| 1 | 2 | 3 | 4 | 5 |
INLAND REVENUE ORDINANCE

INLAND REVENUE ORDINANCE cised or performed by the Commissioner personally, such power may be exercised or such duty may be performed by the deputy commissioner or by an assistant commissioner.

(2) Except where a provision of this Ordinance provides that a power or duty shall be exercised or performed by the Commissioner personally, the Commissioner may, subject to such limitations as he may think fit, authorize in writing any public officer to exercise any power or perform any duty conferred or imposed upon him by this Ordinance.

(Added 26 of 1969 s. 4) 4. Official secrecy (1) Except in the performance of his duties under this Ordinance, every person who has been appointed under or who is or has been employed in carrying out or in assisting any persons to carry out the provisions of this Ordinance shall preserve and aid in preserving secrecy with regard to all matters relating to the affairs of any person that may come to his knowledge in the performance of his duties under this Ordinance, and shall not communicate any such matter to any person other than the person to whom such matter relates or his executor or the authorized representative of such person or such executor, nor suffer or permit any person to have access to any records in the possession, custody or control of the Commissioner. (Amended 9 of 1958 s. 3) (2) Every person appointed under or employed in carrying out the provisions of this Ordinance, shall before acting under this Ordinance take and subscribe before a justice of the peace an oath of secrecy in such form as the Board of Inland Revenue may specify.

(Amended 39 of 1969 s. 2) (3) No person appointed under or employed in carrying out the provisions of this Ordinance shall be required to produce in any court any return, document, or assessment, or to divulge or communicate to any court any matter or thing coming under his notice in the performance of his duties under this Ordinance, except as may be necessary for the purpose of carrying into effect the provisions of this Ordinance.

(4) Notwithstanding anything contained in this section, the Commissioner or any officer of the Inland Revenue Department authorized by the Commissioner in that behalf may communicate any matter which comes to his knowledge, including a copy of any return, accounts or other document submitted to him in connection with this Ordinance- (a) to the Commissioner of Rating and Valuation, to the Collector of Stamp Revenue, or to the Estate Duty Commissioner, or (Amended 20 of 1948 s. 4) (b) to the income tax authority of any part of the Commonwealth to such an extent as the Commissioner may deem necessary to enable the correct relief to be given from income tax in that part in respect of the payment of tax under this Ordinance, or (Amended 30 of 1950 Schedule; 9 of 1958 s. 3) (c) to the Attorney General, or any public officer authorized by him, for the purpose of reporting under section 68 (5) an appeal to the Board of Review, or (Added 2 of 1971 s. 3. Amended 79 of 1992 s. 10) (d) to any person appointed under or employed in carrying out the provisions of the Business Registration Ordinance (Cap. 310), as regards any matter required to be notified to the Commissioner pursuant to section 8 (1) or (2) of that Ordinance by the person submitting such return, accounts or other document. (Added 79 of 1992 s. 10) (5) Notwithstanding anything contained in this section, the Commissioner may permit the Director of Audit or any officer of that department duly authorized by the Director of Audit in that behalf to have such access to any records or documents as may be necessary for the performance of his official duties.

The Director of Audit or any officer so authorized shall be deemed to be a person employed in carrying out the provisions of this Ordinance for the purpose of subsection (2).

(6) Notwithstanding anything contained in this section, where the Commissioner is of the opinion that any tax deemed to be in default under the provisions of section 71 (1) has for the time being become irrecoverable, he may communicate to the Financial Secretary the names and descriptions of the persons charged with such tax together with particulars of the tax in default. (Added 9 of 1958 s. 3) (Amended 9 of 1958 s. 3) PART II PROPERTY TAX 5. Charge of property tax (1) Property tax shall, subject to the provisions of this Ordinance, be charged for each year of assessment on every person being the owner of any land or buildings or land and buildings wherever situate in Hong Kong and shall be computed at the standard rate on the net assessable value of such land or buildings or land and buildings for each such year. (Amended 76 of 1975 s. 3; 8 of 1983 s. 4; 7 of 1986 s. 12) Provided that- (a) (Repealed 76 of 1975 s. 3) (b) where the owner of the land is not the owner of the buildings thereon, separate assessments shall be made for the land and for the buildings; (c) (Repealed 26 of 1969 s. 5) (d) (Repealed 76 of 1975 s. 3) (e) property tax shall not be charged for any year of assessment in respect of any land or buildings or land and buildings in the New Territories other than New Kowloon unless and until the Governor by proclamation in the Gazette declares that property tax shall be so charged. (Added 49 of 1956 s. 4) (Replaced 36 of 1955 s. 6) (1A) In subsection (1), "net assessable value" means the assessable value of land or buildings or land and buildings, ascertained in accordance with section 5A or 5B, as the case may be- (a) less, in a case under section 5A, an allowance for repairs and outgoings of 20% of that assessable value; or (b) less, in a case under section 5B- (i) where the owner agrees to pay the rates in respect of the land or buildings or land and buildings, those rates paid by him; and (ii) an allowance for repairs and outgoings of 20% of that assessable value after deduction of any rates under subparagraph (i). (Added 76 of 1975 s. 3. Amended 8 of 1983 s. 4) (1B) The percentage allowance specified in subsection (1A) may be amended by resolution of the Legislative Council. (Added 76 of 1975 s. 3) (2) (a) Notwithstanding subsection (1), any corporation carrying on a trade, profession or business in Hong Kong shall, on application made in writing to the Commissioner and on proof of the facts to the satisfaction of the Commissioner, be entitled to exemption from the property tax for any year of assessment in respect of any land or buildings or land and buildings owned by the corporation where the corporation would be entitled under section 25 to a set-off of the property tax which, if exemption were not granted under this subsection, would be paid by the corporation; and the property shall be and remain exempted from property tax for each year of assessment in which the circumstances, throughout the whole of that year, are such as to qualify the property for such exemption for the whole of that year. (Amended 7 of 1986 s. 12) (b) Where the circumstances are such that the property does not qualify for exemption under this subsection for the whole of any year of assessment, then the property tax chargeable in respect thereof shall be reduced in the proportion which the number of days in such year during which the property was so qualified bears to the whole of that year, and any excess tax paid shall be refunded.

