Advance Ruling Case No. 18

1. The provisions of the Ordinance

This ruling applies in respect of section 18E of the Inland Revenue Ordinance.

2. Background

(a)

The Applicants are companies of the same group, 3 of which commenced business before 1 April 1974 ("the Old Businesses"). The remaining 12 companies commenced business after 1 April 1974 ("the New Businesses").

(b)

The holding company of the Applicants is Company A, a company incorporated in Country X.

(c)

In 2004, Company A merged with Company B.

(d)

The Applicants make up their accounts to 30 September whereas Company B makes up its accounts to 31 December.

3. The arrangement

(a)

The Applicants will change the accounting date from 30 September to 31 December in the year of assessment 2004/2005. Both the Old Businesses and the New Businesses will adopt a basis period of 15 months from 1 October 2003 to 31 December 2004 for the year of assessment 2004/2005.

(b)

The reason put forward by the Applicants for the change of accounting date is to conform to the accounting date of Company B.

4. The ruling

(a)

The Commissioner will adopt the 12-month period from 1 January 2004 to 31 December 2004 as the basis period of the Old Businesses for the year of assessment 2004/2005.

(b)

The assessable profits/adjusted losses of the Old Businesses for the year of assessment 2003/2004 will be subject to a re-computation as a result of the change of their accounting date from 30 September to 31 December.

(c)

The Commissioner will adopt the 15-month period from 1 October 2003 to 31 December 2004 as the basis period of the New Businesses for the year of assessment 2004/2005.

(d)

The assessable profits/adjusted losses of the New Businesses for the year of assessment 2003/2004 will not be recomputed as a result of the change of their accounting date from 30 September to 31 December.

5. The period for which the ruling applies

This ruling applies to the Applicants for the years of assessment 2003/2004 and 2004/2005.

6. The material assumptions in respect of a future event or any other matter made by the Commissioner

There are no assumptions made by the Commissioner.

7 . Date of ruling issued

14 December 2004.