News Archives (started from April 2016)

DIPN 53  

The Inland Revenue Department today issued the Departmental Interpretation and Practice Notes No. 53 (“Tax Treatment of Regulatory Capital Securities”) which sets out the Department’s interpretation and practice on the application of the profits tax provisions relating to regulatory capital securities in the Inland Revenue (Amendment) (No. 2) Ordinance 2016.  The provisions clarify the profits tax treatment of regulatory capital securities issued by financial institutions to comply with Basel III capital adequacy requirements.

Country-by-Country Reporting  

Hong Kong will implement Country-by-Country Reporting for the accounting periods commencing on or after 1 January 2018, subject to necessary legislative amendments. As a transitional arrangement, parent surrogate filing will be made available for the accounting periods commencing between 1 January 2016 and 31 December 2017.

Profits Tax - Court-free Company Amalgamations 

The assessment practice in relation to court-free amalgamations has been updated to clarify the meaning of amalgamating company and amalgamated company, elaborate the tests for set-off of the tax losses carried forward in the amalgamated company or from the amalgamating company, and add examples to illustrate the application of the same trade test.

DIPN 6 (Revised)  

The Departmental Interpretation and Practice Notes No. 6 (Revised) has been updated to reflect the legislative changes brought about by the Inland Revenue (Amendment) (No. 3) Ordinance 2015 which commenced on 1 April 2016.  This Practice Note covers the provisions of the Inland Revenue Ordinance in relation to:
(A) Objections to the Commissioner
(B) Appeals to the Board of Review
(C) Appeals to the Courts

Newly published Advance Ruling Cases  

(No. 59 & 60)

Hong Kong has now legislation in place for implementing automatic exchange of financial account information (AEOI). The Department has to ensure that financial institutions comply with their obligations under the relevant legislation. Some reference materials on AEOI have been uploaded onto the Department’s website today to provide guidance for financial institutions and other relevant parties.  

Please click here for information.

DIPN 52  

The Inland Revenue Department today issued the Departmental Interpretation and Practice Notes No. 52 (“Taxation of Corporate Treasury Activity”) which sets out the Department’s interpretation and practice in relation to the relevant provisions in the Inland Revenue (Amendment) (No. 2) Ordinance 2016. The Practice Note explains the conditions under which interest deduction claims could be allowed by virtue of section 16(2)(g) of the Inland Revenue Ordinance and how a corporate treasury centre can obtain the half rate concession under section 14D(1).

Revised application forms for certificate of Hong Kong resident status in respect of the Comprehensive Arrangement for the Avoidance of Double Taxation between the Mainland and Hong Kong (“the Arrangement”) will apply as from 20 June 2016  

To streamline the implementation of the Arrangement, the Mainland and Hong Kong exchanged notes on 16 March 2016 and 15 April 2016 agreeing and confirming the following administrative arrangement on certificate of Hong Kong resident status:

A Certificate of Resident Status issued by the Hong Kong competent authority to a Hong Kong resident for a particular calendar year serves as a proof of the Hong Kong resident status of the Hong Kong resident for that calendar year and the two succeeding calendar years.  Where there are changes in the Hong Kong resident’s circumstances such that the conditions for enjoying tax benefits under the Arrangement are no longer met, such issued Certificate of Resident Status cannot serve as a proof of the Hong Kong resident status after the changes.

The above administrative arrangement is effective as from 15 April 2016, and applies to all Certificates of Resident Status issued by the Hong Kong competent authority in respect of the Arrangement, including those issued before 15 April 2016.

In connection with the above administration arrangement, any person applying for a certificate of Hong Kong resident status in respect of the Arrangement has to complete the following revised forms as from 20 June 2016:
IR1313A (06/2016) – for company, partnership, trust or other body of person
IR1314A (06/2016) – for individuals

Generally, for claiming tax benefits under the Arrangement in the Mainland, where a person has been issued with a certificate of Hong Kong resident status for a particular calendar year, it would not be necessary for the person to apply for certificate of Hong Kong resident status for the two succeeding calendar years.

The revised forms can be downloaded here.

Performance Pledge Annual Report 2015/16  

The Inland Revenue Department has achieved all the targets, and exceeded many, in its performance pledges in 2015/16. The Performance Pledge Annual Report 2015/16 has been uploaded to the Department’s website.

DIPN 51 & DIPN 43(Revised)  

DIPN 51 DIPN 43(Revised)

The Inland Revenue Department today issued the Departmental Interpretation and Practice Notes No. 51 (“Profits Tax Exemption for Offshore Private Equity Funds”) which sets out the Department’s interpretation and practice in relation to the relevant provisions in the Inland Revenue (Amendment) (No. 2) Ordinance 2015.  The amendment ordinance was principally enacted to extend the profits tax exemption for offshore funds to offshore private equity funds.  The Departmental Interpretation and Practice Notes No. 43 (Revised) (“Profits Tax Exemption for Offshore Funds”) has also been updated to reflect the legislative changes brought about by the amendment ordinance.