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(CHAPTER 112)CONTENTS

(CHAPTER 112)CONTENTS 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, design or patent used in the trade, profession or business which produces such profits; (Replaced 26 of 1969 s. 14) (ga) the payments and expenditure specified in sections 16B and 16C, as provided therein; (h) such other deductions as may be prescribed by any rule made under this Ordinance. (2) The conditions referred to in subsection (1) (a) are that- (a) the money has been borrowed by a financial institution; (b) the money has been borrowed by a public utility company specified in 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 and the repayment of the principal or interest is not secured or guaranteed either in whole or in part, and whether directly or indirectly, by any instrument executed or any undertaking given- (i) by or on behalf of the borrower or any partner of the borrower; (ii) where the borrower is a body of persons, whether corporate or unincorporate, by or on behalf of any shareholders, member, director or member of the board of management of the borrower; or (iii) where the borrower is a corporation, by or on behalf of any associated corporation, against a deposit made with that or any other financial institution or overseas financial institution where any sums, payable by way of interest on the deposit are not chargeable to tax under this Ordinance; (Amended 7 of 1986 s. 4) (e) the money has been borrowed wholly and exclusively to finance- (i) capital expenditure incurred on the provision of machinery or plant which qualifies for an allowance under Part VI; or (ii) the purchase of trading stock, and such stock is used by the borrower in the production of profits chargeable to tax under this Part, and the lender is not- (A) any partner of the borrower; or (B) where the borrower is a body of persons, whether corporate or unincorporate, any shareholder, member, director or member of the board of management of the borrower; or (C) where the borrower is a corporation, any associated corporation; (Replaced 36 of 1984 s. 4. Amended 7 of 1986 s. 4) (f) the person chargeable to tax is a corporation and the deduction is in respect of interest payable by that corporation- (i) on debentures; (ii) to the holder of any instrument issued- (A) bona fide and in the course of carrying on business and which is marketable in Hong Kong or in a major financial centre outside Hong Kong approved by the Commissioner for the purposes of this subparagraph; or (B) in pursuance of any agreement or arrangements, where the issue of an advertisement or invitation to the public in respect of such agreement or arrangements, or any document which contains such an advertisement or invitation, has been authorized by the Securities and Futures Commission under section 4 (2) (g) of the Protection of Investors Ordinance (Cap.

335); or (Amended 10 of 1989 s. 65) (iii) on moneys borrowed from an associated corporation, where the moneys borrowed in the hands of the associated corporation arise entirely from the proceeds of an issue by the associated corporation of debentures or of any such instrument as is described in subparagraph (ii), in an amount not exceeding the interest payable by the associated corporation to the holders of its debentures or of such instruments. (Added 7 of 1986 s. 4) (3) For the purposes of subsection (2)- (a) any reference in paragraph (d) (i) or (ii) or paragraph (e) (A) or (B) to- (i) a borrower or partner of a borrower; or (ii) a shareholder, member, director or member of the board of management, who is a natural person, shall be deemed to extend to that person's parents, spouse, child, brother or sister (whether of the whole or half blood) and, in deducing such a relationship, an adopted child shall be deemed to be a child both of the natural parents and of the adopting parent and a step child to be the child both of the natural parents and of any step parent; (b) an "associated corporation" means- (i) a corporation over which the borrower has control; (ii) a corporation which has control over the borrower; or (iii) a corporation which is under the control of the same person as the borrower, and, for the purposes of this definition, control shall have the same meaning as it has in section 2 (2); (ba) "debentures" means debentures listed on a stock exchange in Hong Kong or any other stock exchange recognized for the purposes of this paragraph by the Commissioner; (Added 7 of 1986 s. 4) (c) an "overseas financial institution" 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 subsection (2) as an overseas financial institution. (Added 36 of 1984 s. 4. Amended 7 of 1986 s. 12) (4) The Commissioner may for the purposes of subsection (2) 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) (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) (6) The Governor in Council may, by notice in the Gazette, amend Schedule 3. (Added 17 of 1989 s. 5) (Replaced 28 of 1964 s. 7. (Amended 35 of 1965 s. 9) 16A. Special payment under an approved retirement scheme allowable as a deduction (1) 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 an approved retirement scheme; or (b) a premium, other than an ordinary annual premium, in respect of a contract of insurance under an approved retirement scheme, 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).

