Cap. 112 - Inland Revenue Ordinance

To impose a tax on property, earnings and profits. (Amended 26 of 1969 s. 2; 17 of 1989 s. 2) [3 May 1947](Format changes—E.R. 1 of 2012) Part 1 Introductory 1. Short title This Ordinance may be cited as the Inland Revenue Ordinance. 2. Interpretation (1) In this Ordinance, unless the context otherwise requires—active partner (積極參與的合夥人), in relation to a partnership, means a partner who takes an active part in the control, management, or conduct of the trade or business of such partnership; agent (代理人), in relation to a non-resident person or to a partnership in which any partner is a non-resident person, includes— (a) the agent, attorney, factor, receiver, or manager in Hong Kong of such person or partnership, and (b) any person in Hong Kong through whom such person or partnership is in receipt of any profits or income arising in or derived from Hong Kong; approved association of underwriters (獲認可的承保人組織) means an association of underwriters approved by the Insurance Authority as mentioned in section 6(1)(c) of the Insurance Ordinance (Cap. 41); (Added 15 of 2020 s. 3)approved charitable donation (認可慈善捐款) means a donation of money to any charitable institution or trust of a public character which is exempt from tax under section 88 or to the Government, for charitable purposes; (Replaced 13 of 1971 s. 2. Amended 76 of 1975 s. 2; 74 of 1981 s. 4; 30 of 1990 s. 2; 78 of 1999 s. 7) arrangement (安排) includes— (a) any agreement, arrangement, understanding, promise or undertaking, whether express or implied, and whether or not enforceable or intended to be enforceable, by legal proceedings; and (b) any scheme, plan, proposal, action or course of action or course of conduct; (Added 32 of 1998 s. 3) assessable income (應評稅入息) means the assessable income of a person in any year of assessment as ascertained in accordance with sections 11B, 11C and 11D; and net assessable income (應評稅入息實額) means assessable income as adjusted in accordance with section 12; (Replaced 71 of 1983 s. 2)assessable profits (應評稅利潤) means the profits in respect of which a person is chargeable to tax for the basis period for any year of assessment, calculated in accordance with the provisions of Part 4; (Replaced 28 of 1964 s. 2)assessor (評稅主任) means an assessor appointed under this Ordinance;assistant commissioner (助理局長) means an assistant commissioner of Inland Revenue appointed under this Ordinance;authorized representative (獲授權代表) means a person authorized in writing by any other person to act on his behalf for the purposes of this Ordinance; (Replaced 7 of 1975 s. 2)banking business (銀行業務) has the meaning given by section 2(1) of the Banking Ordinance (Cap. 155); (Added 22 of 2016 s. 3)banking LAC requirement (銀行LAC規定) means a LAC requirement as defined by rule 2(1) of the Financial Institutions (Resolution) (Loss-absorbing Capacity Requirements—Banking Sector) Rules (Cap. 628 sub. leg. B); (Added 4 of 2019 s. 3. Amended E.R. 6 of 2019)basis period (評稅基期) for any year of assessment is the period on the income or the profits of which tax for that year ultimately falls to be computed; (Amended 36 of 1955 s. 3)bill of sale (賣據) means a bill of sale registrable under the Bills of Sale Ordinance (Cap. 20);Board of Review (稅務上訴委員會) means the Board of Review referred to in section 65; (Added 4 of 2010 s. 2)body of persons (團體) means any body politic, corporate or collegiate and any company, fraternity, fellowship and society of persons whether corporate or not corporate; (Added 36 of 1955 s. 3)business (業務) includes agricultural undertaking, poultry and pig rearing and the letting or sub-letting by any corporation to any person of any premises or portion thereof, and the sub-letting by any other person of any premises or portion of any premises held by him under a lease or tenancy other than from the Government; (Replaced 35 of 1965 s. 2. Amended 19 of 1996 s. 15)certificate of deposit (存款證) means a document relating to money, in any currency, which has been deposited with the issuer or some other person, being a document which recognizes an obligation to pay a stated amount to bearer or to order, with or without interest, and being a document by the delivery of which, with or without endorsement, the right to receive that stated amount, with or without interest, is transferable, and, in the case of any such document which is a prescribed instrument by virtue of paragraph (a) of the definition of prescribed instrument (訂明的票據) in section 137B of the Banking Ordinance (Cap. 155), includes any right or interest referred to in paragraph (b) of that definition in respect of such document; (Added 30 of 1981 s. 2. Amended 94 of 1993 s. 36)Commissioner (局長) means the Commissioner of Inland Revenue appointed under this Ordinance; (Replaced 26 of 1969 s. 3)Commissioner for I&T (創科署署長) means the Commissioner for Innovation and Technology; (Added 29 of 2018 s. 3) common parts (公用部分), in relation to any land or buildings or land and buildings— (a) means the whole of the land or buildings or land and buildings, except such parts as have been specified or designated in an instrument registered in the Land Registry as being for the exclusive use, occupation or enjoyment of an owner; and (b) includes, unless so specified or designated in the instrument mentioned in paragraph (a), those parts of a building specified in Schedule 1 to the Building Management Ordinance (Cap. 344); (Added 4 of 2010 s. 2) conditional sale agreement (有條件售賣協議) means an agreement for the sale of goods under which the purchase price or part of the purchase price is payable by instalments, and the property in the goods remains in the seller (notwithstanding that the buyer is to be in possession of the goods) until such conditions as to the payment of instalments or otherwise as may be specified in the agreement are fulfilled; (Added 32 of 1998 s. 3) corporation (法團)— (a) means any company that is either incorporated or registered under any enactment or charter in force in Hong Kong or elsewhere; and (b) includes—(i) Lloyd’s; and(ii) an approved association of underwriters; but (c) does not include a co-operative society or a trade union; (Replaced 15 of 2020 s. 3) debenture (債權證), in relation to a corporation, includes debenture stock, bond and any other debt security of the corporation, whether or not constituting a charge on the assets of the corporation; (Replaced 12 of 2016 s. 11)deposit (存款) means a deposit as defined in section 2(1) of the Banking Ordinance (Cap. 155); (Added 29 of 1982 s. 2. Amended 27 of 1986 s. 137)deputy commissioner (副局長) means a deputy commissioner of Inland Revenue appointed under this Ordinance; (Amended 48 of 1995 s. 2)digital signature (數碼簽署) has the same meaning as in section 2(1) of the Electronic Transactions Ordinance (Cap. 553); (Added 5 of 2003 s. 2)electronic record (電子紀錄) has the same meaning as in section 2(1) of the Electronic Transactions Ordinance (Cap. 553); (Added 5 of 2003 s. 2)executor (遺囑執行人) means any executor, administrator, or other person administering the estate of a deceased person, and includes a trustee acting under a trust created by the last will of the author of the trust; financial institution (財務機構), except in Part 8A and Schedules 17C and 17D, means— (Amended 22 of 2016 s. 3) (a) an authorized institution within the meaning of section 2 of the Banking Ordinance (Cap. 155); (b) any associated corporation of such an authorized institution which, being exempt by virtue of section 3(2)(a) or (b) or (c) of the Banking Ordinance (Cap. 155), would have been liable to be authorized as a deposit-taking company or restricted licence bank under that Ordinance had it not been so exempt; (Replaced 27 of 1986 s. 137. Amended 3 of 1990 s. 55; 49 of 1995 s. 53) foreign DMTT (外地當地最低補足稅) means a minimum tax that is included in the domestic law of a territory outside Hong Kong and implemented and administered in that territory and that—(a) is a QDMTT; or(b) would have been a QDMTT but for either or both of paragraphs (c) and (d) of the definition of qualified domestic minimum top-up tax in Article 10.1.1 of the GloBE rules; (Added 21 of 2025 s. 3)foreign IIR top-up tax (外地收入納入規則補足稅) means a tax under an IIR, as defined by Article 10.1.1 of the GloBE rules, implemented and administered in a territory outside Hong Kong (whether or not a qualified IIR); (Added 21 of 2025 s. 3)foreign UTPR top-up tax (外地低稅利潤規則補足稅) means a tax under a UTPR, as defined by Article 10.1.1 of the GloBE rules, implemented and administered in a territory outside Hong Kong (whether or not a qualified UTPR); (Added 21 of 2025 s. 3)GloBE rules (《全球反侵蝕稅基規則》) has the meaning given by section 26AD(1); (Added 21 of 2025 s. 3) grandparent or grandparent of his or her spouse (該人的或其配偶的祖父母或外祖父母), in relation to any person, means— (a) a natural grandfather or grandmother of the person or his or her spouse; (b) an adoptive grandparent of the person or his or her spouse (whether an adoptive parent of a natural parent, adoptive parent or step parent of the person or his or her spouse, or a natural parent of an adoptive parent of the person or his or her spouse); (c) a step grandparent of the person or his or her spouse (whether a step parent of a natural parent, adoptive parent or step parent of the person or his or her spouse, or a natural parent of a step parent of the person or his or her spouse); or (d) in the case of a deceased spouse, a person who would have been the grandparent of the person’s spouse by reason of any of the provisions of paragraphs (a) to (c) if the spouse had not died; (Added 31 of 1998 s. 3) hire-purchase agreement (租購協議) means an agreement for the bailment of goods under which the bailee may buy the goods, or under which the property in the goods will or may pass to the bailee; (Added 32 of 1998 s. 3)HKMTT (香港最低補足稅)—see section 26AE(4); (Added 21 of 2025 s. 3)Hong Kong currency (港幣) means money which is legal tender in Hong Kong; (Added 29 of 1982 s. 2)husband (丈夫) means a married man whose marriage is a marriage within the meaning of this section; (Added 43 of 1989 s. 2)IIR top-up tax (收入納入規則補足稅)—see section 26AE(2); (Added 21 of 2025 s. 3)incapacitated person (無行為能力的人) means any minor, lunatic, idiot, or person of unsound mind;inspector (稅務督察) means an inspector appointed under this Ordinance; (Added 36 of 1955 s. 3)LAC banking entity (LAC銀行實體) means—(a) an HK affiliated operational entity, as defined by rule 2(1) of the Financial Institutions (Resolution) (Loss-absorbing Capacity Requirements—Banking Sector) Rules (Cap. 628 sub. leg. B), that is required to meet a banking LAC requirement under those Rules; or (Amended E.R. 6 of 2019)(b) a clean HK holding company, as defined by rule 2(1) of those Rules, that is required to meet a banking LAC requirement under those Rules; (Added 4 of 2019 s. 3) lease (租約), except in Subdivisions 4 and 5 of Division 2 of Part 4 and Schedules 17F and 17FA, in relation to any machinery or plant, includes— (Amended 9 of 2017 s. 3; 5 of 2020 s. 3; 10 of 2022 s. 2) (a) any arrangement under which a right to use the machinery or plant is granted by the owner of the machinery or plant to another person; and (b) any arrangement under which a right to use the machinery or plant, being a right derived directly or indirectly from a right referred to in paragraph (a), is granted by a person to another person, but does not include a hire-purchase agreement or a conditional sale agreement unless, in the opinion of the Commissioner, the right under the agreement to purchase or obtain the property in the goods would reasonably be expected not to be exercised; (Added 32 of 1998 s. 3) limited partnership (有限責任合夥) has the same meaning as in section 3 of the Limited Partnerships Ordinance (Cap. 37); (Added 47 of 1992 s. 2)limited partnership fund (有限合夥基金) has the meaning given by section 2 of the Limited Partnership Fund Ordinance (Cap. 637); (Added 14 of 2020 s. 107. Amended E.R. 5 of 2020)Lloyd’s (勞合社) has the meaning given by section 2(1) of the Insurance Ordinance (Cap. 41); (Added 15 of 2020 s. 3)mandatory contributions (強制性供款), in relation to a mandatory provident fund scheme, means mandatory contributions paid to the scheme in accordance with the Mandatory Provident Fund Schemes Ordinance (Cap. 485); (Added 4 of 1998 s. 6)mandatory provident fund scheme (強制性公積金計劃) means a provident fund scheme registered under the Mandatory Provident Fund Schemes Ordinance (Cap. 485); (Added 4 of 1998 s. 6) marriage (婚姻) means— (a) any marriage recognized by the law of Hong Kong; or (b) any marriage, whether or not so recognized, entered into outside Hong Kong according to the law of the place where it was entered into and between persons having the capacity to do so, but shall not, in the case of a marriage which is both potentially and actually polygamous, include marriage between a man and any wife other than the principal wife, and married (結婚) shall be construed accordingly; (Added 43 of 1989 s. 2) Monetary Authority (金融管理專員) means the Monetary Authority appointed under section 5A(1) of the Exchange Fund Ordinance (Cap. 66); (Added 9 of 2021 s. 3) mortgage (按揭) means a security by way of mortgage or equitable mortgage for the payment of any definite and certain sum of money advanced or lent at the time, or previously due and owing, or forborne to be paid, being payable, or for the repayment of money thereafter to be lent, advanced or paid, or which may become due upon an account current, together with any sum already advanced or due, or without, as the case may be, and includes— (a) conditional surrender by way of mortgage, or further charge, of or affecting any property whatsoever; and (b) any conveyance of any property whatsoever in trust to be sold or otherwise converted into money, intended only as a security, and redeemable before the sale or other disposal thereof, either by express stipulation or otherwise; and (c) any instrument for defeating or making redeemable, or explaining or qualifying any conveyance, transfer or disposition of any property whatsoever, apparently absolute, but intended only as a security; and (d) any instrument relating to the deposit of any title deeds or instruments constituting or being evidence of the title to any property whatsoever or creating a charge on any property whatsoever; and (e) any mortgage by an equitable owner of his equitable rights; and (f) any warrant of attorney to enter up judgment; (Replaced 79 of 1979 s. 2) [cf. 1891 c. 39 s. 86 U.K.] net chargeable income (應課稅入息實額) means net chargeable income calculated in accordance with section 12B; (Added 71 of 1983 s. 2)occupational retirement scheme (職業退休計劃) has the meaning assigned to it by section 2(1) of the Occupational Retirement Schemes Ordinance (Cap. 426); (Added 76 of 1993 s. 2)open-ended fund company (開放式基金型公司) has the meaning given by section 112A of the Securities and Futures Ordinance (Cap. 571); (Added 16 of 2016 s. 25) owner (擁有人), in respect of land or buildings or land and buildings, includes— (a) a person holding the land or buildings or land and buildings directly from the Government; (b) a beneficial owner; (c) a tenant for life; (d) a mortgagor; (e) a mortgagee in possession; (f) a person with adverse title to land receiving rent from buildings or other structures erected on that land; (g) a person who is making payments to a co-operative society registered under the Co-operative Societies Ordinance (Cap. 33) for the purpose of the purchase of the land or buildings or land and buildings; (h) a person who holds land or buildings or land and buildings subject to a ground rent or other annual charge; (i) (in so far as common parts are concerned) a corporation registered under section 8 of the Building Management Ordinance (Cap. 344) or a person who, on the person’s own behalf or on behalf of another person, receives any consideration, in money or money’s worth, in respect of the right of use of any common parts solely or with another; and (j) an executor of the estate of an owner; (Replaced 4 of 2010 s. 2) parent or parent of his or her spouse (該人的或其配偶的父或母), in relation to any person, means— (a) a parent of whose marriage the person or his or her spouse is the child; (b) the natural father or mother of the person or his or her spouse; (c) a parent by whom the person or his or her spouse was adopted; (d) a step parent of the person or his or her spouse; or (e) in the case of a deceased spouse, a person who would have been the parent of the person’s spouse by reason of any of the provisions of paragraphs (a) to (d) if the spouse had not died; (Added 31 of 1998 s. 3) password (通行密碼) means any combination of letters, characters, numbers or other symbols selected by a person and approved by the Commissioner for use in systems designated by the Commissioner for the purpose of authenticating the person’s identification in communicating with the Commissioner in relation to a return required to be furnished under this Ordinance; (Added 5 of 2003 s. 2)person (人、人士) includes a corporation, partnership, trustee, whether incorporated or unincorporated, or body of persons; (Amended 2 of 1971 s. 2; 30 of 1981 s. 2) precedent partner (首合夥人) means the partner who, of the active partners resident in Hong Kong— (a) is first named in the agreement of partnership; or (b) if there is no agreement, is specified by name or initials singly or with precedence to the other partners in the usual name of the partnership; or (c) is first named in any statutory statement of the names of the partners; profits arising in or derived from Hong Kong (於香港產生或得自香港的利潤) for the purposes of Part 4 shall, without in any way limiting the meaning of the term, include all profits from business transacted in Hong Kong, whether directly or through an agent;profits tax (利得稅)—(a) in this Ordinance (except in a reference to profits tax under Part 4 (however worded) or to provisional profits tax), means, subject to paragraph (b)—(i) profits tax under Part 4 (including provisional profits tax under Part 10B); or(ii) top-up tax under Part 4AA; or(b) in Parts 4, 7, 8AA, 8A, 9A and 10B and Schedules relating to provisions of those Parts, in sections 50AAA and 50AAAB and Schedule 54, in section 59(1B), (1C) and (1D) and in Schedules 16D and 16E, means profits tax under Part 4 (including provisional profits tax under Part 10B); (Added 21 of 2025 s. 3)QDMTT (合資格當地最低補足稅) means a qualified domestic minimum top-up tax as defined by Article 10.1.1 of the GloBE rules; (Added 21 of 2025 s. 3)qualified IIR (合資格收入納入規則) has the meaning given by Article 10.1.1 of the GloBE rules; (Added 21 of 2025 s. 3)qualified UTPR (合資格低稅利潤規則) has the meaning given by Article 10.1.1 of the GloBE rules; (Added 21 of 2025 s. 3)receiver (接管人) includes any receiver, provisional liquidator or liquidator, and any assignee, trustee, or other person having the possession or control of the property of any person by reason of insolvency or bankruptcy; (Amended 16 of 2016 s. 25)recognized certificate (認可證書) has the same meaning as in section 2(1) of the Electronic Transactions Ordinance (Cap. 553); (Added 5 of 2003 s. 2) recognized occupational retirement scheme (認可職業退休計劃) means an occupational retirement scheme— (a) which, prior to the commencement* of section 2 of the Inland Revenue (Amendment) (No. 5) Ordinance 1993 (76 of 1993), was a retirement scheme approved by the Commissioner under section 87A where such approval has not subsequently been withdrawn; (b) registered for the time being under section 18 of the Occupational Retirement Schemes Ordinance (Cap. 426); (c) in respect of which an exemption certificate has been issued under section 7(1) of the Occupational Retirement Schemes Ordinance (Cap. 426) and has not been withdrawn; (d) which is operated by an employer who is—(i) the government of a country or territory outside Hong Kong; or(ii) any agency or undertaking of or by such a government which is not operated for the purpose of gain; or (Amended 19 of 1996 s. 3) (e) contained in or otherwise established by an Ordinance other than the Mandatory Provident Fund Schemes Ordinance (Cap. 485); (Added 76 of 1993 s. 2. Amended 4 of 1998 s. 6) recognized retirement scheme (認可退休計劃) means— (a) a recognized occupational retirement scheme; or (b) a mandatory provident fund scheme; (Added 31 of 1998 s. 3) re-domiciled company (經遷冊公司) has the meaning given by section 2(1) of the Companies Ordinance (Cap. 622); (Added 14 of 2025 s. 144)regulatory capital security (監管資本證券) has the meaning given by section 17A; (Added 12 of 2016 s. 11)reportable account (須申報帳户) has the meaning given by section 50A; (Added 22 of 2016 s. 3)reportable jurisdiction (申報稅務管轄區) has the meaning given by section 50A; (Added 22 of 2016 s. 3)reporting financial institution (申報財務機構) has the meaning given by section 50A; (Added 22 of 2016 s. 3)return (報稅表) includes any return furnished under section 51AA, irrespective of the manner in which that return is furnished; (Added 5 of 2003 s. 2)river trade limits (內河航限) has the same meaning as in the Merchant Shipping Ordinance (Cap. 281); (Added 47 of 1992 s. 2)service provider (服務提供者)—(a) except in relation to a provision of Part 9 or 9A or Schedule 63—has the meaning given by section 50A(1);(b) in relation to a provision of Part 9—has the meaning given by section 51AAD(8);(c) in relation to a provision of Part 9A—has the meaning given by section 58B(2); or(d) in relation to a provision of Schedule 63—has the meaning given by section 2 of that Schedule; (Replaced 21 of 2025 s. 3)specified form (指明的格式) means a form specified under section 86; (Added 43 of 1989 s. 2. Amended 5 of 2003 s. 2)spouse (配偶) means a husband or wife; (Added 43 of 1989 s. 2)standard rate (標準稅率) means the rate specified in Schedule 1; (Added 30 of 1950 Schedule)tax (稅、稅款、稅項) except for the purposes of Parts 12 and 13, means any tax imposed by this Ordinance (including provisional salaries tax charged under Part 10A, provisional profits tax charged under Part 10B and provisional property tax charged under Part 10C) other than additional tax, but for the purposes of Parts 12 and 13 tax (稅、稅款、稅項) includes additional tax; (Replaced 26 of 1969 s. 3. Amended 8 of 1973 s. 2; 7 of 1975 s. 2; 8 of 1983 s. 2)telefiling system (電話報稅系統) means a system that enables a person to furnish to the Commissioner certain returns or information by using a telephone; (Added 5 of 2003 s. 2)top-up tax (補足稅) means—(a) IIR top-up tax;(b) UTPR top-up tax; or(c) HKMTT; (Added 21 of 2025 s. 3)trade (行業、生意) includes every trade and manufacture, and every adventure and concern in the nature of trade;trustee (受託人) includes any trustee, guardian, curator, manager, or other person having the direction, control, or management of any property on behalf of any person, but does not include an executor;UTPR top-up tax (低稅利潤規則補足稅)—see section 26AE(2); (Added 21 of 2025 s. 3)voluntary contributions (自願性供款), in relation to a mandatory provident fund scheme, means voluntary contributions paid to the scheme in accordance with section 11 of the Mandatory Provident Fund Schemes Ordinance (Cap. 485); (Added 4 of 1998 s. 6)wife (妻子) means a married woman whose marriage is a marriage within the meaning of this section; (Replaced 43 of 1989 s. 2)year of assessment (課稅年度) means the period of 12 months commencing on 1 April in any year; (Replaced 30 of 1950 Schedule)year preceding a year of assessment (任何課稅年度的上一年) means the period of 12 months ending on 31 March immediately prior to such year of assessment.(Amended 36 of 1955 s. 3; 9 of 1958 s. 2; 26 of 1969 s. 3; 7 of 1986 s. 12; 76 of 1993 s. 2; 12 of 1999 s. 3; 10 of 2022 s. 2)(2) For the purposes of the definition of financial institution (財務機構) in subsection (1)— associated corporation (相聯法團), in relation to an authorized institution, means— (a) a corporation over which the institution has control; (b) a corporation which has control over the institution; or (c) a corporation which is under the control of the same person as is the institution; (Replaced 49 of 1995 s. 53) control (控制), in relation to a corporation, means the power of a person to secure— (a) by means of the holding of shares or the possession of voting power in or in relation to that or any other corporation; or (b) by virtue of any powers conferred by the articles of association or other document regulating that or any other corporation, that the affairs of the first-mentioned corporation are conducted in accordance with the wishes of that person. (Added 73 of 1978 s. 2)(2A) For the purposes of the definition of recognized occupational retirement scheme (認可職業退休計劃) in subsection (1)— (a) a scheme which is registered for the time being under section 18 of the Occupational Retirement Schemes Ordinance (Cap. 426) shall upon registration be regarded as a recognized occupational retirement scheme as from—(i) the date on which the application for such registration was made; or(ii) the date on which the terms of the scheme came into effect,whichever is the earlier; and (b) a scheme in respect of which an exemption certificate has been issued under section 7(1) of the Occupational Retirement Schemes Ordinance (Cap. 426) and has not been withdrawn shall upon the issue of the certificate be regarded as a recognized occupational retirement scheme as from—(i) the date on which the application for the certificate was made; or(ii) the date on which the terms of the scheme came into effect,whichever is the earlier: Provided that if such date is earlier than the first commencement date of the Occupational Retirement Schemes Ordinance (Cap. 426), the scheme shall be regarded as a recognized occupational retirement scheme as from such commencement date. (Added 76 of 1993 s. 2) (3) For the purposes of this Ordinance a husband and wife shall be deemed to be living apart when they are living apart—(a) under a decree or order of a competent court in or outside Hong Kong;(b) under a duly executed deed of separation or any instrument of similar effect; or(c) in such circumstances that the Commissioner is of the opinion the separation is likely to be permanent. (Added 43 of 1989 s. 2)(4) Whether or not a person who is or was formerly a member of a mandatory provident fund scheme has permanently departed from Hong Kong is, for the purposes of this Ordinance, to be determined by reference to regulations in force under the Mandatory Provident Fund Schemes Ordinance (Cap. 485). (Added 4 of 1998 s. 6)(5) In this Ordinance, a reference to the act of signing a return required to be furnished under this Ordinance includes a reference to—(a) the affixing of a digital signature to; or (Amended 14 of 2004 s. 29)(b) the inclusion of a password with,the return for the purpose of authenticating or approving it. (Added 5 of 2003 s. 2)(6) For the purposes of subsection (5)(a), a digital signature shall be—(a) supported by a recognized certificate;(b) generated within the validity of that certificate; and(c) used in accordance with the terms of that certificate. (Added 14 of 2004 s. 29)(7) For the purposes of subsection (6)(a), a digital signature is taken to be supported by a recognized certificate if it is taken to be supported by that certificate under section 2(2) of the Electronic Transactions Ordinance (Cap. 553). (Added 14 of 2004 s. 29)(8) In subsection (6)(b), within the validity of that certificate (在該證書的有效期內) has the meaning assigned to it by section 6(2) of the Electronic Transactions Ordinance (Cap. 553). (Added 14 of 2004 s. 29)(9) A reference in this Ordinance to a company or entity established or incorporated in Hong Kong includes a re-domiciled company. (Added 14 of 2025 s. 144)(10) A reference in this Ordinance (other than sections 17A and 50A) to a company or entity established or incorporated outside Hong Kong does not include a re-domiciled company. (Added 14 of 2025 s. 144)#(11) Unless otherwise provided by this Ordinance, an entity is a tax resident in Hong Kong if—(a) where the entity is a company—the entity is incorporated in Hong Kong or, if incorporated outside Hong Kong, normally managed or controlled in Hong Kong; or(b) in any other case—the entity is constituted under the laws of Hong Kong or, if otherwise constituted, normally managed or controlled in Hong Kong. (Added 21 of 2025 s. 3)(Amended E.R. 1 of 2012) Editorial Note: * Commencement date: 19 November 1993. # Section 2(11), added by section 3(3) of 21 of 2025, is deemed to have come into operation on 1 January 2024—see section 1(3) of 21 of 2025. 3. Establishment of Board of Inland Revenue. Power of Chief Executive to appoint a Commissioner and other officers (1) (a) There shall be a Board of Inland Revenue composed of the Financial Secretary and 4 other members appointed by the Chief Executive, of whom not more than one shall be an official in the employment of the Government. A member so appointed shall hold office until he shall resign or be removed from office by the Chief Executive. (Amended 12 of 1999 s. 3)(aa) The Board of Inland Revenue shall have a secretary who shall be a deputy commissioner. (Added 8 of 1983 s. 3. Amended 48 of 1995 s. 3)(b) 3 members of the Board of Inland Revenue shall form a quorum for the transaction of business and when the Financial Secretary is present he shall be the chairman.(c) All matters coming before the Board of Inland Revenue shall be decided by a majority of votes, and in the case of an equality of votes the chairman or presiding member shall have a second or a casting vote. (d) The Board of Inland Revenue may transact any of its business by the circulation of papers without meeting; and a resolution signed by a majority of the members shall be as valid and effective as if it had been passed at a meeting by the votes of the members so signing. (Added 8 of 1983 s. 3)(2) For the purposes of this Ordinance, the Chief Executive may appoint a Commissioner, deputy commissioners, assistant commissioners, assessors and inspectors. (Amended 36 of 1955 s. 4; 48 of 1995 s. 3; 12 of 1999 s. 3)(3) An assistant commissioner exercising or performing any power, duty, or function of the Commissioner under this Ordinance shall be deemed for all purposes to be authorized to exercise or perform the same until the contrary is proved.(4) All powers conferred upon an assessor by this Ordinance may be exercised by an assistant commissioner. 3A. Exercise of powers and duties (1) Where under this Ordinance any power is conferred or any duty is imposed on the Commissioner and so long as it is not provided that the power or duty shall be exercised or performed by the Commissioner personally, such power may be exercised or such duty may be performed by a deputy commissioner or by an assistant commissioner. (Amended 48 of 1995 s. 4)(2) Except where a provision of this Ordinance provides that a power or duty shall be exercised or performed by the Commissioner personally, the Commissioner may, subject to such limitations as he may think fit, authorize in writing any public officer to exercise any power or perform any duty conferred or imposed upon him by this Ordinance.(Added 26 of 1969 s. 4) 4. Official secrecy (1) Except in the performance of his duties under this Ordinance, every person who has been appointed under or who is or has been employed in carrying out or in assisting any persons to carry out the provisions of this Ordinance shall preserve and aid in preserving secrecy with regard to all matters relating to the affairs of any person that may come to his knowledge in the performance of his duties under this Ordinance, and shall not communicate any such matter to any person other than the person to whom such matter relates or his executor or the authorized representative of such person or such executor, nor suffer or permit any person to have access to any records in the possession, custody or control of the Commissioner. (Amended 9 of 1958 s. 3) (2) Every person appointed under or employed in carrying out the provisions of this Ordinance, shall before acting under this Ordinance take and subscribe before a commissioner for oaths an oath of secrecy in such form as the Board of Inland Revenue may specify. (Amended 39 of 1969 s. 2; 47 of 1997 s. 10) (3) No person appointed under or employed in carrying out the provisions of this Ordinance shall be required to produce in any court any return, document, or assessment, or to divulge or communicate to any court any matter or thing coming under his notice in the performance of his duties under this Ordinance, except as may be necessary for the purpose of carrying into effect the provisions of this Ordinance. (4) Notwithstanding anything contained in this section, the Commissioner or any officer of the Inland Revenue Department authorized by the Commissioner in that behalf may communicate any matter which comes to his knowledge, including a copy of any return, accounts or other document submitted to him in connection with this Ordinance—(a) to the Commissioner of Rating and Valuation, to the Collector of Stamp Revenue, or to the Estate Duty Commissioner; (Amended 20 of 1948 s. 4; 29 of 2018 s. 4) (b) (Repealed 12 of 1999 s. 3)(c) to the Secretary for Justice, or a public officer authorized by the Secretary for Justice, for the purpose of reporting under section 68(5) an appeal to the Board of Review; (Added 2 of 1971 s. 3. Amended 79 of 1992 s. 10; L.N. 362 of 1997; 29 of 2018 s. 4) (d) to any person appointed under or employed in carrying out the provisions of the Business Registration Ordinance (Cap. 310), as regards any matter required to be notified to the Commissioner pursuant to section 8 of that Ordinance by the person submitting such return, accounts or other document; (Added 79 of 1992 s. 10. Amended 13 of 2010 s. 26; 29 of 2018 s. 4; 9 of 2021 s. 4)(e) to the Commissioner for I&T, or a public officer authorized by the Commissioner for I&T, for the purpose of seeking advice under section 18 of Schedule 45; or (Added 29 of 2018 s. 4. Amended 9 of 2021 s. 4)(f) to the Monetary Authority, or an officer authorized by the Monetary Authority, for the purpose of seeking advice under section 12 of Schedule 16D. (Added 9 of 2021 s. 4)(5) Notwithstanding anything contained in this section, the Commissioner may permit the Director of Audit or any officer of that department duly authorized by the Director of Audit in that behalf to have such access to any records or documents as may be necessary for the performance of his official duties. The Director of Audit or any officer so authorized shall be deemed to be a person employed in carrying out the provisions of this Ordinance for the purpose of subsection (2). (6) Notwithstanding anything contained in this section, where the Commissioner is of the opinion that any tax deemed to be in default under the provisions of section 71(1) has for the time being become irrecoverable, he may communicate to the Financial Secretary the names and descriptions of the persons charged with such tax together with particulars of the tax in default. (Added 9 of 1958 s. 3)(7) Despite anything contained in this section, the Commissioner, or any officer of the Inland Revenue Department authorized by the Commissioner in that behalf, may communicate to any entity or permanent establishment of an MNE group any matter that comes to his or her knowledge in connection with the implementation of the GloBE rules and HKMTT under Part 4AA, if doing so is necessary for—(a) the determination of the amount (if any) of top-up tax payable by, or chargeable in respect of the income of, any entity or permanent establishment of the MNE group; or(b) the performance of duties under this Ordinance involving top-up tax. (Added 21 of 2025 s. 4)(8) In subsection (7), entity (實體), MNE group (跨國企業集團) and permanent establishment (常設機構) have the same meanings as they have in the GloBE rules. (Added 21 of 2025 s. 4)(Amended 9 of 1958 s. 3) Part 2 Property Tax 5. Charge of property tax (1) Property tax shall, subject to the provisions of this Ordinance, be charged for each year of assessment on every person being the owner of any land or buildings or land and buildings wherever situate in Hong Kong and shall be computed at the standard rate on the net assessable value of such land or buildings or land and buildings for each such year. (Amended 35 of 1965 s. 3; 76 of 1975 s. 3; 8 of 1983 s. 4; 7 of 1986 s. 12) Provided that— (a) (Repealed 76 of 1975 s. 3) (b) where the owner of the land is not the owner of the buildings thereon, separate assessments shall be made for the land and for the buildings; (c) (Repealed 26 of 1969 s. 5) (d) (Repealed 76 of 1975 s. 3) (e) (Repealed 56 of 1993 s. 2) (Replaced 36 of 1955 s. 6)(1A) In subsection (1), net assessable value (應評稅淨值) means the assessable value of land or buildings or land and buildings, ascertained in accordance with section 5B— (a) (Repealed 56 of 1993 s. 2) (b) less—(i) where the owner agrees to pay the rates in respect of the land or buildings or land and buildings, those rates paid by him; and(ii) an allowance for repairs and outgoings of 20% of that assessable value after deduction of any rates under subparagraph (i). (Added 76 of 1975 s. 3. Amended 8 of 1983 s. 4; 56 of 1993 s. 2) (1B) The percentage allowance specified in subsection (1A) may be amended by resolution of the Legislative Council. (Added 76 of 1975 s. 3)(2) (a) Notwithstanding subsection (1), any corporation carrying on a trade, profession or business in Hong Kong shall, on application made in writing to the Commissioner and on proof of the facts to the satisfaction of the Commissioner, be entitled to exemption from the property tax for any year of assessment in respect of any land or buildings or land and buildings owned by the corporation where the corporation would be entitled under section 25 to a set-off of the property tax which, if exemption were not granted under this subsection, would be paid by the corporation; and the property shall be and remain exempted from property tax for each year of assessment in which the circumstances are such as to qualify the property for such exemption for that year. (Amended 7 of 1986 s. 12; 56 of 1993 s. 2)(b) (Repealed 56 of 1993 s. 2)(c) Every corporation exempted from property tax under this subsection in respect of any land or buildings or land and buildings shall, within 30 days after the event, notify the Commissioner in writing of any change in the ownership or use thereof or in any other circumstances affecting such exemption. (Added 35 of 1965 s. 3)(2A)-(5) (Repealed 56 of 1993 s. 2) 5A. (Repealed 56 of 1993 s. 3) 5B. Ascertainment of assessable value on or after 1 April 1983 (1) This section shall apply to any year of assessment commencing or after 1 April 1983. (Amended 56 of 1993 s. 4)(2) The assessable value of land or buildings or land and buildings for each year of assessment shall be the consideration, in money or money’s worth, payable in that year to, to the order of, or for the benefit of, the owner in respect of the right of use of that land or buildings or land and buildings.(3) Any consideration payable before the year of assessment commencing on 1 April 1983 in respect of a period of the right of use which starts after, or extends beyond, 1 April 1983 shall, for the purposes of this section, be deemed to be payable in equal monthly instalments during the period of the right of use or during a period of 3 years ending on 31 March 1986, whichever is the shorter.(4) Any consideration payable in respect of a period of the right of use which is not contained within any one year of assessment shall, for the purposes of this section, be deemed to be payable in equal monthly instalments during the period of the right of use or during a period of 3 years commencing at the start of the period of the right of use to which the consideration relates, whichever is the shorter.(5) (Repealed 56 of 1993 s. 4)(6) In this section, consideration (代價) includes any consideration payable in respect of the provision of any services or benefits connected with or related to the right of use.(7) Section 22 of Schedule 17A (specified alternative bond scheme and its treatment under this Ordinance (other than Part 4AA)) provides for modifications to this section. (Added 10 of 2013 s. 5. Amended 21 of 2025 s. 33)(Added 8 of 1983 s. 6) 6. (Repealed 8 of 1983 s. 7) 7. (Repealed 56 of 1993 s. 5) 7A. Interpretation In this Part—buildings (建築物), except for the purposes of section 5(2), includes any part of a building; (Replaced 35 of 1965 s. 4. Amended 56 of 1993 s. 6)land or buildings or land and buildings (土地或建築物或土地連建築物) includes piers, wharves and other structures;occupied (佔用), in relation to land or buildings or land and buildings, means land or buildings or land and buildings which are being put to beneficial use. (Replaced 76 of 1975 s. 6)(Added 36 of 1955 s. 9) 7B. (Repealed 56 of 1993 s. 7) 7C. Bad debts (1) In ascertaining the assessable value of any land or buildings or land and buildings under this Part for any year of assessment commencing on or after 1 April 1983, there shall be deducted any consideration in money or money’s worth, payable or deemed to be payable on or after 1 April 1983 to, to the order of, or for the benefit of, the owner in respect of the right of use of that land or buildings or that land and buildings and proved to the satisfaction of the assessor to have become irrecoverable during that year of assessment. (2) Consideration previously deducted as irrecoverable and recovered during any year of assessment shall be treated as consideration mentioned in section 5B(2) payable in that year of assessment in respect of the right of use of the land or buildings or land and buildings in respect of which that consideration was payable. (3) Notwithstanding section 70, where a person is entitled to deduct any consideration under subsection (1) but the land or buildings or land and buildings has no or insufficient assessable value from which to deduct that consideration in the year of assessment in which, under that subsection, that consideration is deductible, that consideration, or that consideration to the extent to which it cannot be deducted in that year, shall be deducted from the assessable value of that land or buildings or that land and buildings in the latest year of assessment in which that assessable value is sufficient. (Added 8 of 1983 s. 9) 7D. Part 8AA applies Part 8AA applies for the purposes of calculation of property tax.(Added 27 of 2018 s. 11) Part 3 Salaries Tax (Amended 36 of 1955 s. 10) 8. Charge of salaries tax (1) Salaries tax shall, subject to the provisions of this Ordinance, be charged for each year of assessment on every person in respect of his income arising in or derived from Hong Kong from the following sources—(a) any office or employment of profit; and(b) any pension.(1A) For the purposes of this Part, income arising in or derived from Hong Kong from any employment—(a) includes, without in any way limiting the meaning of the expression and subject to paragraph (b), all income derived from services rendered in Hong Kong including leave pay attributable to such services; (Amended 69 of 1987 s. 2)(b) subject to subsection (1AB), excludes income derived from services rendered by a person who— (Amended 6 of 2019 s. 10)(i) is not employed by the Government or as master or member of the crew of a ship or as commander or member of the crew of an aircraft; and(ii) renders outside Hong Kong all the services in connection with his employment; and (Added 2 of 1971 s. 5. Amended 69 of 1987 s. 2)(c) subject to subsection (1C) and section 50AA, excludes income derived by a person from services rendered by him in any territory outside Hong Kong where— (Amended 27 of 2018 s. 3)(i) by the laws of the territory where the services are rendered, the income is chargeable to tax of substantially the same nature as salaries tax under this Ordinance; and(ii) the Commissioner is satisfied that that person has, by deduction or otherwise, paid tax of that nature in that territory in respect of the income. (Added 69 of 1987 s. 2)(1AB) If—(a) a person’s income is derived from services rendered by the person as a visiting teacher or researcher in a territory outside Hong Kong (territory);(b) the double taxation arrangements made with that territory provide for exemption from tax in that territory on income derived from services rendered as a visiting teacher or researcher in that territory (the provision is referred to as exemption provision); and(c) the person is or, immediately before visiting that territory as a visiting teacher or researcher, was a Hong Kong resident person,subsection (1A)(b) applies to the income referred to in paragraph (a) only if the person proves to the Commissioner’s satisfaction that, despite the exemption provision, tax is paid or payable in that territory in respect of the income. (Added 6 of 2019 s. 10)(1B) In determining whether or not all services are rendered outside Hong Kong for the purposes of subsection (1A) no account shall be taken of services rendered in Hong Kong during visits not exceeding a total of 60 days in the basis period for the year of assessment. (Added 2 of 1971 s. 5)(1C) Subsection (1A)(c) does not apply in relation to income derived by a person from services rendered by the person in a territory if—(a) the territory is a DTA territory (as defined by section 48A); and(b) under section 50, tax payable in the territory by a Hong Kong resident person in respect of income derived from services rendered by him or her in the territory is to be allowed as a credit against tax payable in Hong Kong by the Hong Kong resident person in respect of that income. (Added 27 of 2018 s. 3)(1D) In subsections (1AB) and (1C)—double taxation arrangements (雙重課稅安排) has the meaning given by section 48A;Hong Kong resident person (香港居民人士) has the meaning given by section 48A;visiting teacher or researcher (外訪教師或研究人員), in relation to a territory outside Hong Kong, means a person who visits that territory and is present in that territory for the sole or primary purpose of teaching or conducting research at an educational institution or scientific research institution (including a university, college or school) in that territory. (Added 6 of 2019 s. 10)(2) In computing the income of any person for the purposes of subsection (1) there shall be excluded the following—(a) (Repealed 130 of 1997 s. 2)(b) the official emoluments of consuls, vice-consuls and persons employed on the staff of any consulate, who are subjects or citizens of the state which they represent;(c) subject to subsection (4) any sum received by way of commutation of pension under—(i) a recognized occupational retirement scheme upon termination of service, death, incapacity, terminal illness or retirement; (Amended 1 of 2015 s. 58)(ii) the Pensions Ordinance (Cap. 89);(iii) the Pension Benefits Ordinance (Cap. 99); or(iv) the Pension Benefits (Judicial Officers) Ordinance (Cap. 401); (Replaced 76 of 1993 s. 3)(ca) in the case of a pension attributable to services rendered in any office or employment, other than employment by the Government, so much of the pension as is not attributable to services rendered in Hong Kong; (Added 2 of 1971 s. 5)(cb) so much of accrued benefits received from the approved trustee of a mandatory provident fund scheme, whether in a lump sum or (if applicable) as an instalment, on the ground of a person’s retirement from employment, death, incapacity, terminal illness or permanent departure from Hong Kong as is attributable to mandatory contributions; (Replaced 4 of 1998 s. 6. Amended 1 of 2015 s. 58)(cc) subject to subsections (4) and (5)—(i) any sum (not being a pension) withdrawn from a recognized occupational retirement scheme on retirement, death, incapacity, terminal illness or termination of service; and (Amended 1 of 2015 s.