(c) Every corporation exempted from property tax under this subsection in respect of any land or buildings or land and buildings shall, within 30 days after the event, notify the Commissioner in writing of any change in the ownership or use thereof or in any other circumstances affecting such exemption. (Added 35 of 1965 s. 3) (2A) Except for the purposes of section 5B (5)- (a) the words "throughout the whole of that year" and "the whole of" in subsection (2) (a); (b) subsection (2) (b); and (c) subsection (3), (4) and (5), shall not apply to any year of assessment commencing on or after 1 April 1983. (Added 98 of 1983 s. 4) (3) Notwithstanding subsection (1)-(Amended 2 of 1971 s. 4; 5 of 1982 s. 2) (a) in the case of any building or any part thereof owned by a sole owner and occupied solely by him exclusively for residential purposes throughout the whole of any year of assessment, property tax shall not be charged in respect thereof for that year of assessment, and any tax paid shall be refunded; (b) in the case of any building or any part thereof owned by a sole owner and occupied solely by him exclusively for residential purposes during, but not throughout the whole of, any year of assessment, property tax in respect thereof for that year of assessment shall be reduced in the proportion in which the number of days during which it was occupied solely by the owner exclusively for residential purposes during that year bears to the number of days in that year, and any excess tax paid shall be refunded; (c) in the case of any building or part thereof owned by more than one owner jointly or in common, the property tax which would, but for the provisions of this paragraph, be chargeable in respect thereof shall, for the purposes of determining what, if any, reduction in the amount of such tax is allowable under this paragraph, and for this purpose only, be treated as if apportioned- (i) in the case of joint ownership, between the joint owners equally; and (ii) in the case of ownership in common, between the owners in common each in proportion to his share in such ownership, and in respect of any such owner who throughout the whole of any year of assessment solely occupied such building or part exclusively for residential purposes, his portion of the property tax for that year of assessment shall not be charged in respect of such building or part, and in respect of any such owner who, during but not throughout the whole of, any year of assessment, solely occupied such building or part exclusively for residential purposes, his portion of the property tax for that year of assessment shall be reduced in the proportion in which the number of days during which such building or part was solely occupied by him exclusively for residential purposes during that year bears to the number of days in that year, and the total property tax in respect of such building or part shall be computed accordingly, and any excess tax paid shall be refunded; (Added 35 of 1965 s. 3) (d) in the case of any land or building or land and building or part thereof owned by- (i) a person who carries on a club or similar institution on or in such land or building or land and building or such part, being a person who is, by virtue of section 24(1), deemed not to carry on a business; (ii) a person who carries on a trade, professional or business association on or in such land or building or land and building or part in such circumstances that he is not deemed by section 24 (2) to carry on a business; (iii) a clan, family or t'ong, which land or building or land and building or part is certified by the Secretary for Home Affairs to be the ancestral property of the clan or family or the property of the t'ong, (Amended L.

N. 17 of 1982; L. N. 18 of 1983; L. N. 262 of 1989) and occupied by such person, clan, family and t'ong solely for the purposes of a club or similar institution or a trade, professional or business association or for the purposes of the clan, family or t'ong, as the case may be, throughout the whole of any year of assessment, property tax shall not be charged in respect thereof for that year of assessment, and any tax paid shall be refunded; Provided that where, during a year of assessment, such person, clan, family or t'ong received any rent or other similar consideration, other than from a member of the club or similar institution or of the trade, professional or business association or of the clan, family or t'ong, under a lease or licence or an agreement for a lease or licence of such land or building or land and building or part thereof, property tax shall be charged for that year in accordance with subsection (1) by reference to- (i) the proportion which the area the subject of the lease or licence or agreement therefor bears to the total area of the whole of the land or building or land and building or part; and (ii) the proportion which the number of days during which such land or building or land and building or part was subject to such lease or licence or agreement therefor during that year bears to the number of days in that year. (Added 7 of 1979 s. 2) (4) Where any building or part of any building in respect of which the property tax has not been charged or has been reduced in pursuance of any of the provisions of subsection (3) ceases to be occupied solely by the owner exclusively for residential purposes or, in the case referred to in paragraph (c) of that subsection, solely by any of the owners by reason of whose occupation the property tax was not charged or was reduced, such owner shall notify the Commissioner in writing within 3 months of his ceasing so to occupy the same. (Added 35 of 1965 s. 3) (5) For the purposes of subsections (2), (3) and (4)- (a) (Repealed 26 of 1969 s. 5) (b) occupation of any building or part by one of more than one owners shall not be taken to be occupation otherwise than solely by such owner merely by reason of the fact that another owner also occupied the same building or part during the same period; (c) references to a building or part thereof means only a building or a part of a building the rateable value of which is separately estimated under section 10 of the Rating Ordinance (Cap. 116). (Added 35 of 1965 s. 3) 5A. Ascertainment of assessable value (1) Except for the purposes of section 5B (5) and an assessment of provisional property tax under Part XC for the year of assessment commencing on 1 April 1983, this section shall not apply to any year of assessment commencing on or after 1 April 1983. (Added 8 of 1983 s. 5) (1A) In a case where subsection (4) applies, the assessable value of land or buildings or land and buildings shall be an amount equal to the estimated annual rent which would be permitted under Part I or authorized or fixed under Part II or IV or section 124C, as the case may be, of the Landlord and Tenant (Consolidation) Ordinance (Cap. 7) if- (Amended 39 of 1979 s. 26; 76 of 1981 s. 60) (a) the tenant undertook to pay all usual tenant's rates and taxes; and (b) the landlord undertook to pay the Crown rent, the costs of repairs and insurance and any other expenses necessary to maintain the property in a state to command that rent.

(2) In any other case, the assessable value of land or buildings or land and buildings shall be an amount equal to the rent at which on the first day of any year of assessment such property might reasonably be expected to let from year to year if- (a) the tenant undertook to pay all usual tenant's rates and taxes; and (b) the landlord undertook to pay the Crown rent, the costs of repairs and insurance and any other expenses necessary to maintain the property in a state to command that rent: Provided that- (i) in respect of any property which became chargeable to property tax on a date after the first day of the year of assessment for which an assessable value falls to be ascertained, the assessable value of such property shall be ascertained by reference to that date; (ii) where in relation to any year of assessment a fresh assessable value of any property has not been ascertained, the assessable value of the property for that year shall be deemed to be the same as that last ascertained in respect of such property. (3) For the purpose of ascertaining the assessable value of land or buildings or land and buildings under this section- (a) subject to paragraph (b), all machinery (including lifts) used as adjuncts to the property shall be regarded as part of the property, but the reasonable expenses incurred in working such machinery shall be allowed for in arriving at the assessable value of the property; (b) no account shall be taken of the value of any machinery in or on the property for the purpose of manufacturing operations or trade processes.

(3A) Subject to subsection (3B), where any land or buildings or land and buildings are wholly let on the first day of any year of assessment and the Commissioner is satisfied that the assessable value of the land or buildings or land and buildings as ascertained in accordance with this section exceeds the annual rent in respect of the land or buildings or land and buildings, the assessable value for that year of assessment shall, if paragraphs (a) and (b) of subsection (1A) or (2) apply, be reduced to the annual rent. (Added 5 of 1982 s. 3) (3B) For the purposes of subsection (3A), the annual rent shall be- (a) if the rent reserved as on the first day of the year of assessment is expressed as an annual rent, such annual rent; or (b) in any other case, the amount of the rent reserved as on the first day of the year of assessment expressed as the annual rent, and shall include any consideration which has been given or required or will be given or required, whether in money or in kind or in any other manner, as a condition of the grant or continuation of the letting: Provided that in respect of any letting the Commissioner may apportion such consideration or any part thereof on such basis as in his opinion is reasonable and appropriate in the circumstances of the case. (Added 5 of 1982 s. 3) (4) This subsection applies where- (a) any building or any part thereof is wholly let on the first day of any year of assessment; (b) Part I, II or IV or section 124A of the Landlord and Tenant (Consolidation) Ordinance (Cap. 7) applies on the first day of any year of assessment to that letting; and (Amended 39 of 1979 s. 26; 76 of 1981 s.

60) (c) the Commissioner is satisfied that no consideration has been given or required or will be given or required, whether in money or in kind or in any other manner, as a condition of the grant or continuation of such letting other than the payment of such rent as is permitted or authorized under the Landlord and Tenant (Consolidation) Ordinance (Cap. 7).

