Advance Ruling Case No. 15

1. The provisions of the Ordinance

This ruling applies in respect of section 19C(4) of the Inland Revenue Ordinance ("IRO").

2. Background

(a)

A partnership business known as X & Y [the Partnership] was carried on by Company X and Company Y as partners in equal shares.

(b)

Both Company X and Company Y were incorporated in an overseas Country A.

(c)

The board of directors of Company X and Company Y concluded a merger plan under which Company Y merged into Company X with effect from 1 January 2003.

(d)

Pursuant to the Public Companies Act of Country A, Company Y was dissolved and without liquidation by transfer of Company Y's rights, assets and liabilities to Company X as the surviving company.

(e)

In connection with the merger, the Partnership had ceased to exist. Company X changed its name to CD from 1 January 2003 and its registered office is situated in Country A. CD has its financial accounting year ended 31 December.

(f)

The merger has been effected by way of a universal succession in all assets and liabilities of Company Y and of the Partnership by the merged company, CD.

3. The arrangement

(a)

The merging of Company X and Company Y, with Company X as the surviving company, has financial effect from 1 January 2003.

(b)

In connection with the merger, Company X has changed its name to CD.

(c)

The merger has been effected by way of a universal succession in all assets and liabilities of Company Y and of the Partnership by the merged company, CD.

4. The ruling

The tax losses sustained by the Partnership prior to the merger shall be available for set off against CD's assessable profits under section 19C(4) of the IRO.

5. The period for which the ruling applies

This ruling will apply for the year of assessment 2003/04 and subsequent years of assessment.

6. Date of ruling issued

19 January 2004.