58)(ii) a sum equal to so much of the accrued benefit received from the approved trustee of a mandatory provident fund scheme, whether in a lump sum or (if applicable) as an instalment, on the ground of retirement, death, incapacity, terminal illness, termination of service, or taken to have been received from the approved trustee of such a scheme as provided by subsection (9), as is attributable to voluntary contributions paid to the scheme by an employer; (Added 4 of 1998 s. 6. Amended 1 of 2015 s. 58)(cd) a payment—(i) received by the person on the dismissal or lay-off of the person in the circumstances described in section 31B of the Employment Ordinance (Cap. 57); and(ii) calculated in accordance with section 31G of that Ordinance; (Added 4 of 2022 s. 22)(ce) a payment—(i) received by the person on the dismissal, or termination of the contract of employment, of the person in the circumstances described in section 31R of the Employment Ordinance (Cap. 57); and(ii) calculated in accordance with section 31V of that Ordinance; (Added 4 of 2022 s. 22)(cf) a payment—(i) received in respect of the person on his or her death in the circumstances described in section 31RA of the Employment Ordinance (Cap. 57); and(ii) calculated in accordance with section 31V of that Ordinance; (Added 4 of 2022 s. 22)(d) the emoluments payable by the Central People’s Government to members of the Chinese People’s Liberation Army, and to persons in the permanent service of that Government in Hong Kong in respect of their offices under that Government; (Replaced 2 of 2012 s. 3)(e) wound and disability pensions granted to members of the Chinese People’s Liberation Army; (Amended 2 of 2012 s. 3)(f) gratuities granted to members of the Chinese People’s Liberation Army in respect of services rendered during war; (Amended 2 of 2012 s. 3)(fa) the Hong Kong War Memorial Pensions and additional benefits paid under the Hong Kong War Memorial Pensions Ordinance (Cap. 386); (Added 51 of 1991 s. 24)(g) any amount arising from a scholarship, exhibition, bursary, or other similar educational endowment held by that person where he is receiving full time instruction at a university, college, school, or other similar educational establishment; (Replaced 26 of 1969 s. 9. Amended 1 of 1991 s. 2)(h) the emoluments payable by the Central People’s Government to persons in the temporary service of that Government who are in the opinion of the Commissioner serving in Hong Kong on Mainland of China based terms whereby they are normally employed in the Mainland of China but are liable for service elsewhere or are recruited in the Mainland of China specially for service in Hong Kong; (Added 26 of 1969 s. 9. Amended 23 of 1998 s. 2; 12 of 1999 s. 3)(i) any amount received by way of periodical payments in the nature of alimony or maintenance by a person from his or her spouse or former spouse; (Added 35 of 1965 s. 5. Amended 2 of 1971 s. 5; 19 of 1991 s. 2)(j) income derived from services rendered as master or member of the crew of a ship or as commander or member of the crew of an aircraft by a person who was present in Hong Kong on not more than—(i) a total of 60 days in the basis period for that year of assessment; and(ii) a total of 120 days falling partly within each of the basis periods for 2 consecutive years of assessment, one of which is that year of assessment; (Added 2 of 1971 s. 5. Amended 7 of 1986 s. 3)(k) any salary or other remuneration paid by another person who is chargeable to profits tax under Part 4 which, but for section 17(2), would be deductible in computing the profits or losses of such other person for the purposes of that Part. (Added 7 of 1986 s. 3)(2A) In computing the income of any person for the purposes of subsection (1) there is to be excluded any amount that, had it been payable immediately before the date of commencement* of section 17 of Schedule 1 to the Adaptation of Laws (Military References) Ordinance 2012 (2 of 2012), would have been excluded under subsection (2)(e) or (f) as in force immediately before that date. (Added 2 of 2012 s. 3)(2B) For determining whether any sum, benefit or payment falls within subsection (2)(c)(i), (cb), (cc)(i) or (ii), (cd), (ce) or (cf), it is immaterial whether or not the sum, benefit or payment was to any extent available to be reduced under—(a) in relation to subsection (2)(c)(i), (cb) or (cc)(i) or (ii)—section 31IA, 31YAA or 31YB of the Employment Ordinance (Cap. 57);(b) in relation to subsection (2)(cd)—section 31I of that Ordinance;(c) in relation to subsection (2)(ce)—section 31Y of that Ordinance; or(d) in relation to subsection (2)(cf)—section 31YA of that Ordinance. (Added 4 of 2022 s. 22)(3) For the purposes of subsection (2)(c) and (cc)— (Amended 4 of 1998 s. 6)incapacity (無行為能力) means permanent unfitness to perform the kind of work that a person was last performing before becoming incapacitated; (Added 1 of 2015 s. 58) retirement (退休) means— (a) a retirement from the service of the employer at some specified age of not less than 45 years; or (b) a retirement after some specified period of service with the employer of not less than 10 years; or (c) the attainment of the age of 60 years or some specified age of retirement, whichever is the later; terminal illness (罹患末期疾病) means a terminal illness within the meaning of section 158(3) of the Mandatory Provident Fund Schemes (General) Regulation (Cap. 485 sub. leg. A); (Added 1 of 2015 s. 58)termination of service (服務終止) means a termination of employment with the employer other than upon retirement, death, incapacity or terminal illness. (Added 76 of 1993 s. 3. Amended 1 of 2015 s. 58)(4) For the purposes of paragraphs (c) and (cc) of subsection (2), an amount that a person—(a) has received from a recognized occupational retirement scheme on the person’s termination of service; or (b) has received, or is taken to have received, from a mandatory provident fund scheme on termination of service,may be excluded under those paragraphs to the extent that it is attributable to voluntary contributions made by the person’s employer and does not exceed the proportionate benefit calculated in accordance with subsection (5). However, where, in the case of a recognized occupational retirement scheme approved by the Commissioner under section 87A before its repeal by the Inland Revenue (Amendment) (No. 5) Ordinance 1993 (76 of 1993), an amount payable on termination of service in accordance with the rules of the scheme (as approved by the Commissioner before that repeal) exceeds the proportionate benefit so calculated, that amount is to be taken to be the proportionate benefit. (Replaced 4 of 1998 s. 6)(5) For the purposes of subsection (4), the formula for calculating the proportionate benefit is— PB = CMS × AB 120 where— PB is the proportionate benefit to be calculated; CMS is the number of completed months of service that the person has completed with the employer; and AB the amount of the person’s accrued benefit. (Added 4 of 1998 s. 6) (6) In subsection (5), accrued benefit (累算權益), in relation to a person, means— (a) if the person is a member of a recognized occupational retirement scheme, the maximum benefit that the person would have been entitled to receive from the scheme for the person’s service recognized for the purposes of the scheme if, at the date on which the person’s employment was terminated, the person had retired (within the meaning of subsection (3)); and (b) if the person is a member of a mandatory provident fund scheme, the person’s accrued benefits attributable to voluntary contributions paid to the scheme in respect of the person for that service. (Added 4 of 1998 s. 6) (7) If—(a) the recognized occupational retirement scheme referred to in subsection (2)(cc)(i) is established by an employer who is not chargeable to tax under Part 4; or (b) the employer who contributes to the mandatory provident fund scheme referred to in subsection (2)(cc)(ii) is not so chargeable, the sum excluded by subsection (2)(cc) must not, with respect to the part of the sum that is attributable to the employer’s voluntary contributions to the scheme, exceed the amount calculated in accordance with subsection (8). (Added 4 of 1998 s. 6)(8) For the purposes of subsection (7), the formula is— A=[(EI× 15 100 )×YCS] – RAB where— A is the amount to be calculated; EI is the employee’s income from the employee’s office or employment for the period of 12 months preceding the date on which the relevant benefit is received or taken to have been received; YCS is the employee’s completed years of service with the employee’s employer; RAB is— (a) in the case of a recognized occupational retirement scheme, zero; or (b) in the case of a mandatory provident fund scheme, so much of the relevant accrued benefit that the employee has received from the scheme as is attributable to mandatory contributions paid to the scheme by the person’s employer. (Added 4 of 1998 s. 6. Amended E.R. 4 of 2017) (9) If—(a) the service of a person in respect of whom an employer has paid voluntary contributions to a mandatory provident fund scheme is terminated; and(b) the accrued benefit attributable to those contributions is retained within the scheme or is transferred to another mandatory provident fund scheme,the person is, for the purposes of subsection (2)(cc), taken to have received from the scheme on the date of termination of service such part of the person’s accrued benefit as is attributable to those contributions. (Added 4 of 1998 s. 6)(10) Subsection (4) does not apply to a part of a person’s accrued benefit in a mandatory provident fund scheme that has previously been taken to have been paid to the person because of the operation of subsection (9). (Added 4 of 1998 s. 6)(Replaced 36 of 1955 s. 11. Amended 15 of 1966 s. 2; 7 of 1986 s. 12; E.R. 1 of 2012)(Format changes—E.R. 2 of 2012) Editorial Note: * Commencement date: 1 July 1997. 9. Definition of income from employment* (1) Income from any office or employment includes—(a) any wages, salary, leave pay, fee, commission, bonus, gratuity, perquisite, or allowance, whether derived from the employer or others, except—(i)-(iii) (Repealed 24 of 2003 s. 3)(iv) subject to subsection (2A), any amount paid by the employer to or for the credit of a person other than the employee in discharge of a sole and primary liability of the employer to that other person, not being a liability for which any person was surety; (Added 1 of 1991 s. 3)(aa) so much of any amount (other than a pension falling under section 8(1)(b)) received by an employee before or after his employment ceases, whether by way of commutation or otherwise, from a pension or provident fund, scheme or society, other than a recognized occupational retirement scheme or mandatory provident fund scheme, as is attributable to the employer’s contributions to that fund, scheme or society; (Added 2 of 1971 s. 6. Amended 76 of 1993 s. 4; 4 of 1998 s. 6)(ab) so much of any amount (other than a pension falling under section 8(1)(b)) received by an employee, whether by way of commutation or otherwise, under a recognized occupational retirement scheme—(i) otherwise than because of termination of service, death, incapacity, terminal illness or retirement of the employee as is attributable to the employer’s contributions under the scheme in respect of the employee; or (Amended 1 of 2015 s. 59)(ii) by reason of termination of service as is attributable to such part of the employer’s contributions under the scheme in respect of the employee that exceeds the proportionate benefit calculated in accordance with section 8(5); (Added 76 of 1993 s. 4. Amended 4 of 1998 s. 6)(ac) any payment received by an employee pursuant to a judgment given under section 57(3)(b) of the Occupational Retirement Schemes Ordinance (Cap. 426) that is attributable to his employer’s contributions to the occupational retirement scheme in respect of which the judgment was given; (Added 76 of 1993 s. 4)(ad) so much of the accrued benefit that an employee has received, or is taken to have received, from a mandatory provident fund scheme (otherwise than on the ground of retirement, death, incapacity, terminal illness or termination of service, whether in a lump sum or (if applicable) as an instalment) as is attributable to contributions paid to the scheme by the employee’s employer; (Added 4 of 1998 s. 6. Amended 1 of 2015 s. 59)(ae) so much of the accrued benefit that an employee has received, or is taken to have received, from a mandatory provident fund scheme as is attributable to voluntary contributions paid to the scheme by the employee’s employer that exceeds the proportionate benefit calculated in accordance with section 8(5); (Added 4 of 1998 s. 6)(af) so much of any payment—(i) received by an employee on the dismissal, or termination of the contract of employment, of the employee in the circumstances described in section 31R of the Employment Ordinance (Cap. 57); and(ii) calculated based on the period of employment of the employee,that exceeds a payment falling within section 8(2)(ce); (Added 4 of 2022 s. 23)(ag) so much of any payment—(i) received in respect of an employee on his or her death in the circumstances described in section 31RA of the Employment Ordinance (Cap. 57); and(ii) calculated based on the period of employment of the employee,that exceeds a payment falling within section 8(2)(cf); (Added 4 of 2022 s. 23)(b) the rental value of any place of residence provided rent-free by the employer or an associated corporation; (Amended 38 of 1975 s. 2)(c) where a place of residence is provided by an employer or an associated corporation at a rent less than the rental value, the excess of the rental value over such rent; (Amended 2 of 1971 s. 6; 38 of 1975 s. 2)(d) any gain realized by the exercise of, or by the assignment or release of, a right to acquire shares or stock in a corporation obtained by a person as the holder of an office in or an employee of that or any other corporation. (Added 2 of 1971 s. 6)(1A) (a) Notwithstanding subsection (1)(a), where an employer or an associated corporation—(i) pays all or part of the rent payable by the employee; or(ii) refunds all or part of the rent paid by the employee,such payment or refund shall be deemed not to be income; (Replaced 1 of 1991 s. 3)(b) a place of residence in respect of which an employer or associated corporation has paid or refunded all the rent therefor shall be deemed for the purposes of subsection (1) to be provided rent free by the employer or associated corporation; (Amended 1 of 1991 s. 3)(c) a place of residence in respect of which an employer or associated corporation has paid or refunded part of the rent therefor shall be deemed for the purposes of subsection (1) to be provided by the employer or associated corporation for a rent equal to the difference between the rent payable or paid by the employee and the part thereof paid or refunded by the employer or associated corporation. (Added 36 of 1954 s. 2. Amended 38 of 1975 s. 2; 1 of 1991 s. 3)(2) The rental value of any place of residence provided by the employer or an associated corporation shall be deemed to be 10% of the income as described in subsection (1)(a) derived from the employer for the period during which a place of residence is provided after deducting the outgoings, expenses and allowances provided for in section 12(1)(a) and (b) to the extent to which they are incurred during the period for which the place of residence is provided and any lump sum payment or gratuity paid or granted upon the retirement or termination of employment of the employee: (Amended 35 of 1965 s. 6; 26 of 1969 s. 10; 7 of 1975 s. 3; 38 of 1975 s. 2) Provided that— (a) if such place of residence be a hotel, hostel or boarding house the rental value shall be deemed to be 8% of the income aforesaid where the accommodation consists of not more than 2 rooms and 4% where the accommodation consists of not more than one room; (Replaced 10 of 1950 s. 3. Amended 38 of 1975 s. 2) (b) if such place of residence be other than a hotel, hostel or boarding house any person may elect to have, in respect of the years of assessment commencing on or after 1 April 1983, the rateable value included in the valuation list prepared under section 12 of the Rating Ordinance (Cap. 116) or, if the place of residence is not so included, the rateable value ascertained in accordance with Part III of that Ordinance, substituted for rental value at 10% as aforesaid. (Replaced 19 of 1996 s. 4) (2A) Subsection (1)(a)(iv) shall not operate to exclude—(a) any benefit that is—(i) provided by an employer otherwise than in connection with a holiday journey; and(ii) capable of being converted into money by the recipient; (Replaced 24 of 2003 s. 3)(b) any amount paid by an employer in connection with the education of a child of an employee; or (Amended 24 of 2003 s. 3)(c) any amount paid by an employer in connection with a holiday journey, (Added 24 of 2003 s. 3)from income from any office or employment. (Added 1 of 1991 s. 3)(3) A pension shall include a pension which is voluntary or is capable of being discontinued. (Replaced 36 of 1955 s. 13)(4) For the purposes of subsection (1)—(a) the gain realized by the exercise at any time of such a right as is referred to in paragraph (d) of that subsection shall be taken to be the difference between the amount which a person might reasonably expect to obtain from a sale in the open market at that time of the shares or stock acquired and the amount or value of the consideration given whether for them or for the grant of the right or for both; and(b) the gain realized by the assignment or release of such a right as is referred to in paragraph (d) of that subsection shall be taken to be the difference between the amount or value of the consideration for the assignment or release and the amount or value of the consideration given for the grant of the right,(a just apportionment being made of any entire consideration given for the grant of the right to acquire the said shares or stock and other shares or stock or otherwise for the grant of the right to acquire those shares or stock and for something beside):Provided that neither the consideration given for the grant of the right nor any such entire consideration shall be taken to include the performance of any duties in or in connection with the office or employment by reason of which the right was granted, and no part of the amount or value of the consideration given for the grant shall be deducted more than once under this subsection. (Replaced 2 of 1971 s. 6)(5) Where salaries tax may by virtue of subsection (1)(d) become chargeable in respect of any gain which may be realized by the exercise of a right, salaries tax shall not be chargeable under any other provision of this Ordinance in respect of the receipt of the right. (Added 2 of 1971 s. 6. Amended L.N. 65 of 1986)(6) For the purposes of this section—accrued benefit (累算權益) has the same meaning as in section 8(6); (Added 4 of 1998 s. 6) associated corporation (相聯法團) means— (a) a corporation over which the employer has control; (b) if the employer is a corporation—(i) a corporation which has control over the employer; or(ii) a corporation which is under the control of the same person as is the employer; child of an employee (僱員的子女) means any child of an employee or of his or her spouse or former spouse, whether or not born in wedlock, and includes the adopted or step child of either or both of them; (Added 1 of 1991 s. 3) control (控制), in relation to a corporation, means the power of a person to secure— (a) by means of the holding of shares or the possession of voting power in or in relation to that or any other corporation; or (b) by virtue of any powers conferred by the articles of association or other document regulating that or any other corporation, that the affairs of the first-mentioned corporation are conducted in accordance with the wishes of that person; (Added 38 of 1975 s. 2) employee (僱員) includes a holder of an office; (Added 1 of 1991 s. 3) holiday journey (度假旅程) means— (a) a journey taken for holiday purposes; or (b) where a journey is taken for holiday and other purposes, the part of the journey taken for holiday purposes; (Added 24 of 2003 s. 3) incapacity (無行為能力) has the meaning given by section 8(3); (Added 1 of 2015 s. 59)place of residence (居住地方) includes a residence provided by an employer or an associated corporation notwithstanding that the employee is required to occupy that place of residence by or under his terms of employment and whether or not by doing so he can better perform his duties; (Added 48 of 1979 s. 2. Amended 76 of 1993 s. 4)retirement (退休) and termination of service (服務終止) have the same meaning as in section 8(3); (Added 76 of 1993 s. 4. Amended 1 of 2015 s. 59)terminal illness (罹患末期疾病) means a terminal illness within the meaning of section 158(3) of the Mandatory Provident Fund Schemes (General) Regulation (Cap. 485 sub. leg. A). (Added 1 of 2015 s. 59) Editorial Note: * The amendments made by 24 of 2003 to section 9(1)(a)(i) to (iii), (2A)(a) and (c) and (6) apply in relation to the year of assessment commencing on 1 April 2003 and to all subsequent years of assessment. (Please see 24 of 2003 s. 2). 9A. Remuneration under certain agreements treated as being income derived from an employment of profit (1) Where a person (relevant person) carrying on (or deemed under this Ordinance to be carrying on) a trade, profession or business, or prescribed activity, has entered into an agreement, whether before, on or after the appointed day, under which any remuneration for any services carried out under the agreement on or after that day by an individual (relevant individual) for the relevant person or any other person is paid or credited on or after that day to—(a) a corporation controlled by—(i) the relevant individual;(ii) an associate or associates of the relevant individual; or (iii) the relevant individual together with an associate or associates of the relevant individual;(b) a trustee of a trust estate under which the relevant individual or an associate or associates of the relevant individual is a beneficiary, or are beneficiaries, as the case may be, under the trust; or(c) a corporation controlled by such a trustee,then, subject to subsections (3) and (4), for the purposes of this Ordinance—(i) the relevant individual shall be treated as having an employment of profit with the relevant person—(A) commencing on—(I) in the case of the trade, profession or business, the day the relevant individual commenced to carry out any of those services or the appointed day, whichever is the later;(II) in the case of the prescribed activity, the day the notice concerned under subsection (6) commenced or the day the relevant individual commenced to carry out any of those services, whichever is the later;(B) until the agreement terminates without the relevant individual continuing to carry out any of those services as an employee of the relevant person;(ii) the relevant individual shall be treated as an employee of the relevant person, and the relevant person shall be treated as the employer of the relevant individual, whilst the relevant individual is treated, under paragraph (i), as having an employment of profit with the relevant person; and (iii) any such remuneration shall be treated as being—(A) income derived by the relevant individual from an employment of profit with the relevant person; and(B) received by and accrued to the relevant individual at the time that it is paid or credited to the corporation or trustee concerned referred to in paragraph (a), (b) or (c),and the other provisions of this Ordinance (including section 52) shall be construed accordingly.(2) Where an agreement referred to in subsection (1) does not specify or otherwise identify the amount of any remuneration referred to in that subsection which is from time to time to be paid or credited to the corporation or trustee referred to in paragraph (a), (b) or (c) of that subsection, then any sum which under that agreement is paid or credited to that corporation or trustee, as the case may be, shall be deemed to be such remuneration (and the other provisions of this Ordinance, including that subsection, shall apply accordingly) except any such sum or part thereof in respect of which the relevant individual concerned or the relevant person establishes to the satisfaction of the Commissioner that it was not in substance remuneration for any services carried out under that agreement on or after the appointed day by the relevant individual for the relevant person or any other person.(3) Paragraphs (i), (ii) and (iii) of subsection (1) shall not apply where—(a) neither the agreement referred to in that subsection nor any related undertaking (and whether or not the agreement refers to that undertaking) provides for any remuneration for any of those services to include or to be the provision of annual leave, passage allowance, sick leave, pension entitlements, medical payments or accommodation, or any similar benefit, or any benefit (including money) in lieu thereof;(b) if the agreement referred to in that subsection or any related undertaking (and whether or not the agreement refers to that undertaking) requires any of the services referred to in that subsection to be carried out personally by the relevant individual, the relevant individual carries out the same or similar services—(i) for persons other than any person for whom those first-mentioned services are carried out under that agreement; and(ii) during the term of that agreement or undertaking, as the case may be;(c) the performance by the relevant individual of any of those services is not subject to any control or supervision—(i) which may be commonly exercised by an employer in relation to the performance of his employee’s duties; and(ii) by any person (including the relevant person) other than the corporation or trustee concerned referred to in subsection (1)(a), (b) or (c);(d) the remuneration referred to in that subsection is not paid or credited periodically and calculated on a basis commonly used in relation to the payment or crediting and calculation of remuneration under a contract of employment;(e) the relevant person does not have the right to cause any of those services to cease to be carried out in a manner, or for a reason, commonly provided for in relation to the dismissal of an employee under a contract of employment; and(f) the relevant individual is not held out to the public to be an officer or employee of the relevant person.(4) Paragraphs (i), (ii) and (iii) of subsection (1) shall not apply where the relevant individual establishes to the satisfaction of the Commissioner that at all relevant times the carrying out of the services referred to in that subsection was not in substance the holding by him of an office or employment of profit with the relevant person.(5) It is hereby declared that where, by virtue of the operation of this section, the relevant individual is chargeable to salaries tax on remuneration referred to in subsection (1), then—(a) the corporation or trustee concerned referred to in paragraph (a), (b) or (c) of that subsection to whom that remuneration is paid or credited is not chargeable to tax thereon; and(b) the relevant individual is not chargeable to tax on any remuneration paid or credited to him by that corporation or trustee, as the case may be—(i) in respect of any office or employment of profit he has with that corporation or trustee, as the case may be; and(ii) to the extent that the remuneration referred to in this paragraph is attributable to any of the services referred to in that subsection.(6) The Commissioner may, by notice in the Gazette, prescribe an activity for the purposes of this section.(7) For the avoidance of doubt, it is hereby declared that—(a) where there are 2 or more relevant individuals under an agreement referred to in subsection (1), then that subsection shall apply to them individually and not collectively, and the other provisions of this section (including subsection (2)) shall be construed accordingly;(b) paragraphs (i), (ii) and (iii) of subsection (1) shall not apply where under an agreement referred to in that subsection—(i) the relevant person is also the relevant individual; or(ii) the relevant person is a partnership and the relevant individual is a partner of the partnership.(8) In this section—appointed day (指定日期) means the day appointed under section 1(2) of the Inland Revenue (Amendment) (No. 2) Ordinance 1995 (54 of 1995);associate (相聯者), in relation to the relevant individual, means—(a) a relative of the relevant individual;(b) a partner of the relevant individual and any relative of that partner;(c) a partnership in which the relevant individual is a partner;(d) any corporation controlled by the relevant individual, by a partner of the relevant individual or by a partnership in which the relevant individual is a partner;(e) any director or principal officer of a corporation referred to in paragraph (d);(f) another relevant individual who is such an individual under the agreement referred to in subsection (1) under which the first-mentioned relevant individual is also such an individual;beneficiary (受益人), in relation to a trust estate, means any person who benefits or is capable (whether by the exercise of a power of appointment or otherwise) of benefiting under the trust estate, either directly or through any interposed person, or who is able or might reasonably be expected to be able, whether directly or indirectly, to control the activities of the trust estate or the application of its corpus or income;control (控制), in relation to a corporation, means the power of a person to secure—(a) by means of the holding of shares or the possession of voting power in or in relation to that or any other corporation; or(b) by virtue of any powers conferred by the articles of association or other document regulating that or any other corporation,that the affairs of the first-mentioned corporation are conducted in accordance with the wishes of that person;prescribed activity (訂明活動) means any activity prescribed in a notice under subsection (6);principal officer (主要職員) means—(a) a person employed by a corporation who, either alone or jointly with one or more other persons, is responsible under the immediate authority of the directors for the conduct of the business of the corporation; or(b) a person so employed who, under the immediate authority of a director of the corporation or a person to whom paragraph (a) applies, exercises managerial functions in respect of the corporation;relative (親屬) means the spouse, parent, child, brother or sister of the person concerned, and, in deducing such a relationship, an adopted child shall be deemed to be a child both of the natural parents and the adopting parent and a step child to be the child of both the natural parents and of any step parent.(Added 54 of 1995 s. 2) 10. Salaries tax on spouses to be paid separately unless they elect to be jointly assessed (1) In the case of a husband and wife, unless an election is made under subsection (2), salaries tax shall be payable on the net chargeable income of each spouse ascertained under this Part by the spouse to whom the income has accrued.(2) Where in any year of assessment a husband and wife, not being a wife living apart from her husband, both have assessable income and—(a) either the husband or wife is entitled to deductions under Part 4A and allowances under Part 5 which, in aggregate, are in excess of his or her net assessable income; or (Amended 31 of 1998 s. 4)(b) both also have a net chargeable income and the aggregate of the salaries tax which would be payable by them if subsection (1) applies exceeds the salaries tax which would be payable if an election is made under this subsection,an election may be made by them, subject to section 11, to be assessed to salaries tax in the manner specified in subsection (3).(3) Where an election is made by a husband and wife under subsection (2) salaries tax shall be payable on their aggregated net chargeable income as ascertained under section 12B(2) and in the case of an election—(a) under subsection (2)(a), the spouse who would have been chargeable to salaries tax in the absence of such an election;(b) under subsection (2)(b), the spouse who is nominated by them,shall be chargeable to salaries tax in respect of such aggregated net chargeable income.(4) Where a husband or wife is deceased an executor shall have the same right to make an election under subsection (2) as the deceased would have had if the deceased had not died.(5) For the purposes of subsection (3), where an election is made under subsection (2) by a husband and wife who married one another in the year of assessment to which the election relates, they shall be deemed, for the purposes of ascertaining their aggregated net chargeable income for that year, to have married at the commencement of that year.(Replaced 43 of 1989 s. 3. Amended E.R. 1 of 2012) 11. The time and manner in which an election or the withdrawal of an election for joint assessment is to be made (1) An election shall be made in the specified form jointly by the husband and wife and, subject to subsection (3), may be withdrawn by them jointly by notice in writing given to the Commissioner.(2) An election shall relate to the year of assessment specified in such form and it, and any withdrawal thereof under this section, may be made at any time—(a) within that year of assessment or the following year of assessment; or(b) before the expiration of a period of one month following the time when the assessment for the year of assessment becomes final and conclusive under section 70,whichever is the later, or within such further time, if any, as the Commissioner may allow as being reasonable in the circumstances.(3) Where an election is withdrawn under this section it shall, for the purpose of assessing the net chargeable income of the husband and wife, be deemed never to have been made and any assessment made prior to such withdrawal on the basis of the election may be adjusted by the Commissioner to take account of the withdrawal.(4) A husband and wife who under this section have withdrawn an election may not again make an election in relation to the year of assessment to which the withdrawn election relates.(5) In this section election (選擇) means an election made under section 10(2) and, where a nomination under section 10(3)(b) is required, includes such nomination.(Added 43 of 1989 s. 3) 11A. (Repealed 71 of 1983 s. 4) 11B. Ascertainment of assessable income The assessable income of a person in any year of assessment shall be the aggregate amount of income accruing to him from all sources in that year of assessment.(Added 8 of 1973 s. 5. Amended 71 of 1983 s. 5) 11C. Office or employment of profit For the purpose of section 11B, a person shall be deemed to commence or cease, as the case may be, to derive income from a source whenever and as often as he commences or ceases—(a) to hold any office or employment of profit; or (b) to become entitled to a pension. (Replaced 71 of 1983 s. 6) 11D. Receipt of income For the purpose of section 11B—(a) income which has accrued to a person during the basis period for a year of assessment but which has not been received by him in such basis period shall not be included in his assessable income for that year of assessment until such time as he shall have received such income, when notwithstanding anything contained in this Ordinance, an additional assessment shall be raised in respect of such income:Provided that for the purposes of this paragraph income which has either been made available to the person to whom it has accrued or has been dealt with on his behalf or according to his directions shall be deemed to have been received by such person;(b) income accrues to a person when he becomes entitled to claim payment thereof:Provided that—(i) any lump sum payment received on or after 1 April 1966, being a lump sum payment or gratuity paid or granted upon the retirement from or termination of any office or employment or any contract of employment of an employee or a lump sum payment of deferred pay or arrears of pay arising from an award of salary or wages, whether such a payment is paid by an employer to a person during employment or after that person has left his employ, shall upon the application in writing of the person entitled to claim payment thereof within 2 years after the end of the year of assessment in which the payment is made be related back and shall then be deemed to be income which has accrued during the periods in which the services or employment, in respect of which the payment was made, were performed or exercised, or, if the relevant periods of service or employment exceed 3 years, the payment shall be deemed to be income accruing at a constant rate over the 3 years ending on the date on which the person became entitled to claim payment thereof or ending on the last day of employment, whichever is the earlier; and, notwithstanding section 70, an application made by any person under this proviso for the adjustment of an assessment shall, to that extent, be regarded as a valid objection to the assessment under section 64; and(ii) subject to proviso (i), any payment made by an employer to a person after that person has ceased or been deemed to cease to derive income which, if it had been made on the last day of the period during which he derived income, would have been included in that person’s assessable income for the year of assessment in which he ceased or is deemed to cease to derive income from that employment, shall be deemed to have accrued to that person on the last day of that employment.(Added 8 of 1973 s. 5. Amended 71 of 1983 s. 7) 12. Adjustments to assessable income (1) In ascertaining the net assessable income of a person for any year of assessment, there shall be deducted from the assessable income of that person—(a) all outgoings and expenses, other than expenses of a domestic or private nature and capital expenditure, wholly, exclusively and necessarily incurred in the production of the assessable income;(b) allowances calculated in accordance with Part 6 in respect of capital expenditure on machinery or plant the use of which is essential to the production of the assessable income;(c) the amount of any excess carried forward to that year of assessment in accordance with section 12A(3);(d) the amount of any excess required by subsection (3) to be deducted;(e) the amount of the expenses of self-education paid in the year of assessment not exceeding the amount prescribed in subsection (6). (Added 24 of 1996 s. 3)(2) Where any machinery or plant is not used wholly and exclusively in the production of assessable income, the amount of the allowances provided for in subsection (1)(b) shall be reduced in the proportion considered by the assessor to be fair and reasonable.(3) If in the case of a husband and wife who have made an election under section 10(2), the aggregate of deductions claimed for any year of assessment by either spouse under subsection (1)(a), (b) and (c) exceeds the assessable income of that spouse in that year, the excess shall be deducted from the assessable income of the other spouse for the purpose of determining the net assessable income of that other spouse in that year. (Amended 43 of 1989 s. 4)(4) (Repealed 71 of 1983 s. 8)(5) The amount of assessable income for any year of assessment of a person shall, for the purposes of ascertaining his net assessable income, be increased by the amount of any balancing charge directed to be made under Part 6 on that person in respect of the machinery or plant used in the production of the assessable income. (6) For the purposes of subsection (1)(e)—(a) the total amount that may be deducted in any year of assessment shall not exceed the amount specified in relation to that year in Schedule 3A; (Amended 42 of 1997 s. 3)*(b) expenses of self-education (個人進修開支) means expenses paid by the taxpayer as— (i) fees, including tuition and examination fees, in connection with a prescribed course of education undertaken by the taxpayer; or (ii) fees in respect of an examination set by an education provider or a trade, professional or business association, and undertaken by the taxpayer to gain or maintain qualifications for use in any employment, but does not include— (A) expenses for which a deduction is allowable or has been allowed to the taxpayer in any year of assessment under any other provision of this Ordinance; or (B) expenses to the extent to which they have been reimbursed or are reimbursable to the taxpayer by his employer or any other person unless the reimbursement has been or will be included in the assessable income of the taxpayer; (Replaced 12 of 2004 s. 4) *(c) prescribed course of education (訂明教育課程) means a course undertaken to gain or maintain qualifications for use in any employment and being— (i) a course of education provided by an education provider; (ii) a training or development course provided by a trade, professional or business association; or +(iii) a training or development course accredited or recognized by an institution specified in Schedule 13; (Replaced 12 of 2004 s. 4) *(d) education provider (教育提供者) means— (i) a university, university college or technical college; (ii) a place of education to which the Education Ordinance (Cap. 279) does not apply by virtue of section 2 of that Ordinance; (iii) a school registered under section 13(a) of the Education Ordinance (Cap. 279); (iv) a school exempted from registration under section 9(1) of the Education Ordinance (Cap. 279); (v) an institution approved by the Commissioner for the purposes of section 16C; or (vi) an institution approved by the Commissioner under paragraph (e); (Replaced 12 of 2004 s. 4) *(e) the Commissioner may in writing approve an institution as an education provider and the approval may operate from a date, whether before or after the date of approval, specified in the instrument of approval and may be withdrawn at any time; (Added 12 of 2004 s. 4)+(f) the Secretary for Financial Services and the Treasury may by order amend Schedule 13. (Added 12 of 2004 s. 4)(Replaced 7 of 1975 s. 4. Amended 71 of 1983 s. 8; E.R. 1 of 2012) Editorial Note: * Section 12(6)(b), (c)(except paragraph (c)(iii)), (d) and (e) applies in relation to the year of assessment 2000/01 and to all subsequent years of assessment. (Please see 12 of 2004 s. 2(1)) + Section 12(6)(c)(iii) and (f) applies in relation to the year of assessment 2004/05 and to all subsequent years of assessment. (Please see 12 of 2004 s. 2(4)) 12A. Treatment of losses (1) Where in any year of assessment the aggregate of the outgoings, expenses and allowances deductible under section 12(1)(a) and (b) from the assessable income of a person exceeds the amount of his assessable income, the amount of the excess shall, subject to subsection (4), be carried forward and set off against his assessable income in subsequent years of assessment.(2) The aggregate amount set off against a person’s assessable income in subsequent years of assessment shall not exceed the amount of any excess under subsection (1).(3) Subject to subsection (4), a set off by a person under this section shall first be made against his assessable income for the year of assessment next succeeding the year of assessment in respect of which the excess occurred and, so far as it cannot be so made, against his assessable income for the next year of assessment and so on until the excess has been completely set off.(4) Where in any year of assessment the net chargeable incomes of the husband and wife are aggregated by reason of an election made under section 10(2), any excess carried forward into that year under this section shall—(a) be set off primarily against the assessable income of the spouse whose deductions resulted in the excess and then, so far as it cannot be so set off, against the assessable income of the other spouse; and(b) then, and so far as it cannot be set off in accordance with paragraph (a)—(i) where no election is made under section 10(2) in respect of the following year of assessment, in accordance with subsection (3); or(ii) where an election is made under section 10(2) in respect of the following year of assessment, in accordance with paragraph (a),and so on from year to year until the excess has been completely set off. (Replaced 43 of 1989 s. 5)(Replaced 7 of 1975 s. 4. Amended 71 of 1983 s. 9) 12B. Ascertainment of net chargeable income (1) The net chargeable income of a person for any year of assessment shall, subject to subsection (2), be such amount as is arrived at after deducting from his net assessable income—(a) such deductions as are under Part 4A allowable to that person; and (Replaced 31 of 1998 s. 5)(b) such allowances as are under Part 5 permitted for that person. (Amended 43 of 1989 s. 6)(2) In the case of a person chargeable to salaries tax under section 10(3), that person and his or her spouse shall have but one net chargeable income, and it shall be the amount arrived at after deducting from the aggregate of their net assessable incomes—(a) such deductions as are under Part 4A allowable to them; and (Replaced 31 of 1998 s. 5)(b) such allowances as are under Part 5 permitted in their case. (Replaced 43 of 1989 s. 6) (3) (Repealed 43 of 1989 s. 6) (Replaced 71 of 1983 s. 10. Amended E.R. 1 of 2012) 12BA. (Repealed 31 of 1998 s. 6) 13. Calculation of salaries tax (1) Subject to subsection (2), salaries tax shall be charged at the rates specified in Schedule 2 on the net chargeable income of a person for each year of assessment ascertained in accordance with this Part. (Amended L.N. 350 of 1990)(2) The amount of salaries tax so charged shall not exceed the amount which would have been chargeable had the standard rate been charged on the whole of—(a) the net assessable income as reduced by such deductions as are under Part 4A allowable to the person; or(b) in the case of a spouse chargeable to salaries tax under section 10(3), the aggregate amount of his or her net assessable income and that of his or her spouse as reduced by such deductions as are under Part 4A allowable to them. (Amended 31 of 1998 s. 7)(3) Notwithstanding subsections (1) and (2), the amount of salaries tax charged under this section for the year of assessment commencing on 1 April 2006 shall be reduced by an amount equivalent to—(a) 50% of the amount of the tax as computed under subsection (1) read together with subsection (2); or(b) $15,000,whichever is the less. (Added 10 of 2007 s. 3)(Replaced 43 of 1989 s. 8. Amended E.R. 1 of 2012) 13A. Part 8AA applies Part 8AA applies for the purposes of calculation of salaries tax.(Added 27 of 2018 s. 12) Part 4 Profits Tax Division 1 Charge of Profits Tax (Added 15 of 2020 s. 2) 14. Charge of profits tax (1) Subject to the provisions of this Ordinance, profits tax shall be charged for each year of assessment on every person carrying on a trade, profession or business in Hong Kong in respect of his assessable profits arising in or derived from Hong Kong for that year from such trade, profession or business (excluding profits arising from the sale of capital assets) as ascertained in accordance with this Part. (Replaced 2 of 1971 s. 9. Amended 7 of 1986 s. 12; 56 of 1993 s. 8; 13 of 2018 s. 3)(2) For a person other than a corporation, the tax is to be charged on the assessable profits of the person—(a) for any year of assessment commencing before 1 April 2018—at the standard rate;

or(b) for any year of assessment commencing on or after 1 April 2018—in accordance with section 2 of Schedule 8A. (Replaced 13 of 2018 s. 3)(3) For a corporation, the tax is to be charged, subject to subsections (4) and (5), on the assessable profits of the corporation—(a) for any year of assessment commencing before 1 April 2018—at the rate specified in Schedule 8; or(b) for any year of assessment commencing on or after 1 April 2018—in accordance with section 2(a) of Schedule 8B. (Added 13 of 2018 s. 3)(4) If a corporation is a partner in a partnership, in relation to any share of assessable profits of the partnership apportioned to the corporation under section 22A, the tax is to be charged—(a) for any year of assessment commencing before 1 April 2018—at the rate specified in Schedule 8; or(b) for any year of assessment commencing on or after 1 April 2018—in accordance with section 2(b) of Schedule 8B. (Added 13 of 2018 s. 3)(5) If a corporation has made an election under section 14B(2)(b), 14D(5)(b), 14H(4)(b), 14J(5)(b), 14P(4)(b), 14T(5)(b), 14ZD(7)(b), 14ZM(7)(b) or 14ZV(7)(b) or section 4 of Schedule 17FD in respect of a portion of its assessable profits, then, in relation to the rest of its assessable profits, the tax is to be charged at the rate specified in Schedule 8. (Added 13 of 2018 s. 3. Amended 9 of 2019 s. 3; 5 of 2020 s. 4; 10 of 2022 s. 3; 17 of 2024 s. 3) 14AA. Interpretation (1) In this section and sections 14AAB and 14AAC— entity (實體) means— (a) a natural person; (b) a body of persons; or (c) a legal arrangement, including—(i) a corporation;(ii) a partnership; and(iii) a trust; sole proprietorship business (獨資經營業務), in relation to a natural person, means a trade, profession or business carried on by the person as a sole proprietor.(2) For the purposes of section 14AAB(1)(c), if a natural person carries on more than one sole proprietorship business, the person is taken to be a separate entity in relation to each sole proprietorship business.(Added 13 of 2018 s. 4) 14AAB. Meaning of connected entity (1) For the purposes of section 14AAC, an entity is a connected entity of another entity if—(a) one of them has control over the other;(b) both of them are under the control of the same entity; or(c) in the case of the first entity being a natural person carrying on a sole proprietorship business—the other entity is the same person carrying on another sole proprietorship business.(2) For the purposes of subsection (1), an entity (entity A) has control over another entity (entity B) if—(a) in the case of entity B being a trust—entity A is entitled to a vested interest in more than 50% of the capital of the property of the trust—(i) whether the interest is in possession or in remainder or reversion; and(ii) whether the interest is defeasible or not; or(b) in any other case—entity A has a specified interest in entity B.(3) However, entity A does not have control over entity B if it falls within the description in subsection (2)(a) or (b) in respect of entity B solely by acting in the capacity of a trustee.(4) For the purposes of subsection (2)(b), entity A has a specified interest in entity B if entity A, whether directly or indirectly through one or more than one other entity (interposed entity)—(a) owns or controls more than 50% in aggregate of the issued share capital of entity B;(b) is entitled to exercise or control the exercise of more than 50% in aggregate of the voting rights in entity B; or(c) is entitled to more than 50% in aggregate of the capital or profits of entity B.(5) For the purposes of subsection (4), the extent of any indirect interest of entity A in entity B is—(a) if there is 1 interposed entity—the percentage arrived at by multiplying the percentage representing the extent of the direct interest of entity A in the interposed entity by the percentage representing the extent of the direct interest of the interposed entity in entity B; or(b) if there is a series of 2 or more interposed entities—the percentage arrived at by multiplying the percentage representing the extent of the direct interest of entity A in the first interposed entity in the series by—(i) the percentage representing the extent of the direct interest of each interposed entity (other than the last interposed entity) in the next interposed entity in the series; and(ii) the percentage representing the extent of the direct interest of the last interposed entity in entity B.(6) For the purposes of subsection (5), the extent of the direct interest of an entity in another entity is—(a) in relation to issued share capital—the percentage of the issued share capital of the other entity directly owned or directly controlled by the first entity;(b) in relation to voting rights—the percentage of the voting rights in the other entity that the first entity is directly entitled to exercise, or over which the first entity is directly entitled to control the exercise; or(c) in relation to capital or profits—the percentage of the capital or profits of the other entity that the first entity is directly entitled to.(7) For the purposes of this section, if an entity is a corporation, a reference to the exercise of the voting rights in the entity is to be construed as a reference to the exercise of the voting rights at general meetings of the entity.(Added 13 of 2018 s. 4) 14AAC. Charge of profits tax for connected entities (1) This section applies to an entity in relation to any year of assessment commencing on or after 1 April 2018 (specified year of assessment) if, at the end of the basis period of the entity for that year of assessment, the entity has any connected entity.(2) Section 14 applies to the entity subject to any applicable modifications specified in subsection (3).(3) The modifications are—(a) for an entity other than a corporation—the reference in section 14(2)(b) to “in accordance with section 2 of Schedule 8A” is taken to be a reference to “at the standard rate”;(b) for a corporation—the reference in section 14(3)(b) to “in accordance with section 2(a) of Schedule 8B” is taken to be a reference to “at the rate specified in Schedule 8”; and(c) for a corporation that is a partner in a partnership—the reference in section 14(4)(b) to “in accordance with section 2(b) of Schedule 8B” is taken to be a reference to “at the rate specified in Schedule 8”.(4) However, the Commissioner may exempt an entity from subsection (2) for a specified year of assessment if the entity has elected in writing to be so exempted.(5) The election, once made, is irrevocable.(6) Subsection (4) does not apply to an entity (entity A) for a specified year of assessment if—(a) entity A is a connected entity of another entity (entity B) at the end of the basis period of entity A for that year of assessment; and(b) entity B has been exempted under that subsection for that year of assessment.(Added 13 of 2018 s. 4) Division 2 Profits Tax Concessions (Added 15 of 2020 s. 2) Subdivision 1 Qualifying Debt Instruments (Added 15 of 2020 s. 2) 14A. Qualifying debt instruments*# (1) For the purposes of this Part the assessable profits of a person for sums received by or accrued to the person as—(a) interest paid or payable on a medium term debt instrument or short term debt instrument; or(b) any gain or profit on the sale or other disposal or on the redemption on maturity or presentment of the medium term debt instrument or short term debt instrument, are chargeable to tax under this Part at one-half of the rate specified in Schedule 1 or Schedule 8, as the case may be. (Amended 4 of 2011 s. 3)(1A) In relation to—(a) a medium term debt instrument issued on or after 25 March 2011; or (Amended 32 of 2018 s. 18)(b) a short term debt instrument, subsection (1) does not apply in respect of any sums received by or accrued to a person as referred to in that subsection if, at the time the sums are so received or accrued, the person is an associate of the issuer of the debt instrument. (Added 4 of 2011 s. 3)(1B) For the purposes of this Part—(a) interest paid or payable on a debt instrument issued on or after 1 April 2018; and(b) any gain or profit on the sale or other disposal, or on the redemption on maturity or presentment, of the debt instrument,received by or accrued to a person are not chargeable to tax under this Part. (Added 32 of 2018 s. 18)(1C) Subsection (1B) does not apply in relation to a debt instrument if, at the time the interest or gain or profit relating to the debt instrument is received by or accrued to a person, the person is an associate of the issuer of the debt instrument. (Added 32 of 2018 s. 18)(2)-(3) (Repealed 32 of 1998 s. 4)(4) In this section— (Amended 34 of 2003 s. 3) associate (相聯者), in relation to the issuer of a debt instrument, means— (a) if the issuer is a natural person—(i) any relative of the issuer;(ii) any partner of the issuer;(iii) if a partner of the issuer is a natural person, any relative of that partner;(iv) any partnership of which the issuer is a partner;(v) any corporation controlled by—(A) the issuer;(B) a partner of the issuer;(C) if a partner of the issuer is a natural person, any relative of that partner; or(D) a partnership of which the issuer is a partner; or(vi) any director or principal officer of a corporation referred to in subparagraph (v); (b) if the issuer is a corporation—(i) any associated corporation;(ii) any person who controls the issuer;(iii) any partner of a person who controls the issuer;(iv) if a person who controls the issuer is a natural person, any relative of that person;(v) if a partner referred to in subparagraph (iii) is a natural person, any relative of that partner;(vi) any director or principal officer of the issuer or of any associated corporation;(vii) any relative of a director or principal officer referred to in subparagraph (vi);(viii) any partner of the issuer; or(ix) if a partner of the issuer is a natural person, any relative of that partner; or (c) if the issuer is a partnership—(i) any partner of the issuer;(ii) if a partner of the issuer is a partnership, any partner (Partner A) of that partnership or any partner (Partner B) with that partnership in any other partnership;(iii) if Partner A is a partnership, any partner of Partner A;(iv) if Partner B is a partnership, any partner of Partner B;(v) if a partner of, or with, or in any of the partnerships referred to in subparagraph (ii), (iii) or (iv) is a natural person, any relative of that partner;(vi) any corporation controlled by—(A) the issuer;(B) a partner of the issuer;(C) if a partner of the issuer is a natural person, any relative of that partner; or(D) a partnership of which the issuer is a partner;(vii) any director or principal officer of a corporation referred to in subparagraph (vi); or(viii) any corporation of which any partner of the issuer is a director or principal officer; (Added 4 of 2011 s. 3) associated corporation (相聯法團), in relation to the issuer of a debt instrument which is a corporation, means— (a) a corporation over which the issuer has control; (b) a corporation which has control over the issuer; or (c) a corporation which is under the control of the same person as is the issuer; (Added 4 of 2011 s. 3) control (控制), in relation to a corporation, means the power of a person to secure— (a) by means of the holding of shares or the possession of voting power in or in relation to that or any other corporation; or (b) by virtue of any power conferred by the articles of association or other document regulating that or any other corporation, that the affairs of the first-mentioned corporation are conducted in accordance with the wishes of that person; (Added 4 of 2011 s. 3) debt instrument (債務票據) means an instrument specified in Part 1 of Schedule 6 that— (Amended 34 of 2003 s. 3) (a) is—(i) in respect of a debt issue which in its entirety has been lodged with and cleared by the Central Moneymarkets Unit operated by the Monetary Authority; or(ii) listed on a stock exchange in Hong Kong; (Replaced 32 of 2018 s. 18) (b) subject to subsection (5), is issued by a person and has at all relevant times a credit rating acceptable to the Monetary Authority from a credit rating agency recognized by the Monetary Authority; (c) (Repealed 34 of 2003 s. 3) (d) subject to subsection (5), has—(i) where it is issued before 1 April 1999, a minimum denomination of $500,000 or its equivalent in a foreign currency; or(ii) where it is issued on or after 1 April 1999, a minimum denomination of $50,000 or its equivalent in a foreign currency; (Replaced L.N. 90 of 1999 and 44 of 1999 s. 11) (e) is, at issuance, issued in Hong Kong to—(i) 10 or more persons; or(ii) less than 10 persons none of whom is an associate of the issuer of the instrument; (Replaced 4 of 2011 s. 3) (f) if it is a scripless instrument, it is one that would qualify in the terms of this definition if it were in a physical form; (Amended 34 of 2003 s. 3) (g) is issued on or after 24 May 1996; (Amended 34 of 2003 s. 3; 4 of 2011 s. 3; 10 of 2013 s. 6) medium term debt instrument (中期債務票據) means— (a) a debt instrument that—(i) is issued before 5 March 2003;(ii) has an original maturity of not less than 5 years or is undated; and(iii) cannot be redeemed within 5 years from the date of its issue; or (b) a debt instrument that—(i) is issued on or after 5 March 2003 but before 1 April 2018; (Amended 32 of 2018 s. 18)(ii) has an original maturity of less than 7 years but not less than 3 years or is undated; and(iii) can be redeemed within 7 years from the date of its issue but not within the first 3 years; (Added 34 of 2003 s. 3. Amended 4 of 2011 s. 3) principal officer (主要職員), in relation to a corporation, means— (a) a person employed by the corporation who, either alone or jointly with one or more other persons, is responsible under the immediate authority of the directors of the corporation for the conduct of the business of the corporation; or (b) a person employed by the corporation who, under the immediate authority of a director of the corporation or a person to whom paragraph (a) applies, exercises managerial functions in respect of the corporation; (Added 4 of 2011 s. 3) relative (親屬), in relation to a person, means the spouse, parent, child, brother or sister of that person, and, in deducing such a relationship— (a) an adopted child is regarded as a child of both the natural parents and the adopting parents; and (b) a step child is regarded as a child of both the natural parents and the step parents; (Added 4 of 2011 s. 3) short term debt instrument (短期債務票據) means a debt instrument that— (a) is issued on or after 25 March 2011 but before 1 April 2018; (Amended 32 of 2018 s. 18) (b) has an original maturity of less than 3 years or is undated; and (c) can be redeemed within 3 years from the date of its issue; (Added 4 of 2011 s. 3) wholly owned subsidiary (全資附屬公司) has the same meaning as it is given for the purposes of Part 9 of the Companies Ordinance (Cap. 622) by section 357(3) of that Ordinance. (Added 4 of 2011 s. 3. Amended 28 of 2012 ss. 912 & 920)(4A) For the purposes of paragraph (c) of the definition of associated corporation in subsection (4), a corporation is not regarded as being under the control of the same person as is the issuer of a debt instrument issued on or after 25 March 2011 by reason only that— (Amended 32 of 2018 s. 18)(a) both the corporation and the issuer are wholly owned by—(i) the Government of Hong Kong; or(ii) the central government of the same country;(b) more than 50% of the voting power in the corporation and more than 50% of the voting power in the issuer are held or controlled by—(i) one or more than one corporation which is established and wholly owned by the Government of Hong Kong or the central government of the same country for the purpose of carrying on the business of investment (government investment vehicle); or(ii) a wholly owned subsidiary of a government investment vehicle; or(c) more than 50% of the voting power in the corporation is held or controlled by a corporation wholly owned by the Government of Hong Kong or the central government of the same country (government enterprise) and more than 50% of the voting power in the issuer is held or controlled by another government enterprise. (Added 4 of 2011 s. 3)(5) For the purposes of the definition of debt instrument in subsection (4), the Financial Secretary may by order—(a) declare that the provisions relating to a credit rating mentioned in paragraph (b) of that definition do not apply;(b) fix an amount of minimum denomination different from the amount mentioned in paragraph (d)(i) or (ii), as the case may be, of that definition, (Amended L.N. 90 of 1999 and 44 of 1999 s. 11) in respect of a debt instrument issued by such person as may be specified in the order.