commissioner may accept such shorter notice as he may deem reasonable; and (b) this subsection shall not apply in the case of an individual who is required in the course of his employment, business or profession to leave Hong Kong at frequent intervals. (Added 49 of 1956 s. 37. Amended 7 of 1986 s. 12) (8) Any person chargeable to tax under Part II, III, IV or VII who changes his address shall within 1 month inform the Commissioner in writing of the particulars of the change. (Added 2 of 1971 s. 33. Amended 8 of 1983 s. 14) (9) (Repealed 43 of 1975 s. 2) INLAND REVENUE ORDINANCE - SECT 51AA Form and manner of furnishing return, etc. under section 51 VerDate:17/04/2003 (1) Except as provided in subsection (2) or (3), a return required to be furnished under section 51(1)- (a) shall be furnished in paper form using a printed form specified by the Board of Inland Revenue and provided by the Commissioner; and (b) shall contain the particulars specified in the printed form. (2) A return required to be furnished under section 51(1) may, in a case specified by the Commissioner, be furnished in the form of an electronic record that- (a) is sent using a system specified by the Board of Inland Revenue; (b) uses a template specified by the Board of Inland Revenue and made available by the Commissioner; or (c) contains the particulars specified by the Board of Inland Revenue that are arranged in a form specified by the Board of Inland Revenue. (3) A return required to be furnished under section 51(1) may, in a case specified by the Commissioner, be furnished by using a telefiling system which- (a) provides for the furnishing of such particulars as may be specified by the Board of Inland Revenue; and (b) is made available by the Commissioner. (4) A return shall be regarded as furnished under subsection (3) when the particulars and the password are accepted by the telefiling system. (5) Any case to be specified by the Commissioner for the purposes of subsections (2) and (3)- (a) shall be specified by notice published in the Gazette; and (b) may be specified by reference to a class or description of persons or returns. (6) The Commissioner may by notice published in the Gazette specify requirements as to- (a) the manner of generating or sending an electronic record or any attachment required to be furnished with an electronic record; (b) how a digital signature is to be affixed to, or a password is to be included with, a return furnished under this section; and (c) the software and communication in relation to any attachment required to be furnished with an electronic record. (7) The Commissioner may approve a password and designate any system in respect of any communication with the Commissioner for the purposes of this section. (8) A notice under subsection (5) or (6) is not subsidiary legislation. (Added 5 of 2003 s. 8) INLAND REVENUE ORDINANCE - SECT 51A Power to require statement of assets and liabilities, etc. VerDate:01/07/1997 Adaptation amendments retroactively made - see 23 of 1998 s. 2 (1) Where the Commissioner or a deputy commissioner is personally of the opinion that a person has made an incorrect return or supplied false information having the effect of understating his income or profits chargeable to tax and has done so without reasonable excuse and not through an innocent oversight or omission, the Commissioner may, with the consent of the Board of Review, give notice in writing to such person requiring him to furnish within the time limited by such notice, not being less than 30 days from the date of service of the notice, a statement containing particulars of- (Amended 43 of 1975 s. 3; L.N. 377 of 1980; 48 of 1995 s. 9) (a) all assets which the person or his spouse possessed in Hong Kong, including any possessed jointly or severally with any other person, at such times as may be specified in the notice; and (b) all liabilities to which the person or his spouse was subject in Hong Kong, including any to which he was subject jointly or severally with any other person, at such times as may be specified in the notice; and (c) all expenditure or disbursements from funds in Hong Kong, including remittances to places outside Hong Kong and gifts, incurred or made by the person or his spouse during such periods as may be specified in the notice; and (Amended 23 of 1998 s. 2) (d) all sums, including remittances, gifts and legacies received in Hong Kong by the person or his spouse during such periods as may be specified in the notice. (Amended 71 of 1983 s. 26; 7 of 1986 s. 12) (2) A notice given under subsection (1) shall not specify any time or period earlier than 7 years before the commencement of the year of assessment in which it is given. (3) An application for the consent of the Board of Review shall be made in writing by the Commissioner to the clerk of the Board and shall be accompanied by a statement of the material on the basis of which it is proposed to exercise the powers of the Commissioner or deputy commissioner under subsection (1). (4) Upon receipt of an application under subsection (3), the Chairman of the Board of Review shall