Advance Ruling Case No. 20

1. The provisions of the Ordinance

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

2. Background

(a)

The Applicants comprise eight companies of the same group. They all commenced business after 1 April 1974.

(b)

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

(c)

Company A and the Applicants make up their accounts to 31 December.

(d)

For administrative reasons, Company A decided to change its accounting date to 30 June. To give effect to the change, accounts for 18 months will be drawn up for the period 1 January 2004 to 30 June 2005.

3. The arrangement

(a)

The Applicants will change the accounting date from 31 December to 30 June in the year of assessment 2004/2005. The first set of financial accounts drawn up after the change will be for the 18 months ended 30 June 2005. The 18-month account finalization will be completed by the end of 2005.

(b)

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

4. The ruling

(a)

The Commissioner will adopt the 6-month period from 1 January 2004 to 30 June 2004 as the basis period of the Applicants for the year of assessment 2004/2005.

(b)

The Commissioner will adopt the 12-month period from 1 July 2004 to 30 June 2005 as the basis period of the Applicants for the year of assessment 2005/2006.

(c)

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

(d)

The assessments for 2004/2005 and 2005/2006 will be based on the financial accounts for the 18-month period from 1 January 2004 to 30 June 2005.

5. The period for which the ruling applies

This ruling applies to the Applicants for the years of assessment 2003/2004, 2004/2005 and 2005/2006.

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

21 April 2005.