(6) Section 21 of Schedule 17A (specified alternative bond scheme and its treatment under this Ordinance (other than Part 4AA)) provides for modifications to this section. (Added 10 of 2013 s. 6. Amended 21 of 2025 s. 33)(7) An amount of loss incurred or sustained by a person from a transaction in or related to a debt instrument issued on or after 1 April 2018 in a year of assessment cannot be set off against the person’s assessable profits for the year of assessment or any subsequent year of assessment. (Added 32 of 2018 s. 18)(8) To avoid doubt, paragraph (a) of the definition of debt instrument in subsection (4) as in force on the commencement date@ of the Inland Revenue (Amendment) (No. 9) Ordinance 2018 (32 of 2018) applies to an instrument issued within the period from 1 April 2018 to the day before that commencement date@. (Added 32 of 2018 s. 18)(Added 25 of 1996 s. 2. Amended 34 of 2003 s. 3; E.R. 1 of 2012; E.R. 2 of 2014) Editorial Note: * The amendments made by 34 of 2003 to section 14A(1)(a) and (b), (4) and (5) apply in relation to the year of assessment commencing on 1 April 2003 and to all subsequent years of assessment. (Please see 34 of 2003 s. 2) # The operation of this section is affected by s. 6 of 10 of 2013. That section is reproduced as follows— “6. Section 14A amended (qualifying debt instruments) (1) Section 14A(4), definition of debt instrument, paragraph (g)—Repeal“14 November 2003” Substitute“24 May 1996”. (2) A relevant instrument is to be regarded as a debt instrument within the meaning of section 14A of the IRO in relation to a year of assessment to the extent to which it would have been such a debt instrument if paragraph (g) of the definition of debt instrument in subsection (4) of that section, as amended by subsection (1) of this section, had always been in force. (3) If, for the purposes of an assessment made before the date of commencement** of subsection (1), a relevant instrument was regarded as a debt instrument within the meaning of section 14A of the IRO, the assessment is to be regarded as valid to the extent to which it would have been valid if subsection (4) of that section, as amended by subsection (1) of this section, had always been in force. (4) For the purposes of subsections (2) and (3)—IRO (《條例》) means the Inland Revenue Ordinance (Cap. 112); relevant instrument (相關票據) means an instrument issued on or after 24 May 1996 but before 14 November 2003. (5) After section 14A(5)—Add “(6) Section 21 of Schedule 17A (specified alternative bond scheme and its tax treatment) provides for modifications to this section.”.” ** Commencement date: 19 July 2013. @ Commencement date: 23 November 2018 Subdivision 2 Qualifying Insurance Business and Insurance Brokerage Business (Added 15 of 2020 s. 2) 14AB. Qualifying insurance business and insurance brokerage business: interpretation (1) In this Subdivision— authorized captive insurer (獲授權專屬自保保險人) means a company that— (a) is a captive insurer within the meaning of section 2(7)(a) of the Insurance Ordinance (Cap. 41); and (b) is authorized under section 8 of that Ordinance to carry on in or from Hong Kong insurance business as a captive insurer; contract of insurance (保險合約) includes a contract referred to in column 3 of Part 3 of Schedule 1 to the Insurance Ordinance (Cap. 41) that is described in that column as a contract other than a contract of insurance; Note— For example, contracts for fidelity bonds referred to in that column of class 15. general insurance business (一般保險業務) means a business of a class specified in Part 3 of Schedule 1 to the Insurance Ordinance (Cap. 41); general reinsurance business (一般再保險業務) means a business of providing reinsurance of liabilities under a contract of insurance effected by an insurer or Lloyd’s in the course of— (a) carrying on a general insurance business; or (b) carrying on a business similar to a general insurance business under the law of a place outside Hong Kong; insurer (保險人) has the meaning given by section 2(1) of the Insurance Ordinance (Cap. 41);licensed insurance broker company (持牌保險經紀公司) has the meaning given by section 2(1) of the Insurance Ordinance (Cap. 41);professional reinsurer (專業再保險人) means a company authorized under section 8 of the Insurance Ordinance (Cap. 41) to carry on in or from Hong Kong reinsurance business only; qualifying regulated activity (合資格受規管活動) means an act that— (a) is specified in Part 1 of Schedule 1A to the Insurance Ordinance (Cap. 41); and (b) relates to a contract of insurance effected by a professional reinsurer or a specified insurer in the course of carrying on a business specified in section 14B(1)(a) or (c); series of transactions (一系列交易)—see subsections (2) and (3); specified general insurance business (指明一般保險業務) means a business that— (a) is a general insurance business; but (b) is not a business of effecting and carrying out a contract of insurance that covers any of the risks and liabilities specified and described in Schedule 49; specified insurer (指明保險人) means any of the following persons carrying on in or from Hong Kong a class of insurance business specified in Schedule 1 to the Insurance Ordinance (Cap. 41)— (a) a company authorized by the Insurance Authority under section 8 of the Insurance Ordinance (Cap. 41) to carry on the business, except a professional reinsurer and an authorized captive insurer; (b) Lloyd’s; (c) an approved association of underwriters; transaction (交易) includes any operation, scheme, arrangement, understanding and mutual practice (whether express or implied, and whether or not enforceable or intended to be enforceable by legal proceedings).(2) References in section 14B to a series of transactions include a number of transactions each entered into (whether or not one after the other) in pursuance of, or in relation to, the same matter.(3) For the purposes of section 14B(2A), a series of transactions is not prevented from being regarded as a series of transactions by means of which a corporation sells or purchases insurance or reinsurance to or from any person, even if one or more of the following applies—(a) there is no transaction in the series to which the corporation and the person are parties;(b) the parties to any arrangement or scheme in pursuance of which the transactions in the series are entered into do not include one or both of the corporation and the person;(c) there is one or more transactions in the series to which neither the corporation nor the person is a party.(4) The Secretary for Financial Services and the Treasury may by notice published in the Gazette amend Schedule 49.(5) A note located in the text of this section is provided for information only and has no legislative effect.(Added 15 of 2020 s. 4) 14B. Qualifying insurance business and insurance brokerage business: profits tax concessions* (Amended 3 of 2014 s. 4; 15 of 2020 s. 5)(1) For the purposes of this Part, the assessable profits of a corporation are, subject to subsection (2) and section 26AB, chargeable to tax under this Part at one-half of the rate specified in Schedule 8 to the extent to which those profits are— (Amended 3 of 2014 s. 4; 27 of 2018 s. 25)(a) the assessable profits of the corporation derived from the business of reinsurance as a professional reinsurer; (Amended 15 of 2020 s. 5)(b) the assessable profits of the corporation derived from the business of insurance as an authorized captive insurer; (Amended 3 of 2014 s. 4; 27 of 2018 s. 25; 15 of 2020 s. 5)(c) the assessable profits of the corporation derived from any of the following businesses as a specified insurer—(i) specified general insurance business;(ii) general reinsurance business; or (Added 15 of 2020 s. 5)(d) the assessable profits of the corporation derived from the business of carrying on a qualifying regulated activity as a licensed insurance broker company. (Added 15 of 2020 s. 5)(2) Subsection (1) applies to a corporation for a year of assessment only if—(a) in that year of assessment, the activities that produce the corporation’s assessable profits that fall within subsection (1)(a), (b), (c) or (d) in that year are— (Amended 15 of 2020 s. 5)(i) carried out in Hong Kong by the corporation; or(ii) arranged by the corporation to be carried out in Hong Kong; and(b) the corporation has elected in writing that subsection (1) applies to it. (Replaced 27 of 2018 s. 25)(2A) Subsection (1)(c) does not apply to the assessable profits of a corporation derived from a transaction or a series of transaction if—(a) the corporation enters into the transaction or the series of transactions with a person for the sale or purchase of insurance or reinsurance to or from the person or another person; and(b) the main purpose, or one of the main purposes, of the corporation in entering into the transaction or the series of transactions is to avoid or postpone any liability to pay tax or reduce the amount of the liability. (Added 15 of 2020 s. 5)(3) An election under subsection (2)(b), once made, is irrevocable. (Added 27 of 2018 s. 25)(4) (Repealed 15 of 2020 s. 5)(Added 32 of 1998 s. 5) Editorial Note: * The amendments made by 3 of 2014 to section 14B(1) and (2) and its heading apply in relation to the year of assessment commencing on 1 April 2013 and to all subsequent years of assessment. (Please see 3 of 2014 s. 3) Subdivision 3 Qualifying Corporate Treasury Centre (Added 15 of 2020 s. 2) 14C. Qualifying corporate treasury centre: interpretation (1) In this section and sections 14D, 14E and 14F— associated corporation (相聯法團), in relation to a corporation, means— (a) another corporation over which the corporation has control; (b) another corporation that has control over the corporation; or (c) another corporation that is under the control of the same person as is the corporation; corporate treasury activity (企業財資活動) means— (a) carrying on an intra-group financing business; (b) providing a corporate treasury service; or (c) entering into a corporate treasury transaction; corporate treasury asset (企業財資資產), in relation to a corporation, means an asset of the corporation used by it to carry out a corporate treasury activity;corporate treasury profits (企業財資利潤), in relation to a corporation, means any profits of the corporation that are derived from a corporate treasury activity;corporate treasury service (企業財資服務)—see section 1 of Schedule 17B;corporate treasury transaction (企業財資交易)—see section 2 of Schedule 17B;intra-group financing business (集團內部融資業務), in relation to a corporation, means the business of the borrowing of money from and lending of money to its associated corporations;intra-group lending transaction (集團內部貸款交易), in relation to a corporation, means a transaction under which the corporation lends money, in the ordinary course of its intra-group financing business, to its associated corporation; (Added 27 of 2018 s. 26)prescribed asset percentage (訂明資產百分率)—see section 4 of Schedule 17B;prescribed profits percentage (訂明利潤百分率)—see section 3 of Schedule 17B;qualifying corporate treasury centre (合資格企業財資中心)—see section 14D(2) and (9);qualifying profits (合資格利潤), in relation to a corporation, means the assessable profits of the corporation that fall within section 14D(1)(a), (b) or (c).(Amended 27 of 2018 s. 26)(2) For the purposes of the definition of associated corporation in subsection (1), a person has control over a corporation if the person has the power to secure—(a) by means of the holding of shares or the possession of voting power in or in relation to that or any other corporation; or(b) by virtue of any powers conferred by the articles of association or other document regulating that or any other corporation,that the affairs of the first-mentioned corporation are conducted in accordance with the wishes of that person.(3)-(4) (Repealed 27 of 2018 s. 26)(5) The Secretary for Financial Services and the Treasury may by order published in the Gazette amend Schedule 17B.(Added 12 of 2016 s. 3) 14D. Qualifying corporate treasury centre: profits tax concession (1) For the purposes of this Part, the assessable profits of a corporation that is a qualifying corporate treasury centre for a year of assessment are, subject to subsection (5) and section 26AB, chargeable to tax under this Part at one-half of the rate specified in Schedule 8 to the extent to which those profits are— (Amended 27 of 2018 s. 27)(a) assessable profits derived from its intra-group lending transaction;(b) assessable profits derived from its corporate treasury service; or(c) assessable profits derived from its corporate treasury transaction. (Amended 27 of 2018 s. 27)(2) A corporation is a qualifying corporate treasury centre for a year of assessment if, for that year of assessment—(a) it satisfies the conditions specified in subsection (3);(b) it satisfies the safe harbour rule under section 14E; or(c) it has obtained the Commissioner’s determination under section 14F(1).(3) The conditions specified for the purposes of subsection (2)(a) are that, in the basis period for the year of assessment, the corporation—(a) has carried out in Hong Kong one or more corporate treasury activities; and(b) has not carried out in Hong Kong any activity other than a corporate treasury activity.(4) For the purposes of subsection (3)(b), in determining whether a corporation has carried out any activity other than a corporate treasury activity, only activities that generate income to the corporation are to be taken into account.(5) Subsection (1) applies to a corporation for a year of assessment only if—(a) in that year of assessment—(i) the central management and control of the corporation is exercised in Hong Kong; and(ii) the activities that produce its qualifying profits in that year are—(A) carried out in Hong Kong by the corporation; or(B) arranged by the corporation to be carried out in Hong Kong; and(b) the corporation has elected in writing that subsection (1) applies to it.(6) An election under subsection (5)(b), once made, is irrevocable.(7) If subsection (1) does not apply to a corporation for a year of assessment (cessation year) while it did for the previous year of assessment—(a) the election made by the corporation under subsection (5)(b) ceases to be effective; and(b) despite anything in this section, subsection (1) is not to apply to the corporation for the year of assessment that follows the cessation year.(8) (Repealed 27 of 2018 s. 27)(9) Despite subsection (2), a financial institution or LAC banking entity is not eligible to be a qualifying corporate treasury centre. (Amended 4 of 2019 s. 4)(Added 12 of 2016 s. 3) 14E. Qualifying corporate treasury centre: safe harbour rule (1) For the purposes of section 14D(2)(b), a corporation satisfies the safe harbour rule for a year of assessment (subject year) if the corporation falls within—(a) the 1-year safe harbour under subsection (2); or(b) the multiple-year safe harbour under subsection (3).(2) A corporation falls within the 1-year safe harbour if, for the subject year—(a) its CTP percentage is not lower than the prescribed profits percentage; and(b) its CTA percentage is not lower than the prescribed asset percentage.(3) A corporation falls within the multiple-year safe harbour if, for the specified years—(a) its average CTP percentage is not lower than the prescribed profits percentage; and(b) its average CTA percentage is not lower than the prescribed asset percentage.(4) In subsections (3), (7) and (8), the specified years (指明年度) for a corporation means—(a) if the corporation has carried on a trade, profession or business in Hong Kong for less than 2 consecutive years of assessment immediately before the subject year—the subject year and the preceding year of assessment (the 2 years); or(b) if the corporation has carried on a trade, profession or business in Hong Kong for 2 or more consecutive years of assessment immediately before the subject year—the subject year and the preceding 2 years of assessment (the 3 years).(5) The CTP percentage (企業財資利潤總額百分率) of a corporation for a year of assessment is calculated in accordance with the following formula— CTP P where: CTP means the aggregate amount of the corporate treasury profits of the corporation in the basis period for the year of assessment; and P means the aggregate amount of profits accruing to the corporation from all sources, whether in Hong Kong or not, in the basis period for the year of assessment. (6) The CTA percentage (企業財資資產總值百分率) of a corporation for a year of assessment is calculated in accordance with the following formula— CTA A where: CTA means the aggregate value of the corporate treasury assets of the corporation as at the end of the basis period for the year of assessment; and A means the aggregate value of all assets, whether in Hong Kong or not, of the corporation as at the end of the basis period for the year of assessment. (7) The average CTP percentage (企業財資利潤總額平均百分率) of a corporation for the specified years means the percentage arrived at by—(a) if subsection (4)(a) applies—dividing the sum of the CTP percentages of the corporation for the 2 years by 2; or(b) if subsection (4)(b) applies—dividing the sum of the CTP percentages of the corporation for the 3 years by 3.(8) The average CTA percentage (企業財資資產總值平均百分率) of a corporation for the specified years means the percentage arrived at by—(a) if subsection (4)(a) applies—dividing the sum of the CTA percentages of the corporation for the 2 years by 2; or(b) if subsection (4)(b) applies—dividing the sum of the CTA percentages of the corporation for the 3 years by 3.(9) For the purposes of subsection (6), in computing the aggregate value of the corporate treasury assets of a corporation, if a corporate treasury asset is used partly to carry out a corporate treasury activity and partly for another purpose, only the part of the value of the asset that is proportionate to the extent to which the asset is used to carry out a corporate treasury activity is to be taken into account.(Added 12 of 2016 s. 3) 14F. Qualifying corporate treasury centre: Commissioner’s determination (1) For the purposes of section 14D(2)(c), the Commissioner may, on application by a corporation, determine that the corporation is a qualifying corporate treasury centre for a year of assessment.(2) A corporation may apply for the Commissioner’s determination under subsection (1) only if—(a) it is not a financial institution or LAC banking entity; and (Amended 4 of 2019 s. 5)(b) for the year of assessment, it satisfies neither of the following—(i) the conditions specified in section 14D(3);(ii) the safe harbour rule under section 14E.(3) The Commissioner may make a determination under subsection (1) only if the Commissioner is of the opinion that the conditions specified in section 14D(3), or the safe harbour rule under section 14E, would, in the ordinary course of business of the corporation, have been satisfied for the year of assessment.(Added 12 of 2016 s. 3) Subdivision 4 Aircraft Leasing (Added 15 of 2020 s. 2) 14G. Interpretation of Subdivision 4 of Division 2 of Part 4 (Amended 10 of 2022 s. 2)(1) In this Subdivision— (Amended 10 of 2022 s. 2)actual residual value (實際剩餘價值), in relation to an aircraft, means the actual fair market value of the aircraft at the end of the term of a lease or its useful economic life; aircraft (飛機)— (a) includes an aeroplane, airframe, aircraft engine and helicopter; but (b) does not include an aircraft solely for military use, airship, spacecraft or satellite; aircraft engine (飛機引擎) means an engine— (a) that is used or to be used in an aircraft; and (b) that—(i) is powered by jet propulsion and has at least 1 750 lb of thrust or its equivalent; or(ii) is powered by turbine or piston technology and has at least 550 rated take-off shaft horsepower or its equivalent, together with any aircraft engine component; aircraft engine component (飛機引擎組件), in relation to an engine, means— (a) a module or other installed, incorporated or attached accessory, part or equipment of the engine; or (b) data, manual or record relating to the engine; aircraft leasing activity (飛機租賃活動)—see section 1(1) of Schedule 17F;aircraft leasing management activity (飛機租賃管理活動)—see section 1(1) of Schedule 17F;aircraft leasing management asset (飛機租賃管理資產), in relation to a corporation, means an asset of the corporation used by it to carry out a qualifying aircraft leasing management activity;aircraft leasing management profits (飛機租賃管理利潤), in relation to a corporation, means any profits of the corporation that are derived from a qualifying aircraft leasing management activity; aircraft operation business (飛機營運業務)— (a) means a business of operating aircraft as an owner or a charterer for providing services for the carriage by air of passengers, cargo or mail; but (b) does not include dealing in aircraft or agency business in connection with air transport; aircraft operator (飛機營運商) means a person carrying on an aircraft operation business; associate (相聯者), in relation to a corporation, means— (a) a person who has control over the corporation; (b) a partner of the person mentioned in paragraph (a); (c) if a person mentioned in paragraph (a) is a natural person, a relative of the person; (d) if a partner mentioned in paragraph (b) is a natural person, a relative of the partner; (e) a director or principal officer of—(i) the corporation; or(ii) an associated corporation of the corporation; (f) a relative of a director (if the director is a natural person) or principal officer mentioned in paragraph (e); (g) a partner of the corporation; (h) if a partner of the corporation is a natural person, a relative of the partner; (i) a partnership in which the corporation is a partner; or (j) an associated corporation of the corporation; associated corporation (相聯法團), in relation to a corporation, means— (a) another corporation over which the corporation has control; (b) another corporation that has control over the corporation; or (c) another corporation that is under the control of the same person as is the corporation; connected person (有關連者), in relation to a corporation, means— (a) an associated corporation of the corporation; (b) a person (other than a corporation)—(i) over whom the corporation has control;(ii) who has control over the corporation; or(iii) who is under the control of the same person as is the corporation; or (c) a partnership in which the corporation or its associate is a partner; control (控制), in relation to the definitions of associate, associated corporation and connected person—see subsection (2);estimated residual value (估計剩餘價值), in relation to an aircraft, means an estimated fair market value of the aircraft at the end of the term of a lease or its useful economic life;funding lease (融購租約)—(a) means an arrangement—(i) under which a right to use an aircraft is granted by a person (lessor) to another person (lessee);(ii) that satisfies one or more of the following conditions at its inception—(A) the arrangement is accounted for as a finance lease or loan by the lessor in accordance with—(I) the Hong Kong Financial Reporting Standards issued by the Hong Kong Institute of Certified Public Accountants, as in force from time to time; or(II) the International Financial Reporting Standards issued by the International Accounting Standards Board, as in force from time to time;(B) the present value of the aggregate minimum lease payments (whether or not they are periodic payments and including any sum payable under a residual value guarantee) during the term of the arrangement is equal to or more than 80% of the fair market value of the aircraft;(C) the term of the arrangement is equal to or more than 65% of the remaining useful economic life of the aircraft; and(iii) under which the property in the aircraft will or may pass to the lessee, or an associate of the lessee, at the end of its term; and(b) includes an agreement or any other arrangement in connection with an arrangement that falls within paragraph (a); Note— See also subsection (3). (Replaced 5 of 2024 s. 3) lease (租約), when used as a noun, means— (Amended 5 of 2024 s. 3)(a) an operating lease; or (Replaced 5 of 2024 s. 3)(b) a funding lease, (Replaced 5 of 2024 s. 3)and lease (租賃), when used as a verb, is to be construed accordingly; Note— (Repealed 5 of 2024 s. 3) operating lease (營運租約)—(a) means—(i) an arrangement under which a right to use an aircraft is granted by an owner of the aircraft to another person (specified head lease); or(ii) a sublease of an aircraft; and(b) does not include a funding lease; (Added 5 of 2024 s. 3)own (擁有) includes—(a) to hold as a lessee under a funding lease;(b) to hold as a bailee under a hire-purchase agreement; and(c) to hold as a buyer under a conditional sale agreement; Note— See also subsection (5). permanent establishment (常設機構)— (a) means a branch, management or other place of business; but (b) does not include an agency unless the agent has, and habitually exercises, a general authority to negotiate and conclude contracts on behalf of the principal; prescribed asset percentage (訂明資產百分率)—see section 4 of Schedule 17F;prescribed profits percentage (訂明利潤百分率)—see section 3 of Schedule 17F; principal officer (主要職員), in relation to a corporation, means— (a) a person employed by the corporation who, either alone or jointly with one or more other persons, is responsible under the immediate authority of the directors of the corporation for the conduct of the business of the corporation; or (b) a person employed by the corporation who, under the immediate authority of a director of the corporation or a person to whom paragraph (a) applies, exercises managerial functions in respect of the corporation; qualifying aircraft leasing activity (合資格飛機租賃活動)—see subsection (6);qualifying aircraft leasing management activity (合資格飛機租賃管理活動)—see subsection (7);qualifying aircraft leasing manager (合資格飛機租賃管理商)—see section 14J(2);qualifying aircraft lessor (合資格飛機出租商)—see section 14H(2); relative (親屬), in relation to a person, means the spouse, parent, child, brother or sister of the person, and, in deducing such a relationship— (a) an adopted child is to be regarded as a child of both the natural parents and any adopting parent; and (b) a step child is to be regarded as a child of both the natural parents and any step parent; residual value guarantee (剩餘價值擔保), in relation to an aircraft, means a financial commitment to pay a sum by reference to the amount by which the estimated residual value of the aircraft exceeds the actual residual value of the aircraft; (Amended 5 of 2024 s. 3)specified head lease (指明主租約) means an arrangement that falls within the description in paragraph (a)(i) of the definition of operating lease; (Added 5 of 2024 s. 3)sublease (分租租約), when used as a noun, means an arrangement that is a sublease of an aircraft under subsection (7A); (Added 5 of 2024 s. 3)sublease (分租), when used as a verb, is to be construed accordingly. (Added 5 of 2024 s. 3)(Amended 5 of 2024 s. 3)(2) For the purposes of the definitions of associate, associated corporation and connected person in subsection (1)—(a) a person has control over a corporation if the person has the power to secure—(i) by means of the holding of shares or the possession of voting power in or in relation to that or any other corporation; or(ii) by virtue of any powers conferred by the articles of association or other document regulating that or any other corporation,that the affairs of the first-mentioned corporation are conducted in accordance with the wishes of that person; and(b) a person (first-mentioned person) has control over another person (other than a corporation) (second-mentioned person) if the second-mentioned person is accustomed or under an obligation (whether express or implied, and whether or not enforceable or intended to be enforceable by legal proceedings) to act, in relation to the investment or business affairs of the second-mentioned person, in accordance with the directions, instructions or wishes of the first-mentioned person.(3) For the purposes of the definition of funding lease in subsection (1), an arrangement does not fall within paragraph (a)(iii) of that definition if, in the opinion of the Commissioner, the property in the aircraft concerned would reasonably be expected not to pass to the lessee, or an associate of the lessee, under the arrangement at the end of its term. (Replaced 5 of 2024 s. 3)(4) (Repealed 5 of 2024 s. 3)(5) In the definition of own in subsection (1), a reference to a hire-purchase agreement or conditional sale agreement does not include one under which, in the opinion of the Commissioner, the property in the aircraft concerned would reasonably be expected not to pass to the bailee or buyer (as the case may be). (Amended 5 of 2024 s. 3)(6) An aircraft leasing activity carried out by a corporation in respect of an aircraft is a qualifying aircraft leasing activity if the activity is carried out in the ordinary course of the corporation’s business carried on in Hong Kong. (Replaced 5 of 2024 s. 3)(7) An aircraft leasing management activity carried out by a corporation in respect of an aircraft is a qualifying aircraft leasing management activity if—(a) the activity is carried out in the ordinary course of the corporation’s business carried on in Hong Kong;(b) the activity is carried out for another corporation in the basis period of the other corporation for a year of assessment; and (Amended 5 of 2024 s. 3)(c) the other corporation is a qualifying aircraft lessor for that year of assessment. (Amended 5 of 2024 s. 3)(d) (Repealed 5 of 2024 s. 3)(7A) An arrangement (specified arrangement) is a sublease of an aircraft if—(a) a right to use the aircraft is granted under the specified arrangement, by a person deriving the right under a specified head lease of the aircraft (lessee), to another person; or(b) a right to use the aircraft is granted under the specified arrangement, by a person (other than a lessee of a specified head lease of the aircraft) who derives the right from another arrangement, to another person. (Added 5 of 2024 s. 3)(8) A note located in the text of this section is provided for information only and has no legislative effect.(Added 9 of 2017 s. 4) 14H. Concession for qualifying aircraft lessor (Amended 10 of 2022 s. 2)(1) For the purposes of this Part and subject to subsections (4) and (6), the assessable profits of a corporation that is a qualifying aircraft lessor for a year of assessment are chargeable to tax under this Part at one-half of the rate specified in Schedule 8 to the extent to which those profits are assessable profits derived from its qualifying aircraft leasing activity. (Amended 27 of 2018 s. 28; 5 of 2024 s. 4)(2) A corporation is a qualifying aircraft lessor for a year of assessment if, in the basis period for that year of assessment—(a) it is not an aircraft operator;(b) it has carried out in Hong Kong one or more qualifying aircraft leasing activities;

and(c) it has not carried out in Hong Kong any activity other than a qualifying aircraft leasing activity.(3) For the purposes of subsection (2)(c), in determining whether a corporation has carried out any activity other than a qualifying aircraft leasing activity, only activities that generate income to the corporation are to be taken into account.(4) Subsection (1) applies to a corporation for a year of assessment only if—(a) in that year of assessment—(i) the central management and control of the corporation is exercised in Hong Kong;(ii) the activities that produce its qualifying profits in that year are—(A) carried out in Hong Kong by the corporation; or(B) arranged by the corporation to be carried out in Hong Kong; and(iii) those activities are not carried out by a permanent establishment outside Hong Kong; and(b) the corporation has elected in writing that subsection (1) applies to it.(5) An election under subsection (4)(b), once made, is irrevocable.(6) If subsection (1) does not apply to a corporation for a year of assessment (cessation year) while it did for the previous year of assessment—(a) the election made by the corporation under subsection (4)(b) ceases to be effective; and(b) despite anything in this section, subsection (1) is not to apply to the corporation for the year of assessment that follows the cessation year.(7) If subsection (1) applies to a corporation for a year of assessment, the corporation is not entitled to be granted any allowance under Part 6 for that year of assessment in respect of the capital expenditure incurred on the provision of the aircraft concerned.(8) An aircraft owned by a corporation is to be treated as a capital asset of the corporation for the purposes of this Part if—(a) the corporation uses the aircraft for carrying out a qualifying aircraft leasing activity for a continuous period of not less than 3 years immediately before it disposes of the aircraft; and(b) subsection (1) applies in relation to that activity for any year of assessment.(9) In this section—qualifying profits (合資格利潤), in relation to a corporation, means the assessable profits of the corporation that fall within subsection (1).(Added 9 of 2017 s. 4) 14HA. Carrying out of activities in Hong Kong—supplementary provisions for section 14H(4)(a)(ii) (1) For the purposes of section 14H(4)(a)(ii), an activity producing the assessable profits of a corporation that fall within section 14H(1) for a year of assessment is not considered to be carried out in Hong Kong by the corporation or arranged by the corporation to be carried out in Hong Kong in that year of assessment unless the requirements prescribed in section 5 of Schedule 17F (prescribed requirements) are met.(2) To avoid doubt, the fact that the prescribed requirements are not met does not imply that the assessable profits mentioned in subsection (1) do not arise in or are not derived from Hong Kong.(Added 5 of 2024 s. 5) 14HB. Calculation of assessable profits of corporation derived from qualifying aircraft leasing activity for purposes of section 14H(1) (1) This section applies to a corporation for a year of assessment if section 14H(1) applies to the corporation for that year of assessment (particular year).(2) The assessable profits of the corporation that are chargeable to tax under this Part at the rate specified in section 14H(1) (qualifying profits) for the particular year is to be calculated in accordance with the following formula— A = B + C + D + E + F – G where: A means the qualifying profits of the corporation for the particular year; B means the aggregate amount of the assessable profits of the corporation calculated under section 14I for the particular year; C means the aggregate amount of the assessable profits of the corporation calculated under section 14IB for the particular year; D means the aggregate amount of the specified receipts of the corporation for the particular year; E means the aggregate amount of the assessable profits of the corporation calculated under section 14IL; F means the aggregate amount of the assessable profits of the corporation calculated under section 14IM for the particular year; and G means the aggregate amount that is deductible under section 14IC in relation to the corporation for the particular year. (3) In this section—specified receipts (指明收入), in relation to a particular year, means—(a) the aggregate of the amounts—(i) that are regarded as trading receipts of the corporation concerned under section 14IH for the particular year; and(ii) that, under section 14IH, are accrued or regarded as being accrued in that year;(b) the aggregate of the amounts—(i) that are regarded as trading receipts of the corporation concerned under section 14II for the particular year; and(ii) that, under section 14II, are accrued or regarded as being accrued in that year; or(c) the aggregate of the amounts—(i) that are regarded as trading receipts of the corporation concerned under section 14IJ for the particular year; and(ii) that, under section 14IJ, are accrued or regarded as being accrued in that year.(Added 5 of 2024 s. 5) 14I. Calculation of net lease payments for right to use aircraft under operating lease: aircraft acquired in year of assessment preceding year of assessment beginning on 1 April 2023 (Amended 10 of 2022 s. 2; 5 of 2024 s. 6)(1) Subject to section 14IA, this section applies to a corporation for a year of assessment (particular year) if—(a) section 14H(1) applies to the corporation for the particular year; and(b) any qualifying aircraft leasing activity of the corporation for the particular year relates to an operating lease of an aircraft—(i) that was acquired by the corporation in a year of assessment preceding the year of assessment beginning on 1 April 2023; and(ii) that has been used by the corporation for carrying out any qualifying aircraft leasing activity relating to an operating lease in a year of assessment preceding the year of assessment beginning on 1 April 2023. (Replaced 5 of 2024 s. 6)(1A) The assessable profits of the corporation derived from the qualifying aircraft leasing activity relating to the operating lease for the particular year are to be the net lease payments for the right to use the aircraft under the operating lease (NLP). (Added 5 of 2024 s. 6)(2) The NLP is to be calculated in accordance with the following formula— (Amended 5 of 2024 s. 6) A = (B - C) x D where: A means the NLP; B means the aggregate amount of the gross lease payments for the right to use the aircraft under the operating lease (whether or not they are periodic payments and including any sum payable under a residual value guarantee) (lease income) earned by or accrued to the corporation during the basis period for the particular year; C means the aggregate amount of any outgoings and expenses deductible under this Part to the extent to which they are incurred during the basis period for the particular year by the corporation in the production of the lease income (relevant outgoings and expenses); and D means the percentage prescribed in section 2 of Schedule 17F. (3) (Repealed 5 of 2024 s. 6)(4) If the aircraft is leased together with other dealings in pursuance of one bargain, then for calculating the NLP, the Commissioner must, having regard to all the circumstances of the bargain, allocate an amount of gross lease payments for the right to use the aircraft under the lease.(5) If subsection (2) applies, the relevant outgoings and expenses may not be claimed for deduction under this Part otherwise than for calculating the NLP under that subsection.(Added 9 of 2017 s. 4. Amended 5 of 2024 s. 6) 14IA. Circumstances under which section 14I does not apply (1) Section 14I does not apply to a corporation for a year of assessment in respect of a qualifying aircraft leasing activity carried out by the corporation in relation to an operating lease of an aircraft (specified aircraft) if—(a) the corporation has not incurred any capital expenditure on the provision of the specified aircraft;(b) an allowance under Part 6 is or has been granted to a relevant person in respect of any capital expenditure incurred on the provision of the aircraft;(c) capital allowances are granted to a relevant person in a jurisdiction outside Hong Kong (non-Hong Kong jurisdiction), for the year of assessment, in respect of any capital expenditure incurred on the provision of the aircraft;(d) subject to subsection (7), the qualifying aircraft leasing activity is carried out by the corporation as an owner of the aircraft and, before the aircraft is acquired by the corporation—(i) the aircraft was owned and used by a lessee of the operating lease to which the qualifying aircraft leasing activity relates (lessee), whether alone or with another person; or(ii) the aircraft was owned and used by an associate of a lessee mentioned in subparagraph (i), whether alone or with another person; or(e) the corporation has elected in writing that section 14IB applies in calculating the assessable profits of the corporation derived from any qualifying aircraft leasing activity carried out by the corporation in relation to any operating lease of the aircraft for the year of assessment and any subsequent year of assessment.(2) An election under subsection (1)(e), once made, is irrevocable.(3) For the purposes of subsection (1)(b), an allowance under Part 6 is to be regarded as not being or having been granted to a relevant person in respect of any capital expenditure incurred on the provision of the specified aircraft if an amount equal to the allowance has been charged to profits tax as balancing charge made on the relevant person.(4) Subsection (1)(c) does not apply to capital allowances granted to a relevant person in a non-Hong Kong jurisdiction (as described in that subsection) if Condition 1 or Condition 2 is satisfied in relation to the year of assessment.(5) Condition 1 is that—(a) the relevant person is subject to tax in the non-Hong Kong jurisdiction (non-Hong Kong tax) in respect of the gross lease payments for the right to use the specified aircraft in relation to the year of assessment (GLP);(b) the GLP is chargeable to tax under this Part;(c) the non-Hong Kong tax is a tax of substantially the same nature as tax imposed under this Part; and(d) capital allowances are granted to the relevant person in calculating any chargeable profits derived from the GLP for the purpose of the non-Hong Kong tax.(6) Condition 2 is that—(a) one or both of the specified events occur in respect of the specified aircraft in the year of assessment;(b) the relevant person is, in respect of the insurance money or other compensation or the consideration for the disposal of the aircraft (as the case requires), subject to a non-Hong Kong tax that is a tax of substantially the same nature as tax imposed under this Part (specified tax); and(c) the total amount that the relevant person is subject to the specified tax is not less than the total amount of the capital allowances granted to that person in the non-Hong Kong jurisdiction (as described in subsection (1)(c)).(7) Subsection (1)(d) does not apply if—(a) the specified aircraft was acquired by the corporation from the lessee or the associate mentioned in that subsection (end-user) with a consideration that is not more than the consideration paid by the end-user to another person (supplier) for acquiring the aircraft from the supplier; and(b) no initial or annual allowance under Part 6 was or has been granted to the end-user in respect of the aircraft before the acquisition of the aircraft by the corporation.(8) For the purposes of subsection (7)(b), an allowance is to be regarded as not being or having been granted if the end-user disclaims the allowance by giving the Commissioner a written notice within—(a) the period of 3 months beginning on the date on which the capital expenditure giving rise to the allowance is incurred; or(b) any further time that the Commissioner permits in a particular case.(9) In this section—relevant person (相關人士) means—(a) the corporation concerned; or(b) a connected person of that corporation;specified event (指明事件)—see subsection (10).(10) For the purposes of this section, a specified event occurs in respect of an aircraft in a year of assessment if—(a) any insurance money or other compensation is accrued in relation to the aircraft in the year of assessment; or(b) the aircraft is disposed of in the year of assessment.(Added 5 of 2024 s. 7) 14IB. Calculation of net lease payments for right to use aircraft under operating lease: aircraft acquired in year of assessment beginning on or after 1 April 2023 and certain other aircraft (1) This section applies to a corporation for a year of assessment (particular year) if—(a) section 14H(1) applies to the corporation for the particular year; and(b) Condition 1, Condition 2 or Condition 3 is satisfied.(2) Condition 1 is that—any qualifying aircraft leasing activity carried out by the corporation in the particular year relates to an operating lease of an aircraft acquired by the corporation in a year of assessment beginning on or after 1 April 2023.(3) Condition 2 is that—(a) any qualifying aircraft leasing activity carried out by the corporation in the particular year relates to an operating lease of an aircraft that was acquired by the corporation in a year of assessment preceding the year of assessment beginning on 1 April 2023 (previous year of assessment); and(b) the aircraft had not been used by the corporation, in any previous year of assessment, for carrying out any qualifying aircraft leasing activity in relation to an operating lease.(4) Condition 3 is that—(a) any qualifying aircraft leasing activity carried out by the corporation in the particular year relates to an operating lease of an aircraft that was acquired by the corporation in a previous year of assessment; and(b) either—(i) the corporation has elected under section 14IA(1)(e) in relation to an aircraft for the particular year; or(ii) section 14I does not apply in any other case to any operating lease of the aircraft for the particular year.(5) The assessable profits derived from the qualifying aircraft leasing activity mentioned in subsection (2), (3)(a) or (4)(a), as the case requires, are to be the net lease payments for the right to use the aircraft under the lease concerned (NLP).(6) The NLP is to be calculated in accordance with the following formula— A = B – C – D + E + F where: A means the NLP; B means the aggregate amount of the gross lease payments for the right to use the aircraft under the operating lease (whether or not they are periodic payments and including any sum payable under a residual value guarantee) (lease income) earned by or accrued to the corporation during the basis period for the particular year; C means the aggregate amount of any outgoings and expenses deductible under this Part, to the extent to which they are incurred during the basis period for the particular year by the corporation in the production of the lease income (relevant outgoings and expenses); D means the aggregate amount of the allowances granted under Part 6, to the extent that the relevant assets counted for the allowances are used during the basis period for the particular year by the corporation in the production of the lease income (relevant allowances); E means the aggregate amount of the other income and trading receipts arising in or derived from Hong Kong that are attributable to the qualifying aircraft leasing activity relating to the operating lease; and F means the balancing charge to be made under Part 6 on the corporation, to the extent that the relevant assets counted for the balancing charge are used in the production of specified gross lease income (relevant charge). (7) If the aircraft is leased together with any other dealings in pursuance of one bargain, then for calculating the NLP, the Commissioner must, having regard to all the circumstances of the bargain, allocate an amount of gross lease payments for the right to use the aircraft under the lease.(8) If subsections (5) and (6) apply—(a) the relevant outgoings and expenses and the relevant allowances may not be claimed for deduction under this Part otherwise than for calculating the NLP under subsection (6); and(b) the other income and trading receipts and the relevant charge are not taxable under this Part otherwise than for calculating the NLP under subsection (6).(9) In this section—specified gross lease income (指明總租約收入), in relation to a corporation, means any gross lease payments for the right to use an aircraft of the corporation under an operating lease that are used for calculating the net lease payments for the right to use the aircraft under this section;trading receipts (營業收入) does not include any amounts that are regarded as trading receipts under section 14IH, 14II or 14IJ.(Added 5 of 2024 s. 7) 14IC. Deduction of certain capital expenditure incurred in relation to aircraft (1) Despite section 17, this section applies to a corporation for a year of assessment (particular year) if—(a) section 14IB applies to the corporation for the particular year in relation to its assessable profits derived from the qualifying aircraft leasing activity relating to an operating lease of an aircraft (specified aircraft);(b) the specified aircraft is an aircraft acquired by the corporation; and(c) the corporation uses the aircraft in the particular year for the carrying out of any qualifying aircraft leasing activity by the corporation in relation to an operating lease of the aircraft.(2) Subject to section 14IF, the specified capital expenditure incurred in relation to the specified aircraft in the particular year (SCE) is deductible for the corporation for that year.(3) If the particular year is the first year of assessment for which section 14IB applies to the specified aircraft, the SCE is to be determined in accordance with the formula in section 14ID(2).(4) If the particular year is any other year of assessment for which section 14IB applies to the specified aircraft, the SCE is to be determined in accordance with the formula in section 14IE(2).(5) If the SCE has been allowed to be deducted under this section for a corporation, the corporation is not entitled to be granted any allowance under Part 6 in respect of the capital expenditure (aircraft) incurred by the corporation in relation to the aircraft concerned.(6) In this section—capital expenditure (aircraft) (資本開支(飛機))—see section 14IG.(Added 5 of 2024 s. 7) 14ID. Supplementary provisions for section 14IC(3) (1) This section applies for the purposes of section 14IC(3).(2) The formula referred to in section 14IC(3) is— A = B – C – D – E – F where: A means the specified capital expenditure incurred in relation to the aircraft concerned (specified aircraft) in the year of assessment concerned (particular year); B means the total amount of capital expenditure (aircraft) incurred in the particular year by the corporation in relation to the specified aircraft; C means the aggregate amount of the initial allowances granted under sections 37(1), 37A(1) and 39B(1) to the corporation in relation to the specified aircraft; D means the aggregate amount of the annual allowances granted under sections 37(2), 37A(2) and 39B(2) to the corporation in relation to the specified aircraft; E means the notional amount of the annual allowances that would have been granted to the corporation in respect of the specified aircraft (NA); and F means the aggregate of the relevant amounts of capital allowances granted to relevant persons in jurisdictions outside Hong Kong. (3) For the purposes of subsection (2), the NA is the sum of the total amount determined under paragraph (a) and the total amount determined under paragraph (b)—(a) the total amount of the annual allowances that would have been granted under sections 37(2), 37A(2) and 39B(2) to the corporation in respect of the specified aircraft for a section 14I-related year if the allowances had been available to the corporation for that year;(b) the total amount of the annual allowances that would have been granted under sections 37(2), 37A(2) and 39B(2) to the corporation in respect of the aircraft for a specific year if the allowances had been available to the corporation for that year.(4) For the purposes of subsection (2), subject to subsection (6), the relevant amount of capital allowances granted to a relevant person in a jurisdiction outside Hong Kong (non-Hong Kong jurisdiction) is to be determined in accordance with the following formula— G = H – I where: G means the relevant amount of capital allowances granted to the relevant person in the non-Hong Kong jurisdiction; H means the aggregate of the total amount of capital allowances granted, to the relevant person in the non-Hong Kong jurisdiction, for each relevant year in respect of capital expenditure (aircraft) incurred by the corporation in relation to the specified aircraft; and I means the aggregate of the total amount of insurance money or other compensation, accrued in each relevant year in relation to the specified aircraft, in respect of which the relevant person is subject to a specific tax in the non-Hong Kong jurisdiction. (5) For the purposes of subsection (4), G is taken to be zero if H is equal to or less than I.(6) If—(a) a relevant person is subject to a specific tax in a non-Hong Kong jurisdiction in respect of any gross lease payments for the right to use the specified aircraft in relation to the particular year (GLP);(b) the GLP is chargeable to tax under this Part; and(c) capital allowances are granted to the relevant person in calculating any chargeable profits derived from the GLP for the purpose of the specific tax,the relevant person is to be regarded as not being granted any relevant amount of capital allowances in the non-Hong Kong jurisdiction.(7) In this section—capital expenditure (aircraft) (資本開支(飛機))—see section 14IG;relevant person (相關人士) means—(a) the corporation concerned; or(b) a connected person of that corporation;relevant year (相關年度) means the particular year or any year of assessment preceding the particular year;section 14I-related year (第14I條所涉年度)—see subsection (8);specific tax (指定稅)—see subsection (9);specific year (指定年度)—see subsection (10).(8) For the purposes of this section, a year of assessment is a section 14I-related year in relation to a corporation to which this section applies if section 14I has applied to the corporation because of the specified aircraft for the year of assessment.(9) For the purposes of this section, a tax is a specific tax if it is a tax of substantially the same nature as tax imposed under this Part.(10) For the purposes of this section, a year of assessment is a specific year in relation to a corporation to which this section applies if the specified aircraft has not been used at any time during the year of assessment for producing chargeable profits of the corporation.(11) For the purposes of this section, in calculating the total amount of capital expenditure (aircraft) incurred in the particular year by the corporation in relation to the specified aircraft—(a) any capital expenditure (aircraft) that is incurred in the particular year by the corporation in relation to the aircraft is to be taken into account unless it is regarded as being incurred or taken to be incurred in another year of assessment in relation to the aircraft under section 14IG;(b) any capital expenditure (aircraft) that is regarded as being incurred in the particular year by the corporation in relation to the aircraft is to be taken into account unless it is taken to be incurred in another year of assessment in relation to the aircraft under section 14IG; and(c) any capital expenditure (aircraft) that is taken to be incurred in the particular year by the corporation in relation to the aircraft is to be taken into account.(Added 5 of 2024 s. 7) 14IE. Supplementary provisions for section 14IC(4) (1) This section applies for the purposes of section 14IC(4).(2) The formula referred to in section 14IC(4) is— J = K – L where: J means the specified capital expenditure incurred in relation to the aircraft concerned (specified aircraft) in the year of assessment concerned (particular year); K means the total amount of capital expenditure (aircraft) incurred in the particular year by the corporation in relation to the specified aircraft; and L means the aggregate of the relevant amounts of capital allowances granted to relevant persons in jurisdictions outside Hong Kong. (3) For the purposes of subsection (2), subject to subsection (5), the relevant amount of capital allowances granted to a relevant person in a jurisdiction outside Hong Kong (non-Hong Kong jurisdiction) is to be determined in accordance with the following formula— M = N – P where: M means the relevant amount of capital allowances granted to the relevant person in the non-Hong Kong jurisdiction; N means the total amount of capital allowances granted, to the relevant person in the non-Hong Kong jurisdiction, for the particular year in respect of capital expenditure (aircraft) incurred by the corporation in relation to the specified aircraft; and P means the total amount of insurance money or other compensation, accrued in the particular year in relation to the specified aircraft, in respect of which the relevant person is subject to a specific tax in the non-Hong Kong jurisdiction. (4) For the purposes of subsection (3), M is taken to be zero if N is equal to or less than P.(5) If—(a) a relevant person is subject to a specific tax in a non-Hong Kong jurisdiction in respect of any gross lease payments for the right to use the specified aircraft in relation to the particular year (GLP);(b) the GLP is chargeable to tax under this Part; and(c) capital allowances are granted to the relevant person in calculating any chargeable profits derived from the GLP for the purpose of the specific tax,the relevant person is to be regarded as not being granted any relevant amount of capital allowances in the non-Hong Kong jurisdiction.(6) In this section—capital expenditure (aircraft) (資本開支(飛機))—see section 14IG;relevant person (相關人士) means—(a) the corporation concerned; or(b) a connected person of that corporation;specific tax (指定稅)—see subsection (7).(7) For the purposes of this section, a tax is a specific tax if it is a tax of substantially the same nature as tax imposed under this Part.(8) For the purposes of this section, in calculating the total amount of capital expenditure (aircraft) incurred in the particular year by the corporation in relation to the specified aircraft—(a) any capital expenditure (aircraft) that is incurred in the particular year by the corporation in relation to the aircraft is to be taken into account unless it is regarded as being incurred or taken to be incurred in another year of assessment in relation to the aircraft under section 14IG;(b) any capital expenditure (aircraft) that is regarded as being incurred in the particular year by the corporation in relation to the aircraft is to be taken into account unless it is taken to be incurred in another year of assessment in relation to the aircraft under section 14IG; and(c) any capital expenditure (aircraft) that is taken to be incurred in the particular year by the corporation in relation to the aircraft is to be taken into account.(Added 5 of 2024 s. 7) 14IF. Circumstances under which capital expenditure is not allowed to be deducted under section 14IC (1) Section 14IC does not apply to a corporation in relation to an aircraft (specified aircraft) for a year of assessment if—(a) any allowance has been granted under Part 6 or deduction has been allowed under this Part to the corporation in respect of any capital expenditure (aircraft) in relation to the specified aircraft and the aggregate amount of the allowances and deductions so granted or allowed is equal to the total amount of capital expenditure (aircraft) incurred by the corporation in relation to the aircraft; or(b) subject to subsection (2), the aircraft was, before the acquisition of the aircraft by the corporation—(i) owned and used by a lessee of an operating lease of the aircraft (whether alone or with any other person); or(ii) owned and used by an associate of a lessee of an operating lease of the aircraft (whether alone or with any other person).(2) Subsection (1)(b) does not apply if—(a) the specified aircraft was acquired by the corporation from the lessee or any associate of the lessee (end-user) with a consideration not more than the consideration paid by the end-user to another person (supplier) for acquiring the aircraft from the supplier; and(b) no initial or annual allowance under Part 6 was or has been granted to the end-user in respect of the aircraft before the acquisition of the aircraft by the corporation.(3) For the purposes of subsection (2)(b), an allowance is to be regarded as not being or having been granted if the end-user disclaims the allowance by giving the Commissioner a written notice within—(a) the period of 3 months beginning on the date on which the capital expenditure giving rise to the allowance is incurred; or(b) any further time that the Commissioner permits in a particular case.(4) In this section—capital expenditure (aircraft) (資本開支(飛機))—see section 14IG.(Added 5 of 2024 s. 7) 14IG. Meaning of capital expenditure (aircraft)—for sections 14IC, 14ID, 14IE and 14IF (1) This section applies for the purposes of sections 14IC, 14ID, 14IE and 14IF.(2) Any capital expenditure incurred by a corporation in relation to an aircraft is capital expenditure (aircraft) in relation to the aircraft.(3) Capital expenditure incurred by a corporation in relation to an aircraft includes—(a) any consideration for the acquisition of the aircraft made by the corporation; and(b) any legal expenses and valuation fees incurred by the corporation in connection with the acquisition.(4) However, neither the expenditure mentioned in paragraph (a) nor the expenditure mentioned in paragraph (b) is capital expenditure incurred by a corporation in relation to an aircraft—(a) any expenditure incurred in relation to the aircraft that is reimbursed to the corporation by way of or attributable to a grant, subsidy or similar financial assistance;(b) any capital expenditure incurred by the corporation that has been deducted or may be deducted in relation to the aircraft under any section (other than section 14IC) in this Part.(5) If the aircraft is acquired together with any other assets in pursuance of one bargain, then for determining the actual amount of the consideration for the acquisition, the Commissioner must, having regard to all the circumstances of the bargain, allocate an amount of the consideration for the acquisition of the aircraft.(6) If the Commissioner is of the opinion that the consideration for the acquisition of the aircraft does not represent the true market value of the aircraft at the time of the acquisition—(a) the Commissioner may determine the true market value of the aircraft; and(b) the amount so determined is to be taken to be the consideration for the acquisition.(7) If a corporation begins to use an aircraft, for the carrying out of any qualifying aircraft leasing activity, in a particular year of assessment after the year of assessment in which the acquisition takes place, any capital expenditure (aircraft) incurred in relation to the aircraft by the corporation before the particular year of assessment is to be regarded as being incurred by the corporation in the particular year of assessment by the corporation.(8) If any capital expenditure (aircraft) in relation to the aircraft (expenditure) is incurred or regarded as being incurred in a year of assessment preceding the year of assessment beginning on 1 April 2023, the expenditure is taken to be incurred in the year of assessment beginning on 1 April 2023.