appoint 3 members from the panel of the Board of Review, one of whom shall be the Chairman or a deputy chairman, to consider the application. (5) When the Board is considering an application, the Commissioner or his authorized representative may attend, but the person in respect of whom the application is made may not attend. (6) Subject to subsection (7), neither in the application nor on the consideration thereof shall the identity of the person in respect of whom the application is made be revealed to the Board of Review. (7) If the person on whom a notice under subsection (1) has been given so requests, the Commissioner shall furnish him with a certificate from the Chairman or deputy chairman of the Board of Review certifying that the Board's consent to the issue of the notice was given, and for the purpose of obtaining such a certificate the Commissioner shall reveal to the Chairman or deputy chairman the identity of that person. (8) The decision of the Board of Review to grant or refuse consent shall be final. (Added 26 of 1969 s. 28. Amended 40 of 1972 s. 5; 43 of 1975 s. 3) INLAND REVENUE ORDINANCE - SECT 51B Power to issue search warrant VerDate:12/02/2010 (1) If the Commissioner, or an officer of the Inland Revenue Department not below the rank of chief assessor authorized in writing by the Commissioner for the purpose (in this section referred to as the authorized officer), satisfies a magistrate, by statement made on oath,- (a) that there are reasonable grounds for suspecting that a person has made an incorrect return or supplied false information having the effect of understating his income or profits chargeable to tax and has done so without reasonable excuse and not through an innocent oversight or omission; or (b) that a person has failed to comply with an order of a court made under section 80(1) or (2A) directing him to comply with the requirements of a notice given to him under section 51(1) or (3), (Amended 56 of 1993 s. 22) the magistrate may by warrant authorize the Commissioner or authorized officer to exercise the following powers- (i) without previous notice at any reasonable time during the day, to enter and have free access to any land, buildings, or place where he suspects there to be any books, records, accounts or documents of that person, or of any other person, which may afford evidence material in assessing the liability of the first-mentioned person for tax, and there to search for and examine any books, records, accounts or documents; (Amended 43 of 1975 s. 4) (ii) in carrying out any such search, to open or cause to be removed and opened, any article in which he suspects any books, records, accounts or documents to be contained; (iii) to take possession of any books, records, accounts or documents of that person or that person's spouse, and to make copies of such parts of any books, records, accounts or documents of any other person, as may afford evidence material in assessing the liability of the first-mentioned person for tax; (Replaced 43 of 1975 s. 4. Amended 71 of 1983 s. 27) (iv) to retain any such books, records, accounts or documents for as long as they may be reasonably required for any assessment to be made or for any proceedings under this Ordinance to be completed: Provided that if the Commissioner or authorized officer shall retain any book, record, account or document for a period of more than 14 days, the person aggrieved may apply in writing to the Board of Review for an order directing the return thereof and the Board of Review, after hearing the applicant or his authorized representative and the Commissioner or his representative, may so order, either unconditionally or subject to any condition which the Board may consider it proper to impose. (Amended 7 of 1975 s. 34) (1A) Any officer of the Inland Revenue Department under the direction of the Commissioner or an authorized officer may assist the Commissioner or an authorized officer in the execution of a warrant issued under subsection (1) and may exercise any of the powers referred to in subsection (1)(i), (ii) and (iii). (Added 40 of 1972 s. 6) (2) When exercising any power under subsection (1), the Commissioner or authorized officer shall produce on demand the warrant issued to him under that subsection. (3) The person to whose affairs any books, records, accounts or documents taken possession of under subsection (1) relate shall be entitled to examine and make extracts from them at such times and under such conditions as the Commissioner may determine. (4) Any person who obstructs or hinders the Commissioner or an authorized officer acting in the discharge of his duty under subsection (1) or an officer assisting him under subsection (1A) commits an offence and is liable on conviction to a fine at level 3 and imprisonment for 6 months. (Amended 56 of 1993 s. 22; L.N. 338 of 1995; 4 of 2010 s. 8) (Added 26 of 1969 s. 28. Amended 40 of 1972 s. 6) INLAND REVENUE ORDINANCE - SECT 51C Business records to be kept VerDate:30/06/1997 (1) Subject to subsection (2), every person carrying on a trade, profession or business in Hong Kong