(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 case 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 avoidance of doubt it is hereby declared that this section is applicable only to payments made in or after the basis period for the year of assessment commencing on 1 April 1955.

(Replaced 49 of 1956 s. 12) 16B. Expenditure on scientific research (1) Notwithstanding anything in section 17, in ascertaining the profits from any trade 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 scientific research related to that trade or business; or (ii) an approved research institute, the object of which is the undertaking of scientific research related to the class of trade or business to which that trade or business belongs; and (b) expenditure on scientific research related to that trade or business, including capital expenditure except to the extent that it is expenditure on land or buildings or on alteration, 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 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 scientific research expenditure of a capital nature which pursuant to subsection (1) (b) has been allowed as a deduction in ascertaining the profits from a trade or business, ceases to be used by the person carrying on the trade or business for scientific research related to that trade or business and is then or thereafter sold by him, the proceeds of sale shall be treated as a trading receipt of the trade or business accruing at the time of the sale or, if the sale occurs on or after the date on which the trade 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 or business in respect of the destruction and any money received by him in respect of the remains of the plant to 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.

(4) (a) In this section- "an approved research institute" means any university, college, institute, association or organization which is approved in writing for the purposes of this section by the Director of Education as an institute, association or organization for undertaking scientific research which is or may prove to be of value to Hong Kong; (Amended 7 of 1986 s. 12) "scientific research" means any activities in the fields of natural or applied science for the extension of knowledge.

(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.

(5) In this section- (a) references to expenditure incurred on scientific research do not include any expenditure incurred in the acquisition of rights in, or arising out of, scientific research, 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, scientific research; and (b) references to scientific research related to a trade or business or class of trade or business shall be read as including a reference to- (i) any scientific research which may lead to or facilitate an extension, or an improvement in the technical efficiency, of that trade or business, or, as the case may be, of trades or businesses of that class; and (ii) any scientific research of a medical nature which is of special relation to the welfare of workers employed in that trade or business or, as the case may be, in trades or businesses of that class.

(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 Crown 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) (b) any expenditure of a capital nature incurred on scientific research related to any trade to business by a person about to carry on that trade 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 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 or business. (Added 35 of 1965 s. 10) 16C. Payments for technical education (1) Notwithstanding anything in section 17, where a person carrying on a trade or business in Hong Kong makes any payment to be used for the purposes of technical education related to that trade 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 Director of Education (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 or business for the year of assessment in the basis period of which the payment was made. (Amended 7 of 1986 s. 12) (2) For the purposes of this section, technical education shall be deemed to be related to a trade or business, if, and only if, it is technical education of a kind specially requisite for persons employed in the class of trade or business to which that trade 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) 16D. Approved charitable donations (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 for any year of assessment- (a) any sum which is allowable as a deduction under section 12 (1) (c), 16, 16B or 16C; (b) a sum in excess of 10% of such balance of that person's assessable profits after making any adjustment for the allowances and charges provided under Part VI. (Added 7 of 1975 s. 10) 16E. Purchase and sale of patent rights, etc.

