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INLAND REVENUE ORDINANCE

INLAND REVENUE ORDINANCE (CHAPTER 112) CONTENTS Section PART I INTRODUCTORY 1. Short title 2. Interpretation 3. Establishment of Board of Inland Revenue. Power of Governor to appoint a Commissioner and other officers 3A. Exercise of powers and duties 4. Official secrecy PART II PROPERTY TAX 5. Charge of property tax 5A. Ascertainment of assessable value 5B. Ascertainment of assessable value on or after 1 April 1983 6. (Repealed) 7. Reduction and refund in case of unoccupied property 7A. Interpretation 7B. Claims for refund of property tax 7C. Bad debts PART III SALARIES TAX 8. Charge of salaries tax 9. Definition of income from employment 10. Salaries tax on spouses to be paid separately unless they elect to be jointly assessed 11. The time and manner in which an election or the withdrawal of an election for joint assessment is to be made 11A. (Repealed) 11B. Ascertainment of assessable income 11C. Office or employment of profit 11D. Receipt of income 12. Adjustments to assessable income 12A. Treatment of losses 12B. Ascertainment of net chargeable income 12BA. Charitable donation 13. Calculation of salaries tax PART IV PROFITS TAX 14. Charge of profits tax 15. Certain amounts deemed trading receipts 15A. Transfer of right to receive income 15B. (Repealed) 15C. Valuation of trading stock on cessation of business 15D. Post-cessation receipts and payments 16. Ascertainment of chargeable profits 16A. Special payment under an approved retirement scheme allowable as a deduction 16B. Expenditure on scientific research 16C. Payments for technical education 16D. Approved charitable donations 16E. Purchase and sale of patent rights, etc.

17. Deductions not allowed 18. Basis for computing profits 18A. Assessable profits for the year of assessment 1974/5 18B. Basis for computing assessable profit for years of assessment commencing on 1 April 1975 18C. Commencement of source of profits in years of assessment commencing on or after 1 April 1974 18D. Cessation of source of profits in years of assessment commencing on 1 April 1975 18E. Change of accounting date and apportionments 18F. Adjustment of assessable profits 19. Treatment of losses 19A. Computation of losses 19B. Approved charitable donations 19C. Treatment of losses after 1 April 1975 19D. Computation of losses after 1 April 1975 19E. Adjustment of losses 20. Liability of certain non-resident persons 20A. Persons chargeable on behalf of a non-resident 20B. Persons chargeable in respect of certain profits of a non-resident 21. Assessable profits of certain businesses to be computed on a percentage of the turnover 21A. Computation of assessable profits from cinematograph films, patents, trademarks, etc.

22. Assessment of partnerships 22A. Ascertainment of share of partnership profits or losses 22B. Limited partner loss relief 23. Ascertainment of assessable profits of life insurance corporations 23A. Ascertainment of assessable profits of insurance corporations other than life insurance corporations 23AA. Mutual insurance corporations 23B. Ascertainment of the assessable profits of a ship-owner carrying on business in Hong Kong 23C. Ascertainment of the assessable profits of a resident aircraft-owner 23D. Ascertainment of the assessable profits of a non-resident aircraft- owner 23E. Alternative computation of "total shipping profits" and "total air- craft profits" 24. Clubs, trade associations, etc.

25. Deduction of property tax from profits tax.

26. Exclusion of certain dividends and profits from the assessable profits of other persons 26A. Exclusion of certain profits from tax PART V ALLOWANCES 27. Allowances, general provisions 28. Basic allowance 29. Married person's allowance 30. Dependent parent allowance 31. Child allowance 32. Single parent allowance 33. Provisions supplementary to section 30 and 31 PART VI DEPRECIATION, ETC.