(Added 5 of 2024 s. 7) 14IH. Consideration for disposal of aircraft etc. to be regarded as trading receipts of corporation—aircraft in respect of which no election has been made under section 14IA(1)(e) (1) This section applies to a corporation if—(a) section 14I applies to the corporation in relation to an aircraft (specified aircraft) for a year of assessment beginning on or after 1 April 2023;(b) no election has been made under section 14IA(1)(e) in respect of the specified aircraft for any year of assessment; and(c) either or both of the following events occur in a year of assessment beginning on or after 1 April 2023—(i) any insurance money or other compensation is accrued to the corporation in relation to the aircraft;(ii) the aircraft is disposed of by the corporation.(2) Despite the exclusion relating to the sale of capital assets in section 14, each of the following amounts in relation to the specified aircraft is to be regarded as a trading receipt arising in or derived from Hong Kong in relation to the qualifying aircraft leasing activity of the corporation (trading receipt)—(a) the amount of any insurance money or other compensation accrued to the corporation in relation to the aircraft (IMOC);(b) the actual amount of the consideration for the disposal of the aircraft determined in accordance with section 14IK.(3) However, if, in relation to the specified aircraft, the aggregate of the total amount of the IMOCs and the amount mentioned in subsection (2)(b) accrued or regarded as being accrued in a particular year exceeds the specified amount (SA), the excess amount is not regarded as any trading receipt of the corporation under subsection (2) for the particular year.(4) The SA—(a) if any insurance money or other compensation—(i) is accrued or regarded as being accrued, in relation to the specified aircraft, in a year of assessment preceding the particular year; and(ii) is chargeable to tax under this Part in relation to the corporation,is the amount of the notional amount (NA) minus the total amount of all such insurance money or other compensation; and(b) in any other case—is the NA.(5) Subject to subsection (6), the NA is to be the amount determined in accordance with the following formula— A = B × (1 – C) C where: A means the NA; B means the aggregate of the total amount of the net lease payments for the right to use the specified aircraft, calculated in accordance with section 14I in relation to the corporation, for each particular year (aggregate NLP); and C means the percentage prescribed in section 2 of Schedule 17F. (6) If the aggregate NLP is equal to or less than zero, the NA is taken to be zero.(7) For a trading receipt that falls within the description in subsection (2)(a)—(a) if the corporation has permanently discontinued its qualifying aircraft leasing activity before the IMOC concerned is accrued—the trading receipt is to be regarded as being accrued in the year of assessment in which the discontinuance takes place; and(b) in any other case—the trading receipt is accrued in the year of assessment in which the IMOC is accrued.(8) For a trading receipt that falls within the description in subsection (2)(b)—(a) if the corporation has permanently discontinued its qualifying aircraft leasing activity before the disposal of the specified aircraft takes place—the trading receipt is to be regarded as being accrued in the year of assessment in which the discontinuance takes place; and(b) in any other case—the trading receipt is accrued in the year of assessment in which the aircraft is disposed of.(9) In this section—particular year (特定年度) means a year of assessment beginning on or after 1 April 2023.(Added 5 of 2024 s. 7) 14II. Consideration for disposal of aircraft etc. to be regarded as trading receipts of corporation—aircraft in respect of which section 14I has not applied for year of assessment beginning on or after 1 April 2023 (1) This section applies to a corporation if—(a) section 14IB applies to the corporation for a year of assessment in relation to an aircraft;(b) the application of that section to the aircraft is not because of an election made under section 14IA(1)(e); and(c) either or both of the following events occur in a year of assessment beginning on or after 1 April 2023—(i) any insurance money or other compensation is accrued to the corporation in relation to the aircraft;(ii) the aircraft is disposed of by the corporation.(2) This section also applies to a corporation if—(a) section 14IB applies to the corporation for a year of assessment in relation to an aircraft because of an election made under section 14IA(1)(e);(b) section 14I has not applied to the corporation in relation to the aircraft for any year of assessment beginning on or after 1 April 2023; and(c) either or both of the following events occur in a year of assessment beginning on or after 1 April 2023—(i) any insurance money or other compensation is accrued to the corporation in relation to the aircraft;(ii) the aircraft is disposed of by the corporation.(3) Despite the exclusion relating to the sale of capital assets in section 14, each of the following amounts in relation to an aircraft to which this section applies (specified aircraft) is to be regarded as a trading receipt arising in or derived from Hong Kong in relation to the qualifying aircraft leasing activity of the corporation (trading receipt)—(a) the amount of any insurance money or other compensation accrued to the corporation in relation to the specified aircraft (IMOC);(b) the actual amount of the consideration for the disposal of the aircraft determined in accordance with section 14IK.(4) However, if, in relation to the specified aircraft, the aggregate of the total amount of the IMOCs and the amount mentioned in subsection (3)(b) accrued or regarded as being accrued in a particular year exceeds the specified amount (SA), the excess amount is not regarded as any trading receipt of the corporation under subsection (3) for the particular year.(5) The SA—(a) if any insurance money or other compensation—(i) is accrued or regarded as being accrued, in relation to the specified aircraft, in a year of assessment preceding the particular year; and(ii) is chargeable to tax under this Part in relation to the corporation,is the amount of the D&A minus the total amount of all such insurance money or other compensation; and(b) in any other case—is the D&A.(6) For a trading receipt that falls within the description in subsection (3)(a)—(a) if the corporation has permanently discontinued its qualifying aircraft leasing activity before the IMOC concerned is accrued—the trading receipt is to be regarded as being accrued in the year of assessment in which the discontinuance takes place; and(b) in any other case—the trading receipt is accrued in the year of assessment in which the IMOC is accrued.(7) For a trading receipt that falls within the description in subsection (3)(b)—(a) if the corporation has permanently discontinued its qualifying aircraft leasing activity before the disposal of the specified aircraft takes place—the trading receipt is to be regarded as being accrued in the year of assessment in which the discontinuance takes place; and(b) in any other case—the trading receipt is accrued in the year of assessment in which the aircraft is disposed of.(8) In this section—D&A (扣免總額), in relation to a specified aircraft, means the aggregate of the following—(a) the total amount of the deductions allowed to the corporation under section 14IC in respect of the specified aircraft;(b) the total amount of the allowances granted to the corporation under Part 6 in respect of the aircraft;particular year (特定年度) means a year of assessment beginning on or after 1 April 2023.(Added 5 of 2024 s. 7) 14IJ. Consideration for disposal of aircraft etc. to be regarded as trading receipts of corporation—aircraft in respect of which section 14I has applied for year of assessment beginning on or after 1 April 2023 (1) This section applies to a corporation if—(a) section 14IB applies to the corporation for a year of assessment in relation to an aircraft (specified aircraft) because of an election made under section 14IA(1)(e);(b) section 14I has applied to the corporation in relation to the specified aircraft for a year of assessment beginning on or after 1 April 2023; and(c) either or both of the following events occur in a year of assessment beginning on or after 1 April 2023—(i) any insurance money or other compensation is accrued to the corporation in relation to the aircraft;(ii) the aircraft is disposed of by the corporation.(2) Despite the exclusion relating to the sale of capital assets in section 14, each of the following amounts in relation to the specified aircraft is to be regarded as a trading receipt arising in or derived from Hong Kong in relation to the qualifying aircraft leasing activity of the corporation (trading receipt)—(a) the amount of any insurance money or other compensation accrued to the corporation in relation to the aircraft (IMOC);(b) the actual amount of the consideration for the disposal of the aircraft determined in accordance with section 14IK.(3) However, if, in relation to the specified aircraft, the aggregate of the total amount of the IMOCs and the amount mentioned in subsection (2)(b) accrued or regarded as being accrued in a particular year exceeds the specified amount (SA), the excess amount is not regarded as any trading receipt of the corporation under subsection (2) for the particular year.(4) The SA—(a) if any insurance money or other compensation—(i) is accrued or regarded as being accrued, in relation to the specified aircraft, in a year of assessment preceding the particular year; and(ii) is chargeable to tax under this Part in relation to the corporation,is the amount of the D&A minus the total amount of all such insurance money or other compensation; and(b) in any other case—is the D&A.(5) For a trading receipt that falls within the description in subsection (2)(a)—(a) if the corporation has permanently discontinued its qualifying aircraft leasing activity before the IMOC concerned is accrued—the trading receipt is to be regarded as being accrued in the year of assessment in which the discontinuance takes place; and(b) in any other case—the trading receipt is accrued in the year of assessment in which the IMOC is accrued.(6) For a trading receipt that falls within the description in subsection (2)(b)—(a) if the corporation has permanently discontinued its qualifying aircraft leasing activity before the disposal of the specified aircraft takes place—the trading receipt is to be regarded as being accrued in the year of assessment in which the discontinuance takes place; and(b) in any other case—the trading receipt is accrued in the year of assessment in which the aircraft is disposed of.(7) In this section—D&A (扣免總額), in relation to a specified aircraft, means the aggregate of the following—(a) the total amount of the deductions allowed to the corporation under section 14IC in respect of the specified aircraft;(b) the notional amount (NA) determined under subsection (8) or (9) (as the case requires);particular year (特定年度) means a year of assessment beginning on or after 1 April 2023.(8) Subject to subsection (9), the NA in relation to a specified aircraft is to be determined in accordance with the following formula— A = B × (1 – C) C where: A means the NA; B means the aggregate of the total amount of the net lease payments for the right to use the specified aircraft, calculated in accordance with section 14I, for each year of assessment beginning on or after 1 April 2023 up to the year of assessment preceding the one in which section 14IB begins to apply in relation to the aircraft (aggregate NLP); and C means the percentage prescribed in section 2 of Schedule 17F. (9) If the aggregate NLP is equal to or less than zero, the NA is taken to be zero.(Added 5 of 2024 s. 7) 14IK. Determination of actual amount of consideration for disposal of aircraft—supplementary provisions for sections 14IH, 14II and 14IJ (1) This section applies for the purposes of sections 14IH, 14II and 14IJ.(2) For the purposes of section 14IH, subject to subsections (5) and (6), the actual amount of the consideration for a disposal of an aircraft by a corporation is to be determined in accordance with the following formula— A = B × C D where: A means the actual amount of the consideration for the disposal; B means the consideration for the sale or other disposal of the aircraft; C means the total number of completed months in the specified period; and D means the total number of section 14I-related months. (3) For the purposes of section 14II, subject to subsections (5) and (6), the actual amount of the consideration for a disposal of an aircraft by a corporation is—(a) if section 14I has applied to the aircraft for any year of assessment preceding the year of assessment beginning on 1 April 2023, an amount determined in accordance with the following formula— E = F × G H where: E means the actual amount of the consideration for the disposal; F means the consideration for the sale or other disposal of the aircraft; G means the total number of completed months in the specified period; and H means the aggregate of the total number of section 14I-related months and the total number of section 14IB-related months; and (b) in any other case—the sale proceeds of the aircraft.(4) For the purposes of section 14IJ, subject to subsections (5) and (6), the actual amount of the consideration for a disposal of an aircraft by a corporation is to be determined in accordance with the following formula— I = J × K L where: I means the actual amount of the consideration for the disposal; J means the consideration for the sale or other disposal of the aircraft; K means the total number of completed months in the specified period; and L means the aggregate of the total number of section 14I-related months and the total number of section 14IB-related months. (5) If the aircraft is disposed of together with other assets in pursuance of one bargain, the Commissioner must, having regard to all the circumstances of the bargain, allocate an amount to be the actual amount of the consideration for the disposal.(6) If the Commissioner is of the opinion that the consideration for the disposal of the aircraft does not represent the true market value of the aircraft at the time of the disposal—(a) the Commissioner may determine the true market value of the aircraft; and(b) the amount so determined is to be taken as the actual amount of the consideration for the disposal.(7) In this section—completed month (完整月份) means a full calendar month;section 14I-related month (第14I條所涉月份)—see subsection (8);section 14IB-related month (第14IB條所涉月份)—see subsection (9);specified period (指明期間)—(a) for the purposes of subsections (2) and (4)—(i) if the corporation has permanently discontinued its qualifying aircraft leasing activity in relation to the aircraft before the disposal takes place—means the period beginning on the 1st day of the basis period of the corporation for the year of assessment (2023/2024) and ending on the date of the discontinuance; and(ii) in any other case—means the period beginning on the 1st day of the basis period of the corporation for the year of assessment (2023/2024) and ending on the date of the disposal of the aircraft; and(b) for the purposes of subsection (3)—(i) if the corporation has permanently discontinued its qualifying aircraft leasing activity in relation to the aircraft before the disposal takes place—means the period beginning on the date on which section 14IB begins to apply to the corporation in relation to the aircraft concerned and ending on the date of the discontinuance;

and(ii) in any other case—means the period beginning on the date on which section 14IB begins to apply to the corporation in relation to the aircraft concerned and ending on the date of the disposal of the aircraft;year of assessment (2023/2024) (課稅年度(2023/2024)) means the year of assessment beginning on 1 April 2023.(8) For an aircraft of a corporation to which subsection (2), (3) or (4) applies, each completed month in respect of which section 14I applies to the corporation in relation to the aircraft is a section 14I-related month.(9) For an aircraft of a corporation to which subsection (3) or (4) applies, each completed month in respect of which section 14IB applies to the corporation in relation to the aircraft is a section 14IB-related month.(10) For the purposes of this section, the consideration for the sale or other disposal of an aircraft—(a) if the disposal is a sale of the aircraft—is the proceeds of sale of the aircraft; and(b) in any other case—is the value of the consideration for the disposal of the aircraft.(Added 5 of 2024 s. 7) 14IL. Calculation of net lease payments for right to use aircraft under operating lease: subleasing of aircraft (1) This section applies to a corporation for a year of assessment (particular year) if—(a) section 14H(1) applies to the corporation for the particular year;(b) a right to use an aircraft is granted to the corporation by—(i) an owner of the aircraft under an arrangement in relation to the aircraft that falls within the description in paragraph (a) of the definition of operating lease in section 14G(1); or(ii) a person deriving the right to use the aircraft under a sublease of the aircraft;(c) a right to use the aircraft is subsequently granted by the corporation to another person under a sublease of the aircraft; and(d) any qualifying aircraft leasing activity carried out by the corporation in the particular year relates to the sublease.(2) The assessable profits derived from the qualifying aircraft leasing activity mentioned in subsection (1)(a) are to be the net lease payments for the right to use the aircraft under the sublease (NLP).(3) The NLP is to be calculated in accordance with the following formula— A = B – C – D + E + F where: A means the NLP; B means the aggregate amount of the gross lease payments for the right to use the aircraft under the sublease (whether or not they are periodic payments and including any sum payable under a residual value guarantee) (lease income) earned by or accrued to the corporation during the basis period for the particular year; C means the aggregate amount of any outgoings and expenses deductible under this Part, to the extent to which they are incurred during the basis period for the particular year by the corporation in the production of the lease income (relevant outgoings and expenses); D means the aggregate amount of the allowances granted under Part 6, to the extent that the relevant assets counted for the allowances are used during the basis period for the particular year by the corporation in the production of the lease income (relevant allowances); E means the aggregate amount of the other income and trading receipts arising in or derived from Hong Kong that are attributable to the qualifying aircraft leasing activity relating to the sublease; and F means the balancing charge to be made under Part 6 on the corporation, to the extent that the relevant assets counted for the balancing charge are used in the production of specified gross lease income (relevant charge). (4) If the aircraft is subleased together with any other dealings in pursuance of one bargain, then for calculating the NLP, the Commissioner must, having regard to all the circumstances of the bargain, allocate an amount of gross lease payments for the right to use the aircraft under the sublease.(5) If subsections (2) and (3) apply—(a) the relevant outgoings and expenses and the relevant allowances may not be claimed for deduction under this Part otherwise than for calculating the NLP under subsection (3); and(b) the other income and trading receipts and the relevant charge are not taxable under this Part otherwise than for calculating the NLP under subsection (3).(6) In this section—specified gross lease income (指明總租約收入), in relation to a corporation, means any gross lease payments for the right to use an aircraft under a sublease of the aircraft that are used for calculating the net lease payments for the right to use the aircraft under this section.(Added 5 of 2024 s. 7) 14IM. Calculation of net payments of finance charges or interest for funding leases (1) This section applies to a corporation for a year of assessment if section 14H(1) applies to the corporation, for that year of assessment, in relation to its assessable profits that are derived from the qualifying aircraft leasing activity relating to a funding lease of an aircraft.(2) The assessable profits of the corporation that are derived from the qualifying aircraft leasing activity carried out in relation to a funding lease of an aircraft for a year of assessment (particular year) are to be the net payments of finance charges or interest in relation to the right to use the aircraft under the lease (NP).(3) The NP is to be calculated in accordance with the following formula— A = B – C – D + E + F (Amended 21 of 2025 s. 5) where: A means the NP; B means the aggregate amount of the gross payments of finance charges or interest (whether or not they are periodic payments) (lease income) earned by or accrued to the corporation under the funding lease during the basis period for the particular year; C means the aggregate amount of any outgoings and expenses deductible under this Part, to the extent to which they are incurred during the basis period for the particular year by the corporation in the production of the lease income (relevant outgoings and expenses); D means the aggregate amount of the allowances granted under Part 6, to the extent that the relevant assets counted for the allowances are used during the basis period for the particular year by the corporation in the production of the lease income (relevant allowances); E means the aggregate amount of the other income and trading receipts arising in or derived from Hong Kong that are attributable to the lease income; and F means the balancing charge to be made under Part 6 on the corporation, to the extent that the relevant assets counted for the balancing charge are used in the production of specified gross lease income (relevant charge). (4) If an aircraft is leased together with any other dealings in pursuance of one bargain, the Commissioner must, having regard to all the circumstances of the bargain, allocate an amount of the lease income.(5) If subsections (2) and (3) apply—(a) the relevant outgoings and expenses and the relevant allowances may not be claimed for deduction under this Part otherwise than for calculating the NP under subsection (3); and(b) the other income and trading receipts and the relevant charge are not taxable under this Part otherwise than for calculating the NP under subsection (3).(6) In this section—specified gross lease income (指明總租約收入), in relation to a corporation, means any gross payments of finance charges or interest in relation to the right to use an aircraft under a funding lease that are used for calculating the net payments of finance charges or interest in relation to the right to use the aircraft under this section.(Added 5 of 2024 s. 7) 14J. Concession for qualifying aircraft leasing manager (Amended 10 of 2022 s. 2)(1) For the purposes of this Part and subject to subsections (5) and (7) and section 26AB, the assessable profits of a corporation that is a qualifying aircraft leasing manager for a year of assessment are chargeable to tax under this Part at one-half of the rate specified in Schedule 8 to the extent to which those profits are assessable profits derived from its qualifying aircraft leasing management activity. (Amended 27 of 2018 s. 29)(2) A corporation is a qualifying aircraft leasing manager for a year of assessment if—(a) in the basis period for that year of assessment, it is not an aircraft operator; and(b) for that year of assessment—(i) it satisfies the conditions specified in subsection (3);(ii) it satisfies the safe harbour rule under section 14K; or(iii) it has obtained the Commissioner’s determination under section 14L(1).(3) For the purposes of subsection (2)(b)(i), the conditions are that, in the basis period for the year of assessment, the corporation—(a) has carried out in Hong Kong one or more qualifying aircraft leasing management activities; and(b) has not carried out in Hong Kong any activity other than a qualifying aircraft leasing management activity.(4) For the purposes of subsection (3)(b), in determining whether a corporation has carried out any activity other than a qualifying aircraft leasing management activity, only activities that generate income to the corporation are to be taken into account.(5) Subsection (1) applies to a corporation for a year of assessment only if—(a) in that year of assessment—(i) the central management and control of the corporation is exercised in Hong Kong;(ii) the activities that produce its qualifying profits in that year are—(A) carried out in Hong Kong by the corporation; or(B) arranged by the corporation to be carried out in Hong Kong; and(iii) those activities are not carried out by a permanent establishment outside Hong Kong; and(b) the corporation has elected in writing that subsection (1) applies to it.(6) An election under subsection (5)(b), once made, is irrevocable.(7) If subsection (1) does not apply to a corporation for a year of assessment (cessation year) while it did for the previous year of assessment—(a) the election made by the corporation under subsection (5)(b) ceases to be effective; and(b) despite anything in this section, subsection (1) is not to apply to the corporation for the year of assessment that follows the cessation year.(8) In this section—qualifying profits (合資格利潤), in relation to a corporation, means the assessable profits of the corporation that fall within subsection (1).(Added 9 of 2017 s. 4) 14K. Safe harbour rule—aircraft leasing (Amended 10 of 2022 s. 2)(1) For the purposes of section 14J(2)(b)(ii), a corporation satisfies the safe harbour rule for a year of assessment (subject year) if the corporation falls within—(a) the 1-year safe harbour under subsection (2); or(b) the multiple-year safe harbour under subsection (3).(2) A corporation falls within the 1-year safe harbour if, for the subject year—(a) its ALMP percentage is not lower than the prescribed profits percentage; and(b) its ALMA percentage is not lower than the prescribed asset percentage.(3) A corporation falls within the multiple-year safe harbour if, for the specified years—(a) its average ALMP percentage is not lower than the prescribed profits percentage; and(b) its average ALMA percentage is not lower than the prescribed asset percentage.(4) In this section, a reference to the specified years for a corporation is a reference to—(a) if the corporation has carried on a trade, profession or business in Hong Kong for less than 2 consecutive years of assessment immediately before the subject year—the subject year and the preceding year of assessment (the 2 years); or(b) if the corporation has carried on a trade, profession or business in Hong Kong for 2 or more consecutive years of assessment immediately before the subject year—the subject year and the preceding 2 years of assessment (the 3 years).(5) The ALMP percentage of a corporation for a year of assessment is calculated in accordance with the following formula— ALMP P where: ALMP means the aggregate amount of the aircraft leasing management profits of the corporation in the basis period for the year of assessment; and P means the aggregate amount of profits accruing to the corporation from all sources, whether in Hong Kong or not, in the basis period for the year of assessment. (6) The ALMA percentage of a corporation for a year of assessment is calculated in accordance with the following formula— ALMA A where: ALMA means the aggregate value of the aircraft leasing management assets of the corporation as at the end of the basis period for the year of assessment; and A means the aggregate value of all assets, whether in Hong Kong or not, of the corporation as at the end of the basis period for the year of assessment. (7) For the purposes of subsection (6), in computing the aggregate value of the aircraft leasing management assets of a corporation, if an aircraft leasing management asset is used partly to carry out a qualifying aircraft leasing management activity and partly for another purpose, only the part of the value of the asset that is proportionate to the extent to which the asset is used to carry out a qualifying aircraft leasing management activity is to be taken into account.(8) A reference to the average ALMP percentage of a corporation for the specified years is a reference to the percentage arrived at by—(a) if subsection (4)(a) applies—dividing the sum of the ALMP percentages of the corporation for the 2 years by 2; or(b) if subsection (4)(b) applies—dividing the sum of the ALMP percentages of the corporation for the 3 years by 3.(9) A reference to the average ALMA percentage of a corporation for the specified years is a reference to the percentage arrived at by—(a) if subsection (4)(a) applies—dividing the sum of the ALMA percentages of the corporation for the 2 years by 2; or(b) if subsection (4)(b) applies—dividing the sum of the ALMA percentages of the corporation for the 3 years by 3.(Added 9 of 2017 s. 4) 14L. Commissioner’s determination—aircraft leasing (Amended 10 of 2022 s. 2)(1) For the purposes of section 14J(2)(b)(iii), the Commissioner may, on application by a corporation, determine that the corporation is a qualifying aircraft leasing manager for a year of assessment.(2) A corporation may apply for the Commissioner’s determination under subsection (1) only if—(a) it is not an aircraft operator; and(b) for the year of assessment, it satisfies neither of the following—(i) the conditions specified in section 14J(3);(ii) the safe harbour rule under section 14K.(3) The Commissioner may make a determination under subsection (1) only if the Commissioner is of the opinion that the conditions specified in section 14J(3), or the safe harbour rule under section 14K, would, in the ordinary course of business of the corporation, have been satisfied for the year of assessment.(Added 9 of 2017 s. 4) 14LA. Carrying out of activities in Hong Kong—supplementary provisions for section 14J(5)(a)(ii) (1) For the purposes of section 14J(5)(a)(ii), an activity producing the assessable profits of a corporation that fall within section 14J(1) for a year of assessment is not considered to be carried out in Hong Kong by the corporation or arranged by the corporation to be carried out in Hong Kong in that year of assessment unless the requirements prescribed in section 6 of Schedule 17F (prescribed requirements) are met.(2) To avoid doubt, the fact that the prescribed requirements are not met does not imply that the assessable profits do not arise in or are not derived from Hong Kong.(Added 5 of 2024 s. 8) 14M. Anti-avoidance provisions—aircraft leasing (Amended 10 of 2022 s. 2)(1) Subsection (2) applies if—(a) conditions are made or imposed between a corporation that is a qualifying aircraft lessor and a person who is an associate of that corporation, in their commercial or financial relations in connection with a qualifying aircraft leasing activity; and(b) the conditions differ from those that would be made if the person were not such an associate.(2) Any profits that, but for the conditions referred to in subsection (1)(a), would have accrued to the corporation or the person and, by reason of those conditions, have not so accrued, are to be included in the profits of the corporation or the person and taxed in accordance with this Part.(3) Subsection (4) applies if—(a) conditions are made or imposed between a corporation that is a qualifying aircraft leasing manager and a person who is an associate of that corporation, in their commercial or financial relations in connection with a qualifying aircraft leasing management activity; and(b) the conditions differ from those that would be made if the person were not such an associate.(4) Any profits that, but for the conditions referred to in subsection (3)(a), would have accrued to the corporation or the person and, by reason of those conditions, have not so accrued, are to be included in the profits of the corporation or the person and taxed in accordance with this Part.(5) If—(a) an aircraft is owned by a corporation that is a qualifying aircraft lessor under an arrangement (ownership arrangement); and(b) the corporation enters into an arrangement (release arrangement) under which—(i) it is released from the primary obligation under the ownership arrangement; and(ii) that obligation is assumed by another person,this Subdivision is to have effect as if the corporation had ceased to own the aircraft during the time when the release arrangement is in force. (Amended 10 of 2022 s. 2)(Added 9 of 2017 s. 4) 14N. Power to amend Schedule 17F (Amended 10 of 2022 s. 2)The Commissioner may by order published in the Gazette amend Schedule 17F.(Added 9 of 2017 s. 4) Subdivision 5 Ship Leasing (Added 15 of 2020 s. 2) 14O. Interpretation of Subdivision 5 of Division 2 of Part 4 (Amended 10 of 2022 s. 2)(1) In this Subdivision— (Amended 10 of 2022 s. 2)actual residual value (實際剩餘價值), in relation to a ship, means the actual fair market value of the ship at the end of the term of a lease or its useful economic life;associate (相聯者)—(a) in relation to a natural person, means—(i) a relative of the person;(ii) a partner of the person;(iii) if a partner of the person is a natural person—a relative of the partner;(iv) a partnership in which the person is a partner;(v) a corporation controlled by—(A) the person;(B) a relative of the person;(C) a partner of the person;(D) if a partner of the person is a natural person—a relative of the partner; or(E) a partnership in which the person is a partner; or(vi) a director or principal officer of a corporation mentioned in subparagraph (v);(b) in relation to a corporation, means—(i) a person who has control over the corporation;(ii) a partner of a person mentioned in subparagraph (i);(iii) if a person mentioned in subparagraph (i) is a natural person—a relative of the person;(iv) if a partner mentioned in subparagraph (ii) is a natural person—a relative of the partner;(v) a director or principal officer of—(A) the corporation; or(B) an associated corporation of the corporation;(vi) a relative of a director (if the director is a natural person) or principal officer mentioned in subparagraph (v);(vii) a partner of the corporation;(viii) if a partner of the corporation is a natural person—a relative of the partner;(ix) a partnership in which the corporation is a partner; or(x) an associated corporation of the corporation;(c) in relation to a partnership, means—(i) a partner in the partnership;(ii) if a partner in the partnership is a natural person—a relative of the partner;(iii) if a partner in the partnership is another partnership—(A) a partner in the other partnership (Partner A); or(B) a partner with the other partnership in any other partnership (Partner B);(iv) if Partner A is a partnership—a partner in Partner A (Partner C);(v) if Partner B is a partnership—a partner in Partner B (Partner D);(vi) if Partner A, Partner B, Partner C or Partner D is a natural person—a relative of the partner;(vii) a corporation controlled by—(A) the partnership;(B) a partner in the partnership;(C) if a partner in the partnership is a natural person—a relative of the partner; or(D) a partnership in which the partnership is a partner;(viii) a director or principal officer of a corporation mentioned in subparagraph (vii);(ix) a corporation of which a partner in the partnership is a director or principal officer; or(x) an associated partnership of the partnership;associated corporation (相聯法團), in relation to a corporation, means—(a) another corporation over which the corporation has control;(b) another corporation that has control over the corporation; or(c) another corporation that is under the control of the same person as is the corporation;associated partnership (相聯合夥), in relation to a partnership, means—(a) another partnership over which the partnership has control;(b) another partnership that has control over the partnership; or(c) another partnership that is under the control of the same person as is the partnership;connected person (有關連者), in relation to a corporation, means—(a) an associated corporation of the corporation;(b) a person (other than a corporation)—(i) over whom the corporation has control;(ii) who has control over the corporation; or(iii) who is under the control of the same person as is the corporation; or(c) a partnership in which the corporation or its associate is a partner;control (控制), in relation to the definitions of associate, associated corporation, associated partnership and connected person—see subsection (2);estimated residual value (估計剩餘價值), in relation to a ship, means an estimated fair market value of the ship at the end of the term of a lease or its useful economic life;funding lease (融購租約) means an arrangement—(a) under which a right to use a ship is granted by a person (lessor) to another person (lessee) for a term exceeding 1 year;(b) that satisfies one of the following conditions at its inception—(i) the arrangement is accounted for as a finance lease or loan by the lessor in accordance with—(A) the Hong Kong Financial Reporting Standards issued by the Hong Kong Institute of Certified Public Accountants, as in force from time to time; or(B) the International Financial Reporting Standards issued by the International Accounting Standards Board, as in force from time to time;(ii) the present value of the aggregate minimum lease payments (whether or not they are periodic payments and including any sum payable under a residual value guarantee) during the term of the arrangement is equal to or more than 80% of the fair market value of the ship;(iii) the term of the arrangement is equal to or more than 65% of the remaining useful economic life of the ship; and(c) under which the property in the ship will or may pass to the lessee, or an associate of the lessee, at the end of its term,and includes an agreement or another arrangement in connection with such an arrangement; Note— See also subsection (3). lease (租約), when used as a noun, means—(a) an operating lease; or(b) a funding lease,and lease (租賃), when used as a verb, is to be construed accordingly;operating lease (營運租約)—(a) means—(i) an arrangement under which a right to use a ship is granted by an owner of the ship to another person for a term exceeding 1 year (specified head lease); or(ii) an arrangement under which a right to use a ship is granted by a lessee under a specified head lease (or by a sub-lessee or any other person deriving the right under the lessee) to another person; and(b) does not include a funding lease;own (擁有) includes—(a) to hold as a lessee under a funding lease;(b) to hold as a bailee under a hire-purchase agreement; and(c) to hold as a buyer under a conditional sale agreement; Note— See also subsection (4). permanent establishment (常設機構)—(a) means a branch, management or other place of business; but(b) does not include an agency unless the agent has, and habitually exercises, a general authority to negotiate and conclude contracts on behalf of a principal;principal officer (主要職員), in relation to a corporation, means—(a) a person employed by the corporation who, either alone or jointly with one or more other persons, is responsible under the immediate authority of the directors of the corporation for the conduct of the business of the corporation; or(b) a person employed by the corporation who, under the immediate authority of a director of the corporation or a person to whom paragraph (a) applies, exercises managerial functions in respect of the corporation;qualifying ship leasing activity (合資格船舶租賃活動)—see subsection (5);qualifying ship leasing management activity (合資格船舶租賃管理活動)—see subsection (7);qualifying ship leasing manager (合資格船舶租賃管理商)—see section 14T(2);qualifying ship lessor (合資格船舶出租商)—see section 14P(2);relative (親屬), in relation to a person, means the spouse, parent, child, brother or sister of the person, and, in deducing such a relationship—(a) an adopted child is to be regarded as a child of both the natural parents and any adopting parent; and(b) a step child is to be regarded as a child of both the natural parents and any step parent;residual value guarantee (剩餘價值擔保), in relation to a ship, means a financial commitment to pay a sum by reference to the amount by which the estimated residual value of the ship exceeds the actual residual value of the ship;ship (船舶) means a vessel of any description capable of navigating in water and—(a) includes—(i) a barge or lighter;(ii) an air-cushion vehicle; and(iii) a dynamically supported craft as defined by section 2 of the Shipping and Port Control Ordinance (Cap. 313); and(b) does not include—(i) a junk as defined by section 2 of the Merchant Shipping Ordinance (Cap. 281);(ii) a vessel propelled by oars; or(iii) a vessel solely for military use;ship leasing activity (船舶租賃活動)—see section 1(1) of Schedule 17FA;ship leasing management activity (船舶租賃管理活動)—see section 1(1) of Schedule 17FA;ship leasing management asset (船舶租賃管理資產), in relation to a corporation, means an asset of the corporation used by it to carry out a qualifying ship leasing management activity;ship leasing management profits (船舶租賃管理利潤), in relation to a corporation, means any profits of the corporation that are derived from a qualifying ship leasing management activity;ship leasing manager (船舶租賃管理商) means a person carrying on a business of carrying out ship leasing management activities;ship lessor (船舶出租商) means a person carrying on a business of carrying out ship leasing activities;ship operation business (船舶營運業務)—(a) means a business of operating ships as an owner or a charterer for providing services for the carriage by ships of passengers, cargo or mail; but(b) does not include dealing in ships or agency business in connection with sea transport;ship operator (船舶營運商) means a person carrying on a ship operation business.(2) For the purposes of the definitions of associate, associated corporation, associated partnership and connected person in subsection (1)—(a) a person has control over a corporation if the person has the power to secure—(i) by means of the holding of shares or the possession of voting power in or in relation to that or any other corporation; or(ii) by virtue of any powers conferred by the articles of association or other document regulating that or any other corporation,that the affairs of the first-mentioned corporation are conducted in accordance with the wishes of that person;(b) a person has control over a partnership if the person has the power to secure—(i) by means of the holding of interests or the possession of voting power in or in relation to that or any other partnership; or(ii) by virtue of any powers conferred by the partnership agreement or other document regulating that or any other partnership,that the affairs of the first-mentioned partnership are conducted in accordance with the wishes of that person; and(c) a person (first-mentioned person) has control over another person who is a natural person (second-mentioned person) if the second-mentioned person is accustomed or under an obligation (whether express or implied, and whether or not enforceable or intended to be enforceable by legal proceedings) to act, in relation to the investment or business affairs of the second-mentioned person, in accordance with the directions, instructions or wishes of the first-mentioned person.(3) For the purposes of the definition of funding lease in subsection (1), an arrangement does not fall within paragraph (c) of the definition if, in the opinion of the Commissioner, the property in the ship concerned would reasonably be expected not to pass to the lessee, or an associate of the lessee, under the arrangement at the end of its term.(4) In the definition of own in subsection (1), a reference to a hire-purchase agreement or conditional sale agreement does not include one under which, in the opinion of the Commissioner, the property in the ship concerned would reasonably be expected not to pass to the bailee or buyer (as the case may be).(5) A ship leasing activity carried out by a corporation in respect of a ship is a qualifying ship leasing activity if—(a) the activity is carried out in the ordinary course of the corporation’s business carried on in Hong Kong; and(b) the ship is—(i) of over 500 gross tonnage; and(ii) navigating solely or mainly outside the waters of Hong Kong.(6) For the purposes of subsection (5)(b)(i), a ship’s gross tonnage is determined in accordance with the formula set out in regulation 6 of the Merchant Shipping (Registration) (Tonnage) Regulations (Cap. 415 sub. leg. C).(7) A ship leasing management activity carried out by a corporation in respect of a ship is a qualifying ship leasing management activity if—(a) the activity is carried out in the ordinary course of the corporation’s business carried on in Hong Kong;(b) the activity is carried out for another corporation during the basis period of the other corporation for a year of assessment;(c) the other corporation is a qualifying ship lessor for that year of assessment; and(d) the ship is leased by the other corporation to a ship lessor, ship leasing manager or ship operator when the activity is carried out.(8) A note located in the text of this Subdivision is provided for information only and has no legislative effect. (Amended 10 of 2022 s. 2)(Added 5 of 2020 s. 5) 14P. Concession for qualifying ship lessor (Amended 10 of 2022 s. 2)(1) For the purposes of this Part and subject to subsections (4) and (6), the assessable profits of a corporation that is a qualifying ship lessor for a year of assessment are chargeable to tax under this Part at the rate specified in Schedule 8C to the extent to which those profits are assessable profits derived from its qualifying ship leasing activity.(2) A ship lessor is a qualifying ship lessor for a year of assessment if, during the basis period for that year of assessment—(a) it is not a ship operator;(b) it has carried out in Hong Kong one or more qualifying ship leasing activities; and(c) it has not carried out in Hong Kong any activity other than a qualifying ship leasing activity.(3) For the purposes of subsection (2)(c), in determining whether a ship lessor has carried out any activity other than a qualifying ship leasing activity, only activities that generate income to the ship lessor are to be taken into account.(4) Subsection (1) applies to a corporation for a year of assessment only if—(a) during the basis period for that year of assessment—(i) the central management and control of the corporation is exercised in Hong Kong;(ii) the activities that produce its qualifying profits for that year are—(A) carried out in Hong Kong by the corporation; or(B) arranged by the corporation to be carried out in Hong Kong; and(iii) those activities are not carried out by a permanent establishment outside Hong Kong; and(b) the corporation has elected in writing that subsection (1) applies to it. Note— See also section 14W. (5) An election under subsection (4)(b), once made, is irrevocable.(6) If subsection (1) does not apply to a corporation for a year of assessment (cessation year) while it did for the previous year of assessment—(a) the election made by the corporation under subsection (4)(b) ceases to be effective; and(b) despite anything in this section, subsection (1) is not to apply to the corporation for the year of assessment that follows the cessation year.(7) A ship owned by a corporation is to be treated as a capital asset of the corporation for the purposes of this Part if—(a) the corporation uses the ship for carrying out a qualifying ship leasing activity for a continuous period of not less than 3 years immediately before it disposes of the ship; and(b) subsection (1) applies in relation to that activity for any year of assessment.(8) In this section—qualifying profits (合資格利潤), in relation to a corporation, means the assessable profits of the corporation that fall within subsection (1).(Added 5 of 2020 s. 5) 14Q. Allowance for capital expenditure on ship (Amended 10 of 2022 s. 2)(1) If section 14P(1) applies to a corporation for a year of assessment, the corporation is not entitled to be granted any allowance under Part 6 for that year of assessment in respect of the capital expenditure incurred on the provision of the ship concerned.(2) If—(a) a person (initial transferor), whether alone or with others and whether directly or through an interposed person, transfers a ship by way of sale to a corporation (initial transferee);(b) the initial transferee subsequently leases the ship to the initial transferor, or to an associate of the initial transferor, under a funding lease (leaseback activity); and(c) the leaseback activity is a qualifying ship leasing activity, and the initial transferee is a qualifying ship lessor for a year of assessment by virtue of carrying out the activity,for the purposes of Part 6, the transfer is not treated as a sale of the ship concerned.(Added 5 of 2020 s. 5) 14R. Calculation of net lease payments for operating leases (Amended 10 of 2022 s. 2)(1) If section 14P(1) applies to a corporation for a year of assessment, and the qualifying ship leasing activity concerned relates to an operating lease, then the assessable profits of the corporation derived from the activity for that year of assessment are calculated in accordance with this section.(2) Unless subsection (3) applies, the net lease payments for the right to use a ship under the operating lease are to be calculated in accordance with the following formula— A = (B – C) × D where: A means the net lease payments; B means the aggregate amount of the gross lease payments (whether or not they are periodic payments and including any sum payable under a residual value guarantee) earned by or accrued to the corporation under the operating lease during the basis period for the year of assessment; C means the aggregate amount of any outgoings and expenses deductible under this Part to the extent to which they are incurred during the basis period for the year of assessment by the corporation in the production of those gross lease payments; and D means the percentage prescribed in section 2 of Schedule 17FA. (3) If there are special circumstances in relation to a year of assessment, the net lease payments for the right to use a ship under the operating lease are to be calculated in accordance with the following formula— A = B – C where: A means the net lease payments; B means the aggregate amount of the gross lease payments (whether or not they are periodic payments and including any sum payable under a residual value guarantee) earned by or accrued to the corporation under the operating lease during the basis period for the year of assessment; and C means the aggregate amount of any outgoings and expenses deductible under this Part to the extent to which they are incurred during the basis period for the year of assessment by the corporation in the production of those gross lease payments. (4) For the purposes of subsection (3), there are special circumstances in relation to a year of assessment if, in relation to the year—(a) the corporation carries out the qualifying ship leasing activity other than as an owner of the ship concerned;(b) the corporation has not incurred capital expenditure on the provision of the ship concerned;(c) allowances under Part 6 have been granted to the corporation or a connected person of the corporation in respect of the capital expenditure incurred on the provision of the ship concerned;(d) capital allowances are granted to a connected person of the corporation, whether in Hong Kong or in a territory outside Hong Kong, for the year of assessment in respect of the capital expenditure incurred on the provision of the ship concerned; or(e) the corporation carries out the qualifying ship leasing activity as an owner of the ship concerned, and the ship was, before the acquisition of the ship by the corporation—(i) owned and used by the lessee (whether alone or with others); or(ii) owned and used by an associate of the lessee.(5) However, subsection (4)(e) does not apply if—(a) the ship concerned was acquired by the corporation from the lessee, or the associate of the lessee, mentioned in that subsection (end-user) with a consideration not more than the consideration paid by the end-user to another person (supplier) for acquiring the ship from the supplier; and(b) no initial or annual allowances under Part 6 have been granted to the end-user in respect of the ship before the acquisition of the ship by the corporation.(6) For the purposes of subsection (5)(b), an allowance is to be regarded as not having been granted if the end-user disclaims the allowance by giving the Commissioner a written notice within—(a) 3 months of the date on which the capital expenditure giving rise to the allowance is incurred; or(b) any further time that the Commissioner permits in a particular case.(7) If a ship is leased under the operating lease together with other dealings in pursuance of one bargain, then for calculating the net lease payments under subsection (2) or (3), the Commissioner must, having regard to all the circumstances of the bargain, allocate an amount of gross lease payments for the right to use the ship under the lease.(8) The outgoings and expenses taken into account in calculating the net lease payments under this section may not otherwise be claimed for deduction under this Part.(9) In this section—acquisition (取得) means acquisition by a person as owner and includes holding or hiring under a hire-purchase agreement or, if the hire-purchase agreement is a conditional sale agreement, holding as purchaser;lessee (承租人) means the lessee under the operating lease concerned.(Added 5 of 2020 s. 5) 14S. Calculation of net payments of finance charges or interest for funding leases (Amended 10 of 2022 s. 2)(1) If section 14P(1) applies to a corporation for a year of assessment, and the qualifying ship leasing activity concerned relates to a funding lease, then the assessable profits of the corporation derived from the activity for that year of assessment are calculated in accordance with this section.(2) The net payments of finance charges or interest in relation to the right to use a ship under the funding lease are to be calculated in accordance with the following formula— E = F – G where: E means the net payments of finance charges or interest; F means the aggregate amount of the gross payments of finance charges or interest (whether or not they are periodic payments) earned by or accrued to the corporation under the funding lease during the basis period for the year of assessment; and G means the aggregate amount of any outgoings and expenses deductible under this Part to the extent to which they are incurred during the basis period for the year of assessment by the corporation in the production of those gross payments of finance charges or interest. (3) If a ship is leased under the funding lease together with other dealings in pursuance of one bargain, then for calculating the net payments of finance charges or interest under subsection (2), the Commissioner must, having regard to all the circumstances of the bargain, allocate an amount of gross payments of finance charges or interest in relation to the right to use the ship under the lease.(4) The outgoings and expenses taken into account in calculating the net payments of finance charges or interest under this section may not otherwise be claimed for deduction under this Part.(Added 5 of 2020 s. 5) 14T. Concession for qualifying ship leasing manager (Amended 10 of 2022 s. 2)(1) For the purposes of this Part and subject to subsections (5) and (7), the assessable profits of a corporation that is a qualifying ship leasing manager for a year of assessment are chargeable to tax under this Part at—(a) to the extent to which those profits are assessable profits derived from its qualifying ship leasing management activity carried out other than for an associated corporation—one-half of the rate specified in Schedule 8; or(b) to the extent to which those profits are assessable profits derived from its qualifying ship leasing management activity carried out for an associated corporation—the rate specified in Schedule 8C.(2) A ship leasing manager is a qualifying ship leasing manager for a year of assessment if—(a) during the basis period for that year of assessment, it is not a ship operator; and(b) for that year of assessment—(i) it satisfies the conditions specified in subsection (3);(ii) it satisfies the safe harbour rule under section 14U; or(iii) it has obtained the Commissioner’s determination under section 14V(1).(3) For the purposes of subsection (2)(b)(i), the conditions are that, during the basis period for the year of assessment, the ship leasing manager—(a) has carried out in Hong Kong one or more qualifying ship leasing management activities; and(b) has not carried out in Hong Kong any activity other than a qualifying ship leasing management activity.(4) For the purposes of subsection (3)(b), in determining whether a ship leasing manager has carried out any activity other than a qualifying ship leasing management activity, only activities that generate income to the ship leasing manager are to be taken into account.(5) Subsection (1) applies to a corporation for a year of assessment only if—(a) during the basis period for that year of assessment—(i) the central management and control of the corporation is exercised in Hong Kong;(ii) the activities that produce its qualifying profits for that year are—(A) carried out in Hong Kong by the corporation; or(B) arranged by the corporation to be carried out in Hong Kong; and(iii) those activities are not carried out by a permanent establishment outside Hong Kong; and(b) the corporation has elected in writing that subsection (1) applies to it. Note— See also section 14W. (6) An election under subsection (5)(b), once made, is irrevocable.(7) If subsection (1) does not apply to a corporation for a year of assessment (cessation year) while it did for the previous year of assessment—(a) the election made by the corporation under subsection (5)(b) ceases to be effective; and(b) despite anything in this section, subsection (1) is not to apply to the corporation for the year of assessment that follows the cessation year.(8) In this section—qualifying profits (合資格利潤), in relation to a corporation, means the assessable profits of the corporation that fall within subsection (1).(Added 5 of 2020 s. 5) 14U. Safe harbour rule—ship leasing (Amended 10 of 2022 s. 2)(1) For the purposes of section 14T(2)(b)(ii), a corporation satisfies the safe harbour rule for a year of assessment (subject year) if the corporation falls within—(a) the 1-year safe harbour under subsection (2); or(b) the multiple-year safe harbour under subsection (3).(2) A corporation falls within the 1-year safe harbour if, for the subject year—(a) its SLMP percentage is not lower than the profits percentage prescribed in section 3 of Schedule 17FA; and(b) its SLMA percentage is not lower than the asset percentage prescribed in section 4 of that Schedule.(3) A corporation falls within the multiple-year safe harbour if, for the specified years—(a) its average SLMP percentage is not lower than the profits percentage prescribed in section 3 of Schedule 17FA; and(b) its average SLMA percentage is not lower than the asset percentage prescribed in section 4 of that Schedule.(4) In this section, a reference to the specified years for a corporation is a reference to—(a) if the corporation has carried on a trade, profession or business in Hong Kong for less than 2 consecutive years of assessment immediately before the subject year—the subject year and the preceding year of assessment (the 2 years); or(b) if the corporation has carried on a trade, profession or business in Hong Kong for 2 or more consecutive years of assessment immediately before the subject year—the subject year and the preceding 2 years of assessment (the 3 years).(5) The SLMP percentage of a corporation for a year of assessment is calculated in accordance with the following formula— SLMP P where: SLMP means the aggregate amount of the ship leasing management profits of the corporation during the basis period for the year of assessment; and P means the aggregate amount of profits accruing to the corporation from all sources, whether in Hong Kong or not, during the basis period for the year of assessment. (6) The SLMA percentage of a corporation for a year of assessment is calculated in accordance with the following formula— SLMA A where: SLMA means the aggregate value of the ship leasing management assets of the corporation as at the end of the basis period for the year of assessment; and A means the aggregate value of all assets, whether in Hong Kong or not, of the corporation as at the end of the basis period for the year of assessment. (7) For the purposes of subsection (6), in computing the aggregate value of the ship leasing management assets of a corporation, if a ship leasing management asset is used partly to carry out a qualifying ship leasing management activity and partly for another purpose, only the part of the value of the asset that is proportionate to the extent to which the asset is used to carry out a qualifying ship leasing management activity is to be taken into account.(8) A reference to the average SLMP percentage of a corporation for the specified years is a reference to the percentage arrived at by—(a) if subsection (4)(a) applies—dividing the sum of the SLMP percentages of the corporation for the 2 years by 2; or(b) if subsection (4)(b) applies—dividing the sum of the SLMP percentages of the corporation for the 3 years by 3.(9) A reference to the average SLMA percentage of a corporation for the specified years is a reference to the percentage arrived at by—(a) if subsection (4)(a) applies—dividing the sum of the SLMA percentages of the corporation for the 2 years by 2; or(b) if subsection (4)(b) applies—dividing the sum of the SLMA percentages of the corporation for the 3 years by 3.(Added 5 of 2020 s. 5) 14V. Commissioner’s determination—ship leasing (Amended 10 of 2022 s. 2)(1) For the purposes of section 14T(2)(b)(iii), the Commissioner may, on application by a corporation, determine that the corporation is a qualifying ship leasing manager for a year of assessment.(2) A corporation may apply for the Commissioner’s determination under subsection (1) only if—(a) it is not a ship operator; and(b) for the year of assessment, it satisfies neither of the following—(i) the conditions specified in section 14T(3);(ii) the safe harbour rule under section 14U.(3) The Commissioner may make a determination under subsection (1) only if the Commissioner is of the opinion that the conditions specified in section 14T(3), or the safe harbour rule under section 14U, would, in the ordinary course of business of the corporation, have been satisfied for the year of assessment.(Added 5 of 2020 s. 5) 14W. Carrying out of activities in Hong Kong—ship leasing (Amended 10 of 2022 s.