(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", 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 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 purchaser is a partnership- (i) any member of the partnership and, where such member is a natural person, any relative of such member; (ii) any partner of the partnership and, where such partner is a natural person, any relative of such partner and, where such partner is a partnership, any relative of any member of that partnership who is a natural person; (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" 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" 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", 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" means any industrial information or techniques likely to assist in the manufacture or processing of goods or materials; "patent rights" 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" 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" 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 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) 17. Deductions not allowed (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 the cost of travelling between residence and place of business; (b) any disbursements or expenses not being money expended for the purpose of producing such profits; (Amended 36 of 1955 s. 25) (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 sum paid by an employer being either an ordinary annual contribution to a fund duly established under an approved retirement scheme or an ordinary annual premium in respect of a contract of insurance under an approved retirement scheme, to the extent that the aggregate of such payments in respect of an employee under an approved retirement scheme or schemes exceeds 15% of the total emoluments of that employee for the period in respect of which the payment is made; (Replaced 49 of 1956 s. 13. Amended 2 of 1971 s. 12; 7 of 1986 s. 5) (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; or (Added 7 of 1986 s. 5) (j) any provision made in respect of a retirement scheme other than for the payment of any sum referred to in paragraph (h). (Added 7 of 1986 s.

5) (2) In computing the profits or losses of a person carrying on a trade, profession or business, nothing shall be deducted for salaries or other remuneration of, or for interest on capital or loans provided by, that person's spouse or, in the case of a partnership, any partner therein or any partner's spouse. (Replaced 71 of 1983 s. 15) 18. Basis for computing profits (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) 18A. Assessable profits for the year of assessment 1974/5 (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) 18B. Basis for computing assessable profit for years of assessment commencing on 1 April 1975 (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) 18C. Commencement of source of profits in years of assessment commencing on or after 1 April 1974 (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) 18D. Cessation of source of profits in years of assessment commencing on 1 April 1975 (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, subject to subsection (3), be deemed to be a cessation for the purposes of subsection (1). (Amended 71 of 1983 s. 16) (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" means a relevant trade, profession or business referred to in the definition in this subsection of "transitional amount"; "relevant period" 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" 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" 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) Where in the year of assessment commencing on 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 and- (a) subsection (2) does not apply by virtue of the proviso thereto; and (b) the assessable profits for the year of assessment commencing on 1 April 1974 have not been computed under section 18A (1) or (2); and (c) the basis period for the year of assessment commencing on 1 April 1974 ended within the year of assessment commencing on 1 April 1973, then the assessable profits for the year of assessment commencing on 1 April 1975 shall be computed on the amount of the profits arising in or derived from Hong Kong during the period beginning 1 year after the end of the basis period for the year of assessment commencing on 1 April 1974 and ending on the date of cessation.

(4) Notwithstanding anything in this Ordinance to the contrary, where, in the year of assessment commencing on 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 in the year of assessment commencing on 1 April 1973- (a) the assessable profits for the year of assessment commencing on 1 April 1974 shall be recomputed on the basis of the actual profits arising in or derived from Hong Kong during such year; and (b) the assessable profits for the year of assessment commencing on 1 April 1975 shall be computed on the amount of the profits therefrom arising in or derived from Hong Kong during the period beginning on 1 April 1975 and ending on the date of cessation. (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) Notwithstanding section 70, where a person ceases to carry on a trade, profession or business in the circumstances described in subsection (4), a claim made by that person for an adjustment of any assessment in accordance with that subsection shall be entertained if it is made in writing within 2 years after the end of the year of assessment commencing on 1 April 1975.

(7) A claim made under subsection (6) shall be regarded as an objection to an assessment under section 64 for the purposes of Part XI.

(Added 7 of 1975 s. 12. Amended 7 of 1986 s. 12) 18E. Change of accounting date and apportionments (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) 18F. Adjustment of assessable profits (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) 19. Treatment of losses (1) Subject to the provisions of subsection (3) 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) (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) For the avoidance of doubt, it is hereby declared that losses incurred during the basis period for any year of assessment prior to that commencing on 1 April 1955, shall be ascertained and treated in accordance with the relevant provisions of this Ordinance in force on 31 March 1955.