34. Initial and annual allowances, industrial buildings and structures 35. Balancing allowances and charges, industrial buildings and structures 35A. Special provisions on termination of leasehold interest 35B. Buildings and structures bought unused 36. Rebuilding allowance for a commercial building or structure 36A. Application of provisions to machinery or plant 37. Initial and annual allowances, machinery or plant 37A. Initial and annual allowances in respect of machinery and plant acquired under hire purchase agreement 38. Balancing allowances and charges, machinery or plant 38A. Determination of cost of individual assets sold together for one price 38B. Commissioner's power to determine the true value of an asset on sale 38C. Special provision as to allowances on a change in partnership 39. Replacement of machinery or plant 39A. Reduction of allowances not to affect calculation of subsequent allowances 39B. Initial and annual allowances on machinery or plant under the pooling system 39C. Pooling system when not to apply 39D. Balancing allowances and charges under the pooling system 39E. Allowances under this Part in respect of capital expenditure on leased machinery and plant 40. Interpretation 40A. Initial allowances in years of assessment 1974/75 to 1975/76 PART VII PERSONAL ASSESSMENT 40B. Interpretation 41. Election for personal assessment 42. Calculation of total income 42A. Assessment to tax 42B. (Repealed) 43. Rates of charge 43A. (Repealed) PART VIII DOUBLE TAXATION RELIEF 44. (Repealed) 45. Relief in respect of Commonwealth income tax 46. Official secrecy 47-48. (Repealed) 49. Double taxation arrangements 50. Tax credits PART IX RETURNS, ETC.

51. Returns and information to be furnished 51A. Power to require statement of assets and liabilities, etc.

51B. Power to issue search warrant 51C. Business records to be kept 51D. Rent records to be kept 52. Information to be furnished by officials and employers 53. Who may act for incapacitated or non-resident persons 54. Liability of executor of deceased taxpayer 55. (Repealed) 56. Precedent partner to act on behalf of partnership 56A. Joint owners and co-owners 57. Principal officer to act on behalf of a corporation or body of persons 58. Signature and service of notices 58A. (Repealed) PART X ASSESSMENTS 59. Assessor to make assessments 59A. Provisional assessments 60. Additional assessments 61. Certain transactions and dispositions to be disregarded 61A. Transactions designed to avoid liability for tax 61B. Utilization of losses to avoid tax 62. Notice to be issued by Commissioner 63. Validity of assessments, etc.

63A. Appointment of agent in the United Kingdom PART XA PROVISIONAL SALARIES TAX 63B. Liability for provisional salaries tax 63C. Amount of provisional salaries tax 63D. Demands for provisional salaries tax 63E. Holding over of payment of provisional salaries tax 63F. Provisional salaries tax to be applied against salaries tax PART XB PROVISIONAL PROFITS TAX 63G. Liability for provisional profits tax 63H. Amount of provisional profits tax 63I. Demands for provisional profits tax 63J. Holding over of payment of provisional profits tax 63K. Provisional profits tax to be applied against profits tax PART XC PROVISIONAL PROPERTY TAX 63L. Liability for provisional property tax 63M. Amount of provisional property tax 63N. Demands for provisional property tax 63O. Holding over of payment of provisional property tax 63P. Provisional property tax to be applied against property tax PART XI OBJECTIONS AND APPEALS 64. Objections 65. Constitution of the Board of Review 66. Right of appeal to the Board of Review 67. Transfer of appeals under section 66 for hearing and determination by High Court instead of Board of Review 68. Hearing and disposal of appeals to the Board of Review 69. Appeals to the High Court 69A. Right to appeal directly to Court of Appeal against decision of Board of Review 70. Assessments or amended assessments to be final 70A. Powers of assessor to correct errors 70B. Husband and wife PART XII PAYMENT AND RECOVERY OF TAX 71. Provisions regarding payment of tax 72. Tax to include fines, etc.

73-74. (Repealed) 75. Tax recoverable as a civil debt through the District Court 75A. (Repealed) 76. Recovery of tax from a debtor of the taxpayer 77. Recovery of tax from persons leaving Hong Kong 77A. Refusal of clearance to ships and aircraft where tax is in default 78. (Repealed) PART XIII REPAYMENT 79. Tax paid in excess to be refunded PART XIV PENALTIES AND OFFENCES 80. Penalties for failure to make returns, making incorrect returns, etc.

80A. (Repealed) 81. Breach of secrecy and other matters to be offences 82. Penal provisions relating to fraud, etc.