(Replaced 76 of 1975 s. 4) 5B. Ascertainment of assessable value on or after 1 April 1983 (1) Subject to subsection (5), this section shall apply to any year of assessment commencing on or after 1 April 1983.

(2) The assessable value of land or buildings or land and buildings for each year of assessment shall be the consideration, in money or money's worth, payable in that year to, to the order of, or for the benefit of, the owner in respect of the right of use of that land or buildings or land and buildings.

(3) Any consideration payable before the year of assessment commencing on 1 April 1983 in respect of a period of the right of use which starts after, or extends beyond, 1 April 1983 shall, for the purposes of this section, be deemed to be payable in equal monthly instalments during the period of the right of use or during a period of 3 years ending on 31 March 1986, whichever is the shorter.

(4) Any consideration payable in respect of a period of the right of use which is not contained within any one year of assessment shall, for the purposes of this section, be deemed to be payable in equal monthly instalments during the period of the right of use or during a period of 3 years commencing at the start of the period of the right of use to which the consideration relates, whichever is the shorter.

(5) When a person ceases to be liable to property tax in respect of land or buildings or land and buildings during the year of assessment commencing on 1 April 1983, the assessable value of that land or buildings or land and buildings shall be ascertained in accordance with section 5A.

(6) In this section, "consideration" includes any consideration payable in respect of the provision of any services or benefits connected with or related to the right of use. (Added 8 of 1983 s. 6) 6. (Repealed 8 of 1983 s. 7) 7. Reduction and refund in case of unoccupied property (1) Except for the purposes of section 5B (5), this section shall not apply to any year of assessment commencing on or after 1 April 1983.

(Added 8 of 1983 s. 8) (2) Where it is proved to the satisfaction of the Commissioner that any land or buildings or land and buildings have been occupied for less than 12 months in any year of assessment any property tax payable in respect thereof shall be reduced proportionately and any excess tax paid shall be refunded. (Replaced 36 of 1955 s. 8. Amended 8 of 1973 s. 3; 16 of 1974 s. 3; 76 of 1975 s. 5) 7A. Interpretation In this Part- "buildings", except for the purposes of section 5(2), (3), (4) and (5), includes any part of a building; (Replaced 35 of 1965 s. 4) "land or buildings or land and buildings" includes piers, wharves and other structures; "occupied", in relation to land or buildings or land and buildings, means land or buildings or land and buildings which are being put to beneficial use. (Replaced 76 of 1975 s. 6) (Added 36 of 1955 s. 9) 7B. Claims for refund of property tax (1) Notwithstanding section 70, a claim made for a refund of property tax under section 5(3) (a), (b), (c) or (d) or under section 7 may be made in writing within 90 days after the end of the relevant year of assessment or within 90 days after notice of assessment to the property tax is given, whichever is the later: (Amended 7 of 1979 s. 3) Provided that if the Commissioner is satisfied that owing to absence from Hong Kong, sickness or other reasonable cause, the person claiming a refund of property tax was prevented from making his claim within the period allowed, the Commissioner shall extend the period as he considers reasonable in the circumstances. (Amended 7 of 1986 s. 12) (2) For the purposes of Part XI a claim made in accordance with subsection (1) shall be regarded as an objection to an assessment under section 64.

(Added 26 of 1969 s. 8) 7C. Bad debts (1) In ascertaining the assessable value of any land or buildings or land and buildings under this Part for any year of assessment commencing on or after 1 April 1983, there shall be deducted any consideration in money or money's worth, payable or deemed to be payable on or after 1 April 1983 to, to the order of, or for the benefit of, the owner in respect of the right of use of that land or buildings or that land and buildings and proved to the satisfaction of the assessor to have become irrecoverable during that year of assessment.

(2) Consideration previously deducted as irrecoverable and recovered during any year of assessment shall be treated as consideration mentioned in section 5B (2) payable in that year of assessment in respect of the right of use of the land or buildings or land and buildings in respect of which that consideration was payable.

(3) Notwithstanding section 70, where a person is entitled to deduct any consideration under subsection (1) but the land or buildings or land and buildings has no or insufficient assessable value from which to deduct that consideration in the year of assessment in which, under that subsection, that consideration is deductible, that consideration, or that consideration to the extent to which it cannot be deducted in that year, shall be deducted from the assessable value of that land or buildings or that land and buildings in the latest year of assessment in which that assessable value is sufficient.

(Added 8 of 1983 s. 9) PART III SALARIES TAX (Amended 36 of 1955 s. 10) 8. Charge of salaries tax (1) Salaries tax shall, subject to the provisions of this Ordinance, be charged for each year of assessment on every person in respect of his income arising in or derived from Hong Kong from the following sources- (a) any office or employment of profit; and (b) any pension.

(1A) For the purposes of this Part, income arising in or derived from Hong Kong from any employment- (a) includes, without in any way limiting the meaning of the expression and subject to paragraph (b), all income derived from services rendered in Hong Kong including leave pay attributable to such services; (Amended 69 of 1987 s. 2) (b) excludes income derived from services rendered by a person who- (i) is not employed by the Government or as master or member of the crew of a ship or as commander or member of the crew of an aircraft; and (ii) renders outside Hong Kong all the services in connection with his employment; and (Added 2 of 1971 s. 5. Amended 69 of 1987 s. 2) (c) excludes income derived by a person from services rendered by him in any territory outside Hong Kong where- (i) by the laws of the territory where the services are rendered, the income is chargeable to tax of substantially the same nature as salaries tax under this Ordinance; and (ii) the Commissioner is satisfied that that person has, by deduction or otherwise, paid tax of that nature in that territory in respect of the income. (Added 69 of 1987 s. 2) (1B) In determining whether or not all services are rendered outside Hong Kong for the purposes of subsection (1A) no account shall be taken of services rendered in Hong Kong during visits not exceeding a total of 60 days in the basis period for the year of assessment. (Added 2 of 1971 s. 5) (2) In computing the income of any person for the purposes of subsection (1) there shall be excluded the following- (a) the official emoluments received by the Governor; (b) the official emoluments of consuls, vice-consuls and persons employed on the staff of any consulate, who are subjects or citizens of the state which they represent; (c) any sum received by way of commutation of pension under an approved retirement scheme, the Pensions Ordinance (Cap.

89), the Pension Benefits Ordinance (Cap. 99) or the Pension Benefits (Judicial Officers) Ordinance (Cap. 401); (Replaced 2 of 1971 s. 5.

Amended 36 of 1987 s. 42; 85 of 1988 s. 48) (ca) in the case of a pension attributable to services rendered in any office or employment, other than employment by the Government, so much of the pension as is not attributable to services rendered in Hong Kong; (Added 2 of 1971 s. 5) (cb) any sum, other than a pension, withdrawn from an approved retirement scheme, but, if the approved retirement scheme is set up by an employer not chargeable to tax under Part IV, the sum excluded by this paragraph shall not exceed, in the case of that part of the sum withdrawn which represents the employer's contributions, an amount equal to 15% of the employee's income from his office or employment for the year preceding the date of withdrawal multiplied by the number of completed years of his service with that employer; (Added 2 of 1971 s. 5) (d) the emoluments payable by the Government of the members of the Commonwealth, other than the Government of Hong Kong, to members of Her Majesty's forces and to persons in the permanent service of those Governments in Hong Kong in respect of their officer under those Governments; (e) wound and disability pensions granted to members of Her Majesty's forces; (f) gratuities granted to members of Her Majesty's forces in respect of services rendered during war; (fa) the Hong Kong War Memorial Pensions and additional benefits paid under the Hong Kong War Memorial Pensions Ordinance (Cap. 386); (Added 51 of 1991 s. 24) (g) any amount arising from a scholarship, exhibition, bursary, or other similar educational endowment held by that person where he is receiving full time instruction at a university, college, school, or other similar educational establishment; (Replaced 26 of 1969 s. 9.

