Advance Ruling Case No. 24

1. The provisions of the Ordinance

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

2. Background

(a)

Company A and Company B ("the applicants") were incorporated in Hong Kong and they commenced business after 1 April 1974.

(b)

The Applicants make up their accounts to 31 March annually.

(c)

The Applicants are associated companies and have substantial investments in subsidiaries incorporated in PRC. The subsidiaries in PRC are required to use 31 December as their accounting year end.

3. The arrangement

(a)

The Applicants will change the accounting date from 31 March to 31 December in the year of assessment 2005/2006.

(b)

The reason put forward by the Applicants for the change of accounting date is for administrative reasons and to reduce the problems arising on preparation of consolidated accounts due to different accounting year end date amongst the group companies.

4. The ruling

(a)

The Commissioner will adopt the nine-month period from 1 April 2005 to 31 December 2005 as the basis period of the Applicants for the year of assessment 2005/2006.

(b)

The assessable profits of the Applicants for the year of assessment 2004/2005 will not be recomputed as a result of the change of their accounting date from 31 March to 31 December.

5. The period for which the ruling applies

This ruling applies to the Applicants for the years of assessment 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

4 October 2005.