82A. Additional tax in certain cases 82B. Appeals against assessment to additional tax to Board of Review 83. Tax payable notwithstanding proceedings 84. Prosecutions, sanction of Commissioner PART XV GENERAL 85. Power to make rules 86. Board of Inland Revenue to specify forms 87. General power of Governor in Council to exempt 87A. Approval of retirement schemes 88. Exemption of charitable bodies 89. Transitional provisions Schedule 1 Standard Rate Schedule 2 Rates Schedule 3 Public Utility Companies Fourth Schedule Allowances Fifth Schedule Transitional Provisions relating to the Inland Revenue (Amendment) (No. 3) Ordinance 1989 Schedule 6 PART I Instruments PART II Bodies To impose a tax on property, earnings and profits.

(Amended 26 of 1969 s. 2; 17 of 1989 s. 2) [3 May 1947] PART I INTRODUCTORY 1. Short title This Ordinance may be cited as the Inland Revenue Ordinance.

2. Interpretation (1) In this Ordinance, unless the context otherwise requires- "active partner", in relation to a partnership, means a partner who takes an active part in the control, management, or conduct of the trade or business of such partnership; "agent", in relation to a non-resident person or to a partnership in which any partner is a non-resident person, includes- (a) the agent, attorney, factor, receiver, or manager in Hong Kong of such person or partnership; and (b) any person in Hong Kong through whom such person or partnership is in receipt of any profits or income arising in or derived from Hong Kong; "approved charitable donation" means a donation of money to any charitable institution or trust of a public character which is exempt from tax under section 88 or to the Government, the Urban Council or Regional Council, for charitable purposes; (Replaced 13 of 1971 s. 2. Amended 76 of 1975 s.

2; 74 of 1981 s. 4; 30 of 1990 s. 2) "approved retirement scheme" means a retirement scheme or part thereof approved for the time being by the Commissioner under section 87A; (Added 49 of 1956 s. 3. Amended 7 of 1986 s. 2) "assessable income" means the assessable income of a person in any year of assessment as ascertained in accordance with sections 11B, 11C and 11D; and "net assessable income" means assessable income as adjusted in accordance with section 12; (Replaced 71 of 1983 s. 2) "assessable profits" means the profits in respect of which a person is chargeable to tax for the basis period for any year of assessment, calculated in accordance with the provisions of Part IV; (Replaced 28 of 1964 s. 2) "assessor" means an assessor appointed under this Ordinance; "assistant commissioner" means an assistant commissioner of Inland Revenue appointed under this Ordinance; "authorized representative" means a person authorized in writing by any other person to act on his behalf for the purposes of this Ordinance; (Replaced 7 of 1975 s. 2) "basis period" for any year of assessment is the period on the income or the profits of which tax for that year ultimately falls to be computed; (Amended 36 of 1955 s. 3) "bill of sale" means a bill of sale registrable under the Bills of Sale Ordinance (Cap. 20); "body of person" means any body politic, corporate or collegiate and any company, fraternity, fellowship and society of persons whether corporate or not corporate; (Added 36 of 1955 s. 3) "business" includes agricultural undertaking, poultry and pig rearing and the letting or sub-letting by any corporation to any person of any premises or portion thereof, and the sub-letting by any other person of any premises or portion of any premises held by him under a lease or tenancy other than from the Crown; (Replaced 35 of 1965 s. 2) "certificate of deposit" means a document relating to money, in any currency, which has been deposited with the issuer or some other person, being a document which recognizes an obligation to pay a stated amount to bearer or to order, with or without interest, and being a document by the delivery of which, with or without endorsement, the right to receive that stated amount, with or without interest, is transferable; (Added 30 of 1981 s. 2) "Commissioner" means the Commissioner of Inland Revenue appointed under this Ordinance; (Replaced 26 of 1969 s. 3) "corporation" means any company which is either incorporated or registered under any enactment or charter in force in Hong Kong or elsewhere but does not include a co-operative society or a trade union; (Amended 2 of 1971 s.