(4) Notwithstanding anything in subsection (3), where a loss is sustained in respect of the basis period for the year of assessment commencing on 1 April 1955, such part of such loss as is attributable to that portion (including the whole) of the basis period which is prior to 1 April 1955, shall for the purposes of this section be deemed to have been sustained during the said year of assessment.

(Replaced 36 of 1955 s. 28) 19A. Computation of losses (1) For the purposes of section 19, the amount of a loss incurred by a person chargeable to tax under this Part shall, subject to the provisions of subsection (2) of this section, be computed in a like manner as assessable profits are computed. (2) Where the assessable profits of a person chargeable to tax under this Part are computed in accordance with section 18 (2) by reference to accounts for a period ending on some day other than 31 March in the year prior to the year of assessment, any loss which may be set off under the provisions of section 19 shall be computed by reference to such person's accounts for a similar period ending on the same day in the year of assessment, and the loss so computed shall be deemed to be the loss incurred by such person in that year of assessment.

(3) Where a person commences to carry on a trade, profession or business in Hong Kong within the year of assessment commencing on 1 April 1974, any loss incurred by that person in that year of assessment shall be computed by reference to such person's accounts for a similar period as that person's accounts for a similar period as that person's assessable profits would have been computed under section 18C. (Added 7 of 1975 s. 14.

Amended 7 of 1986 s. 12) (4) Subsections (1) and (2) shall apply to the years of assessment up to and including the year of assessment commencing on 1 April 1974. (Added 7 of 1975 s. 14) (Added 49 of 1956 s. 16) 19B. Approved charitable donations (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 after first giving effect, where appropriate, to section 19.

(2) A person shall not be entitled under subsection (1) to deduct for any year of assessment- (a) any sum which is allowable as a deduction under section 16, 16B or 16C; (b) a sum exceeding 10% of the assessable profits of that person for that year.

(3) This section shall apply to the year of assessment up to and including the year of assessment commencing on 1 April 1974. (Added 7 of 1975 s. 15) (Added 65 of 1970 s. 5) 19C. Treatment of losses after 1 April 1975 (1) 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) 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) 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) (4) 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) 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 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) For the purposes of this section- (a) "partnership" does not include a partnership (other than a partnership referred to in section 345 (2) of the Companies Ordinance (Cap. 32) consisting at any time in the year of assessment of more than 20 partners; (b) in calculating the number of partners in a partnership, there shall be included every partner in any other partnership which is itself a partner in the first-mentioned partnership. (Replaced 51 of 1978 s. 9) (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) 19D. Computation of losses after 1 April 1975 (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) 19E. Adjustment of losses (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) 20. Liability of certain non-resident persons (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) 20A. Persons chargeable on behalf of a non-resident (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) 20B. Persons chargeable in respect of certain profits of a non-resident (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) or (b) to be receipts arising in or derived from Hong Kong from a trade, profession or business carried on in Hong Kong; or (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 in 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- "entertainer or sportsman" 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; "commercial occasion or event" 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. (Added 4 of 1989 s. 2) 21. Assessable profits of certain businesses to be computed on a percen- tage of the turnover 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) 21A. Computation of assessable profits from cinematograph films, patents, trademarks, etc.

The assessable profits of a person arising in or derived from Hong Kong in respect of a sum deemed by section 15 (1) (a) or (b) 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 10% of such sum.

(Added 2 of 1971 s. 14. Amended 7 of 1975 s. 18; 7 of 1986 s. 12) 22. Assessment of partnerships (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) Provided that on application made in writing by all the persons engaged in the trade, profession or business which was commenced before 1 April 1975 both immediately before and immediately after the change, and signed by all of them or, in the case of a deceased person, by his legal representative, and received by the assessor within 2 years after the change took place, the assessor shall compute the profits for any year of assessment up to and including the year commencing on 1 April 1974 as if the trade, profession or business had been discontinued at the date of the change and a new trade, profession or business had been then set up and commenced. (Amended 30 of 1950 Schedule; 49 of 1956 s. 18 7 of 1975 s. 19) (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.