Amended 1 of 1991 s. 2) (h) the emoluments payable by the Government of the United Kingdom to persons in the temporary service of that Government who are in the opinion of the Commissioner serving in Hong Kong on United Kingdom based terms whereby they are normally employed in the United Kingdom but are liable for overseas service or are recruited in the United Kingdom specially for service in Hong Kong; (Added 26 of 1969 s. 9) (i) any amount received by way of periodical payments in the nature of alimony or maintenance by a person from his or her spouse or former spouse; (Added 35 of 1965 s. 5. Amended 19 of 1991 s. 2) (j) income derived from services rendered as master or member of the crew of a ship or as commander or member of the crew of an aircraft by a person who was present in Hong Kong on not more than- (i) a total of 60 days in the basis period for that year of assessment; and (ii) a total of 120 days falling partly within each of the basis periods for 2 consecutive years of assessment, one of which is that year of assessment; (Added 2 of 1971 s. 5. Amended 7 of 1986 s. 3) (k) any salary or other remuneration paid by another person who is chargeable to profits tax under Part IV which, but for section 17 (2), would be deductible in computing the profits or losses of such other person for the purposes of that Part. (Added 7 of 1986 s. 3) (Replaced 36 of 1955 s. 11. Amended 15 of 1966 s. 2; 7 of 1986 s. 12) 9. Definition of income from employment (1) Income from any office or employment includes- (a) any wages, salary, leave pay, fee, commission, bonus, gratuity, perquisite, or allowance, whether derived from the employer or others, except- (i) the value of any holiday warrant or passage granted by an employer to an employee in so far as it is used for travel; (ii) any allowance for the purchase of any such holiday warrant or passage in so far as it is expended for that purpose; (iii) any allowance paid by an employer to an employee for the transportation of the personal effects of the employee in connection with any journey on which a holiday warrant or passage referred to in subparagraph (i) or (ii) is used in so far as the allowance is expended for the transportation of the personal effects of the employee; and (Amended 3 of 1949 s. 4; 9 of 1950 Schedule; 2 of 1971 s. 6; 40 of 1972 s.

2; 1 of 1991 s. 3) (iv) subject to subsection (2A), any amount paid by the employer to or for the credit of a person other than the employee in discharge of a sole and primary liability of the employer to that other person, not being a liability for which any person was surety; (Added 1 of 1991 s. 3) (aa) so much of any amount (other than a pension falling under section 8 (1) (b)) received by an employee before or after his employment ceases, whether by way of commutation or otherwise, from a pension or provident fund, scheme or society, other than an approved retirement scheme, as represents his employer's contributions to that fund, scheme or society; (Added 2 of 1971 s. 6) (b) the rental value of any place of residence provided rent-free by the employer or an associated corporation; (Amended 38 of 1975 s. 2) (c) where a place of residence is provided by an employer or an associated corporation at a rent less than the rental value, the excess of the rental value over such rent; (Amended 38 of 1975 s. 2) (d) any gain realized by the exercise of, or by the assignment or release of, a right to acquire shares or stock in a corporation obtained by a person as the holder of an office in or an employee of that or any other corporation. (Added 2 of 1971 s. 6) (1A) (a) Notwithstanding subsection (1) (a), where an employer or an associated corporation- (i) pays all or part of the rent payable by the employee; or (ii) refunds all or part of the rent paid by the employee, such payment or refund shall be deemed not to be income; (Replaced 1 of 1991 s. 3) (b) a place of residence in respect of which an employer or associated corporation has paid or refunded all the rent therefor shall be deemed for the purposes of subsection (1) to be provided rent free by the employer or associated corporation; (Amended 1 of 1991 s. 3) (c) a place of residence in respect of which an employer or associated corporation has paid or refunded part of the rent therefor shall be deemed for the purposes of subsection (1) to be provided by the employer or associated corporation for a rent equal to the difference between the rent payable or paid by the employee and the part thereof paid or refunded by the employer or associated corporation. (Added 36 of 1954 s. 2. Amended 38 of 1975 s. 2; 1 of 1991 s. 3) (2) The rental value of any place of residence provided by the employer or an associated corporation shall be deemed to be 10% of the income as described in subsection (1) (a) derived from the employer for the period during which a place of residence is provided after deducting the outgoings, expenses and allowances provided for in section 12 (1) (a) and (b) to the extent to which they are incurred during the period for which the place of residence is provided and any lump sum payment or gratuity paid or granted upon the retirement or termination of employment of the employee: (Amended 35 of 1965 s. 6; 26 of 1969 s. 10; 7 of 1975 s. 3; 38 of 1975 s. 2) Provided that- (a) if such place of residence be a hotel, hostel or boarding house the rental value shall be deemed to be 8% of the income aforesaid where the accommodation consists of not more than 2 rooms and 4% where the accommodation consists of not more than one room; (b) if such place of residence be other than a hotel, hostel or boarding house any person may elect to have- (i) in respect of the years of assessment up to and including the year of assessment commencing on 1 April 1982, the assessable value ascertained in accordance with section 5A; or (ii) in respect of the years of assessment commencing on or after 1 April 1983, the rateable value included in the valuation list prepared under section 12 of the Rating Ordinance (Cap. 116) or, if the place of residence is not so included, the rateable value ascertained in accordance with Part III of that Ordinance, substituted for rental value at 10% as aforesaid. (Replaced 10 of 1950 s. 3. Amended 38 of 1975 s. 2; 76 of 1975 s. 7; 8 of 1983 s. 10) (2A) Subsection (1) (a) (iv) shall not operate to exclude- (a) any benefit capable of being converted into money by the recipient; or (b) any amount paid by an employer in connection with the education of a child of an employee, from income from any office or employment. (Added 1 of 1991 s. 3) (3) A pension shall include a pension which is voluntary or is capable of being discontinued. (Replaced 36 of 1955 s. 13) (4) For the purposes of subsection (1)- (a) the gain realized by the exercise at any time of such a right as is referred to in paragraph (d) of that subsection shall be taken to be the difference between the amount which a person might reasonably expect to obtain from a sale in the open market at that time of the shares or stock acquired and the amount or value of the consideration given whether for them of for the grant of the right of for both; and (b) the gain realized by the assignment or release of such a right as is referred to in paragraph (d) of that subsection shall be taken to be the difference between the amount or value of the consideration for the assignment or release and the amount or value of the consideration given for the grant of the right, (c) just apportionment being made of any entire consideration given for the grant of the right to acquire the said shares or stock and other shares or stock or otherwise for the grant of the right to acquire those shares or stock and for something beside): provided that neither the consideration given for the grant of the right nor any such entire consideration shall be taken to include the performance of any duties in or in connection with the office or employment by reason of which the right was granted, and no part of the amount or value of the consideration given for the grant shall be deducted more than once under this subsection. (Replaced 2 of 1971 s. 6) (5) Where salaries tax may by virtue of subsection (1) (d) become chargeable in respect of any gain which may be realized by the exercise of a right, salaries tax shall not be chargeable under any other provision of this Ordinance in respect of the receipt of the right. (Added 2 of 1971 s. 6. Amended L. N. 65 of 1986) (6) For the purposes of this section- "associated corporation" means- (a) a corporation over which the employer has control; (b) if the employer is a corporation- (i) a corporation which has control over the employer; or (ii) a corporation which is under the control of the same person as is the employer; "child of an employee" means any child of an employee or of his or her spouse or former spouse, whether or not born in wedlock, and includes the adopted or step child of either or both of them; (Added 1 of 1991 s. 3) "control", in relation to a corporation, means the power of a person to secure- (a) by means of the holding of shares or the possession of voting power in or in relation to that or any other corporation; or (b) by virtue of any powers conferred by the articles of association or other document regulating that or any other corporation, that the affairs of the first-mentioned corporation are conducted in accordance with the wishes of that person; (Added 38 of 1975 s. 2) "employee" includes a holder of an office; (Added 1 of 1991 s. 3) "place of residence" includes a residence provided by an employer or an associated corporation notwithstanding that the employee is required to occupy that place of residence by or under his terms of employment and whether or not by doing so he can better perform his duties. (Added 48 of 1979 s. 2) 10. Salaries tax on spouses to be paid separately unless they elect to be jointly assessed (1) In the case of a husband and wife, unless an election is made under subsection (2), salaries tax shall be payable on the net chargeable income of each spouse ascertained under this Part by the spouse to whom the income has accrued.