2) "debenture" means a debenture as defined in section 2 (1) of the Companies Ordinance (Cap. 32); "deposit" means a deposit as defined in section 2 (1) of the Banking Ordinance (Cap. 155); (Added 29 of 1982 s. 2. Amended 27 of 1986 s. 137) "deputy commissioner" means the deputy commissioner of Inland Revenue appointed under this Ordinance; "executor" means any executor, administrator, or other person administering the estate of a deceased person, and includes a trustee acting under a trust created by the last will of the author of the trust; "financial institution", means- (a) an authorized institution licensed or registered under the Banking Ordinance (Cap. 155); (b) any associated corporation of such an authorized institution which, being exempt by virtue of section 3 (2) (a) or (b) or (c) of the Banking Ordinance (Cap. 155), would have been liable to be licensed or registered as a deposit-taking company or restricted licence bank under that Ordinance had it not been so exempt; (Replaced 27 of 1986 s. 137. Amended 3 of 1990 s. 55) "Governor" means the Governor of Hong Kong and includes the officer for the time being administering the Government; (Added 36 of 1955 s. 3) "Hong Kong currency" means money which is legal tender in Hong Kong; (Added 29 of 1982 s. 2) "husband" means a married man whose marriage is a marriage within the meaning of this section; (Added 43 of 1989 s. 2) "incapacitated person" means any minor, lunatic, idiot, or person of unsound mind; "inspector" means an inspector appointed under this Ordinance; (Added 36 of 1955 s. 3) "limited partnership" has the same meaning as in section 3 of the Limited Partnerships Ordinance (Cap. 37); (Added 47 of 1992 s. 2) "marriage" means- (a) any marriage recognized by the law of Hong Kong; or (b) any marriage, whether or not so recognized, entered into outside Hong Kong according to the law of the place where it was entered into and between persons having the capacity to do so, but shall not, in the case of a marriage which is both potentially and actually polygamous, include marriage between a man and any wife other than the principal wife, and "married" shall be construed accordingly; (Added 43 of 1989 s. 2) "mortgage" means a security by way of mortgage or equitable mortgage for the payment of any definite and certain sum of money advanced or lent at the time, or previously due and owing, or forborne to be paid, being payable, or for the repayment of money thereafter to be lent, advanced or paid, or which may become due upon an account current, together with any sum already advanced or due, or without, as the case may be, and includes- (a) conditional surrender by way of mortgage, or further charge, of or affecting any property whatsoever; and (b) any conveyance of any property whatsoever in trust to be sold or otherwise converted into money, intended only as a security, and redeemable before the sale or other disposal thereof, either by express stipulation or otherwise; and (c) any instrument for defeating or making redeemable, or explaining or qualifying any conveyance, transfer or disposition of any property whatsoever, apparently absolute, but intended only as a security; and (d) any instrument relating to the deposit of any title deeds or instruments constituting or being evidence of the title to any property whatsoever or creating a charge on any property whatsoever; and (e) any mortgage by an equitable owner of his equitable rights; and (f) any warrant of attorney to enter up judgment; (Replaced 79 of 1979 s.

2) [cf. 1891 c. 39 s. 86 U. K.] "net chargeable income" means net chargeable income calculated in accordance with section 12B; (Added 71 of 1983 s. 2) "owner" in respect of land or buildings or land and buildings, includes a person holding directly from the Crown, a beneficial owner, a tenant for life, a mortgagor, a mortgagee in possession, a person who is making payments to a co-operative society registered under the Co-operative societies Ordinance (Cap. 33) for the purpose of the purchase thereof, and a person who holds land or buildings or land and buildings subject to a ground rent or other annual charge; and includes an executor of the estate of an owner; (Added 26 of 1969 s. 3. Amended 8 of 1983 s. 2) "person" includes a corporation, partnership, trustee, whether incorporated or unincorporated, or body of persons; (Amended 2 of 1971 s.