2)(1) For the purposes of section 14P(4)(a)(ii), an activity producing the assessable profits of a corporation that fall within section 14P(1) for a year of assessment is not considered to be carried out in Hong Kong by the corporation or arranged by the corporation to be carried out in Hong Kong during the basis period for that year of assessment unless the threshold requirements are met.(2) For the purposes of section 14T(5)(a)(ii), an activity producing the assessable profits of a corporation that fall within section 14T(1) for a year of assessment is not considered to be carried out in Hong Kong by the corporation or arranged by the corporation to be carried out in Hong Kong during the basis period for that year of assessment unless the threshold requirements are met.(3) To avoid doubt, the fact that the threshold requirements are not met for the purposes of subsection (1) or (2) does not imply that the assessable profits mentioned in that subsection do not arise in or are not derived from Hong Kong.(4) In this section—threshold requirements (門檻要求) means—(a) for the purposes of subsection (1)—the requirements prescribed in section 5 of Schedule 17FA; or(b) for the purposes of subsection (2)—the requirements prescribed in section 6 of that Schedule.(Added 5 of 2020 s. 5) 14X. Losses sustained by qualifying ship lessor or qualifying ship leasing manager (Amended 10 of 2022 s. 2)(1) If section 14P(1) applies to a corporation for a zero-tax year of assessment, any loss sustained by the corporation in the year of assessment is not available for set off against any of its assessable profits for any subsequent year of assessment.(2) If section 14T(1)(b) applies to a corporation for a zero-tax year of assessment, any loss sustained by the corporation in the year of assessment is not available for set off against any of its assessable profits for the year of assessment or any subsequent year of assessment.(3) In this section—zero-tax year of assessment (零稅率課稅年度) means a year of assessment for which the rate of profits tax specified in Schedule 8C is 0%.(Added 5 of 2020 s. 5) 14Y. Anti-avoidance provisions relating to arm’s length principle—ship leasing (Amended 10 of 2022 s. 2)(1) Subsection (2) applies if—(a) conditions are made or imposed between a corporation that is a qualifying ship lessor and a person who is an associate of that corporation, in their commercial or financial relations in connection with a qualifying ship leasing activity; and(b) the conditions differ from those that would be made if the person were not such an associate.(2) Any profits that, but for the conditions referred to in subsection (1)(a), would have accrued to the corporation or the person and, by reason of those conditions, have not so accrued, are to be included in the profits of the corporation or the person and taxed in accordance with this Part.(3) Subsection (4) applies if—(a) conditions are made or imposed between a corporation that is a qualifying ship leasing manager and a person who is an associate of that corporation, in their commercial or financial relations in connection with a qualifying ship leasing management activity; and(b) the conditions differ from those that would be made if the person were not such an associate.(4) Any profits that, but for the conditions referred to in subsection (3)(a), would have accrued to the corporation or the person and, by reason of those conditions, have not so accrued, are to be included in the profits of the corporation or the person and taxed in accordance with this Part.(Added 5 of 2020 s. 5) 14Z. Anti-avoidance provisions relating to release of ownership obligation—ship leasing (Amended 10 of 2022 s. 2)If—(a) a ship is owned by a corporation that is a qualifying ship lessor under an arrangement (ownership arrangement); and(b) the corporation enters into an arrangement (release arrangement) under which—(i) it is released from the primary obligation under the ownership arrangement; and(ii) that obligation is assumed by another person,this Subdivision is to have effect as if the corporation had ceased to own the ship during the time when the release arrangement is in force.(Added 5 of 2020 s. 5. Amended 10 of 2022 s. 2) 14ZA. Anti-avoidance provisions relating to arrangement to obtain tax benefit—ship leasing (Amended 10 of 2022 s. 2)(1) If—(a) a corporation that is a qualifying ship lessor or qualifying ship leasing manager enters into an arrangement; and(b) the Commissioner is satisfied that the main purpose, or one of the main purposes, of the corporation in entering into the arrangement is to obtain a tax benefit, whether for the corporation or another person, in relation to a liability to pay profits tax under this Ordinance,sections 14P(1) and 14T(1) do not apply in relation to any assessable profits accrued to the corporation during a basis period relevant to the arrangement.(2) If—(a) a corporation that is a qualifying ship lessor enters into an arrangement; and(b) the Commissioner is satisfied that the main purpose, or one of the main purposes, of the corporation in entering into the arrangement is to obtain a tax benefit, whether for the corporation or another person, under a tax treaty that is contrary to the purpose of the treaty,section 14P(1) does not apply in relation to any assessable profits accrued to the corporation during a basis period relevant to the arrangement.(3) For the purposes of this section, the basis period of a year of assessment is relevant to an arrangement if, in the opinion of the Commissioner, the arrangement has effect during that basis period.(4) In this section—tax benefit (稅務利益) means an avoidance, postponement or reduction of a liability to pay tax;tax treaty (稅收協定) means an arrangement made between 2 or more jurisdictions (whether including Hong Kong or otherwise) with a view to affording relief from double taxation.(Added 5 of 2020 s. 5) 14ZB. Power to amend Schedule 17FA (Amended 10 of 2022 s. 2)The Commissioner may by order published in the Gazette amend Schedule 17FA.(Added 5 of 2020 s. 5) Subdivision 6 Ship Agency (Subdivision 6 added 10 of 2022 s. 4) 14ZC. Interpretation of Subdivision 6 of Division 2 of Part 4 (1) In this Subdivision—qualifying ship agency activity (合資格船舶代理活動)—see subsection (3);qualifying ship agent (合資格船舶代理商)—see section 14ZD(4);ship agency activity (船舶代理活動)—see section 2 of Schedule 17FB.(2) Also, Part 1 of Schedule 17FB contains interpretation provisions that apply to this Subdivision in accordance with their terms.(3) A ship agency activity carried out by a corporation is a qualifying ship agency activity if the activity is carried out in the ordinary course of the corporation’s business carried on in Hong Kong.(4) A note located in the text of this Subdivision is provided for information only and has no legislative effect. 14ZD. Concession for qualifying ship agent (1) For the purposes of this Part and subject to subsections (7) and (9), the assessable profits of a corporation that is a qualifying ship agent for a year of assessment are chargeable to tax under this Part at—(a) to the extent to which those profits are assessable profits derived from its qualifying ship agency activity—(i) that is carried out for its associated qualifying ship lessor; or(ii) that is carried out—(A) for its associated qualifying ship leasing manager; and(B) in respect of that manager’s qualifying ship leasing management activity carried out for that manager’s associated qualifying ship lessor—the rate specified in Schedule 8C; or(b) to the extent to which those profits are assessable profits derived from its qualifying ship agency activity other than one mentioned in paragraph (a)—one-half of the rate specified in Schedule 8.(2) In ascertaining the assessable profits of a corporation for the purposes of subsection (1), there are to be excluded, to the extent specified in subsection (3), any profits derived by the corporation from its qualifying ship agency activity that is carried out—(a) for its connected person that is a ship operator; and(b) in respect of any activity carried out by the connected person in the operation of a ship.(3) The extent specified for subsection (2) is the extent to which the activity mentioned in paragraph (b) of that subsection generates income—(a) that is a sum falling within paragraph (a) or (b) of the definition of exempt sums in section 23B(12); or(b) that is not—(i) a sum falling within paragraph (a) of the definition of relevant sums in that section; or(ii) a sum derived from, attributable to, or in respect of, any charter hire as described in paragraph (b) of the definition of relevant sums in that section.(4) A corporation is a qualifying ship agent for a year of assessment if, for the year of assessment—(a) it satisfies the conditions specified in subsection (5);(b) it satisfies the safe harbour rule under section 14ZE; or(c) it has obtained the Commissioner’s determination under section 14ZF(1).(5) The conditions specified for subsection (4)(a) are—(a) that the corporation has carried out in Hong Kong one or more qualifying ship agency activities; and(b) that the corporation has not carried out in Hong Kong any activity other than a qualifying ship agency activity,during the basis period for the year of assessment.(6) For the purposes of subsection (5)(b), in determining whether a corporation has carried out any activity other than a qualifying ship agency activity, only activities that generate income to the corporation are to be taken into account.(7) Subsection (1) applies to a corporation for a year of assessment only if—(a) during the basis period for the year of assessment—(i) the central management and control of the corporation is exercised in Hong Kong;(ii) the activities that produce its qualifying profits for the year are—(A) carried out in Hong Kong by the corporation; or(B) arranged by the corporation to be carried out in Hong Kong; and(iii) those activities are not carried out by a permanent establishment of the corporation outside Hong Kong; and(b) the corporation has elected in writing that subsection (1) applies to it. Note— See also section 14ZG. (8) An election under subsection (7)(b), once made, is irrevocable.(9) If subsection (1) does not apply to a corporation for a year of assessment (cessation year) while it did for the previous year of assessment—(a) the election made by the corporation under subsection (7)(b) ceases to be effective; and(b) despite anything in this section, subsection (1) is not to apply to the corporation for the year of assessment that follows the cessation year.(10) In this section—qualifying profits (合資格利潤), in relation to a corporation, means the assessable profits of the corporation that fall within subsection (1) (as read together with subsection (2)). 14ZE. Safe harbour rule—qualifying ship agent (1) For the purposes of section 14ZD(4)(b), a corporation satisfies the safe harbour rule for a year of assessment (subject year) if—(a) the corporation falls within the 1-year safe harbour under subsection (2); or(b) the corporation falls within the multiple-year safe harbour under subsection (3).(2) A corporation falls within the 1-year safe harbour if, for the subject year—(a) its SAP percentage is not lower than the profits percentage prescribed in section 3 of Schedule 17FB; and(b) its SAA percentage is not lower than the asset percentage prescribed in section 4 of that Schedule.(3) A corporation falls within the multiple-year safe harbour if, for the specified years—(a) its average SAP percentage is not lower than the profits percentage prescribed in section 3 of Schedule 17FB; and(b) its average SAA percentage is not lower than the asset percentage prescribed in section 4 of that Schedule.(4) In this section, a reference to the specified years for a corporation is a reference to—(a) if the corporation has carried on a trade, profession or business in Hong Kong for less than 2 consecutive years of assessment immediately before the subject year—the subject year and the preceding year of assessment (the 2 years); or(b) if the corporation has carried on a trade, profession or business in Hong Kong for 2 or more consecutive years of assessment immediately before the subject year—the subject year and the preceding 2 years of assessment (the 3 years).(5) The SAP percentage of a corporation for a year of assessment is calculated in accordance with the following formula— SAP P where: SAP means the aggregate amount of the ship agency profits of the corporation during the basis period for the year of assessment; and P means the aggregate amount of profits accruing to the corporation from all sources (whether in Hong Kong or not) during the basis period for the year of assessment. (6) The SAA percentage of a corporation for a year of assessment is calculated in accordance with the following formula— SAA A where: SAA means the aggregate value of the ship agency assets of the corporation as at the end of the basis period for the year of assessment; and A means the aggregate value of all assets (whether in Hong Kong or not) of the corporation as at the end of the basis period for the year of assessment. (7) For the purposes of subsection (6), in computing the aggregate value of the ship agency assets of a corporation, if a ship agency asset is used partly to carry out a qualifying ship agency activity and partly for another purpose, only the part of the value of the asset that is proportionate to the extent to which the asset is used to carry out a qualifying ship agency activity is to be taken into account.(8) A reference to the average SAP percentage of a corporation for the specified years is a reference to the percentage arrived at by—(a) if subsection (4)(a) applies—dividing the sum of the SAP percentages of the corporation for the 2 years by 2; or(b) if subsection (4)(b) applies—dividing the sum of the SAP percentages of the corporation for the 3 years by 3.(9) A reference to the average SAA percentage of a corporation for the specified years is a reference to the percentage arrived at by—(a) if subsection (4)(a) applies—dividing the sum of the SAA percentages of the corporation for the 2 years by 2; or(b) if subsection (4)(b) applies—dividing the sum of the SAA percentages of the corporation for the 3 years by 3.(10) In this section—ship agency asset (船舶代理資產), in relation to a corporation, means an asset of the corporation used by it to carry out one or more qualifying ship agency activities;ship agency profits (船舶代理利潤), in relation to a corporation, means any profits of the corporation that are derived from one or more qualifying ship agency activities. 14ZF. Commissioner’s determination—qualifying ship agent (1) For the purposes of section 14ZD(4)(c), the Commissioner may, on application by a corporation, determine that the corporation is a qualifying ship agent for a year of assessment.(2) A corporation may apply for the Commissioner’s determination under subsection (1) only if, for the year of assessment, the corporation satisfies neither of the following—(a) the conditions specified in section 14ZD(5);(b) the safe harbour rule under section 14ZE.(3) The Commissioner may make a determination under subsection (1) only if the Commissioner is of the opinion that the corporation would, in its ordinary course of business, have satisfied the conditions specified in section 14ZD(5), or the safe harbour rule under section 14ZE, for the year of assessment. 14ZG. Carrying out of activities in Hong Kong—qualifying ship agent (1) For the purposes of section 14ZD(7)(a)(ii), an activity producing the assessable profits of a corporation that fall within section 14ZD(1) (as read together with section 14ZD(2)) for a year of assessment is not considered to be carried out in Hong Kong by the corporation, or arranged by the corporation to be carried out in Hong Kong, during the basis period for the year of assessment unless the prescribed requirements are met.(2) To avoid doubt, the fact that the prescribed requirements are not met for the purposes of subsection (1) does not imply that the assessable profits mentioned in that subsection do not arise in, or are not derived from, Hong Kong.(3) In this section—prescribed requirements (訂明要求) means the requirements prescribed in section 5 of Schedule 17FB. 14ZH. Losses sustained by qualifying ship agent (1) Any loss sustained by a corporation from a qualifying ship agency activity in a year of assessment is, to the extent specified in subsection (2), not available for set off against any of its assessable profits for the year of assessment or any subsequent year of assessment if the activity is carried out—(a) for its connected person that is a ship operator; and(b) in respect of any activity carried out by the connected person in the operation of a ship.(2) The extent specified for subsection (1) is the extent to which the activity mentioned in paragraph (b) of that subsection generates income—(a) that is a sum falling within paragraph (a) or (b) of the definition of exempt sums in section 23B(12); or(b) that is not—(i) a sum falling within paragraph (a) of the definition of relevant sums in that section; or(ii) a sum derived from, attributable to, or in respect of, any charter hire as described in paragraph (b) of the definition of relevant sums in that section.(3) If section 14ZD(1)(a) applies to a corporation for a year of assessment for which the rate of profits tax specified in Schedule 8C is 0%, any loss sustained by the corporation from a qualifying ship agency activity—(a) that is carried out for its associated qualifying ship lessor; or(b) that is carried out—(i) for its associated qualifying ship leasing manager; and(ii) in respect of that manager’s qualifying ship leasing management activity carried out for that manager’s associated qualifying ship lessor,in the year of assessment is not available for set off against any of its assessable profits for the year of assessment or any subsequent year of assessment. 14ZI. Anti-avoidance provisions relating to arm’s length principle—qualifying ship agent (1) Subsection (2) applies if—(a) conditions are made or imposed between a corporation that is a qualifying ship agent and a person who is an associate of the corporation, in their commercial or financial relations in connection with a qualifying ship agency activity; and(b) the conditions differ from those that would be made or imposed if the person were not such an associate.(2) Any profits that, but for the conditions referred to in subsection (1)(a), would have accrued to the corporation or the person and, by reason of those conditions, have not so accrued, are to be included in the profits of the corporation or the person and taxed in accordance with this Part. 14ZJ. Anti-avoidance provisions relating to arrangement to obtain tax benefit—qualifying ship agent (1) If—(a) a corporation that is a qualifying ship agent enters into an arrangement; and(b) the Commissioner is satisfied that the main purpose, or one of the main purposes, of the corporation in entering into the arrangement is—(i) to obtain a tax benefit (whether for the corporation or another person) in relation to a liability to pay profits tax under this Ordinance; or(ii) to obtain a tax benefit (whether for the corporation or another person) under a tax treaty that is contrary to the purpose of the treaty,section 14ZD(1) does not apply in relation to any assessable profits accrued to the corporation during a basis period relevant to the arrangement.(2) For the purposes of this section, the basis period of a year of assessment is relevant to an arrangement if, in the Commissioner’s opinion, the arrangement has effect during that basis period. 14ZK. Power to amend Part 2 of Schedule 17FB The Commissioner may by order published in the Gazette amend Part 2 of Schedule 17FB. Subdivision 7 Ship Management (Subdivision 7 added 10 of 2022 s. 4) 14ZL. Interpretation of Subdivision 7 of Division 2 of Part 4 (1) In this Subdivision—qualifying ship management activity (合資格船舶管理活動)—see subsection (3);qualifying ship manager (合資格船舶管理商)—see section 14ZM(4);ship management activity (船舶管理活動)—see section 6(1) of Schedule 17FB.(2) Also, Part 1 of Schedule 17FB contains interpretation provisions that apply to this Subdivision in accordance with their terms.(3) A ship management activity carried out by a corporation is a qualifying ship management activity if the activity is carried out in the ordinary course of the corporation’s business carried on in Hong Kong.(4) A note located in the text of this Subdivision is provided for information only and has no legislative effect. 14ZM. Concession for qualifying ship manager (1) For the purposes of this Part and subject to subsections (7) and (9), the assessable profits of a corporation that is a qualifying ship manager for a year of assessment are chargeable to tax under this Part at—(a) to the extent to which those profits are assessable profits derived from its qualifying ship management activity—(i) that is carried out for its associated qualifying ship lessor; or(ii) that is carried out—(A) for its associated qualifying ship leasing manager; and(B) in respect of that leasing manager’s qualifying ship leasing management activity carried out for that leasing manager’s associated qualifying ship lessor—the rate specified in Schedule 8C; or(b) to the extent to which those profits are assessable profits derived from its qualifying ship management activity other than one mentioned in paragraph (a)—one-half of the rate specified in Schedule 8.(2) In ascertaining the assessable profits of a corporation for the purposes of subsection (1), there are to be excluded, to the extent specified in subsection (3), any profits derived by the corporation from its qualifying ship management activity that is carried out—(a) for its connected person that is a ship operator; and(b) in respect of any activity carried out by the connected person in the operation of a ship.(3) The extent specified for subsection (2) is the extent to which the activity mentioned in paragraph (b) of that subsection generates income—(a) that is a sum falling within paragraph (a) or (b) of the definition of exempt sums in section 23B(12); or(b) that is not—(i) a sum falling within paragraph (a) of the definition of relevant sums in that section; or(ii) a sum derived from, attributable to, or in respect of, any charter hire as described in paragraph (b) of the definition of relevant sums in that section.(4) A corporation is a qualifying ship manager for a year of assessment if, for the year of assessment—(a) it satisfies the conditions specified in subsection (5);(b) it satisfies the safe harbour rule under section 14ZN; or(c) it has obtained the Commissioner’s determination under section 14ZO(1).(5) The conditions specified for subsection (4)(a) are—(a) that the corporation has carried out in Hong Kong 2 or more qualifying ship management activities; and(b) that the corporation has not carried out in Hong Kong any activity other than a qualifying ship management activity,during the basis period for the year of assessment.(6) For the purposes of subsection (5)(b), in determining whether a corporation has carried out any activity other than a qualifying ship management activity, only activities that generate income to the corporation are to be taken into account.(7) Subsection (1) applies to a corporation for a year of assessment only if—(a) during the basis period for the year of assessment—(i) the central management and control of the corporation is exercised in Hong Kong;(ii) the activities that produce its qualifying profits for the year are—(A) carried out in Hong Kong by the corporation; or(B) arranged by the corporation to be carried out in Hong Kong; and(iii) those activities are not carried out by a permanent establishment of the corporation outside Hong Kong; and(b) the corporation has elected in writing that subsection (1) applies to it. Note— See also section 14ZP. (8) An election under subsection (7)(b), once made, is irrevocable.(9) If subsection (1) does not apply to a corporation for a year of assessment (cessation year) while it did for the previous year of assessment—(a) the election made by the corporation under subsection (7)(b) ceases to be effective; and(b) despite anything in this section, subsection (1) is not to apply to the corporation for the year of assessment that follows the cessation year.(10) In this section—qualifying profits (合資格利潤), in relation to a corporation, means the assessable profits of the corporation that fall within subsection (1) (as read together with subsection (2)). 14ZN. Safe harbour rule—qualifying ship manager (1) For the purposes of section 14ZM(4)(b), a corporation satisfies the safe harbour rule for a year of assessment (subject year) if—(a) the corporation falls within the 1-year safe harbour under subsection (2); or(b) the corporation falls within the multiple-year safe harbour under subsection (3).(2) A corporation falls within the 1-year safe harbour if, for the subject year—(a) its SMP percentage is not lower than the profits percentage prescribed in section 7 of Schedule 17FB; and(b) its SMA percentage is not lower than the asset percentage prescribed in section 8 of that Schedule.(3) A corporation falls within the multiple-year safe harbour if, for the specified years—(a) its average SMP percentage is not lower than the profits percentage prescribed in section 7 of Schedule 17FB; and(b) its average SMA percentage is not lower than the asset percentage prescribed in section 8 of that Schedule.(4) In this section, a reference to the specified years for a corporation is a reference to—(a) if the corporation has carried on a trade, profession or business in Hong Kong for less than 2 consecutive years of assessment immediately before the subject year—the subject year and the preceding year of assessment (the 2 years); or(b) if the corporation has carried on a trade, profession or business in Hong Kong for 2 or more consecutive years of assessment immediately before the subject year—the subject year and the preceding 2 years of assessment (the 3 years).(5) The SMP percentage of a corporation for a year of assessment is calculated in accordance with the following formula— SMP P where: SMP means the aggregate amount of the ship management profits of the corporation during the basis period for the year of assessment; and P means the aggregate amount of profits accruing to the corporation from all sources (whether in Hong Kong or not) during the basis period for the year of assessment. (6) The SMA percentage of a corporation for a year of assessment is calculated in accordance with the following formula— SMA A where: SMA means the aggregate value of the ship management assets of the corporation as at the end of the basis period for the year of assessment; and A means the aggregate value of all assets (whether in Hong Kong or not) of the corporation as at the end of the basis period for the year of assessment. (7) For the purposes of subsection (6), in computing the aggregate value of the ship management assets of a corporation, if a ship management asset is used partly to carry out a qualifying ship management activity and partly for another purpose, only the part of the value of the asset that is proportionate to the extent to which the asset is used to carry out a qualifying ship management activity is to be taken into account.(8) A reference to the average SMP percentage of a corporation for the specified years is a reference to the percentage arrived at by—(a) if subsection (4)(a) applies—dividing the sum of the SMP percentages of the corporation for the 2 years by 2; or(b) if subsection (4)(b) applies—dividing the sum of the SMP percentages of the corporation for the 3 years by 3.(9) A reference to the average SMA percentage of a corporation for the specified years is a reference to the percentage arrived at by—(a) if subsection (4)(a) applies—dividing the sum of the SMA percentages of the corporation for the 2 years by 2; or(b) if subsection (4)(b) applies—dividing the sum of the SMA percentages of the corporation for the 3 years by 3.(10) In this section—ship management asset (船舶管理資產), in relation to a corporation, means an asset of the corporation used by it to carry out 2 or more qualifying ship management activities;ship management profits (船舶管理利潤), in relation to a corporation, means any profits of the corporation that are derived from 2 or more qualifying ship management activities. 14ZO. Commissioner’s determination—qualifying ship manager (1) For the purposes of section 14ZM(4)(c), the Commissioner may, on application by a corporation, determine that the corporation is a qualifying ship manager for a year of assessment.(2) A corporation may apply for the Commissioner’s determination under subsection (1) only if, for the year of assessment, the corporation satisfies neither of the following—(a) the conditions specified in section 14ZM(5);(b) the safe harbour rule under section 14ZN.(3) The Commissioner may make a determination under subsection (1) only if the Commissioner is of the opinion that the corporation would, in its ordinary course of business, have satisfied the conditions specified in section 14ZM(5), or the safe harbour rule under section 14ZN, for the year of assessment. 14ZP. Carrying out of activities in Hong Kong—qualifying ship manager (1) For the purposes of section 14ZM(7)(a)(ii), an activity producing the assessable profits of a corporation that fall within section 14ZM(1) (as read together with section 14ZM(2)) for a year of assessment is not considered to be carried out in Hong Kong by the corporation, or arranged by the corporation to be carried out in Hong Kong, during the basis period for the year of assessment unless the prescribed requirements are met.(2) To avoid doubt, the fact that the prescribed requirements are not met for the purposes of subsection (1) does not imply that the assessable profits mentioned in that subsection do not arise in, or are not derived from, Hong Kong.(3) In this section—prescribed requirements (訂明要求) means the requirements prescribed in section 9 of Schedule 17FB. 14ZQ. Losses sustained by qualifying ship manager (1) Any loss sustained by a corporation from a qualifying ship management activity in a year of assessment is, to the extent specified in subsection (2), not available for set off against any of its assessable profits for the year of assessment or any subsequent year of assessment if the activity is carried out—(a) for its connected person that is a ship operator; and(b) in respect of any activity carried out by the connected person in the operation of a ship.(2) The extent specified for subsection (1) is the extent to which the activity mentioned in paragraph (b) of that subsection generates income—(a) that is a sum falling within paragraph (a) or (b) of the definition of exempt sums in section 23B(12); or(b) that is not—(i) a sum falling within paragraph (a) of the definition of relevant sums in that section; or(ii) a sum derived from, attributable to, or in respect of, any charter hire as described in paragraph (b) of the definition of relevant sums in that section.(3) If section 14ZM(1)(a) applies to a corporation for a year of assessment for which the rate of profits tax specified in Schedule 8C is 0%, any loss sustained by the corporation from a qualifying ship management activity—(a) that is carried out for its associated qualifying ship lessor; or(b) that is carried out—(i) for its associated qualifying ship leasing manager; and(ii) in respect of that manager’s qualifying ship leasing management activity carried out for that manager’s associated qualifying ship lessor,in the year of assessment is not available for set off against any of its assessable profits for the year of assessment or any subsequent year of assessment. 14ZR. Anti-avoidance provisions relating to arm’s length principle—qualifying ship manager (1) Subsection (2) applies if—(a) conditions are made or imposed between a corporation that is a qualifying ship manager and a person who is an associate of the corporation, in their commercial or financial relations in connection with a qualifying ship management activity; and(b) the conditions differ from those that would be made or imposed if the person were not such an associate.(2) Any profits that, but for the conditions referred to in subsection (1)(a), would have accrued to the corporation or the person and, by reason of those conditions, have not so accrued, are to be included in the profits of the corporation or the person and taxed in accordance with this Part. 14ZS. Anti-avoidance provisions relating to arrangement to obtain tax benefit—qualifying ship manager (1) If—(a) a corporation that is a qualifying ship manager enters into an arrangement; and(b) the Commissioner is satisfied that the main purpose, or one of the main purposes, of the corporation in entering into the arrangement is—(i) to obtain a tax benefit (whether for the corporation or another person) in relation to a liability to pay profits tax under this Ordinance; or(ii) to obtain a tax benefit (whether for the corporation or another person) under a tax treaty that is contrary to the purpose of the treaty,section 14ZM(1) does not apply in relation to any assessable profits accrued to the corporation during a basis period relevant to the arrangement.(2) For the purposes of this section, the basis period of a year of assessment is relevant to an arrangement if, in the Commissioner’s opinion, the arrangement has effect during that basis period. 14ZT. Power to amend Part 3 of Schedule 17FB The Commissioner may by order published in the Gazette amend Part 3 of Schedule 17FB. Subdivision 8 Ship Broking (Subdivision 8 added 10 of 2022 s. 4) 14ZU. Interpretation of Subdivision 8 of Division 2 of Part 4 (1) In this Subdivision—qualifying ship broker (合資格船舶經紀商)—see section 14ZV(4);qualifying ship broking activity (合資格船舶經紀活動)—see subsection (3);ship broking activity (船舶經紀活動)—see section 10(1) of Schedule 17FB.(2) Also, Part 1 of Schedule 17FB contains interpretation provisions that apply to this Subdivision in accordance with their terms.(3) A ship broking activity carried out by a corporation is a qualifying ship broking activity if the activity is carried out in the ordinary course of the corporation’s business carried on in Hong Kong.(4) A note located in the text of this Subdivision is provided for information only and has no legislative effect. 14ZV. Concession for qualifying ship broker (1) For the purposes of this Part and subject to subsections (7) and (9), the assessable profits of a corporation that is a qualifying ship broker for a year of assessment are chargeable to tax under this Part at—(a) to the extent to which those profits are assessable profits derived from its qualifying ship broking activity—(i) that is carried out for its associated qualifying ship lessor; or(ii) that is carried out—(A) for its associated qualifying ship leasing manager; and(B) in respect of that manager’s qualifying ship leasing management activity carried out for that manager’s associated qualifying ship lessor—the rate specified in Schedule 8C; or(b) to the extent to which those profits are assessable profits derived from its qualifying ship broking activity other than one mentioned in paragraph (a)—one-half of the rate specified in Schedule 8.(2) In ascertaining the assessable profits of a corporation for the purposes of subsection (1), there are to be excluded, to the extent specified in subsection (3), any profits derived by the corporation from its qualifying ship broking activity that is carried out—(a) for its connected person that is a ship operator; and(b) in respect of any activity carried out by the connected person in the operation of a ship.(3) The extent specified for subsection (2) is the extent to which the activity mentioned in paragraph (b) of that subsection generates income—(a) that is a sum falling within paragraph (a) or (b) of the definition of exempt sums in section 23B(12); or(b) that is not—(i) a sum falling within paragraph (a) of the definition of relevant sums in that section; or(ii) a sum derived from, attributable to, or in respect of, any charter hire as described in paragraph (b) of the definition of relevant sums in that section.(4) A corporation is a qualifying ship broker for a year of assessment if, for the year of assessment—(a) it satisfies the conditions specified in subsection (5);(b) it satisfies the safe harbour rule under section 14ZW; or(c) it has obtained the Commissioner’s determination under section 14ZX(1).(5) The conditions specified for subsection (4)(a) are—(a) that the corporation has carried out in Hong Kong one or more qualifying ship broking activities; and(b) that the corporation has not carried out in Hong Kong any activity other than a qualifying ship broking activity,during the basis period for the year of assessment.(6) For the purposes of subsection (5)(b), in determining whether a corporation has carried out any activity other than a qualifying ship broking activity, only activities that generate income to the corporation are to be taken into account.(7) Subsection (1) applies to a corporation for a year of assessment only if—(a) during the basis period for the year of assessment—(i) the central management and control of the corporation is exercised in Hong Kong;(ii) the activities that produce its qualifying profits for the year are—(A) carried out in Hong Kong by the corporation; or(B) arranged by the corporation to be carried out in Hong Kong; and(iii) those activities are not carried out by a permanent establishment of the corporation outside Hong Kong; and(b) the corporation has elected in writing that subsection (1) applies to it. Note— See also section 14ZY. (8) An election under subsection (7)(b), once made, is irrevocable.(9) If subsection (1) does not apply to a corporation for a year of assessment (cessation year) while it did for the previous year of assessment—(a) the election made by the corporation under subsection (7)(b) ceases to be effective; and(b) despite anything in this section, subsection (1) is not to apply to the corporation for the year of assessment that follows the cessation year.(10) In this section—qualifying profits (合資格利潤), in relation to a corporation, means the assessable profits of the corporation that fall within subsection (1) (as read together with subsection (2)). 14ZW. Safe harbour rule—qualifying ship broker (1) For the purposes of section 14ZV(4)(b), a corporation satisfies the safe harbour rule for a year of assessment (subject year) if—(a) the corporation falls within the 1-year safe harbour under subsection (2); or(b) the corporation falls within the multiple-year safe harbour under subsection (3).(2) A corporation falls within the 1-year safe harbour if, for the subject year—(a) its SBP percentage is not lower than the profits percentage prescribed in section 11 of Schedule 17FB; and(b) its SBA percentage is not lower than the asset percentage prescribed in section 12 of that Schedule.(3) A corporation falls within the multiple-year safe harbour if, for the specified years—(a) its average SBP percentage is not lower than the profits percentage prescribed in section 11 of Schedule 17FB; and(b) its average SBA percentage is not lower than the asset percentage prescribed in section 12 of that Schedule.(4) In this section, a reference to the specified years for a corporation is a reference to—(a) if the corporation has carried on a trade, profession or business in Hong Kong for less than 2 consecutive years of assessment immediately before the subject year—the subject year and the preceding year of assessment (the 2 years); or(b) if the corporation has carried on a trade, profession or business in Hong Kong for 2 or more consecutive years of assessment immediately before the subject year—the subject year and the preceding 2 years of assessment (the 3 years).(5) The SBP percentage of a corporation for a year of assessment is calculated in accordance with the following formula— SBP P where: SBP means the aggregate amount of the ship broking profits of the corporation during the basis period for the year of assessment; and P means the aggregate amount of profits accruing to the corporation from all sources (whether in Hong Kong or not) during the basis period for the year of assessment. (6) The SBA percentage of a corporation for a year of assessment is calculated in accordance with the following formula— SBA A where: SBA means the aggregate value of the ship broking assets of the corporation as at the end of the basis period for the year of assessment; and A means the aggregate value of all assets (whether in Hong Kong or not) of the corporation as at the end of the basis period for the year of assessment. (7) For the purposes of subsection (6), in computing the aggregate value of the ship broking assets of a corporation, if a ship broking asset is used partly to carry out a qualifying ship broking activity and partly for another purpose, only the part of the value of the asset that is proportionate to the extent to which the asset is used to carry out a qualifying ship broking activity is to be taken into account.(8) A reference to the average SBP percentage of a corporation for the specified years is a reference to the percentage arrived at by—(a) if subsection (4)(a) applies—dividing the sum of the SBP percentages of the corporation for the 2 years by 2; or(b) if subsection (4)(b) applies—dividing the sum of the SBP percentages of the corporation for the 3 years by 3.(9) A reference to the average SBA percentage of a corporation for the specified years is a reference to the percentage arrived at by—(a) if subsection (4)(a) applies—dividing the sum of the SBA percentages of the corporation for the 2 years by 2; or(b) if subsection (4)(b) applies—dividing the sum of the SBA percentages of the corporation for the 3 years by 3.(10) In this section—ship broking asset (船舶經紀資產), in relation to a corporation, means an asset of the corporation used by it to carry out one or more qualifying ship broking activities;ship broking profits (船舶經紀利潤), in relation to a corporation, means any profits of the corporation that are derived from one or more qualifying ship broking activities. 14ZX. Commissioner’s determination—qualifying ship broker (1) For the purposes of section 14ZV(4)(c), the Commissioner may, on application by a corporation, determine that the corporation is a qualifying ship broker for a year of assessment.(2) A corporation may apply for the Commissioner’s determination under subsection (1) only if, for the year of assessment, the corporation satisfies neither of the following—(a) the conditions specified in section 14ZV(5);(b) the safe harbour rule under section 14ZW.(3) The Commissioner may make a determination under subsection (1) only if the Commissioner is of the opinion that the corporation would, in its ordinary course of business, have satisfied the conditions specified in section 14ZV(5), or the safe harbour rule under section 14ZW, for the year of assessment. 14ZY. Carrying out of activities in Hong Kong—qualifying ship broker (1) For the purposes of section 14ZV(7)(a)(ii), an activity producing the assessable profits of a corporation that fall within section 14ZV(1) (as read together with section 14ZV(2)) for a year of assessment is not considered to be carried out in Hong Kong by the corporation, or arranged by the corporation to be carried out in Hong Kong, during the basis period for the year of assessment unless the prescribed requirements are met.(2) To avoid doubt, the fact that the prescribed requirements are not met for the purposes of subsection (1) does not imply that the assessable profits mentioned in that subsection do not arise in, or are not derived from, Hong Kong.(3) In this section—prescribed requirements (訂明要求) means the requirements prescribed in section 13 of Schedule 17FB. 14ZZ. Losses sustained by qualifying ship broker (1) Any loss sustained by a corporation from a qualifying ship broking activity in a year of assessment is, to the extent specified in subsection (2), not available for set off against any of its assessable profits for the year of assessment or any subsequent year of assessment if the activity is carried out—(a) for its connected person that is a ship operator; and(b) in respect of any activity carried out by the connected person in the operation of a ship.(2) The extent specified for subsection (1) is the extent to which the activity mentioned in paragraph (b) of that subsection generates income—(a) that is a sum falling within paragraph (a) or (b) of the definition of exempt sums in section 23B(12); or(b) that is not—(i) a sum falling within paragraph (a) of the definition of relevant sums in that section; or(ii) a sum derived from, attributable to, or in respect of, any charter hire as described in paragraph (b) of the definition of relevant sums in that section.(3) If section 14ZV(1)(a) applies to a corporation for a year of assessment for which the rate of profits tax specified in Schedule 8C is 0%, any loss sustained by the corporation from a qualifying ship broking activity—(a) that is carried out for its associated qualifying ship lessor; or(b) that is carried out—(i) for its associated qualifying ship leasing manager; and(ii) in respect of that manager’s qualifying ship leasing management activity carried out for that manager’s associated qualifying ship lessor,in the year of assessment is not available for set off against any of its assessable profits for the year of assessment or any subsequent year of assessment. 14ZZA. Anti-avoidance provisions relating to arm’s length principle—qualifying ship broker (1) Subsection (2) applies if—(a) conditions are made or imposed between a corporation that is a qualifying ship broker and a person who is an associate of the corporation, in their commercial or financial relations in connection with a qualifying ship broking activity; and(b) the conditions differ from those that would be made or imposed if the person were not such an associate.(2) Any profits that, but for the conditions referred to in subsection (1)(a), would have accrued to the corporation or the person and, by reason of those conditions, have not so accrued, are to be included in the profits of the corporation or the person and taxed in accordance with this Part. 14ZZB. Anti-avoidance provisions relating to arrangement to obtain tax benefit—qualifying ship broker (1) If—(a) a corporation that is a qualifying ship broker enters into an arrangement; and(b) the Commissioner is satisfied that the main purpose, or one of the main purposes, of the corporation in entering into the arrangement is—(i) to obtain a tax benefit (whether for the corporation or another person) in relation to a liability to pay profits tax under this Ordinance; or(ii) to obtain a tax benefit (whether for the corporation or another person) under a tax treaty that is contrary to the purpose of the treaty,section 14ZV(1) does not apply in relation to any assessable profits accrued to the corporation during a basis period relevant to the arrangement.(2) For the purposes of this section, the basis period of a year of assessment is relevant to an arrangement if, in the Commissioner’s opinion, the arrangement has effect during that basis period. 14ZZC. Power to amend Part 4 of Schedule 17FB The Commissioner may by order published in the Gazette amend Part 4 of Schedule 17FB. Division 3 Trading Receipts, Trading Stock, Stock Borrowing and Lending, etc. (Added 15 of 2020 s. 2) 15.