shall keep sufficient records in the English or Chinese language of his income and expenditure to enable the assessable profits of such trade, profession or business to be readily ascertained and shall retain such records for a period of not less than 7 years after the completion of the transactions, acts or operations to which they relate. (Amended 7 of 1986 s. 12) (2) Subsection (1) shall not require the preservation of any records- (a) which the Commissioner has specified need not be preserved; or (b) of a corporation which has been dissolved. (3) For the purposes of this section, "records" (紀錄) includes- (a) books of account (whether kept in a legible form, or in a non-legible form by means of a computer or otherwise) recording receipts and payments, or income and expenditure; and (b) vouchers, bank statements, invoices, receipts, and such other documents as are necessary to verify the entries in the books of account referred to in paragraph (a). (Added 48 of 1995 s. 10) (4) Without limiting the generality of subsection (3), the records required to be kept and retained pursuant to subsection (1) in respect of any trade, profession or business carried on during any year of assessment by any person, include- (a) a record of the assets and liabilities of the person in relation to that trade, profession or business; (b) a record of all entries from day to day of all sums of money received and expended by the person in relation to that trade, profession or business and the matters in respect of which the receipt and expenditure take place; (c) where that trade, profession or business involves dealing in goods- (i) a record of all goods purchased, and of all goods sold in the carrying on of that trade, profession or business (except those sold in the course of cash retail trading customarily conducted in a trade, profession or business of the kind of which that trade, profession or business is one) showing the goods, and the sellers and buyers in sufficient detail to enable the Commissioner to readily verify the quantities and values of the goods and the identities of the sellers and buyers; and all invoices relating thereto; and (ii) statements (including quantities and values) of trading stock held by the person- (A) at the end of each year of assessment; or (B) where the Commissioner is satisfied that the accounts of such trade, profession or business are made up to a day other than 31 March, on that day in the year of assessment, and all records of stocktakings from which any such statement of trading stock has been prepared; and (d) where that trade, profession or business involves the provision of services, records of the services provided in sufficient detail to enable the Commissioner to readily verify the entries referred to in paragraph (b). (Added 48 of 1995 s. 10) (Added 26 of 1969 s. 28) "records" (紀錄) INLAND REVENUE ORDINANCE - SECT 51D Rent records to be kept VerDate:30/06/1997 (1) Subject to subsection (2), every person who is the owner of land or buildings or land and buildings situated in Hong Kong shall keep sufficient records in the English or Chinese languages of the consideration, in money or money's worth, payable or deemed to be payable to him, to his order or for his benefit on or after 1 April 1983 in respect of the right of use of that land or buildings or land and buildings to enable the assessable value of that land or buildings or land and buildings to be readily ascertained and shall retain such records for a period of not less than 7 years after the completion of the transactions, acts or operations to which they relate. (2) Subsection (1) shall not require the preservation of any records- (a) which the Commissioner has specified need not be preserved; or (b) of a corporation which has been dissolved. (Added 8 of 1983 s. 15) INLAND REVENUE ORDINANCE - SECT 52 Information to be furnished by officials and employers VerDate:30/06/1997 (1) The Commissioner may give notice in writing to any officer in the employment of the Government or of any public body requiring him within a reasonable time stated in such notice to furnish any particulars which he may require for the purposes of this Ordinance which may be in the possession of such officer: Provided that no such officer shall by virtue of this section be obliged to disclose any particulars as to which he is under any express statutory obligation to observe secrecy. (2) Every person who is an employer shall, when required to do so by notice in writing given by an assessor, furnish within a reasonable time stated in such notice a return containing the names and places of residence and the full amount of the remuneration, whether in cash or otherwise, for the period specified in the notice, of- (a) all persons employed by him in receipt of remuneration in excess of a minimum figure to be fixed by the assessor; and (b) any other person employed by him named by the assessor. (3) For the purposes of this section, any director of a company, or person engaged in the management of a company, shall be deemed to be a person employed by the company. (Amended 7 of 1986 