22A. Ascertainment of share of partnership profits or losses (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) For the purposes of this section- (a) "partnership" does not include a partnership (other than a partnership referred to in section 345 (2) of the Companies Ordinance (Cap. 32) consisting at any time in the year of assessment of more than 20 partners; (b) in calculating the number of partners in a partnership, there shall be included every partner in any other partnership which is itself a partner in the first-mentioned partnership. (Replaced 51 of 1978 s. 9) (Added 7 of 1975 s. 20) 22B. Limited partner loss relief (1) In this section- "limited partner" 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" 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 16A 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) 23. Ascertainment of assessable profits of life insurance corporations (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) Any 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; (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 corporations 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" means any abstract referred to in subsection (2); (Added 11 of 1985 s. 2) "life insurance business" means business of the following classes as specified in Part 2 of the First Schedule 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" shall be construed accordingly; (Replaced 11 of 1985 s. 2) "premiums from life insurance business in Hong Kong" 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) 23A. Ascertainment of assessable profits of insurance corporations other than life insurance corporations (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) For the purposes of this section "premiums from insurance business in Hong Kong" shall include- (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 the corporation in Hong Kong. (Amended 49 of 1956 s. 20) (Added 36 of 1955 s. 33. Amended 7 of 1986 s. 12) 23AA. Mutual insurance corporations 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) 23B. [1] Ascertainment of the assessable profits of a ship-owner carrying on business in Hong Kong (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.

(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 recomputed 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 nature, 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 the definition of "exempt sums" 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; (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) and (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 the definition of "exempt sums" 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; (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 the definition of "exempt sums" 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- (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" (in the first place where they appear in section 37 (2), and where they appear in section 37A (2) read "during the basis period".

(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 form 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" 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" means a business of chartering or operating ships, but does not include dealing in ships or agency business in connection with shipping; "charter hire" 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" means any sums derived from, attributable to, or in respect of- (a) any relevant carriage shipped aboard a registered ship at any location within the waters of Hong Kong and proceeding to sea from that or any other location within those waters; or (b) any towage operation undertaken by a registered ship proceeding to sea from any location within the waters of Hong Kong; "goods" includes livestock and mails; "goods in transit", 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", in relation to a ship, includes the use or possession of the ship, and "operated" shall be construed accordingly; "owner", in relation to a ship, includes a charter of the ship under a charter-party; "passengers" does not include re-embarking passengers; "re-embarking passengers", 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" means a ship registered under the Merchant Shipping (Registration) Ordinance (Cap. 415); "relevant carriage", 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" 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" 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" means the waters contained within river trade limits other than the waters of Hong Kong contained within those limits; "sea", except in relation to relevant carriage, means the waters of the sea other than those contained within river trade limits; "ship" includes any dynamically supported craft within the meaning of the Shipping and Port Control Ordinance (Cap. 313); "shipped", in the case of passengers, means embarked; "shipped in Hong Kong", 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", 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", 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) 23C. Ascertainment of the assessable profits of a resident aircraft-owner (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 basis period for that year of assessment.

(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, 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.

(4) For the purposes of this section, the following sums earned by or accrued to an owner of 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.

(5) In this section- "aerodrome or airport" includes any helipad; "air waybill" 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" includes a helicopter; "business as an owner of aircraft" 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" 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" includes livestock and mails; "goods in transit", 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", in relation to an aircraft, includes the use or possession of the aircraft; "owner", in relation to an aircraft, includes a charterer of the aircraft under a charter-party; "passengers" does not include passengers in transit; "passengers in transit", 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" 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", 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", 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" 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 Macao; "relevant sums" 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; (iii) 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 Macao; "shipped", in the case of passengers, means embarked; "shipped in Hong Kong", in relation to the shipment of relevant carriage, means shipped aboard an aircraft at any aerodrome or airport within Hong Kong; "total aircraft income", 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", 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)

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