Certain amounts deemed trading receipts (1) For the purposes of this Ordinance, the sums described in the following paragraphs shall be deemed to be receipts arising in or derived from Hong Kong from a trade, profession or business carried on in Hong Kong—(a) sums, not otherwise chargeable to tax under this Part, received by or accrued to a person from the exhibition or use in Hong Kong of cinematograph or television film or tape, any sound recording, or any advertising material connected with such film, tape or recording;(b) sums, not otherwise chargeable to tax under this Part, received by or accrued to a person for the use, or the right to the use, in Hong Kong of any patent, design, trade mark, copyright material, layout-design (topography) of an integrated circuit, performer’s right, plant variety right, secret process or formula, or other property or right of a similar nature, or for imparting or undertaking to impart knowledge directly or indirectly connected with the use in Hong Kong of any such patent, design, trade mark, copyright material, layout-design (topography) of an integrated circuit, performer’s right, plant variety right, secret process or formula, or other property or right; (Replaced 12 of 2004 s. 5. Amended 21 of 2011 s. 3; 24 of 2018 s. 3)(ba) sums, not otherwise chargeable to tax under this Part, received by or accrued to a person for the use, or the right to the use, outside Hong Kong of any patent, design, trade mark, copyright material, layout-design (topography) of an integrated circuit, performer’s right, plant variety right, secret process or formula, or other property or right of a similar nature, or for imparting or undertaking to impart knowledge directly or indirectly connected with the use outside Hong Kong of any such patent, design, trade mark, copyright material, layout-design (topography) of an integrated circuit, performer’s right, plant variety right, secret process or formula, or other property or right, which are deductible in ascertaining the assessable profits of a person under this Part; (Added 12 of 2004 s. 5. Amended 21 of 2011 s. 3; 24 of 2018 s. 3)(bb) sums, not otherwise chargeable to tax under this Part, received by or accrued to a performer or an organizer for an assignment of, or an agreement to assign, a performer’s right in relation to a performance given by the performer in Hong Kong on or after the day on which the Inland Revenue (Amendment) (No. 5) Ordinance 2018 (24 of 2018) comes into operation; (Added 24 of 2018 s. 3)(bc) sums, not otherwise chargeable to tax under this Part, received by or accrued to a person—(i) for the use, or the right to the use, outside Hong Kong of any intellectual property or know-how generated from any R&D activity in respect of which a deduction is allowable under section 16B in ascertaining profits of the person under this Part; or(ii) for imparting or undertaking to impart knowledge directly or indirectly connected with the use outside Hong Kong of any such property or know-how; (Added 29 of 2018 s. 5)(c) sums received by or accrued to a person by way of grant, subsidy or similar financial assistance in connection with the carrying on of a trade, profession or business in Hong Kong, other than sums in connection with capital expenditure made or to be made by the person;(d) sums received by or accrued to a person by way of hire, rental or similar charges for the use of movable property in Hong Kong or the right to use movable property in Hong Kong;(e) (Repealed 7 of 1975 s. 7)(f) sums received by or accrued to a corporation carrying on a trade, profession or business in Hong Kong by way of interest derived from Hong Kong; (Replaced 19 of 1986 s. 2)(g) sums received by or accrued to a person, other than a corporation, carrying on a trade, profession or business in Hong Kong by way of interest derived from Hong Kong which interest is in respect of the funds of the trade, profession or business; (Replaced 19 of 1986 s. 2. Amended 17 of 1989 s. 4)(h) sums received by or accrued to a person as a refund to the person of—(i) contributions paid as an employer to a recognized occupational retirement scheme; or(ii) voluntary contributions paid as an employer to a mandatory provident fund scheme, but only to the extent that the sums are allowed as deductions in ascertaining the person’s assessable profits under this Part; (Replaced 4 of 1998 s. 6)(i) sums, not otherwise chargeable to tax under this Part, received by or accrued to a financial institution by way of interest which arises through or from the carrying on by the financial institution of its business in Hong Kong, notwithstanding that the moneys in respect of which the interest is received or accrues are made available outside Hong Kong; (Added 73 of 1978 s. 3)(ia) sums, not otherwise chargeable to tax under this Part, received by or accrued to a corporation (other than a financial institution), by way of interest that arises through or from the carrying on in Hong Kong by the corporation of its intra-group financing business within the meaning of section 16(3), even if the moneys in respect of which the interest is received or accrues are made available outside Hong Kong; (Added 12 of 2016 s. 7)(ib) sums, not otherwise chargeable to tax under this Part, received by or accrued to a LAC banking entity, by way of interest, in respect of a regulatory capital security, that arises through or from the carrying on by the entity of its business in Hong Kong, even if the moneys laid out for the acquisition of the security in respect of which the interest is received or accrues are made available outside Hong Kong; (Added 4 of 2019 s. 6)(j) sums received by or accrued to a corporation carrying on a trade, profession or business in Hong Kong by way of gains or profits arising in or derived from Hong Kong from the sale or other disposal or on the redemption, on maturity or presentment or otherwise, of a certificate of deposit, bill of exchange or regulatory capital security; (Replaced 19 of 1986 s. 2. Amended 12 of 2016 s. 12)(k) sums received by or accrued to a person, other than a corporation, carrying on a trade, profession or business in Hong Kong by way of gains or profits arising in or derived from Hong Kong from the sale or other disposal or on the redemption, on maturity or presentment or otherwise, of a certificate of deposit, bill of exchange or regulatory capital security where such gains or profits are in respect of the funds of the trade, profession or business; (Replaced 19 of 1986 s. 2. Amended 28 of 1987 s. 3; 17 of 1989 s. 4; 12 of 2016 s. 12)(l) sums, not otherwise chargeable to tax under this Part, received by or accrued to a financial institution by way of gains or profits arising through or from the carrying on by the financial institution of its business in Hong Kong from the sale or other disposal or on the redemption, on maturity or presentment or otherwise, of a certificate of deposit, bill of exchange or regulatory capital security even if— (Amended 12 of 2016 s. 12)(i) the moneys laid out for the acquisition of the certificate, bill or security were made available outside Hong Kong; or (Amended 12 of 2016 s. 12)(ii) the sale, disposal or redemption is effected outside Hong Kong; (Added 19 of 1986 s. 2. Amended 28 of 1987 s. 3; 12 of 2016 s. 7)(la) sums, not otherwise chargeable to tax under this Part, received by or accrued to a corporation (other than a financial institution), by way of gains or profits arising through or from the carrying on in Hong Kong by the corporation of its intra-group financing business within the meaning of section 16(3), from the sale or other disposal or on the redemption, on maturity or presentment or otherwise, of a certificate of deposit, bill of exchange or regulatory capital security, even if—(i) the moneys laid out for the acquisition of the certificate, bill or security were made available outside Hong Kong; or(ii) the sale, disposal or redemption is effected outside Hong Kong; (Added 12 of 2016 s. 7. Amended 9 of 2017 s. 5)(lb) sums, not otherwise chargeable to tax under this Part, received by or accrued to a LAC banking entity, by way of gains or profits arising through or from the carrying on by the entity of its business in Hong Kong, from the sale or other disposal or on the redemption, on maturity or presentment or otherwise, of a regulatory capital security, even if—(i) the moneys laid out for the acquisition of the security were made available outside Hong Kong; or(ii) the sale, disposal or redemption is effected outside Hong Kong; (Added 4 of 2019 s. 6)(m) sums received or receivable by a person as consideration in respect of the transfer of a right to receive income, as provided for in section 15A; (Added 28 of 1987 s. 3. Amended 9 of 2017 s. 5; 5 of 2020 s. 6)(n) sums, not otherwise chargeable to tax under this Part, received by or accrued to a corporation by way of gains or profits (other than those arising from the sale of capital assets) arising through or from the carrying on in Hong Kong by the corporation of—(i) its business of granting a right to use an aircraft to another person (aircraft business), even if the aircraft is used outside Hong Kong; or(ii) its business of managing a corporation carrying on an aircraft business or of managing an aircraft business, even if the aircraft concerned is used outside Hong Kong; and (Added 9 of 2017 s. 5. Amended 5 of 2020 s. 6)(o) sums, not otherwise chargeable to tax under this Part, received by or accrued to a corporation by way of gains or profits (other than those arising from the sale of capital assets) arising through or from the carrying on in Hong Kong by the corporation of—(i) its business of granting a right to use a ship to another person (ship business), even if the ship is used outside Hong Kong; or(ii) its business of managing a corporation carrying on a ship business or of managing a ship business, even if the ship concerned is used outside Hong Kong. (Added 5 of 2020 s. 6)(1A) Subsection (1)(j) or (k) shall not apply to gains or profits arising in or derived from Hong Kong, other than gains or profits received by or accrued to a person whose trade, profession or business comprises or includes trading in certificates of deposit or bills of exchange, to the extent to which such gains or profits relate to a period prior to 1 April 1981; and gains or profits received by or accrued to any person from the sale or other disposal or on the redemption on maturity or presentment, on or after 1 April 1981, of a certificate of deposit or bill of exchange purchased or otherwise acquired by that person before that date, shall be determined by reference to such amount as the Commissioner may consider such certificate of deposit or bill of exchange would have realized if it had been sold in the open market at the close of business on 31 March 1981 and not by reference to the amount, if any, paid by that person in so purchasing or otherwise acquiring such certificate of deposit or bill of exchange. (Added 30 of 1981 s. 3)(1B) (Repealed 36 of 1984 s. 3)(1C) Subsection (1)(f), (g), (i), (ia), (j), (k), (l) and (la) applies, subject to sections 17B, 17C, 17D, 17E, 17F and 17G, in relation to a regulatory capital security. (Added 12 of 2016 s. 12)(1D) Subsection (1)(ib) and (lb) applies, subject to sections 17B, 17C, 17D, 17E and 17F, in relation to a regulatory capital security. (Added 4 of 2019 s. 6)(1DA) For the purposes of subsection (1)(n)(i), if the aircraft business is a business of granting a right to use an aircraft under a funding lease as defined by section 14G(1), the finance charges or interest received by or accrued to the corporation for the grant of the right to use the aircraft are to be regarded as sums received by or accrued to the corporation by way of gains or profits. (Added 5 of 2024 s. 9)(1E) For the purposes of subsection (1)(o)(i), if the ship business is a business of granting a right to use a ship under a funding lease as defined by section 14O(1), the finance charges or interest received by or accrued to the corporation for the grant of the right to use the ship are to be regarded as sums received by or accrued to the corporation by way of gains or profits. (Added 5 of 2020 s. 6)(2) Where, in ascertaining for the purposes of this Part the profits of a trade, profession or business carried on in Hong Kong, a deduction has been allowed for any debt incurred for the purposes of the trade, profession or business, then, if the whole or any part of that debt is thereafter released, the amount released shall be deemed to be a receipt of the trade, profession or business arising in or derived from Hong Kong at the time when the release was effected.(3) Where in the basis period for any year of assessment a financial institution was not a financial institution for the whole of that period, in that, if the institution is a bank it was not licensed for the whole of that period or if the institution is a deposit-taking company it was not registered for the whole of that period, then subsection (1)(i) and (l) shall apply only in respect of such part of the basis period during which the bank or deposit-taking company was licensed or registered, as the case may be. (Added 73 of 1978 s. 3. Amended 19 of 1986 s. 2)(3A) Section 21 of Schedule 17A (specified alternative bond scheme and its treatment under this Ordinance (other than Part 4AA)) provides for modifications to subsection (1)(j), (k) and (l). (Added 10 of 2013 s. 7. Amended 21 of 2025 s. 33)(4) The amendments to this section effected by the Inland Revenue (Amendment) Ordinance 1984 (36 of 1984) shall not have the effect of rendering chargeable to tax sums received or accrued to any person prior to 1 April 1984 which were not chargeable to tax immediately prior to the coming into force of that Ordinance. (Added 36 of 1984 s. 3)(5) The amendments to this section effected by the Inland Revenue (Amendment) (No. 2) Ordinance 1986 (19 of 1986) shall apply to sums received or accrued by way of interest, gains or profits on or after 1 April 1986, and the provisions of this section in force immediately prior to the coming into force of that Ordinance shall continue to apply to such sums received or accrued prior to 1 April 1986 as if such amendments had not been enacted. (Added 19 of 1986 s. 2)(6) The amendment made to subsection (1) by section 5(a)(ii) of the Inland Revenue (Amendment) Ordinance 2004 (12 of 2004) does not apply to sums described in subsection (1)(ba) which were received by or which accrued to a person before the commencement* of that Ordinance. (Added 12 of 2004 s. 5)(7) The amendments made to this section by the Inland Revenue (Amendment) (No. 5) Ordinance 2018 (24 of 2018) do not have the effect of rendering chargeable to tax sums received by or accrued to a person before the day on which that Ordinance comes into operation which were not otherwise chargeable to tax. (Added 24 of 2018 s. 3)(7A) The amendments made to this section by the Inland Revenue (Amendment) (No. 7) Ordinance 2018 (29 of 2018) do not have the effect of rendering chargeable to tax sums received by or accrued to a person before the day on which that Ordinance comes into operation which were not otherwise chargeable to tax. (Added 29 of 2018 s. 5)(8) In this section—intellectual property (知識產權) includes—(a) copyright material;(b) a design;(c) a layout-design (topography) of an integrated circuit;(d) a patent;(e) a plant variety right;(f) a secret process or formula; and(g) any other property or right of a similar nature; (Added 29 of 2018 s. 5)know-how (工業知識) means any industrial information or techniques likely to assist in the manufacture or processing of goods or materials; (Added 29 of 2018 s. 5)organizer (籌辦人) means a person who obtains a performer’s right in a performance in Hong Kong through arranging the participation of the performer in the performance or managing the performance;performance (表演) has the meaning given by section 200(2) of the Copyright Ordinance (Cap. 528);performer (表演者) has the meaning given by section 200(2) of the Copyright Ordinance (Cap. 528); (Added 24 of 2018 s. 3. Amended 29 of 2018 s. 5)R&D activity (研發活動) has the meaning given by section 2 of Schedule 45. (Added 29 of 2018 s. 5)(Replaced 2 of 1971 s. 9. Amended 7 of 1986 s. 12) Editorial Note: * Commencement date: 25 June 2004. 15A. Transfer of right to receive income (1) Subject to subsection (3) where—(a) a right to receive income from property is transferred by a person to another person; and(b) consideration has been received or is receivable in respect of the transfer,the amount of the consideration shall, notwithstanding the exclusion relating to the sale of capital assets contained in section 14, be treated as a trading receipt arising in or derived from Hong Kong by the transferor from a trade, profession or business carried on in Hong Kong.(2) The reference in subsection (1) to the amount of consideration shall, in the case where consideration is paid or given otherwise than in cash, be construed as a reference to the money value of the consideration.(3) Subsection (1) shall not apply in relation to a transfer of a right to receive income from property where the right arose from the ownership by the transferor of a legal or equitable estate or interest in the property and, before or at the time of that transfer, the transferor also transferred that estate or interest to the transferee.(4) In this section—income (入息) means any profits, rent, interest or royalty chargeable to tax under Part 4;property (財產) means any property whatsoever;right to receive income from property (從財產收取入息的權利) means a right to have income that will or may be derived from property paid to, or applied or accumulated for the benefit of, the person owning the right.(5) This section shall apply to any agreement made for the transfer of a right to receive income from property within the meaning of subsection (4) entered into or effected after 25 February 1987 other than an agreement made in pursuance of a legally enforceable obligation incurred on or before that date.(Added 28 of 1987 s. 4. Amended E.R. 1 of 2012) 15B. (Repealed 71 of 1983 s. 13) 15BA. Changes in trading stock (1) In this section—trade (行業) means a trade or business; trading stock (營業存貨), in relation to a trade— (a) means anything (whether movable property or immovable property) that—(i) is sold in the ordinary course of trade; or(ii) would be so sold if it were mature or its manufacture, preparation or construction were complete; but (b) does not include—(i) materials used in the manufacture, preparation or construction of any such thing;(ii) any services performed in the ordinary course of the trade; or(iii) any article produced, or any material used, in the performance of any such services. (2) If trading stock of a person’s trade is appropriated by the person for non-trade purpose, then in calculating the profits of the trade—(a) the amount that the trading stock appropriated would have realized if sold in the open market at the time of the appropriation is brought into account as a receipt;(b) the value of anything in fact received from the appropriation of the trading stock is left out of account; and(c) the receipt referred to in paragraph (a) is treated as arising on the date of the appropriation.(3) If something that belongs to a person carrying on a trade, but that is not trading stock of the trade, becomes trading stock of the trade, then in calculating the profits of the trade—(a) the cost of the stock is taken to be the amount that it would have realized if sold in the open market at the time it became trading stock of the trade;(b) the value of anything in fact given for it becoming trading stock of the trade is left out of account; and(c) the cost referred to in paragraph (a) is treated as being incurred on the date it became trading stock of the trade.(4) If trading stock of a trade is disposed of otherwise than in the course of trade and subsection (2) does not apply, then in calculating the profits of the trade—(a) the amount that the trading stock disposed of would have realized if sold in the open market at the time of the disposal is brought into account as the receipt;(b) any consideration obtained for the disposal of the trading stock is left out of account; and(c) the receipt referred to in paragraph (a) is treated as arising on the date of the disposal.(5) If trading stock of a trade has been acquired otherwise than in the course of trade and subsection (3) does not apply, then in calculating the profits of the trade—(a) the cost of the stock is taken to be the amount that it would have realized if sold in the open market at the time of the acquisition;(b) the value of anything in fact given for the acquisition of the trading stock is left out of account; and(c) the cost referred to in paragraph (a) is treated as being incurred on the date of the acquisition.(6) Subsection (4) does not apply in relation to a disposal, and subsection (5) does not apply in relation to an acquisition, of any trading stock if section 15C applies in relation to the trading stock.(Added 27 of 2018 s. 13) 15C. Valuation of trading stock on cessation of business Where a person ceases to carry on a trade or business in Hong Kong the trading stock of the trade or business at the date of cessation shall be valued for the purpose of computing the profits in respect of which that person is chargeable to tax under this Part as follows— (Amended 28 of 1964 s. 6; 26 of 1969 s. 12)(a) in the case of any such trading stock—(i) which is sold or transferred for valuable consideration to a person who carries on or intends to carry on a trade or business in Hong Kong; and(ii) the cost whereof may be deducted by the purchaser as an expense in computing the profits from such trade or business in respect of which such purchaser is chargeable to tax under this Part,the value thereof shall be taken to be the amount realized on the sale or the value of the consideration given for the transfer; (Amended 28 of 1964 s. 6)(b) in the case of any other such trading stock, the value thereof shall be taken to be the amount which it would have realized if it had been sold in the open market at the date of cessation.(Added 36 of 1955 s. 22. Amended 7 of 1986 s. 12) 15D. Post-cessation receipts and payments (1) Where a person who has ceased to carry on a trade, profession or business in Hong Kong, receives any sum which, if it had been received before such cessation, would have been included in the profits of the trade, profession or business in respect of which the person is chargeable to tax under this Part, then to the extent to which the sum has not already been included in such profits that sum shall be deemed to be profits of the trade, profession or business for the year of assessment in which the cessation occurred.(2) Where a person who has ceased to carry on a trade, profession or business in Hong Kong pays any sum which, if it had been paid before such cessation, would have been deductible in computing the profits of the trade, profession or business in respect of which the person is chargeable to tax under this Part, then to the extent to which the sum has not already been deducted in computing such profits, that sum shall be deducted in ascertaining his profits for the year of assessment in which the cessation occurred.(Added 26 of 1969 s. 13. Amended 7 of 1986 s. 12) 15E. Stock borrowing and lending (1) This section applies where—(a) in relation to a stock borrowing under a stock borrowing and lending agreement, the borrower has used the borrowed stock obtained from a lender for one or more than one specified purpose and has effected a stock return; (b) if any distribution is made or a right or option is issued in respect of the borrowed stock during the borrowing period, regardless of whether that event occurs before or after the borrowed stock is disposed of by the borrower to a third party, the lender receives from the borrower the distribution or identical property, the right or option or an identical right or option, or a compensatory payment equal to the value of the distribution or the value of the right or option; (c) the lender does not dispose of, whether by transfer, declaration of trust or otherwise, the right to receive any part of the total consideration payable or to be given by the borrower under the stock borrowing and lending agreement; (d) both the borrower and the lender were dealing with each other at arm’s length in relation to the stock borrowing and the stock return; and (e) the lender does not enter into the stock borrowing with the purpose, or main purpose, of avoiding or deferring the inclusion of any amount in profits in respect of which the lender is chargeable to tax under this Part. (2) For the purpose of determining whether an amount, other than any fee payable under a stock borrowing and lending agreement, should be taken into account in ascertaining the profits in respect of which a lender is chargeable to tax under this Part in respect of a stock borrowing or a stock return, the lender is to be treated as if—(a) the stock borrowing, to the extent of the quantity and description of the borrowed stock in respect of which the stock return is subsequently made, had not been entered into; (b) the stock return had not been made; (c) the lender had, at all times during the relevant borrowing period, held the borrowed stock in respect of which the stock return is made; and (d) the stock which is the subject of the stock return were the borrowed stock in respect of which the stock return is made. (3) Where—(a) a lender receives from a borrower in relation to the borrowed stock a distribution or identical property or a right or option or identical property; and (b) had the borrowed stock continued to be held by the lender at all times during the borrowing period an amount would have been included or excluded, as the case may be, in ascertaining for a year of assessment the profits in respect of which the lender is chargeable to tax under this Part in respect of the distribution or the right or option, then an equal amount shall be likewise treated in ascertaining the chargeable profits of the lender for that year of assessment. (4) Where a lender receives from a borrower in relation to the borrowed stock a compensatory payment in respect of a distribution made or right or option issued during the borrowing period, then in determining whether an amount is to be included or excluded, as the case may be, in ascertaining for a year of assessment the profits in respect of which the lender is chargeable to tax under this Part in respect of the compensatory payment, the lender is to be treated as if—(a) the distribution had been made, or the right or option had been issued directly to him in respect of the borrowed stock; and (b) he had disposed of the distribution or right or option immediately after its making or issue, as the case may be, for a consideration equal to that compensatory payment. (5) In determining the amount, if any, other than a fee payable under a stock borrowing and lending agreement, to be taken into account in ascertaining the profits in respect of which a borrower is chargeable to tax under this Part in respect of a stock borrowing or a stock return, the borrower is to be treated as if the stock borrowing and the stock return respectively had been carried out for a consideration equal to the market value of the borrowed stock at the time of the relevant stock borrowing. (6) Where a person has entered into a stock borrowing and lending agreement under which a stock borrowing has been effected, and at the time of making an assessment of profits tax on that person for any year of assessment the assessor is of the opinion that the requirements specified in subsection (1) have been or will be satisfied, the assessor may make the assessment on the basis that this section is applicable.(7) Where—(a) an assessment has been made on the basis that this section is applicable; and (b) after the making of the assessment, the assessor becomes satisfied that this section is not applicable, then the assessor may accordingly adjust the assessment. (8) In this section—borrower (借用人), borrowed stock (被借用證券), lender (借出人), recognized stock market (認可證券市場), specified purpose (指明用途), stock borrowing (證券借用), stock borrowing and lending agreement (證券借用及借出協議) and stock return (證券交還), subject to subsection (9), have the same meanings as in the Stamp Duty Ordinance (Cap. 117); (Amended 56 of 1996 s. 2; 5 of 2002 s. 407)borrowing period (借用期間) , in relation to any borrowed stock, means the period commencing when that stock was borrowed under a stock borrowing and ending when a stock return is effected in relation to that stock; distribution (派發) includes—(a) an interest payment; (b) a dividend; (c) a share issued by a company to a shareholder in the company where the share is issued as a bonus share; (d) an amount credited by the trustee of a unit trust to a unit holder other than by way of redemption, realization or liquidation; (e) a unit issued by the trustee of a unit trust; option (認購權) includes—(a) in relation to a company, an option to acquire shares in the company; (b) in relation to a unit trust, an option to acquire units in the unit trust; right (權利) includes—(a) in relation to a company, a right to acquire shares in the company or to acquire an option;(b) in relation to a unit trust, a right to acquire units in the unit trust or to acquire an option; specified securities (指明證券) means any of the following, not being Hong Kong stock the sale and purchase of which in Hong Kong are subject to the rules and practices of a recognized stock market— (Amended 5 of 2002 s. 407)(a) any shares, stocks, debentures, loan stocks, funds, bonds or notes of or issued by any body, whether corporate or unincorporate, or any government or local government authority, or any other similar investment of any description; (b) any units under a unit trust scheme; (c) any right, option or interest in or in respect of any security referred to in paragraph (a) or (b), which the Commissioner may specify in writing, either generally or in any particular case, for the purposes of this section. (Added 56 of 1996 s. 2) (9) For the purposes of construing a term by reference to the Stamp Duty Ordinance (Cap. 117) in subsection (8), a reference in the corresponding term in the Stamp Duty Ordinance (Cap. 117) to “Hong Kong stock” or to “Hong Kong stock the sale and purchase of which in Hong Kong are subject to the rules and practices of a recognized stock market”, is construed as including a reference to specified securities that the Commissioner has specified under subsection (8). (Added 56 of 1996 s. 2. Amended 5 of 2002 s. 407) (10) For the purpose of the definition of specified securities in subsection (8), the terms Hong Kong stock, unit and unit trust scheme have the same meanings as in the Stamp Duty Ordinance (Cap. 117). (Added 56 of 1996 s. 2) (Added 71 of 1994 s. 2) 15F. Sums derived from intellectual property by non-Hong Kong resident associates (1) For the purposes of this section, a person makes value creation contributions in relation to any intellectual property if the person has made contributions in relation to the intellectual property through—(a) performing the functions of and assuming risks relating to the development, enhancement, maintenance, protection or exploitation of the intellectual property; or(b) providing assets in and assuming risks relating to the development, enhancement, maintenance, protection or exploitation of the intellectual property.(2) This section applies if—(a) a person has made value creation contributions in Hong Kong in relation to any intellectual property;(b) a sum (relevant sum) accrues to an associate of the person, or is received by or for the benefit of the associate, in respect of—(i) the exhibition or use of, or a right to exhibit or use, (whether in or outside Hong Kong) the intellectual property; or(ii) the imparting or undertaking to impart knowledge directly or indirectly connected with the use (whether in or outside Hong Kong) of the intellectual property; and(c) the associate is a non-Hong Kong resident person.(3) The part of the relevant sum that is attributable to the person’s value creation contributions in Hong Kong (attributable amount) is to be regarded as a trading receipt arising in or derived from Hong Kong by the person from a trade, profession or business carried on in Hong Kong and the person is accordingly chargeable to profits tax in respect of the attributable amount.(4) The associate is not to be chargeable to profits tax in respect of the attributable amount.(5) In this section—associate (相聯者) has the meaning given by section 20AC(6); intellectual property (知識產權) means— (a) cinematograph or television film or tape, any sound recording, any advertising material connected with such film, tape or recording; or (b) patent, design, trade mark, copyright material, layout-design (topography) of an integrated circuit, performer’s right, plant variety right, secret process or formula, or other property or right of a similar nature; non-Hong Kong resident person (非香港居民人士) has the meaning given by section 50AAC(1);performer (表演者) has the meaning given by section 200(2) of the Copyright Ordinance (Cap. 528).(Added 27 of 2018 s. 14) 15FA. Sums derived from funding leases of aircraft For the purposes of this Part, if a person is engaged in a business of granting a right to use an aircraft under a funding lease as defined by section 14G(1), the finance charges or interest received by or accrued to the person for the grant of the right to use the aircraft are to be regarded as sums received by or accrued to the person by way of interest on money lent by the person.(Added 5 of 2024 s. 10) 15G. Sums derived from funding leases of ships To avoid doubt, for the purposes of this Part, if a person is engaged in a business of granting a right to use a ship under a funding lease as defined by section 14O(1), the finance charges or interest received by or accrued to the person for the grant of the right to use the ship are to be regarded as sums received by or accrued to the person by way of interest on money lent by the person.(Added 5 of 2020 s. 7) Division 3A Specified Foreign-sourced Income (Division 3A added 17 of 2022 s. 3) Subdivision 1 Preliminary 15H. Interpretation of Division 3A of Part 4 (1) In this Division—consolidated financial statements (綜合財務報表) means—(a) subject to paragraphs (b) and (c), the financial statements prepared by an entity under applicable accounting principles, in which the assets, liabilities, income, expenses and cash flows of the entity and the entities in which it has a controlling interest are presented as those of a single economic unit;(b) in relation to a stand-alone MNE entity—the financial statements of the entity prepared under applicable accounting principles; or(c) in relation to an ultimate parent entity that does not prepare any financial statements described in paragraph (a) or (b)—the financial statements that would have been prepared if the entity had been required to prepare financial statements under applicable accounting principles;controlling interest (控制權益), in relation to an entity, means an equity interest in the entity such that—(a) the interest holder is required to consolidate the assets, liabilities, income, expenses and cash flows of the entity on a line-by-line basis under applicable accounting principles; or(b) the interest holder would have been required to consolidate the assets, liabilities, income, expenses and cash flows of the entity on a line-by-line basis under applicable accounting principles if the interest holder had prepared consolidated financial statements;disposal gain (處置收益) means any IP disposal gain or non-IP disposal gain; (Amended 32 of 2023 s. 3)entity (實體) means—(a) a legal person (other than a natural person); or(b) an arrangement that prepares separate financial accounts, such as a partnership and a trust;equity interest (股權權益), in relation to an entity, means an interest that carries rights to the profits, capital or reserves of the entity and is accounted for as equity under applicable accounting principles;equity interest disposal gain (股權權益處置收益) means any gain or profit derived from the sale of equity interests (other than partnership interests) in an entity; (Added 32 of 2023 s. 3)group (集團) means—(a) a collection of entities that are related through ownership or control such that the assets, liabilities, income, expenses and cash flows of those entities—(i) are required under applicable accounting principles to be included in the consolidated financial statements of the ultimate parent entity of the collection; or(ii) are excluded from the consolidated financial statements of the ultimate parent entity solely on size or materiality grounds or on the grounds that the entities are held for sale; or(b) a stand-alone MNE entity;Hong Kong resident person (香港居民人士) has the meaning given by section 50AAC(1);intellectual property (知識產權) includes—(a) cinematograph film, film or tape used for radio or television broadcasting, sound recording, and advertising material connected with such film, tape or recording; and(b) patent, design, model, plan, trade mark, copyright material, layout-design (topography) of an integrated circuit, performer’s right, plant variety right, secret process or formula, know-how, information concerning industrial, commercial or scientific experience, and other property or right of a similar nature;IP disposal gain (知識產權處置收益) means any gain or profit derived from the sale of intellectual property; (Added 32 of 2023 s. 3)IP income (知識產權收入) means income derived from intellectual property in respect of—(a) the exhibition or use of, or a right to exhibit or use, (whether in or outside Hong Kong) the property; or(b) the imparting of, or undertaking to impart, knowledge directly or indirectly connected with the use (whether in or outside Hong Kong) of the property;MNE entity (跨國企業實體), subject to subsection (4), means a person that is, or acts for, an MNE group or an entity included in an MNE group;MNE group (跨國企業集團) means a group that includes at least one entity or permanent establishment that is not located or established in the jurisdiction of the ultimate parent entity of the group;non-IP disposal gain (非知識產權處置收益) means any gain or profit derived from the sale of property, but does not include IP disposal gains; (Added 32 of 2023 s. 3)partnership interest (合夥權益) means an equity interest in a partnership that is not a legal person;permanent establishment (常設機構)—see subsection (3);property (財產) means any movable property or immovable property; (Added 32 of 2023 s. 3)regulated financial entity (受規管財務實體) means—(a) an insurer (as defined by section 2(1) of the Insurance Ordinance (Cap. 41)) authorized under that Ordinance, Lloyd’s or an approved association of underwriters;(b) an authorized institution as defined by section 2(1) of the Banking Ordinance (Cap. 155); or(c) an entity licensed under Part V of the Securities and Futures Ordinance (Cap. 571) to carry on a business in any regulated activity as defined by Part 1 of Schedule 5 to that Ordinance;sale (出售), in relation to any property, means a transfer of the property (other than a transfer effected by extinguishing the property) for valuable consideration; (Amended 32 of 2023 s. 3)specified foreign-sourced income (指明外地收入) means any interest, dividend, disposal gain or IP income arising in or derived from a territory outside Hong Kong, but does not include—(a) any interest, dividend or non-IP disposal gain that— (Amended 32 of 2023 s. 3)(i) accrues to an entity that is a regulated financial entity; and(ii) is derived from, or is incidental to, the entity’s business as a regulated financial entity;(b) any interest, dividend or non-IP disposal gain that— (Amended 32 of 2023 s. 3)(i) accrues to an entity the assessable profits of which are chargeable to tax at the rate specified in a concession provision (as defined by section 19CA) other than section 14A(1); and(ii) is derived from, or is incidental to, the activity that produces those assessable profits;(c) any interest, dividend or non-IP disposal gain that— (Amended 32 of 2023 s. 3)(i) accrues to an entity that is exempt from tax chargeable in respect of its assessable profits under section 20AC, 20ACA, 20AN or 20AO; and(ii) is derived from, or is incidental to, the activity that produces those assessable profits; (Amended 32 of 2023 s. 3)(d) any interest, dividend or non-IP disposal gain that— (Amended 32 of 2023 s. 3)(i) accrues to an entity that has any exempt sums (as defined by section 23B(12)) excluded under section 23B(4AA) from the amount of relevant sums (as defined by section 23B(12)) earned by or accrued to the entity; and(ii) is derived from, or is incidental to, the activity that produces those exempt sums; or (Amended 32 of 2023 s. 3)(e) any non-IP disposal gain that—(i) accrues to an entity that is a trader; and(ii) is derived from, or is incidental to, the entity’s business as a trader; (Added 32 of 2023 s. 3)stand-alone MNE entity (獨立跨國企業實體) means an entity that—(a) is located in one jurisdiction and has one or more permanent establishments in other jurisdictions; and(b) is not part of a collection of entities described in paragraph (a) of the definition of group;trader (買賣商) means an entity that sells, or offers to sell, property in the entity’s ordinary course of business; (Added 32 of 2023 s. 3)ultimate parent entity (最終母實體) means—(a) an entity that—(i) owns directly or indirectly a controlling interest in any other entity; and(ii) is not owned, with a controlling interest, directly or indirectly by another entity; or(b) a stand-alone MNE entity.(2) For the purposes of this Division—(a) if an entity is a tax resident in a jurisdiction based on its place of management, place of creation or similar criteria—the entity is to be regarded as located in that jurisdiction; or(b) in any other case—the entity is to be regarded as located in the jurisdiction in which it was created.(3) For the purposes of this Division, an entity has a permanent establishment in a jurisdiction if—(a) where the jurisdiction is Hong Kong—the entity has a permanent establishment in Hong Kong under Schedule 17G; or(b) where the jurisdiction is not Hong Kong—the entity is to be regarded as having a permanent establishment in the jurisdiction under the laws of the jurisdiction or under a bilateral or multilateral tax convention to which the jurisdiction is a party,and a reference to a permanent establishment in a jurisdiction is to be read accordingly.(4) For the purposes of this Division, if an MNE entity is a Hong Kong resident person, any permanent establishment of the entity outside Hong Kong is to be regarded as a separate MNE entity carrying on a trade, profession or business in the territory in which the permanent establishment is established.(5) For the purposes of this Division, without limiting the meaning of “received in Hong Kong”, a sum is to be regarded as received in Hong Kong if—(a) the sum is remitted to, or is transmitted or brought into, Hong Kong;(b) the sum is used to satisfy any debt incurred in respect of a trade, profession or business carried on in Hong Kong; or(c) the sum is used to buy movable property, and the property is brought into Hong Kong.(6) For the purposes of subsection (5)(c), the sum is to be regarded as being received at the time when the movable property is brought into Hong Kong.(7) Subsection (5) applies regardless of whether or not the source from which the sum is derived has ceased. Subdivision 2 Treatment of Specified Foreign-sourced Income for Charging Profits Tax 15I. Specified foreign-sourced income regarded as arising in or derived from Hong Kong (1) For charging profits tax, specified foreign-sourced income to which this subsection applies—(a) is to be regarded as a receipt arising in or derived from Hong Kong for the basis period of the year of assessment during which the income is received in Hong Kong; and(b) is to be regarded as not arising from the sale of capital assets even if it so arises.(2) Subsection (1) is subject to Subdivision 3.(3) Subsection (1) applies to specified foreign-sourced income that—(a) is received in Hong Kong by an MNE entity carrying on a trade, profession or business in Hong Kong; and(b) is not otherwise chargeable to profits tax under this Part.(4) Despite subsection (3), if a sum is both—(a) a sum to which section 15 or 15F applies; and(b) but for this subsection, income to which subsection (1) would have applied,subsection (1) does not apply to the sum.(5) To avoid doubt, if—(a) any specified foreign-sourced income is received in Hong Kong by an MNE entity after the entity ceases to carry on a trade, profession or business in Hong Kong; and(b) had the income been received before the cessation, it would have been chargeable to profits tax because of subsection (1),section 15D applies in relation to the income. 15J. Notification If an MNE entity is chargeable to profits tax in respect of any specified foreign-sourced income under this Part because of section 15I(1), the entity must notify the Commissioner in writing that the entity is so chargeable within 4 months after the end of the basis period of the year of assessment during which the income is received in Hong Kong, unless the entity has already been required to furnish a return under section 51(1). Subdivision 3 Exceptions from Section 15I(1) 15K. Exception 1: interest, dividend or non-IP disposal gain subject to economic substance requirement being met (Amended 32 of 2023 s. 4)(1) Section 15I(1) does not operate in relation to specified foreign-sourced income received in Hong Kong by an MNE entity if—(a) the income is interest, a dividend or a non-IP disposal gain; and (Amended 32 of 2023 s. 4)(b) the economic substance requirement specified in subsection (2) is met.(2) The economic substance requirement is that during the basis period of the year of assessment in which the income accrues to the MNE entity—(a) if the entity is a pure equity-holding entity—(i) the entity complies with every applicable registration and filing requirement under the following Ordinances—(A) the Companies (Winding Up and Miscellaneous Provisions) Ordinance (Cap. 32);(B) the Limited Partnerships Ordinance (Cap. 37);(C) the Business Registration Ordinance (Cap. 310);(D) the Companies Ordinance (Cap. 622);(ii) specified economic activities are—(A) carried out in Hong Kong by the entity; or(B) arranged by the entity to be carried out in Hong Kong; and(iii) in the Commissioner’s opinion, the entity has adequate human resources and premises for carrying out the specified economic activities; or(b) if the entity is not a pure equity-holding entity—(i) specified economic activities are—(A) carried out in Hong Kong by the entity; or(B) arranged by the entity to be carried out in Hong Kong;(ii) the number of employees in Hong Kong who—(A) carry out the specified economic activities; and(B) have the qualifications necessary for doing so,is adequate in the Commissioner’s opinion; and(iii) the total amount of operating expenditure incurred in Hong Kong for carrying out the specified economic activities is adequate in the Commissioner’s opinion.(3) In this section—pure equity-holding entity (純股權持有實體) means an entity that—(a) only holds equity interests in other entities; and(b) only earns—(i) dividends;(ii) equity interest disposal gains; and (Amended 32 of 2023 s.

4)(iii) income incidental to the acquisition, holding or sale of such equity interests;specified economic activities (指明經濟活動) means—(a) in relation to an MNE entity that is a pure equity-holding entity—holding and managing its equity participations in other entities; or(b) in relation to an MNE entity that is not a pure equity-holding entity—(i) making necessary strategic decisions in respect of any assets the entity acquires, holds or disposes of; and(ii) managing and bearing principal risks in respect of such assets. 15L. Exception 2: excepted portion of qualifying IP income ascertained in accordance with nexus requirement (1) If any specified foreign-sourced income received in Hong Kong by an MNE entity is qualifying IP income, section 15I(1) does not operate in relation to the excepted portion of the income ascertained under Part 2 of Schedule 17FC.(2) Part 3 of Schedule 17FC applies in relation to the qualifying IP income.(3) The Secretary for Financial Services and the Treasury may, by notice published in the Gazette, amend Schedule 17FC.(4) In this section—excepted portion (例外部分)—see section 3 of Schedule 17FC;qualifying IP income (合資格知識產權收入) has the meaning given by section 1(2) of Schedule 17FC. 15M. Exception 3: dividend or equity interest disposal gain subject to participation requirement being met (Amended 32 of 2023 s. 5)(1) Subject to section 15N, section 15I(1) does not operate in relation to specified foreign-sourced income received in Hong Kong by an MNE entity if—(a) the entity is—(i) a Hong Kong resident person; or(ii) a non-Hong Kong resident person who has a permanent establishment in Hong Kong;(b) the income is—(i) if the entity is a Hong Kong resident person—a dividend or equity interest disposal gain; or(ii) if the entity is a non-Hong Kong resident person—a dividend or equity interest disposal gain attributable to the entity’s permanent establishment in Hong Kong under section 50AAK; and (Amended 32 of 2023 s. 5)(c) the participation requirement specified in subsection (2) is met.(2) The participation requirement is that the MNE entity has continuously held not less than 5% of equity interests in the investee entity for a period of not less than 12 months immediately before the specified foreign-sourced income accrues to the MNE entity.(3) In this section—investee entity (獲投資實體) means—(a) in relation to an MNE entity that receives a dividend—the entity that distributes the dividend; or(b) in relation to an MNE entity that receives an equity interest disposal gain—the entity the equity interests in which are sold; (Amended 32 of 2023 s. 5)non-Hong Kong resident person (非香港居民人士) has the meaning given by section 50AAC(1). 15N. When does section 15M not apply (1) This section applies to specified foreign-sourced income in relation to which section 15I(1), but for this section, would not have operated because of section 15M.(2) Section 15M only applies if the Commissioner is satisfied that—(a) where the specified foreign-sourced income is a dividend (whether or not the underlying profits of the income consist of any dividend)—(i) the income is subject to a qualifying similar tax in a territory outside Hong Kong; or(ii) the underlying profits of the income are subject to a qualifying similar tax in a territory outside Hong Kong, and the amount of the profits is equal to or larger than that of the income;(b) where the specified foreign-sourced income (subject income) is a dividend, and the underlying profits of the subject income consist wholly or partly of dividends—(i) one or more items of the related downstream income of the profits are subject to a qualifying similar tax in a territory outside Hong Kong; and(ii) the aggregate amount of all such items of income is equal to or larger than the amount of the subject income; or(c) where the specified foreign-sourced income is an equity interest disposal gain—the income is subject to a qualifying similar tax in a territory outside Hong Kong. (Amended 32 of 2023 s. 6)(3) Where—(a) the specified foreign-sourced income is a dividend; and(b) tax is charged on the underlying profits of the income in a territory outside Hong Kong,section 15M does not apply if, and to the extent that, the income is allowable for deduction when computing the amount of the tax.(4) Section 15M also does not apply if—(a) the MNE entity receiving the specified foreign-sourced income entered into an arrangement in respect of the income; and(b) the Commissioner is satisfied that the main purpose, or one of the main purposes, of the entity in entering into the arrangement was to obtain a tax benefit, whether for the entity or another person, under that section for the income.(5) To avoid doubt and without limiting sections 50, 50AAA and 50AAAB (those sections), if section 15M does not apply because of this section, any similar tax payable in the source territory—(a) in respect of the specified foreign-sourced income; and(b) if the income is a dividend—in respect of the underlying profits and in respect of any related downstream income of the profits,may, in accordance with those sections, be allowed as a credit against any tax payable in respect of the specified foreign-sourced income in Hong Kong.(6) For the purposes of subsection (2), a sum is subject to a qualifying similar tax in a territory outside Hong Kong if—(a) the sum is subject to a similar tax or QDMTT in that territory (and this paragraph is not met by the sum being subject to any foreign IIR top-up tax or foreign UTPR top-up tax in that territory); and (Replaced 21 of 2025 s. 6)(b) the applicable rate, or (if there is more than one applicable rate) the highest applicable rate, of a similar tax in that territory is equal to or higher than the reference rate. (Replaced 21 of 2025 s. 6)(7) For the purposes of subsection (6)(b), the reference rate is 15%.(8) The Secretary for Financial Services and the Treasury may, by notice published in the Gazette, amend the reference rate in subsection (7).(9) In this section—applicable rate (適用稅率), in relation to a sum subject to a similar tax or QDMTT (specified tax) in a territory, means—(a) if the specified tax is chargeable at the time the sum accrues—the rate of a similar tax in that territory applicable at that time; or(b) if the specified tax is chargeable for the taxable period during which the sum accrues—the rate of a similar tax in that territory applicable for that taxable period; (Replaced 21 of 2025 s. 6)direct investee entity (直接獲投資實體)—see section 15O(1);indirect investee entity (間接獲投資實體)—see section 15O(2);investee entity (獲投資實體), in relation to an entity, means a direct investee entity, or an indirect investee entity, of the entity;qualifying similar tax (合資格類似稅項)—see subsection (6);related downstream income (有關下游收入), in relation to a subject investee entity’s underlying profits that consist wholly or partly of dividends (underlying dividends), means—(a) the underlying dividends;(b) if the underlying dividends—(i) are paid out of the profits of a direct investee entity of the subject investee entity; or(ii) are derived from the profits of an indirect investee entity of the subject investee entity through another investee entity of the subject investee entity,those profits (downstream profits); or(c) if the downstream profits consist wholly or partly of dividends—those dividends;similar tax (類似稅項) has the meaning given by section 16(2I)(b);source territory (來源地區) means—(a) in relation to specified foreign-sourced income—the territory in which the income accrues;(b) in relation to underlying profits—the territory in which the profits accrue; or(c) in relation to related downstream income—the territory in which the income accrues;subject investee entity (標的獲投資實體), in relation to an MNE entity that receives a dividend, means the entity that distributes the dividend;tax benefit (稅務利益) means an avoidance, postponement or reduction of a liability to pay tax;underlying profits (基礎利潤), in relation to a dividend distributed by a subject investee entity, means the profits of the entity out of which the dividend is paid. 15O. Supplementary provision to section 15N: meaning of direct investee entity and indirect investee entity (1) An entity (entity B) is a direct investee entity of another entity (entity A) if—(a) entity A has any direct beneficial interest in, or in relation to, entity B; or(b) entity A is directly entitled to exercise, or control the exercise of, any voting rights in, or in relation to, entity B.(2) An entity (entity C) is an indirect investee entity of entity A if—(a) entity A has any indirect beneficial interest in, or in relation to, entity C through another entity or a series of 2 or 3 entities; or(b) entity A is indirectly entitled to exercise, or control the exercise of, any voting rights in, or in relation to, entity C through another entity or a series of 2 or 3 entities.(3) To avoid doubt, an entity (entity D) is not an indirect investee entity of entity A if none of the conditions in subsection (2) is satisfied in relation to them, even when—(a) entity A has any indirect beneficial interest in, or in relation to, entity D through a series of 4 or more entities; or(b) entity A is indirectly entitled to exercise, or control the exercise of, any voting rights in, or in relation to, entity D through a series of 4 or more entities.(4) In applying subsection (1)(b), (2)(b) or (3)(b), the voting rights attributed to entity A include all the voting rights of persons other than entity A so far as they are required, or may be required, to be exercised in one or more of the following ways—(a) on behalf of entity A;(b) under the direction of entity A;(c) for the benefit of entity A.(5) For the purposes of this section, if—(a) a reference is made to the exercise of the voting rights in an entity; and(b) the entity is a corporation,the reference is to be read as a reference to the exercise of the voting rights at general meetings of the entity. 15OA. Exception 4: intra-group transfer relief for disposal gain (1) This section applies if—(a) any specified foreign-sourced income (subject income) received in Hong Kong by an MNE entity (selling entity) is a disposal gain;(b) the sale from which the gain is derived (subject sale) is an intra-group transfer;(c) the property to which the subject sale relates (subject property) is acquired by an entity (acquiring entity); and(d) both the selling entity and the acquiring entity are, at the time of the subject sale, chargeable to profits tax under this Part.(2) For the purposes of subsection (1)(b), the subject sale is an intra-group transfer if the selling entity and the acquiring entity are, at the time of the sale, associated with each other.(3) Subject to section 15OB, in applying section 15I(1) to the subject income, the selling entity is to be regarded as having sold the subject property for a consideration of such amount as would secure that neither a gain nor a loss would accrue to the selling entity.(4) Subject to section 15OB, subsections (5), (6), (7), (8) and (9) apply if, subsequent to the subject sale, the acquiring entity—(a) derives specified foreign-sourced income (future income) from the subject property or a resale of the property; and(b) receives the future income in Hong Kong.(5) In applying this Division and (if applicable) Schedule 17FC to the future income, the acquiring entity is to be regarded as having acquired the property for the consideration mentioned in subsection (3) at the time at which the selling entity acquired, or is to be regarded as having acquired, the property.(6) If—(a) an outgoing or expense (however called) is incurred by the selling entity in the production of the subject income;(b) but for the operation of subsection (3), that outgoing or expense, or a part of it, would be deductible for a year of assessment in accordance with section 15Q and Division 4; and(c) the future income is a disposal gain,that outgoing or expense, or that part of the outgoing or expense, is, for the purposes of section 15Q and Division 4, to be regarded as having been incurred by the acquiring entity in the production of the future income.(7) If—(a) any balancing charge is directed to be made on, or any allowance is made to, the selling entity under Part 6;(b) that charge or allowance, or a part of it, relates to the subject income;(c) but for the operation of subsection (3), that charge or allowance, or that part of the charge or allowance, would be taken into account under section 18F or 19E (whether or not because of section 15R) when calculating the amount of the selling entity’s assessable profits or loss; and(d) the future income is a disposal gain,that charge or allowance, or that part of the charge or allowance, is, for the purposes of sections 15R, 18F and 19E and Part 6, to be regarded as having been directed to be made on, or having been made to, the acquiring entity and as relating to the future income.(8) If—(a) but for the operation of subsection (3), any tax paid in respect of the subject income by the selling entity in a territory outside Hong Kong (foreign tax) would be allowable under section 50 (whether or not because of section 50AAA) as a credit against tax payable in respect of that income by the selling entity in Hong Kong; and(b) the future income is a disposal gain,that foreign tax is, for the purposes of sections 50 and 50AAA and Schedule 54, to be regarded as tax paid in respect of the future income by the acquiring entity in that territory.(9) If both the subject income and future income are qualifying IP disposal gains, then in applying Schedule 17FC to the future income—(a) all qualifying R&D expenditures incurred by the selling entity in respect of the subject property are to be regarded as qualifying R&D expenditures incurred by the acquiring entity in respect of the subject property; and(b) all non-qualifying expenditures incurred by the selling entity in respect of the subject property are to be regarded as non-qualifying expenditures incurred by the acquiring entity in respect of the subject property.(10) In this section—associated (相聯)—see section 15OC;non-qualifying expenditure (不合資格開支)—see section 6 of Schedule 17FC;qualifying IP disposal gain (合資格知識產權處置收益) has the meaning given by section 1(2) of Schedule 17FC;qualifying R&D expenditure (合資格研發開支)—see section 5 of Schedule 17FC.