Hong Kong Regulations

INLAND REVENUE RULES - RULE 2C

Investment portfolios

(1) Where the investment portfolio of any person who is chargeable to tax
under Part IV of the Ordinance is, in the opinion of the assessor,
sufficiently substantial to warrant making an adjustment in respect of the
expenses of supervision and management of the portfolio, a due proportion of
the management, clerical and general expenses attributable to the supervision
and management of the investment portfolio shall be disallowed, and, unless a
more practical and suitable basis is available in the circumstances of the
case, the estimation of such due proportion of the management, clerical and
general expenses shall be made on the basis of such percentage of the total
cost of the investments and securities which comprise the investment portfolio
as is most reasonable and appropriate in the circumstances of the case, not
exceeding-

   (a)  one-eighth per cent in any case where the investments are held not for
        purpose of, or not solely for the purpose of, producing profits by way
        of dividends, but for, or also for, the purpose of producing profits,
        by resale or share dealing;

   (b)  one-half per cent, in any other case.

(2) Where the investment portfolio of any person who is chargeable to tax
under Part IV of the Ordinance is not, in the opinion of the assessor,
sufficiently substantial to warrant making an adjustment in respect of the
supervision and management of the portfolio, no disallowance or apportionment
shall be made under paragraph (1). (L.N. 129 of 1965)