(2) Where in any year of assessment a husband and wife, not being a wife living apart from her husband, both have assessable income and- (a) either the husband or wife is entitled to allowances under Part V which are in excess of his or her net assessable income as reduced by approved charitable donations under section 12B (1) (a); or (b) both also have a net chargeable income and the aggregate of the salaries tax which would be payable by them if subsection (1) applies exceeds the salaries tax which would be payable if an election is made under this subsection, an election may be made by them, subject to section 11, to be assessed to salaries tax in the manner specified in subsection (3).

(3) Where an election is made by a husband and wife under subsection (2) salaries tax shall be payable on their aggregated net chargeable income as ascertained under section 12B (2) and in the case of an election- (a) under subsection (2) (a), the spouse who would have been chargeable to salaries tax in the absence of such an election; (b) under subsection (2) (b), the spouse who is nominated by them, shall be chargeable to salaries tax in respect of such aggregated net chargeable income. (4) Where a husband or wife is deceased an executor shall have the same right to make an election under subsection (2) as the deceased would have had if the deceased had not died.

(5) For the purposes of subsection (3), where an election is made under subsection (2) by a husband and wife who married one another in the year of assessment to which the election relates, they shall be deemed, for the purposes of ascertaining their aggregated net chargeable income for that year, to have married at the commencement of that year.

(Replaced 43 of 1989 s. 3) 11. The time and manner in which an election or the withdrawal of an election for joint assessment is to be made (1) An election shall be made in the specified form jointly by the husband and wife and, subject to subsection (3), may be withdrawn by them jointly by notice in writing given to the Commissioner.

(2) An election shall relate to the year of assessment specified in such form and it, and any withdrawal thereof under this section, may be made at any time- (a) within that year of assessment or the following year of assessment; or (b) before the expiration of a period of one month following the time when the assessment for the year of assessment becomes final and conclusive under section 70, whichever is the later, or within such further time, if any, as the Commissioner may allow as being reasonable in the circumstances.

(3) Where an election is withdrawn under this section it shall, for the purpose of assessing the net chargeable income of the husband and wife, be deemed never to have been made and any assessment made prior to such withdrawal on the basis of the election may be adjusted by the Commissioner to take account of the withdrawal. (4) A husband and wife who under this section have withdrawn an election may not again make an election in relation to the year of assessment to which the withdrawn election relates.

(5) In this section "election" means an election made under section 10 (2) and, where a nomination under section 10 (3) (b) is required, includes such nomination. (Added 43 of 1989 s. 3) 11A. (Repealed 71 of 1983 s. 4) 11B. Ascertainment of assessable income The assessable income of a person in any year of assessment shall be the aggregate amount of income accruing to him from all sources in that year of assessment. (Added 8 of 1973 s. 5. Amended 71 of 1983 s. 5) 11C. Office or employment of profit For the purpose of section 11B, a person shall be deemed to commence or cease, as the case may be, to derive income from a source whenever and as often as he commences or ceases- (a) to hold any office or employment of profit; or (b) to become entitled to a pension.

(Replaced 71 of 1983 s. 6) 11D. Receipt of income For the purpose of section 11B- (a) income which has accrued to a person during the basis period for a year of assessment but which has not been received by him in such basis period shall not be included in his assessable income for that year of assessment until such time as he shall have received such income, when notwithstanding anything contained in this Ordinance, an additional assessment shall be raised in respect of such income: Provided that for the purposes of this paragraph income which has either been made available to the person to whom it has accrued or has been dealt with on his behalf or according to his directions shall be deemed to have been received by such person; (b) income accrues to a person when he becomes entitled to claim payment thereof; Provided that- (i) any lump sum payment received on or after 1 April 1966, being a lump sum payment or gratuity paid or granted upon the retirement from or termination of any office or employment or any contract of employment of an employee or a lump sum payment of deferred pay or arrears of pay arising from an award of salary or wages, whether such a payment is paid by an employer to a person during employment or after that person has left his employ, shall upon the application in writing of the person entitled to claim payment thereof within 2 years after the end of the year of assessment in which the payment is made be related back and shall then be deemed to be income which has accrued during the periods in which the services or employment, in respect of which the payment was made, were performed or exercised, or, if the relevant periods of service or employment exceed 3 years, the payment shall be deemed to be income accruing at a constant rate over the 3 years ending on the date on which the person became entitled to claim payment thereof or ending on the last day of employment, whichever is the earlier; and, notwithstanding section 70, an application made by any person under this proviso for the adjustment of an assessment shall, to that extent, be regarded as a valid objection to the assessment under section 64; and (ii) subject to proviso (i), any payment made by an employer to a person after that person has ceased or been deemed to cease to derive income which, if it had been made on the last day of the period during which he derived income, would have been included in that person's assessable income for the year of assessment in which he ceased or is deemed to cease to derive income from that employment, shall be deemed to have accrued to that person on the last day of that employment.

(Added 8 of 1973 s. 5. Amended 71 of 1983 s. 7) 12. Adjustments to assessable income (1) In ascertaining the net assessable income of a person for any year of assessment, there shall be deducted from the assessable income of that person- (a) all outgoings and expenses, other than expenses of a domestic or private nature and capital expenditure, wholly, exclusively and necessarily incurred in the production of the assessable income; (b) allowances calculated in accordance with Part VI in respect of capital expenditure on machinery or plant the use of which is essential to the production of the assessable income; (c) the amount of any excess carried forward to that year of assessment in accordance with section 12A (3); (d) the amount of any excess required by subsection (3) to be deducted.