(Added 32 of 2023 s. 7) 15OB. When does section 15OA cease to apply etc. (1) For the purposes of section 15OA(3) and (4), this section applies if, within 2 years after the subject sale in relation to the subject income mentioned in section 15OA(3), any of the following events occurs—(a) the selling entity or the acquiring entity ceases to be chargeable to profits tax under this Part;(b) the selling entity and the acquiring entity cease to be associated with each other.(2) In relation to the subject income—(a) section 15OA(3) is to cease to apply;(b) section 15I(1) is to apply as if the income were received in Hong Kong during the selling entity’s basis period of the year of assessment during which the event occurs; and(c) if, as a result of the operation of paragraph (b), profits tax is chargeable in respect of the income because of section 15I(1)—(i) the selling entity is chargeable to the tax in the entity’s name or in the name of the acquiring entity; and(ii) the tax is recoverable by all means provided in this Ordinance from the selling entity or acquiring entity.(3) If any future income in relation to which section 15OA(5) applies has already accrued to, and has already been received in Hong Kong by, the acquiring entity at the time of the event, then in relation to the income—(a) section 15OA(5) and (if applicable) section 15OA(6), (7), (8) and (9) are to cease to apply; and(b) if the income was not chargeable to profits tax because of section 15OA(5), section 15I(1) is to apply as if the income were received in Hong Kong during the acquiring entity’s basis period of the year of assessment during which the event occurs.(4) In relation to any future income that—(a) has not yet accrued to the acquiring entity at the time of the event; or(b) has already accrued to, but has not yet been received in Hong Kong by, the acquiring entity at the time of the event,section 15OA(5), (6), (7), (8) and (9) does not apply even if such income eventually accrues to, or is received in Hong Kong by, the acquiring entity.(5) In this section—acquiring entity (取得方), in relation to a subject sale, means the entity that acquires the subject property;associated (相聯)—see section 15OC;future income (未來收入), in relation to a subject sale, means any specified foreign-sourced income derived subsequent to the sale by the acquiring entity from the subject property or a resale of the property;selling entity (出售方), in relation to a subject sale, means the entity that sells the subject property;subject property (標的財產), in relation to a subject sale, means the property to which the sale relates;subject sale (標的出售), in relation to any subject income, means the sale from which the income is derived.(Added 32 of 2023 s. 7) 15OC. Supplementary provision to sections 15OA and 15OB: meaning of associated (1) For the purposes of sections 15OA and 15OB, 2 entities are associated with each other if—(a) one of them has an associating interest in the other; or(b) a third entity has an associating interest in both of them.(2) For the purposes of subsection (1), an entity (entity A) has an associating interest in another entity (entity B) if—(a) entity A has at least 75% of direct or indirect beneficial interest in, or in relation to, entity B; or(b) entity A is, directly or indirectly, entitled to exercise, or control the exercise of, at least 75% of the voting rights in, or in relation to, entity B.(3) In applying subsection (2), if entity A has a direct beneficial interest in entity B, the extent of the beneficial interest of entity A in entity B is—(a) if entity B is a corporation that is not a trustee of a trust estate—the percentage of the issued share capital (however described) of the corporation held by entity A;(b) if entity B is a partnership that is not a trustee of a trust estate—the percentage of the income of the partnership to which entity A is entitled;(c) if entity B is a trustee of a trust estate—the percentage in value of the trust estate in which entity A is interested; or(d) if entity B is an entity that does not fall within any of paragraphs (a), (b) and (c)—the percentage of entity A’s ownership interest in the entity.(4) In applying subsection (2), if entity A has an indirect beneficial interest in, or is indirectly entitled to exercise or control the exercise of voting rights in, entity B through another entity (interposed entity), the extent of the beneficial interest or voting rights of entity A in entity B is—(a) if there is only one interposed entity—the percentage arrived at by multiplying the percentage representing the extent of the beneficial interest or voting rights of entity A in the interposed entity by the percentage representing the extent of the beneficial interest or voting rights of the interposed entity in entity B; or(b) if there is a series of 2 or more interposed entities—the percentage arrived at by multiplying the percentage representing the extent of the beneficial interest or voting rights of entity A in the first interposed entity in the series by—(i) the percentage representing the extent of the beneficial interest or voting rights of each interposed entity (other than the last interposed entity) in the series in the next interposed entity in the series; and(ii) the percentage representing the extent of the beneficial interest or voting rights of the last interposed entity in the series in entity B.(5) For the purposes of subsection (4)—(a) subsection (3) applies in determining the extent of the beneficial interest of entity A in an interposed entity as if the references to entity B in subsection (3) were references to an interposed entity;(b) subsection (3) applies in determining the extent of the beneficial interest of an interposed entity in entity B as if the references to entity A in subsection (3) were references to an interposed entity; and(c) subsection (3) applies in determining the extent of the beneficial interest of an interposed entity (interposed entity X) in another interposed entity (interposed entity Y) as if—(i) the references to entity A in subsection (3) were references to interposed entity X; and(ii) the references to entity B in subsection (3) were references to interposed entity Y.(6) In applying subsection (2)(b), the voting rights attributed to entity A include all the voting rights of persons other than entity A so far as they are required, or may be required, to be exercised in one or more of the following ways—(a) on behalf of entity A;(b) under the direction of entity A;(c) for the benefit of entity A.(7) For the purposes of this section, if—(a) a reference is made to the exercise of the voting rights in an entity; and(b) the entity is a corporation,the reference is to be read as a reference to the exercise of the voting rights at general meetings of the entity.(Added 32 of 2023 s. 7) Subdivision 4 Supplementary Provisions 15P. Setting off loss sustained from sale of certain property outside Hong Kong (Amended 32 of 2023 s. 8)(1) This section applies if—(a) an MNE entity sustains a loss from a sale in a territory outside Hong Kong of any property (other than qualifying intellectual property as defined by section 1(2) of Schedule 17FC); (Amended 32 of 2023 s. 8)(b) the proceeds of the sale are received in Hong Kong by the MNE entity during the basis period of a year of assessment; and(c) had a gain been derived from the sale and received in Hong Kong by the MNE entity, the gain would have been chargeable to profits tax because of section 15I(1).(2) Subject to subsection (3)—(a) the loss may be set off against the MNE entity’s assessable profits for that year of assessment; and(b) any amount of the loss not so set off may be carried forward and set off, in accordance with section 19C, against the MNE entity’s assessable profits for subsequent years of assessment.(3) The loss may only be set off to the extent that the assessable profits concerned are derived from specified foreign-sourced income that is chargeable to profits tax because of section 15I(1). 15Q. Outgoing or expense incurred in production of specified foreign-sourced income may be deducted Without limiting Division 4, if—(a) an outgoing or expense (however called) is incurred in the production of specified foreign-sourced income; and(b) the income is chargeable to profits tax for a year of assessment (that year of assessment) because of section 15I(1),that outgoing or expense may be deducted in accordance with Division 4, to the extent that it has not been deducted for any year of assessment, for that year of assessment as if it were incurred during the basis period of that year of assessment. 15R. Balancing charge or allowance relating to production of specified foreign-sourced income may be taken into account Without limiting sections 18F and 19E and Part 6, if—(a) any balancing charge directed to be made on, or any allowance made to, an MNE entity under Part 6 for a year of assessment (or any part of such a charge or allowance) is not taken into account under section 18F or 19E when calculating the amount of the entity’s assessable profits or loss for that year of assessment because—(i) that charge or allowance, or that part of the charge or allowance, relates to the production of specified foreign-sourced income; and(ii) the income—(A) is not received in Hong Kong during the basis period of that year of assessment; and(B) is not chargeable to profits tax for that year of assessment; and(b) the income—(i) is received in Hong Kong during the basis period of a subsequent year of assessment; and(ii) is chargeable to profits tax for that subsequent year of assessment because of section 15I(1),that charge or allowance, or that part of the charge or allowance, is to be taken into account under section 18F or 19E (as the case requires) when calculating the amount of the entity’s assessable profits or loss for that subsequent year of assessment as if that charge or allowance, or that part of the charge or allowance, were directed to be made on, or made to, the entity under Part 6 for that subsequent year of assessment. 15S. Records to be kept (1) Section 51C applies, with the modifications specified in subsection (2), to an MNE entity that receives in Hong Kong specified foreign-sourced income to which section 15I(1) applies.(2) The MNE entity must retain records of transactions, acts or operations relating to the specified foreign-sourced income under section 51C at least until the later of the following—(a) the expiry of 7 years after the completion of those transactions, acts or operations; or(b) the expiry of 7 years after the income is received, or to be regarded as received, in Hong Kong.(3) Section 80 applies to a failure to comply with section 51C as modified by subsection (2) in the same way section 80 applies to a failure to comply with section 51C. Division 4 Deductions (Added 15 of 2020 s. 2) Subdivision 1 Preliminary (Added 15 of 2020 s. 2) 16. Ascertainment of chargeable profits (1) In ascertaining the profits in respect of which a person is chargeable to tax under this Part for any year of assessment there shall be deducted all outgoings and expenses to the extent to which they are incurred during the basis period for that year of assessment by such person in the production of profits in respect of which he is chargeable to tax under this Part for any period, including—(a) where the condition for the application of this paragraph is satisfied under subsection (2), and subject to subsections (2A), (2B), (2C), (2CA) and (2CC), sums payable by such person by way of interest on any money borrowed by him for the purpose of producing such profits, and sums payable by such person by way of legal fees, procuration fees, stamp duties and other expenses in connection with such borrowing; (Replaced 2 of 1971 s. 11. Amended 36 of 1984 s. 4; 12 of 2004 s. 6; 12 of 2016 s. 8)(b) rent paid by any tenant of land or buildings occupied by him for the purpose of producing such profits, but not exceeding, in the case of rent paid to the tenant’s spouse, or by a partnership to one or more of the partners thereof or to a spouse of any such partner, an amount equal to the assessable value of the land or buildings; (Amended 76 of 1975 s. 8; 8 of 1983 s. 11; 71 of 1983 s. 14)(c) subject to subsections (2J) and (2L) and section 50AA, tax of substantially the same nature as tax imposed under this Ordinance, proved to the satisfaction of the Commissioner to have been paid in a territory outside Hong Kong (whether by deduction or otherwise) by any corporation or by a person other than a corporation who carries on a trade, profession or business in Hong Kong, during the basis period for the year of assessment in respect of profits chargeable to tax by virtue of section 15(1)(f), (g), (i), (ia), (ib), (j), (k), (l), (la) or (lb); (Amended 7 of 1986 s. 12; 19 of 1986 s. 3; 63 of 1997 s. 2(a); 12 of 2016 s. 8; 27 of 2018 s. 4; 18 of 2021 s. 14; 21 of 2025 s. 7)(ca) subject to subsection (2J) and section 50AA, specified tax that is proved to the satisfaction of the Commissioner to have been paid in a territory outside Hong Kong (whether by deduction or otherwise) by any person who carries on a trade, profession or business in Hong Kong during the basis period for the year of assessment in respect of profits chargeable to tax under this Part; (Added 18 of 2021 s. 14)(d) bad debts incurred in any trade, business or profession, proved to the satisfaction of the assessor to have become bad during the basis period for the year of assessment, and doubtful debts to the extent that they are respectively estimated to the satisfaction of the assessor to have become bad during the said basis period notwithstanding that such bad or doubtful debts were due and payable prior to the commencement of the said basis period: Provided that— (i) deductions under this paragraph shall be limited to debts which were included as a trading receipt in ascertaining the profits, in respect of which the person claiming the deduction is chargeable to tax under this Part, of the period within which they arose, and debts in respect of money lent, in the ordinary course of the business of the lending of money within Hong Kong, by a person who carries on that business; (Amended 7 of 1986 s. 12) (ii) all sums recovered during the said basis period on account of amounts previously allowed in respect of bad or doubtful debts shall for the purposes of this Ordinance be treated as part of the profits of the trade, business or profession for that basis period; (e) expenditure incurred in the repair of any premises, plant, machinery, implement, utensil or article employed in the production of such profits;(f) expenditure incurred in the replacement of any implement, utensil or article employed in the production of such profits: Provided that no allowances have been or shall be made under the provisions of Part 6 in respect of such implement, utensil or article; (g) despite section 17, a sum expended for the registration of a trade mark or design, or the registration or grant of a patent or plant variety right, used in the trade, profession or business which produces such profits; (Replaced 26 of 1969 s. 14. Amended 52 of 1997 s. 160; 24 of 2018 s. 4; 29 of 2018 s. 6)*(ga) the payments and expenditure specified in sections 16AA, 16C, 16E, 16EA, 16F, 16G, 16I and 16N, as provided in those sections; (Added 35 of 1965 s. 9. Amended 56 of 1993 s. 9; 31 of 1998 s. 8; 32 of 1998 s. 6; 21 of 2011 s. 4; 29 of 2018 s. 6; 1 of 2024 s. 3)(gb) despite section 17, any deduction allowed under section 16B; (Added 29 of 2018 s. 6)(gc) despite section 17, reinstatement costs incurred for any premises under a lease, but only if all of the conditions specified in subsection (2K) are met; (Added 34 of 2024 s. 3)(h) such other deductions as may be prescribed by any rule made under this Ordinance. Note— See also subsections (3D). (Added 5 of 2020 s. 8) (1A) In computing the amount of deduction of a person’s outgoings and expenses for the purposes of subsection (1), if—(a) the person is a connected person of a corporation;(b) a sum is payable by the person to the corporation, whether directly or through an interposed person; and(c) the sum is included in the assessable profits of the corporation chargeable at a reduced tax rate under section 14B(1), 14D(1), 14H(1), 14J(1), 14P(1), 14T(1), 14ZD(1), 14ZM(1) or 14ZV(1) for a year of assessment, (Amended 27 of 2018 s. 30; 5 of 2020 s. 8; 10 of 2022 s. 5)the amount of deduction in respect of the sum is to be reduced such that the profits tax payable by the person is increased by reference to the amount of the reduction in the profits tax payable by the corporation in respect of the sum for the year of assessment or any subsequent year of assessment. (Added 9 of 2017 s. 6)(1B) However, subsection (1A) does not apply in relation to a person for a year of assessment if, had the sum mentioned in subsection (1A)(b) not been so payable, it would have been included in the assessable profits of the person chargeable at a reduced rate under section 14B(1), 14D(1), 14H(1), 14J(1), 14P(1), 14T(1), 14ZD(1), 14ZM(1) or 14ZV(1) for the year of assessment. (Added 27 of 2018 s. 30. Amended 5 of 2020 s. 8; 10 of 2022 s. 5)(1C) For subsection (1A), a person is a connected person of a corporation if the person is—(a) an associated corporation of the corporation; or(b) a person (other than a corporation)—(i) over whom the corporation has control;(ii) who has control over the corporation; or(iii) who is under the control of the same person as is the corporation. (Added 27 of 2018 s. 30)(1D) For subsection (1A), a person is also a connected person of a corporation in relation to a case where a sum is included in the corporation’s assessable profits chargeable at a reduced rate under section 14H(1), 14J(1), 14P(1), 14T(1), 14ZD(1), 14ZM(1) or 14ZV(1) for a year of assessment if the person is a partnership in which the corporation or its associate (as defined by section 14G(1) or 14O(1) or section 1(1) of Schedule 17FB (whichever is applicable)) is a partner. (Added 27 of 2018 s. 30. Amended 5 of 2020 s. 8; 10 of 2022 s. 5)(2) The condition for the application of subsection (1)(a) is satisfied if— (Amended 12 of 2004 s. 6)(a) the money has been borrowed by a financial institution;(ab) the money has been borrowed by a LAC banking entity by way of issuing a regulatory capital security; (Added 4 of 2019 s. 7)(b) the money has been borrowed by a public utility company specified in Schedule 3 at a rate of interest not exceeding the rate specified by the Financial Secretary by notice in the Gazette; (Amended 17 of 1989 s. 5)(c) the money has been borrowed from a person other than a financial institution or an overseas financial institution and the sums payable by way of interest are chargeable to tax under this Ordinance (other than Part 4AA); (Amended 21 of 2025 s. 7)(d) the money has been borrowed from a financial institution or an overseas financial institution; (Replaced 12 of 2004 s. 6)(e) the money has been borrowed wholly and exclusively to finance—(i) capital expenditure incurred by the borrower on the provision of—(A) any machinery or plant, where the expenditure qualifies for an allowance under Part 6;(B) any machinery or plant for R&D activities within the meaning of section 2 of Schedule 45, where the expenditure may be deducted under section 16B; (Amended 29 of 2018 s. 6)(C) a prescribed fixed asset (as defined in section 16G(6)), where the expenditure may be deducted under section 16G; or(D) any environmental protection machinery or environment-friendly vehicle (as defined in section 16H(1)), where the expenditure may be deducted under section 16I; or (Replaced 4 of 2010 s. 4. Amended 10 of 2010 s. 2)(ii) the purchase of trading stock by the borrower, where the trading stock purchased is used by the borrower in the production of profits chargeable to tax under this Part,and—(iii) the lender is not an associate of the borrower; and(iv) where the lender is a trustee of a trust estate or a corporation controlled by such a trustee, neither the trustee nor the corporation nor any beneficiary under the trust is the borrower or an associate of the borrower; (Replaced 12 of 2004 s. 6. Amended 12 of 2016 s. 8)(ea) the money has been borrowed wholly or exclusively to finance capital expenditure incurred by the borrower, who is a qualifying aircraft lessor, on the provision of an aircraft and—(i) the lender is not an associate of the borrower;(ii) the capital expenditure qualifies for a deduction under section 14IC for the aircraft; and(iii) if the lender is a trustee of a trust estate or a corporation controlled by such a trustee, neither the trustee nor the corporation nor any beneficiary under the trust is the borrower or an associate of the borrower; (Added 5 of 2024 s. 11)(eb) the money has been borrowed wholly or exclusively to finance capital expenditure incurred by the borrower, who is a qualifying aircraft lessor, on the provision of an aircraft and—(i) the deduction claimed is in respect of interest payable by the borrower on money borrowed from its associate for carrying on a qualifying aircraft leasing activity;(ii) the associate is, in respect of the interest, subject to a similar tax in a territory outside Hong Kong at a rate that is not lower than the reference rate;(iii) the associate’s right to use and enjoy that interest is not constrained by a contractual or legal obligation to pass that interest to any other person, unless the obligation arises as a result of a transaction between the associate and a person other than the borrower dealing with each other at arm’s length; and(iv) the capital expenditure qualifies for a deduction under section 14IC; (Added 5 of 2024 s. 11)(f) the borrower is a corporation and the deduction claimed is in respect of interest payable by it—(i) on debentures listed on a stock exchange in Hong Kong or on any other stock exchange recognized by the Commissioner for the purposes of this subparagraph;(ii) on instruments (other than debentures described in subparagraph (i))—(A) issued bona fide and in the course of carrying on business and marketed in Hong Kong or in a major financial centre outside Hong Kong recognized by the Commissioner for the purposes of this sub-subparagraph; or(B) issued pursuant to any agreement or arrangements, where the issue of an advertisement, invitation or document in respect of the agreement or arrangements has been authorized by the Securities and Futures Commission under section 105 of the Securities and Futures Ordinance (Cap. 571), and the advertisement, invitation or document has been issued to the public; or(iii) on money borrowed from an associated corporation of the borrower, where the money borrowed in the hands of the associated corporation arises entirely from the proceeds of an issue by the associated corporation of debentures described in subparagraph (i) or of instruments described in subparagraph (ii), in an amount not exceeding the interest payable by the associated corporation to the holders of such debentures or instruments; or (Replaced 12 of 2004 s. 6. Amended 12 of 2016 s. 8)(g) the borrower is a corporation carrying on in Hong Kong an intra-group financing business and—(i) the deduction claimed is in respect of interest payable by it on money borrowed from a non-Hong Kong associated corporation (lender) in the ordinary course of that business;(ii) the lender is, in respect of the interest, subject to a similar tax in a territory outside Hong Kong at a rate that is not lower than the reference rate; and(iii) the lender’s right to use and enjoy that interest is not constrained by a contractual or legal obligation to pass that interest to any other person, unless the obligation arises as a result of a transaction between the lender and a person other than the borrower dealing with each other at arm’s length. Note— See subsection (2I) for elaboration on how a person is regarded as subject to a tax at a certain rate and the meanings of similar tax and reference rate. (Added 12 of 2016 s. 8) (2AA) Subsections (1)(a) and (2)(a) apply, subject to sections 17B, 17C, 17D, 17E, 17F and 17G, in relation to a sum payable by a financial institution in respect of a regulatory capital security issued by the financial institution. (Added 12 of 2016 s. 13)(2AAB) Subsections (1)(a) and (2)(ab) apply, subject to sections 17B, 17C, 17D, 17E and 17F, in relation to a sum payable by a LAC banking entity in respect of a regulatory capital security issued by the entity. (Added 4 of 2019 s. 7)(2A) Where—(a) the condition for the application of subsection (1)(a) is satisfied under subsection (2)(c), (d) or (e);(b) at any time during the basis period of the borrower for the year of assessment concerned, the payment of any sum payable by way of principal or interest in respect of the money borrowed is secured or guaranteed, whether wholly or in part and whether directly or indirectly, by a deposit or loan made by the borrower or an associate of the borrower with or to—(i) the lender or an associate of the lender;(ii) a financial institution or an associate of a financial institution; or(iii) an overseas financial institution or an associate of an overseas financial institution; and(c) any sum payable by way of interest on the deposit or loan is not chargeable to tax under this Ordinance (other than Part 4AA), (Amended 21 of 2025 s. 7) the amount of the deduction which, but for this subsection and subsections (2B), (2C) and (2CA), would have been allowed under subsection (1)(a) for the year of assessment concerned in respect of sums payable by the borrower by way of interest on the money borrowed shall be reduced, having regard to the sum payable by way of interest on the deposit or loan, by an amount calculated on such basis as is most reasonable and appropriate in the circumstances of the case. (Added 12 of 2004 s. 6. Amended 12 of 2016 s. 8)(2B) Where—(a) the condition for the application of subsection (1)(a) is satisfied under subsection (2)(c), (d) or (e); and(b) at any time during the basis period of the borrower for the year of assessment concerned, arrangements are in place, whether between the borrower and the lender or otherwise, whereby any sum payable by way of interest on the money borrowed or on any part of the money borrowed is payable, whether directly or through any interposed person, to the borrower or to a person (other than the lender) who is connected with the borrower and in either case the borrower or the person, as the case may be, is not an excepted person as defined in subsection (2E)(c), the amount of the deduction which, but for this subsection and subsections (2A) , (2C) and (2CA), would have been allowed under subsection (1)(a) for the year of assessment concerned in respect of sums payable by the borrower by way of interest on the money borrowed or on the relevant part of the money borrowed, as the case may be, shall be reduced by an amount calculated in accordance with the following formula— (Amended 12 of 2016 s. 8) A × C B where: A means the total number of days during the basis period of the borrower for the year of assessment concerned, at the end of each of which the principal in respect of the money borrowed or in respect of the relevant part of the money borrowed, as the case may be, is outstanding and the arrangements are in place; B means the total number of days during the basis period of the borrower for the year of assessment concerned, at the end of each of which the principal in respect of the money borrowed or in respect of the relevant part of the money borrowed, as the case may be, is outstanding; and C means the total amount of sums payable by the borrower by way of interest on the money borrowed or on the relevant part of the money borrowed, as the case may be, which, but for this subsection and subsections (2A) , (2C) and (2CA), would have been deductible under subsection (1)(a) for the year of assessment concerned. (Added 12 of 2004 s. 6. Amended 12 of 2016 s. 8) (2C) Subject to subsection (2G), where—(a) the condition for the application of subsection (1)(a) is satisfied under subsection (2)(f); and(b) at any time during the basis period of the borrower for the year of assessment concerned, arrangements are in place, whether between the borrower and the holders of the debentures or instruments concerned or otherwise, whereby any sum payable by way of interest on the debentures or instruments concerned or on any interest in the debentures or instruments concerned is payable, whether directly or through any interposed person, to the borrower or to a person who is connected with the borrower and in either case the borrower or the person, as the case may be, is not an excepted person as defined in subsection (2F)(c), the amount of the deduction which, but for this subsection and subsections (2A) , (2B) and (2CA), would have been allowed under subsection (1)(a) for the year of assessment concerned in respect of— (Amended 12 of 2016 s. 8)(c) (where the condition for the application of subsection (1)(a) is satisfied under subsection (2)(f)(i) or (ii)) the sum payable by the borrower by way of interest on the debentures or instruments concerned or on the relevant interest in the debentures or instruments concerned, as the case may be; or(d) (where the condition for the application of subsection (1)(a) is satisfied under subsection (2)(f)(iii)) the sum payable by the borrower by way of interest on money borrowed from the associated corporation, being money arising entirely from the proceeds of the issue of the debentures or instruments concerned or of the relevant interest in the debentures or instruments concerned, as the case may be, shall be reduced by an amount calculated in accordance with the following formula— X × Z Y where: X means the total number of days during the basis period of the borrower for the year of assessment concerned, at the end of each of which the principal in respect of the debentures or instruments concerned or in respect of the relevant interest in the debentures or instruments concerned, as the case may be, is outstanding and the arrangements are in place; Y means the total number of days during the basis period of the borrower for the year of assessment concerned, at the end of each of which the principal in respect of the debentures or instruments concerned or in respect of the relevant interest in the debentures or instruments concerned, as the case may be, is outstanding; and Z means the total amount of sums referred to in paragraph (c) or (d), as the case may be, which, but for this subsection and subsections (2A), (2B) and (2CA), would have been deductible under subsection (1)(a) for the year of assessment concerned. (Added 12 of 2004 s. 6. Amended 12 of 2016 s. 8) (2CA) Where the condition for the application of subsection (1)(a) is satisfied under subsection (2)(g), the application of subsection (1)(a) is nevertheless qualified by subsection (2CB) if—(a) at any time during the basis period of the borrower for the year of assessment concerned, arrangements are in place, whether between the borrower and the lender or otherwise, by which any sum payable by way of interest on the money borrowed or on any part of the money borrowed is payable, whether directly or through any interposed person, to a related person; and(b) the related person is, in respect of the sum—(i) neither subject to profits tax in Hong Kong, nor subject to a similar tax in any territory outside Hong Kong; or(ii) subject to profits tax in Hong Kong, or subject to a similar tax in a territory outside Hong Kong, but no rate at which the person is subject to such tax is equal to or higher than the reference rate. Note— See subsection (2I) for elaboration on how a person is regarded as subject to a tax at a certain rate and the meanings of similar tax, reference rate and related person. (Added 12 of 2016 s. 8) (2CB) For the purposes of subsection (2CA), the amount of the deduction that, but for subsections (2A), (2B), (2C) and (2CA), would have been allowed under subsection (1)(a) for the year of assessment concerned in respect of sums payable by the borrower by way of interest on the money borrowed or on the relevant part of the money borrowed, as the case may be, is to be reduced by an amount calculated in accordance with the following formula— A × C B where: A means the total number of days during the basis period of the borrower for the year of assessment concerned, at the end of each of which the principal in respect of the money borrowed or in respect of the relevant part of the money borrowed, as the case may be, is outstanding and the arrangements mentioned in subsection (2CA)(a) are in place; B means the total number of days during the basis period of the borrower for the year of assessment concerned, at the end of each of which the principal in respect of the money borrowed or in respect of the relevant part of the money borrowed, as the case may be, is outstanding; and C means the total amount of sums payable by the borrower by way of interest on the money borrowed or on the relevant part of the money borrowed, as the case may be, that, but for subsections (2A), (2B), (2C) and (2CA), would have been deductible under subsection (1)(a) for the year of assessment concerned. (Added 12 of 2016 s.

8) (2CC) Where a deduction under subsection (1)(a) is claimed, by virtue of subsection (2)(g), for a year of assessment in respect of interest payable on money borrowed by a corporation, no deduction is to be allowed in respect of the interest if the Commissioner is satisfied that the main purpose, or one of the main purposes, of the borrowing of the money is to utilize a loss to avoid, postpone or reduce any liability, whether of the corporation or another person, to profits tax under this Ordinance. (Added 12 of 2016 s. 8)(2CD) In subsection (2CC)— loss (虧損)—— (a) means a loss sustained by a related person within the meaning of subsection (2I)(d)(ii) or (iii) in a trade, profession or business, whether in Hong Kong or elsewhere; and (b) includes any balance of such loss. (Added 12 of 2016 s. 8) (2D) For the purposes of subsection (2A), if a deposit or loan is made by a trustee of a trust estate or a corporation controlled by such a trustee, the deposit or loan shall be deemed to have been made by each of the trustee, the corporation and the beneficiary under the trust. (Added 12 of 2004 s. 6)(2E) For the purposes of subsections (2B) and (2CA)— (Amended 12 of 2016 s. 8)(a) any reference in those subsections to any sum payable by way of interest on the money borrowed or on any part of the money borrowed, however described, shall be construed as including a reference to any sum payable by way of principal or interest in respect of any other loan, where the payment of such sum is— (Amended 12 of 2016 s. 8)(i) secured or guaranteed, whether wholly or in part and whether directly or indirectly, by any sum payable by way of principal or interest in respect of the money borrowed or in respect of any part of the money borrowed; or(ii) conditional, whether wholly or in part and whether directly or indirectly, on the payment of any sum payable by way of principal or interest in respect of the money borrowed or in respect of any part of the money borrowed;(b) if any sum payable by way of interest on the money borrowed or on any part of the money borrowed, as construed in accordance with paragraph (a), is payable, whether directly or through any interposed person, to a trustee of a trust estate or a corporation controlled by such a trustee, such sum shall be deemed to be so payable to each of the trustee, the corporation and the beneficiary under the trust; and(c) excepted person (除外人士) means— (i) a person who is chargeable to tax under this Ordinance (other than Part 4AA) in respect of any sum payable by way of interest on the money borrowed or on any part of the money borrowed, as construed in accordance with paragraph (a); (Amended 21 of 2025 s. 7) (ii) in the case of a person (other than the lender) who is connected with the borrower—(A) a person who is entitled to any sum referred to in subparagraph (i) in the capacity of—(I) a person acting as a trustee of a trust estate or holding property belonging to others pursuant to the terms of a contract, where the person is not beneficially entitled to the sum in question;(II) a beneficiary of a unit trust to which section 26A(1A)(a)(i) or (ii) applies, where the sum in question is payable to a trustee of the unit trust in respect of a specified investment scheme referred to in section 26A(1A)(b); or(III) a member of a retirement scheme which is either a recognized retirement scheme or a substantially similar retirement scheme established outside Hong Kong, where the Commissioner is satisfied that the latter scheme complies with the requirements of a supervisory authority within an acceptable regulatory regime;(B) a public body;(C) a body corporate, where the Government owns beneficially more than half of the issued share capital of that body corporate for the time being; or (Amended 28 of 2012 ss. 912 & 920)(D) a financial institution or an overseas financial institution. (Added 12 of 2004 s. 6) (2F) For the purposes of subsection (2C)—(a) any reference in that subsection to any sum payable by way of interest on the debentures or instruments concerned or on any interest in the debentures or instruments concerned, however described, shall be construed as including a reference to any sum payable by way of principal or interest in respect of any other loan, where the payment of such sum is—(i) secured or guaranteed, whether wholly or in part and whether directly or indirectly, by any sum payable by way of principal or interest in respect of the debentures or instruments concerned or in respect of any interest in the debentures or instruments concerned; or(ii) conditional, whether wholly or in part and whether directly or indirectly, on the payment of any sum payable by way of principal or interest in respect of the debentures or instruments concerned or in respect of any interest in the debentures or instruments concerned;(b) if any sum payable by way of interest on the debentures or instruments concerned or on any interest in the debentures or instruments concerned, as construed in accordance with paragraph (a), is payable, whether directly or through any interposed person, to a trustee of a trust estate or a corporation controlled by such a trustee, such sum shall be deemed to be so payable to each of the trustee, the corporation and the beneficiary under the trust; and(c) excepted person (除外人士) means— (i) a person who is chargeable to tax under this Ordinance (other than Part 4AA) in respect of any sum payable by way of interest on the debentures or instruments concerned or on any interest in the debentures or instruments concerned, as construed in accordance with paragraph (a); (Amended 21 of 2025 s. 7) (ii) in the case of a person who is connected with the borrower—(A) a person who is entitled to any sum referred to in subparagraph (i) in the capacity of—(I) a person acting as a trustee of a trust estate or holding property belonging to others pursuant to the terms of a contract, where the person is not beneficially entitled to the sum in question;(II) a beneficiary of a unit trust to which section 26A(1A)(a)(i) or (ii) applies, where the sum in question is payable to a trustee of the unit trust in respect of a specified investment scheme referred to in section 26A(1A)(b); or(III) a member of a retirement scheme which is either a recognized retirement scheme or a substantially similar retirement scheme established outside Hong Kong, where the Commissioner is satisfied that the latter scheme complies with the requirements of a supervisory authority within an acceptable regulatory regime;(B) a public body;(C) a body corporate, where the Government owns beneficially more than half of the issued share capital of that body corporate for the time being; or (Amended 28 of 2012 ss. 912 & 920)(D) a financial institution or an overseas financial institution. (Added 12 of 2004 s. 6) (2G) Subsection (2C) shall not apply where under the relevant arrangements, the relevant sum payable by way of interest on the debentures or instruments concerned or on any interest in the debentures or instruments concerned is payable to a market maker who, in the ordinary course of conduct of his trade, profession or business in respect of market making, holds such debentures or instruments or such interest for the purpose of providing liquidity thereof. (Added 12 of 2004 s. 6)(2H) In subsection (2G), market maker (市場莊家) means a person who— (a) is licensed or registered for dealing in securities under the Securities and Futures Ordinance (Cap. 571) or authorized to do so by a regulatory authority in a major financial centre outside Hong Kong recognized by the Commissioner for the purposes of subsection (2)(f)(ii)(A); (b) in the ordinary course of conduct of his trade, profession or business in respect of market making holds himself out as being willing to buy and sell securities for his own account and on a regular basis; and (c) is actively involved in market making in securities issued by a wide range of unrelated institutions. (Added 12 of 2004 s. 6) (2I) For the purposes of this subsection and subsections (2)(eb) and (g) and (2CA)— (Amended 5 of 2024 s. 11)(a) a person is, in respect of an interest or a sum, subject to a tax at a certain rate in a territory if the Commissioner is satisfied that—(i) for a similar tax in a territory outside Hong Kong as mentioned in subsections (2)(eb)(ii) and (g)(ii) and (2CA)(b)(i) and (ii)—tax of that nature has been paid or will be paid, whether by deduction or otherwise, at that rate by that person in respect of the interest or sum concerned in that territory as required by the laws of that territory; or (Amended 5 of 2024 s. 11)(ii) for profits tax in Hong Kong as mentioned in subsection (2CA)(b)(i) and (ii)—profits tax under this Ordinance has been paid or will be paid at that rate by that person in respect of the sum concerned in Hong Kong;(b) similar tax (類似稅項) means a tax that is of substantially the same nature as profits tax under this Part; (Amended 21 of 2025 s. 7)(c) reference rate (參考稅率) means— (i) the rate specified in Schedule 8 for the year of assessment concerned; or (ii) if section 14D(1) or 14H(1) applies in respect of the borrower for the year of assessment concerned, the rate applicable under that section; and (Amended 5 of 2024 s. 11) (d) related person (有關連人士) means— (i) the borrower; (ii) a person (other than the lender) who is connected with the borrower; or (iii) a person (other than the borrower) who is connected with the lender. (Added 12 of 2016 s. 8) (2J) Subsection (1)(c) and (ca) does not apply in relation to any tax paid in a territory outside Hong Kong by a person in respect of the profits referred to in that subsection if, under section 50, the tax is to be allowed as a credit against tax payable in Hong Kong by the person in respect of the profits. (Replaced 18 of 2021 s. 14. Amended 17 of 2022 s. 4)(2K) The following conditions are specified for the purposes of subsection (1)(gc)—(a) the person claiming the deduction is a lessee of the lease;(b) the person has a reinstatement obligation for the premises;(c) the reinstatement costs do not relate to any provisions made under—(i) Hong Kong Financial Reporting Standard 16 (Leases) as issued by the Hong Kong Institute of Certified Public Accountants and in force from time to time; or(ii) any other similar accounting standards;(d) the amount of the reinstatement costs is reasonable in the circumstances. (Added 34 of 2024 s. 3)(2L) A reference in subsection (1)(c) to a tax paid in a territory outside Hong Kong in respect of the profits referred to in that subsection—(a) includes a foreign DMTT paid in a territory only to the extent to which it is a QDMTT paid, in respect of the profits referred to in that subsection that are income of a permanent establishment, in that territory; but(b) does not include a foreign IIR top-up tax or a foreign UTPR top-up tax. (Added 21 of 2025 s. 7)(3) In this section— (Amended 12 of 2004 s. 6) associate (相聯者), in relation to a person, means— (a) where the person is a natural person—(i) a relative of the person;(ii) a partner of the person and any relative of that partner;(iii) a partnership in which the person is a partner;(iv) any corporation controlled by the person, by a partner of the person or by a partnership in which the person is a partner;(v) any director or principal officer of any such corporation as is referred to in subparagraph (iv); (b) where the person is a corporation—(i) any associated corporation;(ii) any person who controls the corporation and any partner of such person, and, where either such person is a natural person, any relative of such person;(iii) any director or principal officer of that corporation or of any associated corporation and any relative of any such director or officer;(iv) any partner of the corporation and, where such partner is a natural person, any relative of such partner; (c) where the person is a partnership—(i) any partner of the partnership and where such partner is a partnership any partner of that partnership, any partner with the partnership in any other partnership and where such partner is a partnership any partner of that partnership and where any partner of, or with, or in any of the partnerships mentioned in this subparagraph is a natural person, any relative of such partner;(ii) any corporation controlled by the partnership or by any partner thereof or, where such a partner is a natural person, any relative of such partner;(iii) any corporation of which any partner is a director or principal officer;(iv) any director or principal officer of a corporation referred to in subparagraph (ii); associated corporation (相聯法團), in relation to a person, means— (a) a corporation over which the person has control; (b) if the person is a corporation—(i) a corporation which has control over the person; or (ii) a corporation which is under the control of the same person as is the first-mentioned person; beneficiary under the trust (信託的受益人) means any person who benefits or is capable (whether by the exercise of a power of appointment or otherwise) of benefiting under a trust estate, either directly or through any interposed person, or who is able or might reasonably be expected to be able, whether directly or indirectly, to control the activities of the trust estate or the application of its corpus or income;controlled entity (受控制實體) has the meaning given by section 50A; (Added 6 of 2019 s. 4)export credit business (出口信貸業務), in relation to a jurisdiction, means the business of supporting and developing international trade by providing financing support to exporters or investors of that jurisdiction for export or investment activities outside that jurisdiction; (Added 6 of 2019 s. 4) governmental entity (政府實體), in relation to a jurisdiction, means— (a) the government of the jurisdiction; (b) the political subdivision of the jurisdiction, including a state, a province, a county and a municipality of the jurisdiction; (c) a wholly owned agency or instrumentality of the jurisdiction, or of any entity mentioned in paragraph (a) or (b); or (d) an integral part or controlled entity of the jurisdiction; (Added 6 of 2019 s. 4) integral part (組成部分) has the meaning given by section 50A; (Added 6 of 2019 s. 4)intra-group financing business (集團內部融資業務), in relation to a corporation, means the business of the borrowing of money from and lending of money to its associated corporations; (Added 12 of 2016 s. 8)non-Hong Kong associated corporation (非香港相聯法團) means an associated corporation that does not carry on any trade, profession or business in Hong Kong; (Added 12 of 2016 s. 8)original condition (原來狀況), in relation to any premises under a lease, means the condition the premises are in at the beginning of the term of the lease; (Added 34 of 2024 s. 3)overseas export credit agency (海外出口信貸機構) means an organization that is owned by, or was established and is operated by, a governmental entity of a jurisdiction outside Hong Kong for the purposes of carrying on export credit business; (Added 6 of 2019 s. 4)overseas financial institution (海外財務機構)—(a) means—(i) a person carrying on the business of banking or deposit-taking outside Hong Kong; or(ii) an overseas export credit agency; but(b) excludes a person or organization that the Commissioner has, under subsection (4), determined is not recognized as an overseas financial institution; (Replaced 6 of 2019 s. 4) principal officer (主要職員) means— (a) a person employed by a corporation who, either alone or jointly with one or more other persons, is responsible under the immediate authority of the directors for the conduct of the business of the corporation; or (b) a person so employed who, under the immediate authority of a director of the corporation or a person to whom paragraph (a) applies, exercises managerial functions in respect of the corporation; reinstatement costs (還原費), in relation to any premises under a lease— (a) means the costs of reinstating the premises to their original condition at the end of the term of the lease or on an early termination of the lease; and (b) includes any amount paid or payable by a lessee of the lease to the lessor of the lease in order to discharge the lessee’s reinstatement obligation for the premises; (Added 34 of 2024 s. 3) reinstatement obligation (還原責任), in relation to any premises under a lease, means an obligation (whether express or implied, and whether arising from the lease or from another agreement between the lessor and lessee of the lease) to reinstate, or pay (whether in full or in part) for the reinstatement of, the premises to their original condition at the end of the term of the lease or on an early termination of the lease; (Added 34 of 2024 s. 3)relative (親屬) means the spouse, parent, child, brother or sister of the relevant person, and, in deducing such a relationship, an adopted child shall be deemed to be a child both of the natural parents and the adopting parent and a step child to be the child of both the natural parents and of any step parent; (Replaced 63 of 1997 s. 2. Amended 18 of 2021 s. 14)specified tax (指明稅項) means tax imposed by a territory outside Hong Kong on a person that is—(a) of substantially the same nature as tax imposed on the person under this Part;(b) charged on a certain percentage of income received or receivable by the person from that territory without deduction for the outgoings and expenses (whether or not they were incurred in the production of the relevant income) when computing the amount of tax charged to the person in that territory; and(c) not in respect of profits of the person chargeable to tax because of section 15(1)(f), (g), (i), (ia), (ib), (j), (k), (l), (la) or (lb), (Amended 21 of 2025 s. 7)but does not include a foreign IIR top-up tax, a foreign UTPR top-up tax or a foreign DMTT. (Added 18 of 2021 s. 14. Amended 21 of 2025 s. 7)(3A) In this section—(a) a corporation shall be regarded as being controlled by a person if the person has the power to secure—(i) by means of the holding of shares or the possession of voting power in or in relation to that or any other corporation; or(ii) by virtue of any power conferred by the articles of association or any other document regulating that or any other corporation, that the affairs of the first-mentioned corporation are conducted in accordance with his wishes; and(b) a person (other than a corporation) shall be regarded as being controlled by another person if the first-mentioned person is accustomed or under an obligation, whether express or implied, and whether or not enforceable or intended to be enforceable by legal proceedings, to act, in relation to his investment or business affairs, in accordance with the directions, instructions or wishes of that other person. (Added 12 of 2004 s. 6)(3B) In this section, a person is regarded as being connected with a borrower if the person is— (Amended 12 of 2016 s. 8)(a) an associated corporation of the borrower; or (Amended 12 of 2016 s. 8)(b) a person (other than a corporation)—(i) who controls the borrower;(ii) who is controlled by the borrower; or(iii) who is under the control of the same person as is the borrower. (Added 12 of 2004 s. 6)(3C) In this section, a person is regarded as being connected with a lender if the person is—(a) an associated corporation of the lender; or(b) a person (other than a corporation)—(i) who controls the lender;(ii) who is controlled by the lender; or(iii) who is under the control of the same person as is the lender. (Added 12 of 2016 s. 8)(3CA) To avoid doubt, if a person is, in the production of profits, granted a right to use an aircraft under a funding lease as defined by section 14G(1)—(a) for the purposes of subsection (1)(a), the payments of finance charges or interest by the person for the right to use the aircraft are to be regarded as sums payable by the person by way of interest on money borrowed by the person (specified sums) for the purpose of producing the profits; and(b) for the purposes of subsection (2)(e)(i)(A), the specified sums are to be regarded as money borrowed wholly and exclusively to finance capital expenditure incurred by the person on the provision of the aircraft. (Added 5 of 2024 s. 11)(3D) To avoid doubt, if a person is, in the production of profits, granted a right to use a ship under a funding lease as defined by section 14O(1)—(a) for the purposes of subsection (1)(a), the payments of finance charges or interest by the person for the right to use the ship are to be regarded as sums payable by the person by way of interest on money borrowed by the person (specified loan) for the purpose of producing the profits; and(b) for the purposes of subsection (2)(e)(i)(A), the specified loan is to be regarded as money borrowed wholly and exclusively to finance capital expenditure incurred by the person on the provision of the ship. (Added 5 of 2020 s. 8)(3E) To avoid doubt, a reference to a reduced tax rate in this section includes a tax rate of 0%. (Added 5 of 2020 s. 8)(4) The Commissioner may, for the purposes of this section, determine that any person or organization is not recognized as an overseas financial institution if the Commissioner is of the opinion that—(a) in the case of a person carrying on the business of banking or deposit-taking outside Hong Kong—the business is not adequately supervised by a supervisory authority; or(b) in the case of an organization that is an overseas export credit agency—the organization’s export credit business is not adequately monitored or regulated by the governmental entity by which the organization—(i) is owned; or(ii) was established and is operated. (Replaced 6 of 2019 s. 4)(4A) Sections 21 and 22 of Schedule 17A (specified alternative bond scheme and its treatment under this Ordinance (other than Part 4AA)) provide for modifications to subsection (2)(f). (Added 10 of 2013 s. 8. Amended 21 of 2025 s. 33)(5) The amendments to this section effected by the Inland Revenue (Amendment) Ordinance 1984 (36 of 1984) shall not have the effect of disallowing any deduction under subsection (1)(a) which could lawfully have been made immediately prior to the coming into force of that Ordinance where the deduction is in respect of sums payable prior to 1 April 1984. (Added 36 of 1984 s. 4. Amended 7 of 1986 s. 4)(5A) The amendments made to this section by section 6(a), (b), (c), (d), (e) and (f) of the Inland Revenue (Amendment) Ordinance 2004 (12 of 2004) (the Amendment Ordinance) do not apply to sums described in subsection (1)(a) which were incurred—(a) before the commencement# of the Amendment Ordinance;(b) under a transaction which was the subject of an application for advance clearance made to the Commissioner before 1 April 1998, and the Commissioner has before the commencement# of the Amendment Ordinance expressed the opinion that the transaction would not fall within the terms of section 61A; or(c) under an arrangement which was the subject of an application made to the Commissioner under section 88A, and the Commissioner has before the commencement# of the Amendment Ordinance made a ruling under that section that the arrangement would not fall within the terms of section 61A. (Added 12 of 2004 s. 6)(5B) The amendment made to subsection (1)(g) by the Inland Revenue (Amendment) (No. 5) Ordinance 2018 (24 of 2018) applies only in relation to a year of assessment beginning on or after 1 April 2018. (Added 24 of 2018 s. 4)(5C) The amendments made to this section by the Inland Revenue (Amendment) (Miscellaneous Provisions) Ordinance 2021 (18 of 2021) apply only in relation to a year of assessment beginning on or after 1 April 2021. (Added 18 of 2021 s. 14)(5D) The amendments made to this section by the Inland Revenue (Amendment) (Tax Deductions for Leased Premises Reinstatement and Allowances for Buildings and Structures) Ordinance 2024 (34 of 2024) apply only in relation to a year of assessment beginning on or after 1 April 2024. (Added 34 of 2024 s. 3)(6) The Chief Executive in Council may, by notice in the Gazette, amend Schedule 3. (Added 17 of 1989 s. 5. Amended 12 of 1999 s. 3)(7) The Secretary for Financial Services and the Treasury may by order published in the Gazette amend the definition of reference rate in subsection (2I)(c). (Added 12 of 2016 s. 8)(Replaced 28 of 1964 s. 7. Amended 35 of 1965 s. 9; 12 of 2004 s. 6; E.R. 1 of 2012) Editorial Note: * The amendment made by Ord. No. 31 of 1998 to section 16(1)(ga) applies in relation to the year of assessment commencing on 1 April 2000 and to all subsequent years of assessment. (31 of 1998 s. 2(2); L.N. 175 of 2000) # Commencement date: 25 June 2004. Subdivision 2 Contributions to Approved Retirement Schemes (Added 15 of 2020 s. 2) 16A. Special payment under an approved retirement scheme allowable as a deduction (1) Subject to section 17(1)(k), where a person carrying on a trade, profession or business in Hong Kong makes a payment which is either— (Amended 7 of 1986 s. 12)(a) a contribution, other than an ordinary annual contribution, to a fund duly established under a recognized occupational retirement scheme; or(b) a premium, other than an ordinary annual premium, in respect of a contract of insurance under a recognized occupational retirement scheme; or (Amended 4 of 1998 s. 6)(c) a contribution, other than regular contributions, paid to a mandatory provident fund scheme, (Added 4 of 1998 s. 6)such payment shall, to the extent that it is made in respect of individuals employed by such person for the purposes of producing profits in respect of which he is chargeable to tax under this Part and that it is not excessive in view of all the relevant circumstances, be deemed to be an expense wholly and exclusively incurred in the production of such profits and shall be allowed as a deduction therefrom in accordance with subsection (2). (Amended 76 of 1993 s. 6)(2) For the purpose of making the deduction provided for in subsection (1), one fifth part of the payment shall be deemed to have been expended during the basis period in which the payment was actually made and the remaining 4 parts shall be deemed to have been expended at the rate of one part in the basis period for each of the succeeding 4 years of assessment:Provided that in no case shall the total amount of the deductions exceed the amount of the payment.(3) For the purposes of subsection (1)(c), contributions are regular contributions if they are made to the mandatory provident fund scheme at regular intervals and are either of similar or substantially similar amounts or of amounts calculated by reference to a scale or a fixed percentage of a person’s salary or other remuneration. (Added 4 of 1998 s. 6)(Replaced 49 of 1956 s. 12) 16AA. Mandatory contributions in self-employment cases allowable as a deduction* (1) Subject to subsection (2), where a person carrying on a trade, profession or business in Hong Kong as a sole proprietor or as a partner in a partnership pays any mandatory contributions in the basis period for any year of assessment in respect of any liability of himself to pay such contributions as a self-employed person under the Mandatory Provident Fund Schemes Ordinance (Cap. 485), the payment shall be deemed to be an expense wholly and exclusively incurred in the production of the profits of that trade, profession or business chargeable to tax under this Part and shall be allowed as a deduction from such profits for that year of assessment.(2) A deduction shall not be allowable to a person under subsection (1) for any year of assessment—(a) in respect of any sum which is allowable as a deduction under any other sections of this Part or section 26G;(b) in excess of the amount specified in Schedule 3B in relation to that year of assessment, as reduced by the amount of any sum which is allowable to that person as a deduction under any other sections of this Part or section 26G.(Added 31 of 1998 s. 9) Editorial Note: *Section 16AA applies in relation to the year of assessment commencing on 1 April 2000 and to all subsequent years of assessment. (31 of 1998 s. 2(2); L.N. 175 of 2000) Subdivision 3 Expenditures on R&D Activities and Payments for Technical Education (Added 15 of 2020 s. 2) 16B. Expenditures on R&D activities (1) This section applies despite section 17.(2) In ascertaining the profits from a trade, profession or business in respect of which a person is chargeable to tax under this Part for a year of assessment, a deduction in relation to R&D activities is to be allowed under this section for payments made, and other expenditures incurred, by the person during the basis period for the year of assessment.