s. 9) (4) Where any person who is an employer commences to employ in Hong Kong an individual who is or is likely to be chargeable to tax under Part III, or any married person, he shall give notice thereof in writing to the Commissioner not later than 3 months after the date of commencement of such employment, stating the full name and address of the individual, the date of commencement and the terms of employment. (Added 49 of 1956 s. 38. Amended 7 of 1986 s. 9; 43 of 1989 s. 17) (5) Where any person who is an employer ceases or is about to cease to employ in Hong Kong an individual who is or is likely to be chargeable to tax under Part III, or any married person, he shall give notice thereof in writing to the Commissioner not later than 1 month before such individual ceases to be employed in Hong Kong, stating the name and address of the individual and the expected date of cessation: (Amended 7 of 1986 s. 9; 43 of 1989 s. 17) Provided that the Commissioner may accept such shorter notice as he may deem reasonable. (Added 49 of 1956 s. 38) (6) The employer of any individual who is chargeable to tax under Part III and is about to leave Hong Kong for any period exceeding 1 month shall give notice in writing to the Commissioner of the expected date of departure of such individual. Such notice shall be given not later than 1 month before the expected date of departure: Provided that- (a) the Commissioner may accept such shorter notice as he may deem reasonable; and (b) this subsection shall not apply in the case of an individual who is required in the course of his employment to leave Hong Kong at frequent intervals. (Added 49 of 1956 s. 38) (7) An employer who is required by subsection (6) to give notice to the Commissioner of the expected departure of an individual shall not, in the case of an individual whom he has ceased, or is about to cease, to employ in Hong Kong, except with the consent in writing of the Commissioner or in the case of money paid to the Commissioner on the direction of the individual, make any payment of money or money's worth to or for the benefit of the individual for a period of 1 month from the date on which he gave the notice; and compliance with this subsection shall constitute a defence in any proceedings against an employer in respect of his failure to make any payment to or for the benefit of the individual during the said period. (Added 26 of 1969 s. 29. Amended 2 of 1971 s. 34) (8) Notwithstanding anything to the contrary in subsections (4) and (5) an employer shall not be required to give notice under those subsections in respect of a married person if he has reasonable grounds for believing that neither that person nor his or her spouse are, or are likely to be, chargeable to tax under Part III. (Added 7 of 1986 s. 9. Amended 43 of 1989 s. 17) (Amended 7 of 1986 s. 12) INLAND REVENUE ORDINANCE - SECT 53 Who may act for incapacitated or non-resident persons VerDate:30/06/1997 An act or thing required by or under this Ordinance to be done by any person shall, if such person is an incapacitated or non-resident person, be deemed to be required to be done by the trustee of such incapacitated person or by the agent of such non-resident person, as the case may be. INLAND REVENUE ORDINANCE - SECT 54 Liability of executor of deceased taxpayer VerDate:12/02/2006 The executor of a deceased person shall be chargeable with the tax for all periods prior to the date of such person's death with which the said person would be chargeable if he were alive, and shall be liable to do all such acts, matters or things as the deceased person if he were alive would be liable to do under this Ordinance: Provided that- (a) no proceedings, other than an assessment to additional tax under section 82A, shall be instituted against the executor under the provisions of Part XIV in respect of any act or default of the deceased person; (Amended 43 of 1975 s. 5) (b) where the person dies before 11 February 2006, no assessment or additional assessment, other than an assessment to additional tax under section 82A, in respect of a period prior to the date of the person's death shall be made after- (Amended 21 of 2005 s. 19; L.N. 210 of 2005) (i) the expiry of 1 year from such date of death; or (ii) the expiry of 1 year from the date of filing any affidavit required under the Estate Duty Ordinance (Cap 111), whichever is the later; and (Amended 26 of 1969 s. 30; 56 of 1993 s. 23; 21 of 2005 s. 19) (c) where the person dies at any time on or after 11 February 2006 in any year of assessment, no assessment or additional assessment (other than an assessment to additional tax under section 82A) in respect of a period prior to his death shall be made after the expiry of 3 years immediately after that year of assessment. (Added 21 of 2005 s. 19. Amended L.N. 210 of 2005) INLAND REVENUE ORDINANCE - SECT 55 (Repealed) VerDate:30/06/1997 (Repealed 49 of 1956 s. 39) INLAND REVENUE ORDINANCE - SECT 56 Precedent partner to act on behalf of partnership VerDate:30/06/1997 (1) Wherever 2 or more persons in partnership act as agents, or are employers, or are pe