(2) Where any machinery or plant is not used wholly and exclusively in the production of assessable income, the amount of the allowances provided for in subsection (1) (b) shall be reduced in the proportion considered by the assessor to be fair and reasonable. (3) If in the case of a husband and wife who have made an election under section 10 (2), the aggregate of deductions claimed for any year of assessment by either spouse under subsection (1) (a), (b) and (c) exceeds the assessable income of that spouse in that year, the excess shall be deducted spouse in that year, the excess shall be deducted from the assessable income of the other spouse for the purpose of determining the net assessable income of that other spouse in that year. (Amended 43 of 1989 s. 4) (4) (Repealed 71 of 1983 s. 8) (5) The amount of assessable income for any year of assessment of a person shall, for the purposes of ascertaining his net assessable income, be increased by the amount of any balancing charge directed to be made under Part VI on that person in respect of the machinery or plant used in the production of the assessable income. (Replaced 7 of 1975 s. 4. Amended 71 of 1983 s. 8) 12A. Treatment of losses (1) Where in any year of assessment the aggregate of the outgoings, expenses and allowances deductible under section 12 (1) (a) and (b) from the assessable income of a person exceeds the amount of his assessable income, the amount of the excess shall, subject to subsection (4), be carried forward and set off against his assessable income in subsequent years of assessment.

(2) The aggregate amount set off against a person's assessable income in subsequent years of assessment shall not exceed the amount of any excess under subsection (1). (3) Subject to subsection (4), a set off by a person under this section shall first be made against his assessable income for the year of assessment next succeeding the year of assessment in respect of which the excess occurred and, so far as it cannot be so made, against his assessable income for the next year of assessment and so on until the excess has been completely set off.

(4) Where in any year of assessment the net chargeable incomes of the husband and wife are aggregated by reason of an election made under section 10 (2), any excess carried forward into that year under this section shall- (a) be set off primarily against the assessable income of the spouse whose deductions resulted in the excess and then, so far as it cannot be so set off, against the assessable income of the other spouse; and (b) then, and so far as it cannot be set off in accordance with paragraph (a)- (i) where no election is made under section 10 (2) in respect of the following year of assessment, in accordance with subsection (3); or (ii) where an election is made under section 10 (2) in respect of the following year of assessment, in accordance with paragraph (a), and so on from year to year until the excess has been completely set off.

(Replaced 43 of 1989 s. 5) (Replaced 7 of 1975 s. 4. Amended 71 of 1983 s. 9) 12B. Ascertainment of net chargeable income (1) The net chargeable income of a person for any year of assessment shall, subject to subsection (2), be such amount as is arrived at after deducting from his net assessable income- (a) such approved charitable donations as are provided for under section 12BA; and (b) such allowances as are under Part V permitted for that person. (Amended 43 of 1989 s. 6) (2) In the case of a person chargeable to salaries tax under section 10(3), that person and his or her spouse shall have but one net chargeable income, and it shall be the amount arrived at after deducting from the aggregate of their net assessable incomes- (a) such approved charitable donations as are provided for under section 12BA; and (b) such allowances as are under Part V permitted in their case. (Replaced 43 of 1989 s. 6) (3) (Repealed 43 of 1989 s. 6) (Replaced 71 of 1983 s. 10) 12BA. Charitable donation (1) Subject to subsections (2) and (3), the amount of charitable donations that, in ascertaining net chargeable income, may be deducted- (a) in the case of a person whose assessable income is aggregated with that of his or her spouse by reason of an election made under section 10 (2), from the aggregate of their net assessable incomes; and (b) in the case of any other person, from the net assessable income of that person.

shall be the aggregate of approved charitable donations which are made during that year by that person and by his or her spouse, if in any case such aggregate amount is not less than $ 100. (Replaced 43 of 1989 s. 7) (2) Every deduction claimed by virtue of subsection (1) shall be claimed on the specified form and the deduction shall be permitted only if the claim contains such particulars and is supported by such proof as the Commissioner may require. (Amended 43 of 1989 s. 7) (3) No deduction shall be permitted under subsection (1) for any year of assessment in respect of- (a) any sum which is allowable as a deduction under section 16, 16B, 16C or 16D; (b) a sum in excess of 10% of- (i) the assessable income as reduced by the deductions provided for under section 12 (1) (a) and (b); or (ii) in the case of a husband and wife who have made an election under section 10 (2), the aggregate of the assessable incomes of both spouses as reduced in each case by the deductions provided for under section 12 (1) (a) and (b). (Replaced 43 of 1989 s. 7) (4) Notwithstanding anything contained in this section, a charitable donation shall not be taken into account in ascertaining the net chargeable income of more than one person and, where a deduction of the same donation is claimed or allowed in respect of the net chargeable income of more than one person, section 33(2) to (4) shall apply with the necessary modifications to such a deduction as they do to a dependent parent allowance or a child allowance; and section 33 shall, where this subsection applies, be construed as if a reference to such an allowance included, in the case of a donation so claimed, a reference to an allowance to which section 33 (2) applies and, in the case of a donation so allowed, an allowance to which section 33 (3) applies. (Added 43 of 1989 s. 7) (Added 71 of 1983 s. 11) 13. Calculation of salaries tax (1) Subject to subsection (2), salaries tax, shall be charged at the rates specified in Schedule 2 on the net chargeable income of a person for each year of assessment ascertained in accordance with this Part.

(2) The amount of salaries tax so charged shall not exceed the amount which would have been chargeable had the standard rate been charged on the whole of- (a) the net assessable income as reduced by approved charitable donations provided for under section 12BA; or (b) in the case of a spouse chargeable to salaries tax under section 10 (3), the aggregate amount of his or her net assessable income and that of his or her spouse as reduced by approved charitable donations provided for under section 12BA. (Replaced 43 of 1989 s. 8) PART IV PROFITS TAX 14. Charge of profits tax Subject to the provisions of this Ordinance, profits tax shall be charged for each year of assessment at the standard rate on every person carrying on a trade, profession or business in Hong Kong in respect of his assessable profits arising in or derived from Hong Kong for that year from such trade, profession or business (excluding profits arising from the sale of capital assets) as ascertained in accordance with this Part: (Replaced 2 of 1971 s. 9 Amended 7 of 1986 s. 12) Provided that for the year of assessment commencing on 1 April 1975- (a) in the case of a corporation, profits tax shall be charged at the rate of 16 1/2%; and (b) in the case of a corporation to which a share of the assessable profits of a partnership is apportionable under section 22A and is charged in the partnership name under section 22, profits tax shall be charged on such share of the assessable profits at the rate of 16 1/2%; (Added 38 of 1975 s. 3) Provided further that for the year of assessment commencing on 1 April 1976 and all subsequent years of assessment up to and including the year of assessment commencing on 1 April 1979- (a) in the case of a corporation, profits tax shall be charged at the rate of 17%; and (b) in the case of a corporation to which a share of the assessable profits of a partnership is apportioned under section 22A and is charged in the partnership name under section 22, profits tax shall be charged on such share of the assessable profits at the rate of 17%; (Added 32 of 1976 s. 2. Amended 32 of 1981 s. 2) Provided further that for the year of assessment commencing on 1 April 1980 and all subsequent years of assessment up to and including the year of assessment commencing on 1 April 1983- (a) in the case of a corporation, profits tax shall be charged at the rate of 16 1/2%; and (b) in the case of a corporation to which a share of the assessable profits of a partnership is apportioned under section 22A and is charged in the partnership name under section 22, profits tax shall be charged on such share of the assessable profits at the rate of 16 1/2%; (Added 32 of 1981 s. 2. Amended 32 of 1984 s. 2) Provided further that for the year of assessment commencing on 1 April 1984 and all subsequent years of assessment up to and including the year of assessment commencing on 1 April 1986- (a) in the case of a corporation, profits tax shall be charged at the rate of 18 1/2%; and (b) in the case of a corporation to which a share of the assessable profits of a partnership is apportioned under section 22A and is charged in the partnership name under section 22, profits tax shall be charged on such share of the assessable profits at the rate of 18 1/2%; (Added 36 of 1984 s. 2. Amended 28 of 1987 s. 2) Provided further that for the year of assessment commencing on 1 April 1987- (a) in the case of a corporation, profits tax shall be charged at the rate of 18%; and (b) in the case of a corporation to which a share of the assessable profits of a partnership is apportioned under section 22A and is charged in the partnership name under section 22, profits tax shall be charged on such share of the assessable profits at the rate of 18%; (Added 28 of 1987 s. 2 Amended 28 of 1988 s. 3) Provided further that for the year of assessment commencing on 1 April 1988- (a) in the case of a corporation, profits tax shall be charged at the rate of 17%; and (b) in the case of a corporation to which a share of the assessable profits of a partnership is apportioned under section 22A and is charged in the partnership name under section 22, profits tax shall be charged on such share of the assessable profits at the rate of 17%; (Added 28 of 1988 s.

