Advance Ruling Case No. 38

The provisions of the Ordinance

This ruling applies in respect of section 18E of the Inland Revenue Ordinance ("IRO").

2. Background

(a)

The Applicants are members of a group of companies, some of which commenced businesses before 1 April 1974 ("the Old Businesses") while others commenced businesses on or after 1 April 1974 ("the New Businesses").

(b)

In the application, it was stated that the Applicants make up their accounts to 30 June.

(c)

One of the Applicants, Company A, has associated companies or jointly controlled entities in Hong Kong and the Mainland with 31 December as their accounting date.

3. The arrangement

(a)

The Applicants will change their accounting date from 30 June 2009 to 31 December 2009 in the year of assessment 2009/10.

(b)

The reasons put forward by the Applicants for the change of accounting date are to alleviate time pressure for reporting consolidated results and to adopt the same accounting date for the group companies.

4. The ruling

(a)

The Commissioner will adopt the 18-month period from 1 July 2008 to 31 December 2009 as the basis period of the New Businesses for the year of assessment 2009/10.

(b)

The Commissioner will continue to adopt the 12-month period from 1 July 2007 to 30 June 2008 as the basis period of the New Businesses for the year of assessment 2008/09.

5. The ruling declined

The Commissioner declined to make a ruling:

(a)

in respect of the Applicants that are Old Businesses and section 61A of the IRO because the correctness of the ruling would depend on the making of assumptions about trading results for a future period; and

(b)

in respect of the Applicants that are New Businesses and not having 30 June 2007 as their accounting date for the year of assessment 2007/08 because the correctness of the ruling would depend on the making of assumptions about their accounting date for the year of assessment 2008/09.

6. The period for which the ruling applies

This ruling applies to the Applicants for the years of assessment 2008/09 and 2009/10.

7. 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.

8. Date of ruling issued

19 January 2009.

9. Commentary

Section 2 in Part I of Schedule 10 of the IRO provides that the Commissioner may decline to make a ruling if the application seeking the ruling would require the Commissioner to determine or establish any question of fact. In the present application, the Applicants classify themselves as Old Business or New Business. It is a question of fact whether a company is Old Business or New Business. In this connection, no ruling is given on whether an Applicant commenced business before, on or after 1 April 1974 i.e. whether it is Old Business or New Business.

(This commentary is not a legally binding statement and it does not form part of the Ruling.)