2; 30 of 1981 s. 2) "precedent partner" means the partner who, of the active partners resident in Hong Kong- (a) is first named in the agreement of partnership; or (b) if there is no agreement, is specified by name or initials singly or with precedence to the other partners in the usual name of the partnership; or (c) is first named in any statutory statement of the names of the partners; "profits arising in or derived from Hong Kong" for the purposes of Part IV shall, without in any way limiting the meaning of the term, include all profits from business transacted in Hong Kong, whether directly or through an agent; "receiver" includes any receiver or liquidator, and any assignee, trustee, or other person having the possession or control of the property of any person by reason of insolvency or bankruptcy; "retirement scheme" means any scheme or arrangement, whether or not it is enforceable or intended to be enforceable by legal proceedings, under which, or any provident fund out of which, there is to be paid for the benefit of any person or of his widow, children, surviving dependants or legal representative, any pension, annuity, lump sum, gratuity or other like benefit to be paid- (a) on retirement, or in anticipation of retirement, or, in connection with previous employment, after retirement; or (b) on or in anticipation of or in connection with any change in the nature of the employment of any person, and includes any pension, annuity, lump sum, gratuity or other like benefit which is to be afforded by reason of the death or disability of a person occurring during his employment, where such pension, annuity, lump sum or gratuity is calculated by having regard to the period of such service; (Added 7 of 1986 s. 2) "river trade limits" has the same meaning as in the Merchant Shipping Ordinance (Cap. 281); (Added 47 of 1992 s. 2) "specified form" means a form specified under section 86; (Added 43 of 1989 s. 2) "spouse" means a husband or wife; (Added 43 of 1989 s. 2) "standard rate" means the rate specified in Schedule 1; (Added 30 of 1950 Schedule) "tax" except for the purposes of Parts XII and XIII, means any tax imposed by this Ordinance (including provisional salaries tax charged under Part XA, provisional profits tax charged under Part XB and provisional property tax charged under Part XC) other than additional tax, but for the purposes of Parts XII and XIII "tax" includes additional tax; (Replaced 26 of 1969 s. 3. Amended 8 of 1973 s. 2; 7 of 1975 s. 2; 8 of 1983 s. 2) "trade" includes every trade and manufacture, and every adventure and concern in the nature of trade; "trustee" includes any trustee, guardian, curator, manager, or other person having the direction, control, or management of any property on behalf of any person, but does not include an executor; "wife" means a married woman whose marriage is a marriage within the meaning of this section; (Replaced 43 of 1989 s. 2) "year of assessment" means the period of 12 months commencing on 1 April in any year; (Replaced 30 of 1950 Schedule) "year preceding a year of assessment" means the period of 12 months ending on 31 March immediately prior to such year of assessment.

(Amended 36 of 1955 s. 3; 9 of 1958 s. 2; 26 of 1969 s. 3; 7 of 1986 s.

12) (2) For the purposes of the definition of "financial institution" in subsection (1)- "associated corporation", in relation to a bank or deposit-taking company, means- (a) a corporation over which the bank or deposit-taking company has control; (b) a corporation which has control over the bank or deposit-taking company; or (c) a corporation which is under the control of the same person as is the bank or deposit-taking company; "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.

(Added 73 of 1978 s. 2) (3) For the purposes of this Ordinance a husband and wife shall be deemed to be living apart when they are living apart- (a) under a decree or order of a competent court in or outside Hong Kong; (b) under a duly executed deed of separation or any instrument of similar effect; or (c) in such circumstances that the Commissioner is of the opinion the separation is likely to be permanent. (Added 43 of 1989 s. 2) 3. Establishment of Board of Inland Revenue, Power of Governor to appoint a Commissioner and other officers (1) (a) There shall be a Board of Inland Revenue composed of the Financial Secretary and 4 other members appointed by the Governor, of whom not more than one shall be an official in the employment of the Government. A member so appointed shall hold office until he shall resign or be removed from office by the Governor.

(aa) The Board of Inland Revenue shall have a secretary who shall be the deputy commissioner. (Added 8 of 1983 s. 3) (b) 3 members of the Board of Inland Revenue shall form a quorum for the transaction of business and when the Financial Secretary is present he shall be the chairman. (c) All matters coming before the Board of Inland Revenue shall be decided by a majority of votes, and in the case of an equality of votes the chairman or presiding member shall have a second or a casting vote.

(d) The Board of Inland Revenue may transact any of its business by the circulation of papers without meeting; and a resolution signed by a majority of the members shall be as valid and effective as if it had been passed at a meeting by the votes of the members so signing. (Added 8 of 1983 s. 3) (2) For the purposes of this Ordinance, the Governor may appoint a Commissioner, a deputy commissioner, assistant commissioners, assessors and inspectors. (Amended 36 of 1955 s. 4) (3) An assistant commissioner exercising or performing any power, duty, or function of the Commissioner under this Ordinance shall be deemed for all purposes to be authorized to exercise or perform the same until the contrary is proved.

(4) All powers conferred upon an assessor by this Ordinance may be exercised by an assistant commissioner.

3A. Exercise of powers and duties (1) Where under this Ordinance any power is conferred or any duty is imposed on the Commissioner and so long as it is not provided that the power or duty shall be exer

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