3. Amended 17 of 1989 s. 3) Provided further that for the year of assessment commencing on 1 April 1989 and all subsequent years of assessment up to and including the year of assessment commencing on 1 April 1991- (a) in the case of a corporation, profits tax shall be charged at the rate of 16 1/2%; and (b) in the case of a corporation to which a share of the assessable profits of a partnership is apportioned under section 22A and is charged in the partnership name under section 22, profits tax shall be charged on such share of the assessable profits at the rate of 16 1/2%; (Added 17 of 1989 s. 3. Amended 34 of 1992 s. 2) Provided further that for the year of assessment commencing on 1 April 1992 and all subsequent years of assessment- (a) in the case of corporation, profits tax shall be charged at the rate of 17 1/2%; and (b) in the case of a corporation to which a share of the assessable profits of a partnership is apportioned under section 22A and is charged in the partnership name under section 22, profits tax shall be charged on such share of the assessable profits at the rate of 17 1/2%.

(Added 34 of 1992 s. 2) 15. Certain amounts deemed trading receipts (1) For the purposes of this Ordinance, the sums described in the following paragraphs shall be deemed to be receipts arising in or derived from Hong Kong from a trade, profession or business carried on in Hong Kong- (a) sums, not otherwise chargeable to tax under this Part, received by or accrued to a person from the exhibition or use in Hong Kong of cinematograph or television film or tape, any sound recording, or any advertising material connected with such film, tape or recording; (b) sums, not otherwise chargeable to tax under this Part, received by or accrued to a person for the use of or right to use in Hong Kong a patent, design, trademark, copyright material or secret process or formula or other property of a similar nature, or for imparting or undertaking to impart knowledge directly or indirectly connected with the use in Hong Kong of any such patent, design, trademark, copyright, secret process or formula or other property; (c) sums received by or accrued to a person by way of grant, subsidy or similar financial assistance in connection with the carrying on of a trade, profession or business in Hong Kong, other than sums in connection with capital expenditure made or to be made by the person; (d) sums received by or accrued to a person by way of hire, rental or similar charges for the use of movable property in Hong Kong or the right to use movable property in Hong Kong; (e) (Repealed 7 of 1975 s. 7) (f) sums received by or accrued to a corporation carrying on a trade, profession or business in Hong Kong by way of interest derived from Hong Kong; (Replaced 19 of 1986 s. 2) (g) sums received by or accrued to a person, other than a corporation, carrying on a trade, profession or business in Hong Kong by way of interest derived from Hong Kong which interest is in respect of the funds of the trade, profession or business; (Replaced 19 of 1986 s. 2. Amended 17 of 1989 s. 4) (h) sums received by or accrued to a person by way of refund to that person of a contribution made by him as employer to an approved retirement scheme, but to the extent only that such sums were allowed as deductions in ascertaining the assessable profits of that person under this Part; (i) sums, not otherwise chargeable to tax under this Part, received by or accrued to a financial institution by way of interest which arises through or from the carrying on by the financial institution of its business in Hong Kong, notwithstanding that the moneys in respect of which the interest is received or accrues are made available outside Hong Kong; (Added 73 of 1978 s. 3) (j) sums received by or accrued to a corporation carrying on a trade, profession or business in Hong Kong by way of gains or profits arising in or derived from Hong Kong from the sale or other disposal or on the redemption on maturity or presentment of a certificate of deposit or bill of exchange; (Replaced 19 of 1986 s. 2) (k) sums received by or accrued to a person, other than a corporation, carrying on a trade, profession or business in Hong Kong by way of gains or profits arising in or derived from Hong Kong from the sale or other disposal or on the redemption on maturity or presentment of a certificate of deposit or bill of exchange where such gains or profits are in respect of the funds of the trade, profession or business; (Replaced 19 of 1986 s. 2. Amended 28 of 1987 s.

3; 17 of 1989 s. 4) (l) sums, not otherwise chargeable to tax under this Part, received by or accrued to a financial institution by way of gains or profits arising through or from the carrying on by the financial institution of its business in Hong Kong from the sale or other disposal or on the redemption on maturity or presentment of a certificate of deposit or bill of exchange notwithstanding that- (i) the moneys laid out for the acquisition of the certificate or bill were made available outside Hong Kong; or (ii) the sale, disposal or redemption is effected outside Hong Kong; and (Added 19 of 1986 s. 2. Amended 28 of 1987 s. 3) (m) sums received or receivable by a person as consideration in respect of the transfer of a right to receive income, as provided for in section 15A.

(Added 28 of 1987 s. 3) (1A) Subsection (1) (j) or (k) shall not apply to gains or profits arising in or derived from Hong Kong, other than gains or profits received by or accrued to a person whose trade, profession or business comprises or includes trading in certificates of deposit or bills of exchange, to the extent to which such gains or profits relate to a period prior to 1 April 1981; and gains or profits received by or accrued to any person from the sale or other disposal or on the redemption on maturity or presentment, on or after 1 April 1981, of a certificate of deposit or bill of exchange purchased or otherwise acquired by that person before that date, shall be determined by reference to such amount as the Commissioner may consider such certificate of deposit or bill of exchange would have realized if it had been sold in the open market at the close of business on 31 March 1981 and not by reference to the amount, if any, paid by that person in so purchasing or otherwise acquiring such certificate of deposit or bill of exchange. (Added 30 of 1981 s. 3) (1B) (Repealed 36 of 1984 s. 3) (2) Where, in ascertaining for the purposes of this Part the profits of a trade, profession or business carried on in Hong Kong, a deduction has been allowed for any debt incurred for the purposes of the trade, profession or business, then, if the whole or any part of that debt is thereafter released, the amount released shall be deemed to be a receipt of the trade, profession or business arising in or derived from Hong Kong at the time when the release was effected.

(3) Where in the basis period for any year of assessment a financial institution was not a financial institution for the whole of that period, in that, if the institution is a bank it was not licensed for the whole of that period or if the institution is a deposit-taking company it was not registered for the whole of that period, then subsection (l) (i) and (l) shall apply only in respect of such part of the basis period during which the bank or deposit-taking company was licensed or registered, as the case may be. (Added 73 of 1978 s. 3. Amended 19 of 1986 s. 2) (4) The amendments to this section effected by the Inland Revenue (Amendment) Ordinance 1984 (36 of 1984) shall not have the effect of rendering chargeable to tax sums received or accrued to any person prior to 1 April 1984 which were not chargeable to tax immediately prior to the coming into force of that Ordinance. (Added 36 of 1984 s. 3) (5) The amendments to this section effected by the Inland Revenue (Amendment) (No.

2) Ordinance 1986 (19 of 1986) shall apply to sums received or accrued by way of interest, gains or profits on or after 1 April 1986, and the provisions of this section in force immediately prior to the coming into force of that Ordinance shall continue to apply to such sums received or accrued prior to 1 April 1986 as if such amendments had not been enacted.

(Added 19 of 1986 s. 2) (Replaced 2 of 1971 s. 9. Amended 7 of 1986 s. 12) 15A. Transfer of right to receive income (1) Subject to subsection (3) where- (a) a right to receive income from property is transferred by a person to another person; and (b) consideration has been received or is receivable in respect of the transfer, the amount of the consideration shall, notwithstanding the exclusion relating to the sale of capital assets contained in section 14, be treated as a trading receipt arising in or derived from Hong Kong by the transferor from a trade, profession or business carried on in Hong Kong.

(2) The reference in subsection (1) to the amount of consideration shall, in the case where consideration is paid or given otherwise than in cash, be construed as a reference to the money value of the consideration.

(3) Subsection (1) shall not apply in relation to a transfer of a right to receive income from property where the right arose from the ownership by the transferor of a legal or equitable estate or interest in the property and, before or at the time of that transfer, the transferor also transferred that estate or interest to the transferee. (4) In this section- "income" means any profits, rent, interest or royalty chargeable to tax under Part IV; "property" means any property whatsoever; "right to receive income from property" means a right to have income that will or may be derived from property paid to, or applied or accumulated for the benefit of, the person owning the right.

(5) This section shall apply to any agreement made for the transfer of a right to receive income from property within the meaning of subsection (4) entered into or effected after 25 February 1987 other than an agreement made in pursuance of a legally enforceable obligation incurred on or before that date.

(Added 28 of 1987 s. 4) 15B. (Repealed 71 of 1983 s. 13) 15C. Valuation of trading stock on cessation of business Where a person ceases to carry on a trade or business in Hong Kong the trading stock of the trade or business at the date of cessation shall be valued for the purpose of computing the profits in respect of which that person is chargeable to tax under this Part as follows- (Amended 28 of 1964 s. 6; 26 of 1969 s. 12) (a) in the case of any such trading stock- (i) which is sold or transferred for valuable consideration to a person who carries on or intends to carry on a trade or business in Hong Kong; and (ii) the cost whereof may be deducted by the purchaser as an expense in computing the profits from such trade or business in respect of which such purchasers is chargeable to tax under this Part, the value thereof shall be taken to be the amount realized on the sale or the value of the consideration given for the transfer; (Amended 28 of 1964 s. 6) (b) in the case of any other such trading stock, the value thereof shall be taken to be the amount which it would have realized if it had been sold in the open market at the date of cessation. (Added 36 of 1955 s. 22. Amended 7 of 1986 s. 12) 15D. Post-cessation receipts and payments (1) Where a person who has ceased to carry on a trade, profession or business in Hong Kong, receives any sum which, if it had been received before such cessation, would have been included in the profits of the trade, profession or business in respect of which the person is chargeable to tax under this Part, then to the extent to which the sum has not already been included in such profits that sum shall be deemed to be profits of the trade, profession or business for the year of assessment in which the cessation occurred.

(2) Where a person who has ceased to carry on a trade, profession or business in Hong Kong pays any sum which, if it had been paid before such cessation, would have been deductible in computing the profits of the trade, profession or business in respect of which the person is chargeable to tax under this Part, then to the extent to which the sum has not already been deducted in computing such profits, that sum shall be deducted in ascertaining his profits for the year of assessment in which the cessation occurred. (Added 26 of 1969 s. 13. Amended 7 of 1986 s. 12) 16. Ascertainment of chargeable profits (1) In ascertaining the profits in respect of which a person is chargeable to tax under this Part for any year of assessment there shall be deducted all outgoings and expenses to the extent to which they are incurred during the basis period for that year of assessment by such person in the production of profits in respect of which he is chargeable to tax under this Part for any period, including- (a) where the conditions set out in subsection (2) are satisfied, sums payable by such person by way of interest upon any money borrowed by him for the purpose of producing such profits, and sums payable by such person by way of legal fees, procuration fees, stamp duties and other expenses in connection with such borrowing; (Replaced 2 of 1971 s. 11. Amended 36 of 1984 s. 4) (b) rent paid by any tenant of land or buildings occupied by him for the purpose of producing such profits, but not exceeding, in the case of rent paid to the tenant's spouse, or by a partnership to one or more of the partners thereof or to a spouse of any such partner, an amount equal to the assessable value of the land or buildings; (Amended 76 of 1975 s. 8; 8 of 1983 s. 11; 71 of 1983 s. 14) (c) tax of substantially the same nature as tax imposed under this Ordinance, proved to the satisfaction of the Commissioner to have been paid elsewhere, whether by deduction or otherwise, by any corporation which is managed and controlled in Hong Kong or by a person other than a corporation who carries on a trade, profession or business in Hong Kong, during the basis period for the year of assessment in respect of profits chargeable to tax by virtue of section 15 (1) (f), (g), (i), (j), (k) or (l); (Amended 7 of 1986 s. 12; 19 of 1986 s. 3) Provided that no deduction shall be made under this paragraph if the corporation or person concerned is eligible for relief under Part VIII in respect of such profits; (Added 73 of 1978 s. 4. Amended 36 of 1984 s. 4) (d) bad debts incurred in any trade, business or profession, proved to the satisfaction of the assessor to have become bad during the basis period for the year of assessment, and doubtful debts to the extent that they are respectively estimated to the satisfaction of the assessor to have become bad during the said basis period notwithstanding that such bad or doubtful debts were due and payable prior to the commencement of the said basis period: Provided that- (i) deductions under this paragraph shall be limited to debts which were included as a trading receipt in ascertaining the profits, in respect of which the person claiming the deduction is chargeable to tax under this Part, of the period within which they arose, and debts in respect of money lent, in the ordinary course of the business of the lending of money within Hong Kong, by a person who carries on that business; (Amended 7 of 1986 s. 12) (ii) all sums recovered during the said basis period on account of amounts previously allowed in respect of bad or doubtful debts shall for the purposes of this Ordinance be treated as part of the profits of the trade, business or profession for that basis period; (e) expenditure incurred in the repair of any premises, plant, machinery, implement, utensil or article employed in the production of such profits; (f) expenditure incurred in the replacement of any implement, utensil or article employed in the production of such profits: Provided that no allowances have been or shall be made under the provisions of Part VI in respect of such implement, utensil or article; (g) notwithstanding section 17, a sum expended for the registration of a trade mark, 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 subsec; (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.

tion (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 (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.
| 1 | 2 | 3 | 4 | 5 |