(3) The total amount of deduction to be allowed under this section is to be determined in accordance with Schedule 45.(4) However, no deduction is to be allowed under this section for an amount that is allowable as a deduction apart from this section.(5) The proceeds of sale of any plant or machinery for, and rights generated from, R&D activities are to be treated as a trading receipt in accordance with Schedule 45.(6) In this section—R&D activity (研發活動) has the meaning given by section 2 of Schedule 45.(Replaced 29 of 2018 s. 7) 16C. Payments for technical education (1) Notwithstanding anything in section 17, where a person carrying on a trade, profession or business in Hong Kong makes any payment to be used for the purposes of technical education related to that trade, profession or business at any university, university college, technical college or other similar institution which is approved in writing for the purposes of this section by the Commissioner (being an amount which is not otherwise allowable as a deduction under this Ordinance), the payment shall be deducted as an expense in ascertaining the profits from that trade, profession or business for the year of assessment in the basis period of which the payment was made. (Amended 7 of 1986 s. 12; 24 of 1996 s. 6)(2) For the purposes of this section, technical education shall be deemed to be related to a trade, profession or business, if, and only if, it is technical education of a kind specially requisite for persons employed in the class of trade, profession or business to which that trade, profession or business belongs.(3) An approval for the purposes of subsection (1) may—(a) operate as from a date, whether before or after the date of approval, specified in the instrument of approval; and(b) be withdrawn at any time.(Added 35 of 1965 s. 10. Amended 32 of 1998 s. 8) Subdivision 4 Approved Charitable Donations (Added 15 of 2020 s. 2) 16D. Approved charitable donations (Part 4) (Amended 21 of 2008 s. 3)(1) Subject to subsection (2), a person chargeable to tax under this Part may deduct the aggregate of approved charitable donations made by that person in the basis period for a year of assessment, if such aggregate is not less than $100, from what would otherwise have been the assessable profits of such person for that year of assessment.(2) A person shall not be entitled under subsection (1) to deduct— (Amended 21 of 2008 s. 3)(a) for any year of assessment, any sum which is allowable as a deduction under section 16, 16B, or 16C; (Amended 56 of 1993 s. 11; 31 of 1998 s. 10; 21 of 2008 s. 3)(aa) for any year of assessment, any sum which is allowable as a deduction under Part 4A; (Added 31 of 1998 s. 10. Amended 21 of 2008 s. 3)(b) for any year of assessment up to and including the year of assessment commencing on 1 April 2002, a sum in excess of 10% of the balance of that person’s assessable profits after making any adjustment for the allowances and charges provided under Part 6; (Replaced 21 of 2008 s. 3)(c) for the year of assessment commencing on 1 April 2003 or any subsequent year of assessment up to and including the year of assessment commencing on 1 April 2007, a sum in excess of 25% of the balance of that person’s assessable profits after making any adjustment for the allowances and charges provided under Part 6; (Added 21 of 2008 s. 3)(d) for any year of assessment commencing on or after 1 April 2008, a sum in excess of 35% of the balance of that person’s assessable profits after making any adjustment for the allowances and charges provided under Part 6. (Added 21 of 2008 s. 3)(Added 7 of 1975 s. 10. Amended E.R. 1 of 2012) Subdivision 5 Purchase and Sale of Patent or Intellectual Property Rights (Added 15 of 2020 s. 2) 16E. Purchase and sale of patent rights, etc. (1) Notwithstanding anything in section 17, in ascertaining the profits from any trade, profession or business in respect of which a person is chargeable to tax under this Part for any year of assessment there shall, subject to subsections (2) and (6), be deducted any capital expenditure incurred by such person during the basis period for that year of assessment (other than any amount which is allowable as a deduction apart from this section) on the purchase of patent rights or rights to any know-how, for use in the trade, profession or business in the production of such profits. (Amended 7 of 1986 s. 12; 15 of 1992 s. 2; 21 of 2011 s. 5)(1A) A deduction allowable under subsection (1) includes legal expenses and valuation fees incurred in connection with the purchase of any rights of a kind referred to in that subsection. (Added 21 of 2011 s. 5)(2) If any rights of a kind referred to in subsection (1) are used partly in the production of profits chargeable to tax under this Part and partly for any other purposes, the deduction allowable under this section is that part of the capital expenditure referred to in subsection (1) that is proportionate to the extent of the use of the rights in the production of the profits chargeable to tax under this Part. (Replaced 21 of 2011 s. 5)(2A)-(2B) (Repealed 21 of 2011 s. 5)(3) Despite the exclusion relating to the sale of capital assets in section 14, where any rights of a kind referred to in subsection (1) in respect of which a deduction has been allowed to any person under that subsection in ascertaining the profits from a trade, profession or business are subsequently sold by the person, the relevant proceeds of sale are, to the extent that they are not chargeable to tax under any other section of this Part and do not exceed the amount of the deduction, to be treated as a trading receipt of the trade, profession or business, arising in or derived from Hong Kong and accruing—(a) at the time of sale; or(b) if the sale occurs on or after the date on which the trade, profession or business is permanently discontinued, immediately before the discontinuance. (Replaced 21 of 2011 s. 5)(3A) For the purposes of this section, any capital expenditure incurred for the purposes of a trade, profession or business by a person about to carry on the trade, profession or business is to be treated as if it had been incurred by that person on the first day on which the person carries on the trade, profession or business. (Added 21 of 2011 s. 5)(4) In this section—know-how (工業知識) means any industrial information or techniques likely to assist in the manufacture or processing of goods or materials;patent rights (專利權) means the right to do or authorize the doing of anything which would, but for that right, be an infringement of a patent;relevant proceeds of sale (有關售賣得益), in relation to any rights of a kind referred to in subsection (1) in respect of which a deduction has been allowed under that subsection, means—(a) if subsection (2) does not apply, the proceeds of sale of the rights; or(b) if subsection (2) applies, that part of the proceeds of sale of the rights that is proportionate to the extent to which the deduction has been allowed. (Added 21 of 2011 s. 5)(Amended 21 of 2011 s. 5)(5) In this section, a reference to the purchase or sale of rights of a kind referred to in subsection (1) includes a reference to the purchase or sale of a share or interest in any such rights. (Added 15 of 1992 s. 2)(6) The amendments made to this section by the Inland Revenue (Amendment) Ordinance 1992 (15 of 1992) apply to patent rights or rights to any know-how purchased under contracts entered into on or after 18 April 1991 and the provisions of this section that were in force immediately before the commencement of that Ordinance continue to apply to patent rights or rights to any trade mark or design purchased under contracts entered into before 18 April 1991 and also to proceeds received from the sale of those rights whether before or after 18 April 1991 as if the amendments had not been enacted. (Added 15 of 1992 s. 2)(7) If any rights of a kind referred to in subsection (1) are purchased or sold together or with any other assets for one consideration, the Commissioner may, for the purposes of the calculation of the deduction under subsection (1) or the calculation of the trading receipt under subsection (3), and having regard to all the circumstances of the transaction, allocate a consideration for the purchase or sale of each individual asset. (Added 21 of 2011 s. 5)(8) For the purposes of this section, if the Commissioner is of the opinion that the consideration for the purchase or sale of any rights of a kind referred to in subsection (1) does not represent the true market value of those rights at the time of that purchase or sale, the Commissioner may determine the true market value, and the amount so determined is to be treated—(a) for the purposes of subsection (1), as the capital expenditure incurred on purchase; and(b) for the purposes of subsection (3), as the proceeds of sale, and a reference to relevant proceeds of sale is to be construed accordingly. (Added 21 of 2011 s. 5)(9) To avoid doubt, any expenditure incurred on the acquisition of a licence (as defined by section 16EC(8)) of any rights of a kind referred to in subsection (1) is not deductible under that subsection. (Added 21 of 2011 s. 5) 16EA. Purchase of specified intellectual property rights (1) Despite section 17, this section applies in ascertaining the profits from a trade, profession or business in respect of which a person is chargeable to tax under this Part for any year of assessment.(2) Any specified capital expenditure incurred by the person during the basis period for a year of assessment is to be deducted if the specified intellectual property right concerned is purchased for use in the trade, profession or business in the production of profits in respect of which the person is chargeable to tax under this Part.(3) Unless subsection (4) applies and subject to subsections (5) and (6), a deduction allowable under subsection (2) is to be deducted by 5 equal amounts—(a) one for the year of assessment in the basis period for which the specified capital expenditure is incurred; and(b) one for each of the next succeeding 4 years of assessment.(4) If the specified intellectual property right—(a) is a copyright, performer’s economic right, protected layout-design (topography) right, protected plant variety right or registered design; and (Replaced 24 of 2018 s. 5)(b) is due to expire at the end of its maximum period of protection, and that expiry is to occur before the expiry of the basis period for the last of the 5 succeeding years of assessment mentioned in subsection (3), subject to subsections (5) and (6), a deduction allowable under subsection (2) is to be deducted by a number of equal amounts—(c) one for the year of assessment in the basis period for which the specified capital expenditure is incurred; and(d) one for each of the next succeeding years a part or the whole of the basis period of each of which years coincides with a part or the whole of the remaining part of the maximum period of protection.(5) A deduction mentioned in subsection (3) or (4) is allowable only if, at the end of the basis period for a year of assessment for which an amount is to be deducted, the specified intellectual property right concerned has not been sold by the person who incurred the specified capital expenditure.(6) A deduction mentioned in subsection (3) or (4) is allowable only if—(a) the specified intellectual property right concerned has been used in the trade, profession or business in the production of profits in respect of which the person who incurred the specified capital expenditure is chargeable to tax under this Part;(b) (in the case of the specified intellectual property right being a copyright) the copyright subsists;(ba) (in the case of the specified intellectual property right being a performer’s economic right) the performer’s economic right has not expired; (Added 24 of 2018 s. 5)(bb) (in the case of the specified intellectual property right being a protected layout-design (topography) right) the protection of the layout-design has not ceased; (Added 24 of 2018 s. 5)(bc) (in the case of the specified intellectual property right being a protected plant variety right) the grant of the protected plant variety right is in force; (Added 24 of 2018 s. 5)(c) (in the case of the specified intellectual property right being a registered design) the registration of the design is in force; and(d) (in the case of the specified intellectual property right being a registered trade mark) the registration of the trade mark is in force, during a part or the whole of the basis period for a year of assessment for which an amount is deducted.(7) If any specified intellectual property right is used partly in the production of profits chargeable to tax under this Part and partly for any other purposes, the deduction allowable under this section is that part of the specified capital expenditure that is proportionate to the extent of the use of the specified intellectual property right in the production of the profits chargeable to tax under this Part.(8) If any specified intellectual property rights in respect of which a deduction is allowable under this section are purchased or sold together or with any other assets for one consideration, the Commissioner may, for the purposes of the calculation of the deduction under subsection (2) or the calculation of the trading receipt under section 16EB(2), and having regard to all the circumstances of the transaction, allocate a consideration for the purchase or sale of each individual asset.(9) For the purposes of this section and section 16EB, if the Commissioner is of the opinion that the consideration for the purchase or sale of any specified intellectual property right does not represent the true market value of the specified intellectual property right at the time of that purchase or sale, the Commissioner may determine the true market value, and the amount so determined is to be treated—(a) for the purposes of subsection (2), as the specified capital expenditure; and(b) for the purposes of section 16EB(2), as the proceeds of sale of the specified intellectual property right, and a reference to relevant proceeds of sale is to be construed accordingly.(10) For the purposes of this section, any specified capital expenditure incurred for the purposes of a trade, profession or business by a person about to carry on the trade, profession or business is to be treated as if it had been incurred by that person on the first day on which the person carries on the trade, profession or business.(11) In this section and sections 16EB and 16EC— copyright (版權) means— (a) a copyright within the meaning of section 2(1) of the Copyright Ordinance (Cap. 528), including an unregistered corresponding design as defined by section 87(5)(b) of that Ordinance; or (b) any right that—(i) subsists under the law of a place outside Hong Kong in any work in which a copyright referred to in paragraph (a) may subsist; and(ii) corresponds to a copyright referred to in paragraph (a); maximum period of protection (最長保護限期) means— (a) in the case of a specified intellectual property right that is a copyright—(i) (if the copyright subsists under the Copyright Ordinance (Cap. 528)) the maximum period for which the copyright may subsist under that Ordinance; or(ii) (if the copyright subsists under the law of a place outside Hong Kong) the maximum period for which the copyright may subsist under the law of that place; (ab) in the case of a specified intellectual property right that is a performer’s economic right—(i) (if the right is conferred by Part III of the Copyright Ordinance (Cap. 528)) the maximum period for which the right may be conferred under that Ordinance; or(ii) (if the right subsists under the law of a place outside Hong Kong) the maximum period for which the right may subsist under the law of that place; (Added 24 of 2018 s. 5) (ac) in the case of a specified intellectual property right that is a protected layout-design (topography) right—(i) (if the right is in a layout-design (topography) that is protected under section 3 of the Layout-design (Topography) of Integrated Circuits Ordinance (Cap. 445)) the maximum period for which the layout-design may be protected under that Ordinance; or(ii) (if the right subsists under the law of a place outside Hong Kong) the maximum period for which the right may subsist under the law of that place; (Added 24 of 2018 s. 5) (ad) in the case of a specified intellectual property right that is a protected plant variety right—(i) (if the right is granted under Part III of the Plant Varieties Protection Ordinance (Cap. 490)) the maximum period for which the grant of the right may be in force under that Ordinance; or(ii) (if the right subsists under the law of a place outside Hong Kong) the maximum period for which the right may subsist under the law of that place; (Added 24 of 2018 s. 5) (b) in the case of a specified intellectual property right that is a registered design—(i) (if the design is registered under the Registered Designs Ordinance (Cap. 522)) the maximum period for which the design may be registered under that Ordinance; or(ii) (if the design is registered under the law of a place outside Hong Kong) the maximum period for which the design may be registered under the law of that place; performer (表演者) has the meaning given by section 200(2) of the Copyright Ordinance (Cap. 528); (Added 24 of 2018 s. 5) performer’s economic right (表演者的經濟權利) means— (a) a right mentioned in section 215(1)(a), (b), (c) or (d) of the Copyright Ordinance (Cap. 528) and conferred by Part III of that Ordinance on a performer; or (b) a right that corresponds to the right mentioned in paragraph (a) and subsists under the law of a place outside Hong Kong; (Added 24 of 2018 s. 5) protected layout-design (topography) right (受保護的布圖設計(拓樸圖)權利) means— (a) a right in a layout-design (topography) that is protected under section 3 of the Layout-design (Topography) of Integrated Circuits Ordinance (Cap. 445); or (b) a right that corresponds to the right mentioned in paragraph (a) and subsists under the law of a place outside Hong Kong; (Added 24 of 2018 s. 5) protected plant variety right (受保護植物品種權利) means— (a) a right granted under Part III of the Plant Varieties Protection Ordinance (Cap. 490); or (b) a right that corresponds to the right mentioned in paragraph (a) and subsists under the law of a place outside Hong Kong; (Added 24 of 2018 s. 5) registered design (註冊外觀設計) means a design registered under section 25 of the Registered Designs Ordinance (Cap. 522) or under the law of any place outside Hong Kong;registered trade mark (註冊商標) means a trade mark registered under section 47 of the Trade Marks Ordinance (Cap. 559) or under the law of any place outside Hong Kong; specified capital expenditure (指明資本開支)— (a) means any capital expenditure incurred on the purchase of any specified intellectual property right and includes legal expenses and valuation fees incurred in connection with the purchase; but (b) does not include any capital expenditure that may be deducted under any other section of this Part; Note— Please also see subsection (14). (Added 24 of 2018 s.

5) specified intellectual property right (指明知識產權) means a copyright, performer’s economic right, protected layout-design (topography) right, protected plant variety right, registered design or registered trade mark. (Replaced 24 of 2018 s. 5)(12) In this section and sections 16EB and 16EC, a reference to the purchase or sale of any specified intellectual property right includes the purchase or sale of a share or interest in the specified intellectual property right.(13) To avoid doubt, any expenditure incurred on the acquisition of a licence (as defined by section 16EC(8)) of any specified intellectual property right is not deductible under this section.(14) In this section, a reference to specified capital expenditure is—(a) if specified capital expenditure is incurred in relation to a copyright, registered design or registered trade mark—a reference to specified capital expenditure incurred during a year of assessment beginning on or after 1 April 2011; or(b) if specified capital expenditure is incurred in relation to a performer’s economic right, protected layout-design (topography) right or protected plant variety right—a reference to specified capital expenditure incurred during a year of assessment beginning on or after 1 April 2018. (Replaced 24 of 2018 s. 5)(Added 21 of 2011 s. 6) 16EB. Proceeds of sale of specified intellectual property rights to be treated as trading receipts (1) This section applies despite the exclusion relating to the sale of capital assets in section 14.(2) Where any specified intellectual property right in respect of which a deduction has been allowed to any person under section 16EA in ascertaining the profits from a trade, profession or business is subsequently sold by the person—(a) if there is an unallowed amount that exceeds the relevant proceeds of sale, the excess is to be deducted for the year of assessment in the basis period for which the sale occurs;(b) if there is an unallowed amount but the relevant proceeds of sale exceed that amount, the excess is, to the extent that it is not chargeable to tax under any other section of this Part and does not exceed the amount of the deduction, to be treated as a trading receipt of the trade, profession or business, arising in or derived from Hong Kong and accruing—(i) at the time of the sale; or(ii) if the sale occurs on or after the date on which the trade, profession or business is permanently discontinued, immediately before the discontinuance; or(c) if there is not an unallowed amount, the relevant proceeds of sale are, to the extent that they are not chargeable to tax under any other section of this Part and do not exceed the amount of the deduction, to be treated as a trading receipt of the trade, profession or business, arising in or derived from Hong Kong and accruing—(i) at the time of the sale; or(ii) if the sale occurs on or after the date on which the trade, profession or business is permanently discontinued, immediately before the discontinuance.(3) In this section—relevant proceeds of sale (有關售賣得益), in relation to any specified intellectual property right in respect of which a deduction has been allowed under section 16EA, means—(a) if section 16EA(7) does not apply, the proceeds of sale of the specified intellectual property right; or(b) if section 16EA(7) applies, that part of the proceeds of sale of the specified intellectual property right that is proportionate to the extent to which the deduction has been allowed;unallowed amount (未獲容許扣除額), in relation to any specified intellectual property right in respect of which a deduction has been allowed under section 16EA and which is subsequently sold, means—(a) if section 16EA(7) does not apply, the amount of specified capital expenditure incurred in relation to the specified intellectual property right that is still unallowed as at the time of the sale; or(b) if section 16EA(7) applies, that part of the amount referred to in paragraph (a) that is proportionate to the extent to which the deduction has been allowed.(Added 21 of 2011 s. 6) 16EC. Deduction under section 16E or 16EA not allowable under certain circumstances (1) No deduction is allowable under section 16EA in respect of any specified intellectual property right purchased by a person if—(a) at any time before the commencement date, the specified intellectual property right had been used by the person under a licence the expiry date of which fell on or after the commencement date;(b) the licence was terminated before that expiry date; and(c) the Commissioner is of the opinion that, having regard to the early termination of the licence, the consideration for the purchase is not reasonable consideration in the circumstances of the case.(2) No deduction is allowable under section 16E or 16EA in respect of any relevant right purchased by a person wholly or partly from an associate.(3) For the purposes of subsection (2), any relevant right that is purchased or sold by a trustee of a trust estate or a corporation controlled by the trustee is deemed to have been purchased or sold by each of the trustee, the corporation and the beneficiary under the trust.(4) No deduction is allowable under section 16E or 16EA in respect of any relevant right purchased by a person (taxpayer) if at a time when the relevant right is owned by the taxpayer, a person holds rights as a licensee under a licence of the relevant right, and—(a) the relevant right was, before it was purchased by the taxpayer, owned and used by that person (whether alone or with others) or any associate of that person (which person or any such associate is referred to in this section as the end-user);(b) the relevant right is, while the licence is in force, used wholly or principally outside Hong Kong by a person other than the taxpayer; or(c) the whole or a predominant part of the consideration for the purchase of the relevant right was financed directly or indirectly by a non-recourse debt.(5) Subsection (4)(a) does not apply if—(a) the relevant right was purchased by the taxpayer from the end-user with a consideration not more than the consideration paid by the end-user to the supplier for purchasing the relevant right from the supplier (not being a supplier who is an end-user);(b) the purchase referred to in paragraph (a) by the end-user from the supplier occurred on or after the commencement date; and(c) no deduction under section 16E or 16EA has been allowed to the end-user in respect of the relevant right at any time before the purchase of the relevant right by the taxpayer.(6) For the purposes of subsection (5), a deduction is deemed not to have been made if the end-user, by notice in writing to the Commissioner within a period of 3 months beginning on the day on which the capital expenditure or specified capital expenditure is incurred in relation to the relevant right giving rise to the deduction, or within a further period that the Commissioner may in any particular case permit, disclaims the deduction.(7) For the purposes of subsections (4) and (5), if a trustee of a trust estate or a corporation controlled by the trustee—(a) owns any relevant right; or(b) holds rights as a licensee under a licence of the relevant right, the trustee, the corporation and the beneficiary under the trust are each deemed to be—(c) the owner of the relevant right; or(d) the holder of rights as a licensee of the relevant right (as the case may be).(8) In this section— associate (相聯者), in relation to a person who purchases a relevant right or holds rights as a licensee under a licence of a relevant right (including a person who is deemed to have purchased a relevant right or deemed to be holding rights as such licensee) (first-mentioned person), means— (a) if the first-mentioned person is a natural person—(i) any relative of the first-mentioned person;(ii) any partner of the first-mentioned person;(iii) if a partner of the first-mentioned person is a natural person, any relative of that partner;(iv) any partnership of which the first-mentioned person is a partner;(v) any corporation controlled by—(A) the first-mentioned person;(B) a relative of the first-mentioned person;(C) a partner of the first-mentioned person;(D) if a partner of the first-mentioned person is a natural person, any relative of that partner; or(E) a partnership of which the first-mentioned person is a partner; or(vi) any director or principal officer of a corporation referred to in subparagraph (v); (b) if the first-mentioned person is a corporation—(i) any associated corporation;(ii) any person who controls the first-mentioned person;(iii) any partner of a person who controls the first-mentioned person;(iv) if a person who controls the first-mentioned person is a natural person, any relative of that person;(v) if a partner referred to in subparagraph (iii) is a natural person, any relative of that partner;(vi) any director or principal officer of the first-mentioned person or of any associated corporation;(vii) any relative of a director or principal officer referred to in subparagraph (vi);(viii) any partner of the first-mentioned person; or(ix) if a partner of the first-mentioned person is a natural person, any relative of that partner; or (c) if the first-mentioned person is a partnership—(i) any partner of the first-mentioned person;(ii) if a partner of the first-mentioned person is a partnership, any partner (Partner A) of that partnership or any partner (Partner B) with that partnership in any other partnership;(iii) if Partner A is a partnership, any partner of Partner A;(iv) if Partner B is a partnership, any partner of Partner B;(v) if a partner of, or with, or in any of the partnerships referred to in subparagraph (ii), (iii) or (iv) is a natural person, any relative of that partner;(vi) any corporation controlled by—(A) the first-mentioned person;(B) a partner of the first-mentioned person;(C) if a partner of the first-mentioned person is a natural person, any relative of that partner; or(D) a partnership of which the first-mentioned person is a partner;(vii) any director or principal officer of a corporation referred to in subparagraph (vi); or(viii) any corporation of which any partner of the first-mentioned person is a director or principal officer; associated corporation (相聯法團), in relation to a person who purchases a relevant right or holds rights as a licensee under a licence of a relevant right (including a person who is deemed to have purchased a relevant right or deemed to be holding rights as such licensee) (first-mentioned person), means— (a) a corporation over which the first-mentioned person has control; (b) a corporation which has control over the first-mentioned person; or (c) a corporation which is under the control of the same person as is the first-mentioned person; beneficiary under the trust (信託的受益人) means any person who benefits or is capable (whether by the exercise of a power of appointment or otherwise) of benefiting under a trust estate, either directly or through any interposed person, or who is able or might reasonably be expected to be able, whether directly or indirectly, to control the activities of the trust estate or the application of its corpus or income; commencement date (生效日期) means— (a) in relation to a specified intellectual property right that is a copyright, registered design or registered trade mark—16 December 2011; (b) in relation to a specified intellectual property right that is a performer’s economic right, protected layout-design (topography) right or protected plant variety right—the day on which the Inland Revenue (Amendment) (No. 5) Ordinance 2018 (24 of 2018) comes into operation*; (Replaced 24 of 2018 s. 6) control (控制), in relation to a corporation (first-mentioned corporation), means the power of a person to secure— (a) by means of the holding of shares or the possession of voting power in or in relation to the first-mentioned corporation or any other corporation; or (b) by virtue of any powers conferred by the articles of association or other document regulating the first-mentioned corporation or any other corporation, that the affairs of the first-mentioned corporation are conducted in accordance with the wishes of that person; end-user (最終使用者) means any person (whether alone or with others) holding rights as a licensee under a licence of any relevant right or any associate of the person; licence (特許), in relation to a relevant right— (a) means a licence (however described and whether general or limited) authorizing the licensee to use the relevant right in the manner authorized by the licence; but (b) does not include an agreement under which the ownership of the relevant right will or may be sold to or pass to the licensee unless, in the opinion of the Commissioner, the right under the agreement to purchase or obtain the ownership of the relevant right would reasonably be expected not to be exercised, and licensee (特許持有人) is to be construed accordingly; non-recourse debt (無追索權債項), in relation to the financing of the whole or a predominant part of the consideration for the purchase of any relevant right, means a debt where the rights of the creditor in the event of default in the repayment of principal or payment of interest— (a) are limited wholly or predominantly to any or all of the following—(i) rights (including a right to moneys payable) in relation to the relevant right or the use of the relevant right;(ii) rights (including a right to moneys payable) in relation to goods or services that are produced, supplied or provided using the relevant right;(iii) rights (including a right to moneys payable) in relation to the loss or disposal of the whole or a part of—(A) the relevant right; or(B) the taxpayer’s interest in the relevant right;(iv) any conjunction of those rights referred to in subparagraphs (i), (ii) and (iii);(v) rights in respect of a mortgage or other security over the relevant right;(vi) rights arising out of any arrangement relating to the financial obligations of the end-user of the relevant right towards the taxpayer, being financial obligations in relation to the relevant right; (b) are in the opinion of the Commissioner capable of being limited as described in paragraph (a), having regard to either or both of the following—(i) the assets of the taxpayer;(ii) any arrangement to which the taxpayer is a party; or (c) if paragraphs (a) and (b) do not apply, are limited by reason that not all of the assets of the taxpayer (not being assets that are security for a debt of the taxpayer other than a debt arising in relation to the financing of the whole or part of the consideration for the purchase of the relevant right) would be available for the purpose of the discharge of the whole of the debt so arising (including the payment of interest) in the event of any action or actions by the creditor or creditors against the taxpayer arising out of the debt; principal officer (主要職員), in relation to a corporation, means— (a) a person employed by the corporation who, either alone or jointly with one or more other persons, is responsible under the immediate authority of the directors of the corporation for the conduct of the business of the corporation; or (b) a person employed by the corporation who, under the immediate authority of a director of the corporation or a person to whom paragraph (a) applies, exercises managerial functions in respect of the corporation; relative (親屬), in relation to a person, means the spouse, parent, child, brother or sister of that person, and, in deducing such a relationship— (a) an adopted child is regarded as a child of both the natural parents and the adopting parents; and (b) a step child is regarded as a child of both the natural parents and the step parents; relevant right (有關權利) means any patent rights (as defined by section 16E(4)), rights to any know-how (as defined by section 16E(4)) or specified intellectual property right.(Added 21 of 2011 s. 6) Editorial Note: * In operation on 29 June 2018. Subdivision 6 Expenditure on Building Refurbishment and Prescribed Fixed Assets (Added 15 of 2020 s. 2) 16F. Expenditure on building refurbishment (1) Notwithstanding anything in section 17, in the basis period for any year of assessment, a person who incurs capital expenditure on the renovation or refurbishment of a building or structure other than a domestic building or structure may claim the expenditure as an outgoing or expense, to the extent that it is incurred in the production of profits chargeable to tax under this Part, as an expense incurred in the production of profits and a deduction from those profits is allowed in accordance with this section. (Amended 32 of 1998 s. 9)(2) For the purposes of subsection (1), a deduction is allowed for one-fifth of the expenditure in the basis period in which the expenditure was actually incurred and the remaining part is to be allowed by 4 equal deductions, one in each of the basis periods for the next succeeding 4 years of assessment.(3) The person is not entitled to the allowances under Part 6 for any capital expenditure incurred on the renovation or refurbishment of a building or structure where a deduction for the expenditure is allowed under this section. (Amended 32 of 1998 s. 9)(4) This section does not apply to—(a) capital expenditure incurred for a building or structure which is used or intended to be used as a domestic building or structure;(b) capital expenditure incurred by a person to enable a building or structure to be first used substantially by the person for the production of profits in respect of which the person is chargeable to tax under this Part;(c) capital expenditure incurred by a person to enable a building or structure to be used for a purpose different from that for which it was used immediately before the capital expenditure was incurred. (Replaced 32 of 1998 s. 9)(5) In this section—building or structure (建築物或構築物) includes part of a building or structure;domestic building or structure (住用建築物或構築物) means any building or structure used for habitation, but does not include any building or structure used as a hotel or guesthouse, or any part of a hotel or guesthouse;hotel or guesthouse (酒店或賓館) has the meaning given by section 2A of the Hotel and Guesthouse Accommodation Ordinance (Cap. 349). (Added 6 of 2020 s. 44)(Added 24 of 1996 s. 7. Amended E.R. 1 of 2012; 6 of 2020 s. 44) 16G. Capital expenditure on the provision of a prescribed fixed asset (1) Notwithstanding anything in section 17, in ascertaining the profits of a person from any trade, profession or business in respect of which the person is chargeable to tax under this Part for any year of assessment, there shall, subject to subsections (2) and (3), be deducted any specified capital expenditure incurred by the person during the basis period for that year of assessment.(2) Where a prescribed fixed asset in respect of which any specified capital expenditure is incurred is used partly in the production of profits chargeable to tax under this Part and partly for any other purposes, the deduction allowable under this section shall be such part of the specified capital expenditure as is proportionate to the extent of the use of the asset in the production of the profits so chargeable to tax under this Part.(3) (a) Notwithstanding the exclusion relating to the sale of capital assets contained in section 14, where any prescribed fixed asset in respect of which any specified capital expenditure has been allowed as a deduction to any person under this section in ascertaining the profits from a trade, profession or business is thereafter sold by him—(i) subject to subparagraph (ii), the proceeds of sale;(ii) if the deduction has been allowed in accordance with subsection (2), such part of the proceeds of sale as is proportionate to the extent to which the specified capital expenditure has been allowed as a deduction in respect of that asset in accordance with that subsection,shall, to the extent that the proceeds of sale or the part of the proceeds of sale, as the case may be, is not otherwise chargeable to tax under this Part and does not exceed the amount of the deduction, be treated as a trading receipt arising in or derived from Hong Kong of the trade, profession or business accruing at the time of the sale or, if the sale occurs on or after the date on which the trade, profession or business is permanently discontinued, accruing immediately before the discontinuance.(b) For the purposes of paragraph (a), where any prescribed fixed asset in respect of which any specified capital expenditure has been allowed as a deduction to any person under this section in ascertaining the profits from a trade, profession or business is thereafter destroyed, the asset shall be treated as if it had been sold immediately before the destruction thereof, and any insurance moneys or other compensation of any description received by the person in respect of the destruction and any moneys received by him in respect of the remains of the asset shall be treated as if they were proceeds of that sale.(c) Where, in relation to the sale of a prescribed fixed asset, which is referred to in paragraph (a)—(i) the buyer is a person over whom the seller has control;(ii) the seller is a person over whom the buyer has control;(iii) both the seller and the buyer are persons over both of whom some other person has control; or(iv) the sale is between a husband and his wife, not being a wife living apart from her husband,the Commissioner shall, if he is of the opinion that the sale price of the asset does not represent its true market value at the time of the sale, determine such true market value, and the amount so determined shall, for the purposes of this subsection, be deemed to be the proceeds of sale of the asset.(d) For the purposes of this subsection, the reference to the time of the sale, in relation to a prescribed fixed asset, shall be construed as a reference to the time of completion of the sale of the asset, or the time when possession of the asset is given, whichever is earlier.(4) (a) Subject to paragraph (c), where, immediately prior to the commencement of this section, a person owned and had in use any machinery or plant which is a prescribed fixed asset, that person shall, for the purposes of this section, be deemed to have incurred, at the time of the commencement of this section, specified capital expenditure in relation to that machinery or plant.(b) The specified capital expenditure deemed to have been incurred by a person in relation to any machinery or plant under paragraph (a) shall be the capital expenditure incurred on the provision of that machinery or plant, as reduced by the aggregate of—(i) the amount of the initial allowances, if any, under section 37(1), 37A(1) or 39B(1); and(ii) the amount of the annual allowances, if any, under section 37(2), 37A(3) or 39B(2),made to the person in respect of the capital expenditure in all prior years of assessment.(c) (i) Paragraph (a) shall only apply to a person where the person has elected in writing that the paragraph shall so apply to him, at any time before the expiration of one month after the date on which a notice of the assessment made in respect of the person for the year of assessment commencing on 1 April 1998 under section 59 is given under section 62.(ii) An election under subparagraph (i), once made, is irrevocable.(5) For the purposes of this section, any specified capital expenditure incurred for the purposes of a trade, profession or business by a person about to carry on such trade, profession or business shall be treated as if it had been incurred by that person on the first day on which he does carry on such trade, profession or business.(6) In this section—excluded fixed asset (例外固定資產) means a fixed asset in which any person holds rights as a lessee under a lease;prescribed fixed asset (訂明固定資產) means—(a) such of the machinery or plant specified in items 16, 20, 24, 26, 28, 29, 31, 33 and 35 of the First Part of the Table annexed to rule 2 of the Inland Revenue Rules (Cap. 112 sub. leg. A) as is used specifically and directly for any manufacturing process;(b) computer hardware, other than that which is an integral part of any machinery or plant;(c) computer software and computer systems,but does not include an excluded fixed asset;specified capital expenditure (指明資本開支), in relation to a person, means any capital expenditure incurred by the person on the provision of a prescribed fixed asset, but does not include—(a) capital expenditure that may be deducted under any other section in this Part;(b) capital expenditure incurred under a hire-purchase agreement.(Added 32 of 1998 s. 10) Subdivision 7 Expenditure on Environmental Protection Facilities (Added 15 of 2020 s. 2) 16H. Definitions and general provisions applicable to this section and sections 16I, 16J and 16K (1) In this section and sections 16I, 16J and 16K— building or structure (建築物或構築物) means— (a) any commercial building or structure as defined in section 40(1); or (b) any industrial building or structure as defined in section 40(1); capital expenditure (資本開支) has the meaning assigned to it by section 40(1);environment-friendly vehicle (環保車輛)—(a) means any vehicle that is specified in Part 3 of Schedule 17; but(b) does not include any vehicle in which any person holds rights as a lessee under a lease; (Added 10 of 2010 s. 3)environmental protection facility (環保設施) means—(a) any environmental protection machinery;(b) any environmental protection installation; or(c) any environment-friendly vehicle; (Replaced 10 of 2010 s. 3)environmental protection installation (環保裝置) means any installation, or part of any installation, that is specified in Part 2 of Schedule 17 and forms a building or structure;environmental protection machinery (環保機械)—(a) means any machinery or plant that is specified in Part 1 of Schedule 17; but(b) does not include any machinery or plant in which any person holds rights as a lessee under a lease;relevant interest (有關權益) has the meaning assigned to it by section 40(1);relevant proceeds of sale (有關售賣得益), in relation to an environmental protection facility in respect of which a deduction has been allowed under section 16I, means—(a) if section 16I(4) does not apply, the proceeds of sale of the facility; or(b) if section 16I(4) applies, such part of the proceeds of sale of the facility as is proportionate to the extent to which the deduction has been allowed;residue of expenditure (開支剩餘額) has the meaning assigned to it by section 40(1);specified capital expenditure (指明資本開支)—(a) means any capital expenditure incurred on—(i) the provision of any environmental protection machinery or environment-friendly vehicle; or (Amended 10 of 2010 s. 3)(ii) the construction of any environmental protection installation; but(b) does not include—(i) any capital expenditure that may be deducted under any other section of this Part; or(ii) any capital expenditure incurred under a hire-purchase agreement;unallowed amount (未獲容許扣除款額), in relation to an environmental protection installation in respect of which a deduction has been allowed under section 16I and which is subsequently sold, means—(a) if section 16I(4) does not apply, the amount of specified capital expenditure incurred in relation to the installation that is still unallowed as at the time of the sale; or(b) if section 16I(4) applies, such part of the amount referred to in paragraph (a) as is proportionate to the extent to which the deduction has been allowed.(Amended 10 of 2010 s. 3)(2) In this section and section 16K—(a) a reference to capital expenditure incurred on the provision of any environmental protection machinery or any machinery or plant includes capital expenditure incurred on alterations to an existing building incidental to the installation of that environmental protection machinery or that machinery or plant, as the case may be; and(b) a reference to capital expenditure incurred on the construction of any environmental protection installation or any building or structure does not include any expenditure incurred on the acquisition of, or of rights in or over, any land.(3) The Secretary for Financial Services and the Treasury may, after consultation with the Director of Environmental Protection, by notice published in the Gazette, amend Schedule 17.(Added 21 of 2008 s. 4) 16I. Deductions for specified capital expenditure incurred in relation to environmental protection facilities (1) Notwithstanding section 17, this section applies in ascertaining the profits from any trade, profession or business in respect of which a person is chargeable to tax under this Part for any year of assessment (referred to in this section as that year of assessment).(2) Any specified capital expenditure incurred by the person during the basis period for that year of assessment in relation to any environmental protection machinery or environment-friendly vehicle shall be deducted. (Amended 10 of 2010 s. 4)(3) If that year of assessment commences on or before 1 April 2017, any specified capital expenditure incurred by the person during the basis period for that year of assessment in relation to any environmental protection installation shall be deducted as follows— (Amended 32 of 2018 s. 14)(a) 20% shall be deducted for that year of assessment; and(b) the remaining part shall be deducted by 4 equal amounts, one for each of the next succeeding 4 years of assessment, so long as the installation has not been sold at the end of the basis period for the year of assessment concerned.(3A) Despite subsection (3)(b), any part of a specified capital expenditure that remains to be deducted for any year of assessment commencing on or after 1 April 2018 may be deducted in the year of assessment commencing on that date so long as the installation has not been sold on or before that date. (Added 32 of 2018 s. 14)(3B) If that year of assessment commences on or after 1 April 2018, any specified capital expenditure incurred by the person during the basis period for that year of assessment in relation to any environmental protection installation is to be deducted. (Added 32 of 2018 s. 14)(4) If an environmental protection facility is used partly in the production of profits chargeable to tax under this Part and partly for any other purposes, the amount that shall be deducted under subsection (2), (3), (3A) or (3B) is the amount of specified capital expenditure that is proportionate to the extent of the use of the facility in the production of those profits. (Amended 32 of 2018 s. 14)(5) A person is not entitled to the allowances under Part 6 in respect of any specified capital expenditure if a deduction for any part of the expenditure is allowed under this section.(6) For the purposes of this section, any specified capital expenditure incurred for the purposes of a trade, profession or business by a person about to carry on the trade, profession or business shall be treated as if it had been incurred by that person on the first day on which he carries on the trade, profession or business.(Added 21 of 2008 s. 4. Amended E.R. 1 of 2012) 16J. Proceeds of sale of environmental protection facilities to be treated as trading receipts (1) This section applies notwithstanding the exclusion relating to the sale of capital assets in section 14.(2) If any environmental protection machinery in respect of which a deduction has been allowed under section 16I in ascertaining the profits from a trade, profession or business is subsequently sold, the relevant proceeds of sale shall, to the extent that they are not chargeable to tax under any other section of this Part and do not exceed the amount of the deduction, be treated as a trading receipt of the trade, profession or business, arising in or derived from Hong Kong and accruing—(a) at the time of the sale; or(b) if the sale occurs on or after the date on which the trade, profession or business is permanently discontinued, immediately before the date of discontinuance. (2A) If any environment-friendly vehicle in respect of which a deduction has been allowed under section 16I in ascertaining the profits from a trade, profession or business is sold before the cessation of the trade, profession or business, the relevant proceeds of sale, to the extent that they are not chargeable to tax under any other section of this Part and do not exceed the amount of the deduction, are to be treated as trading receipts of the trade, profession or business, arising in or derived from Hong Kong and accruing at the time of the sale. (Added 10 of 2010 s. 5)(3) If any environmental protection installation in respect of which a deduction has been allowed under section 16I(3), (3A), or (4) in ascertaining the profits from a trade, profession or business is subsequently sold— (Amended 32 of 2018 s. 15)(a) if there is an unallowed amount that exceeds the relevant proceeds of sale, the excess shall be deducted for the year of assessment in the basis period for which the sale occurs;(b) if there is an unallowed amount but the relevant proceeds of sale exceed that amount, the excess shall, to the extent that it is not chargeable to tax under any other section of this Part and does not exceed the amount of the deduction, be treated as a trading receipt of the trade, profession or business, arising in or derived from Hong Kong and accruing—(i) at the time of the sale; or(ii) if the sale occurs on or after the date on which the trade, profession or business is permanently discontinued, immediately before the date of discontinuance; or(c) if there is not an unallowed amount, the relevant proceeds of sale shall, to the extent that they are not chargeable to tax under any other section of this Part and do not exceed the amount of the deduction, be treated as a trading receipt of the trade, profession or business, arising in or derived from Hong Kong and accruing—(i) at the time of the sale; or(ii) if the sale occurs on or after the date on which the trade, profession or business is permanently discontinued, immediately before the date of discontinuance.(3A) If an environmental protection installation for which a deduction has been allowed under section 16I(3B) or (4) is subsequently sold, the relevant proceeds of sale are, if the conditions specified in subsection (3B) are met, to be treated as a trading receipt of the trade, profession or business, arising in or derived from Hong Kong and accruing—(a) if the trade, profession or business is permanently discontinued and the sale occurs on or after the date of discontinuance—immediately before the date of discontinuance; or(b) otherwise—at the time of the sale. (Added 32 of 2018 s. 15)(3B) The conditions are—(a) that the proceeds of sale are not chargeable to tax under any other provision of this Part; and(b) that the proceeds of sale do not exceed the amount of the deduction under section 16I(3B) or (4). (Added 32 of 2018 s. 15)(4) If, in relation to the sale of an environmental protection facility as referred to in subsection (2), (2A), (3) or (3A)— (Amended 10 of 2010 s. 5; 32 of 2018 s. 15)(a) the buyer is a person over whom the seller has control;(b) the seller is a person over whom the buyer has control;(c) both the seller and the buyer are persons over both of whom some other person has control; or(d) the sale is between a husband and his wife, not being a wife living apart from her husband, the Commissioner shall, if he is of the opinion that the sale price of the facility does not represent its true market value at the time of the sale, determine such true market value, and the amount so determined shall, for the purposes of subsection (2), (2A), (3) or (3A), as the case may be, be treated as the proceeds of that sale. (Amended 10 of 2010 s. 5; 32 of 2018 s. 15)(5) For the purposes of subsections (2), (3) and (3A), if any environmental protection machinery or environmental protection installation in respect of which a deduction has been allowed to a person under section 16I in ascertaining the profits from a trade, profession or business is subsequently destroyed— (Amended 10 of 2010 s. 5; 32 of 2018 s. 15)(a) the machinery or installation is deemed to have been sold immediately before the destruction; and(b) any insurance money, other compensation of any description and any money derived from the remains of the machinery or installation that are received by the person in respect of the destruction are to be treated as the proceeds of that sale. (Amended 10 of 2010 s. 5)(5A) For the purposes of subsection (2A), if an environment-friendly vehicle in respect of which a deduction has been allowed to a person under section 16I in ascertaining the profits from a trade, profession or business is destroyed or stolen before the cessation of the trade, profession or business—(a) the vehicle is deemed to have been sold immediately before it was destroyed or stolen; and(b) any insurance money, other compensation of any description and any money derived from the remains of the vehicle that are received by the person in respect of the destruction or theft are to be treated as the proceeds of that sale. (Added 10 of 2010 s. 5)(5B) For the purposes of subsection (2A), if an environment-friendly vehicle in respect of which a deduction has been allowed to a person under section 16I in ascertaining the profits from a trade, profession or business has not been sold, destroyed or stolen before the cessation of the trade, profession or business—(a) the vehicle is deemed to have been sold immediately before the cessation; and(b) the person is deemed to have received immediately before the cessation the proceeds of that sale. (Added 10 of 2010 s. 5)(5C) The amount of proceeds of sale deemed to have been received under subsection (5B)(b) is such amount as the Commissioner may consider the vehicle would have realized had it been sold in the open market at the time of cessation. (Added 10 of 2010 s. 5)(5D) If the environment-friendly vehicle referred to in subsection (5B) is sold, destroyed or stolen on, or within 12 months after, the cessation of the trade, profession or business, the person may claim an adjustment to the amount deemed to have been received under subsection (5C). (Added 10 of 2010 s. 5)(5E) Despite section 70, an assessor may make any necessary correction to any assessment due to an adjustment under subsection (5D). (Added 10 of 2010 s. 5)(6) For the purposes of this section, a reference to the time of the sale, in relation to an environmental protection facility, shall be construed as a reference to the time of completion of the sale of the facility, or the time when possession of the facility is given, whichever is the earlier.(Added 21 of 2008 s. 4) 16K. Environmental protection facilities owned as at certain date (Amended 32 of 2018 s. 16)(1) Subject to subsection (7), if, immediately before the commencement date, a person owned and had in use any machinery or plant that is environmental protection machinery or any vehicle that is an environment-friendly vehicle, that person is, for the purposes of section 16I, deemed to have incurred, on the commencement date, specified capital expenditure in relation to that machinery, plant or vehicle. (Amended 10 of 2010 s. 6)(2) Subject to subsection (7), if, immediately before the commencement date, a person owned and had in use any machinery or plant that would otherwise have qualified as environmental protection machinery but for the fact that that machinery or plant does not comply with the registration or other requirements under Part 1 of Schedule 17, that person shall, for the purposes of section 16I, be deemed to have incurred specified capital expenditure in relation to that machinery or plant on the date on which the registration or other requirements are complied with.(3) The specified capital expenditure deemed to have been incurred by a person in relation to any machinery, plant or vehicle under subsection (1) or (2) shall be the capital expenditure incurred on the provision of that machinery, plant or vehicle reduced by the aggregate of— (Amended 10 of 2010 s. 6)(a) the amount of the initial allowances, if any, under section 37(1), 37A(1) or 39B(1); and(b) the amount of the annual allowances, if any, under section 37(2), 37A(2) or 39B(2), (Amended 10 of 2010 s. 6)made to the person in respect of the capital expenditure in all prior years of assessment.(4) Subject to subsection (7), if—(a) immediately before the commencement date, a person is entitled to an interest in any building or structure that is an environmental protection installation; and(b) that interest is the relevant interest in relation to the capital expenditure incurred on the construction of that building or structure,that person shall, for the purposes of section 16I(3) or (4), be deemed to have incurred, on the commencement date, specified capital expenditure in relation to that building or structure. (Amended 32 of 2018 s. 16)(5) Subject to subsection (7), if—(a) immediately before the commencement date, a person is entitled to an interest in any building or structure that would otherwise have qualified as an environmental protection installation but for the fact that that building or structure does not comply with the registration requirement under Part 2 of Schedule 17; and(b) that interest is the relevant interest in relation to the capital expenditure incurred on the construction of that building or structure,that person shall, for the purposes of section 16I(3) or (4), be deemed to have incurred specified capital expenditure in relation to that building or structure on the date on which the registration requirement is complied with. (Amended 32 of 2018 s. 16)(6) The specified capital expenditure deemed to have been incurred in relation to any building or structure under subsection (4) or (5) shall be the residue of expenditure in relation to that building or structure immediately before the commencement date, or the residue of expenditure in relation to that building or structure immediately before the date on which the registration requirement under Part 2 of Schedule 17 is complied with, whichever is applicable.(7) Where a person is deemed to have incurred specified capital expenditure under any of subsections (1), (2), (4) and (5) (referred to in this subsection as the relevant provision) in the basis period for any year of assessment, the relevant provision applies to him only if he, at any time within one month after the date on which a notice of the assessment made in respect of that year of assessment under section 59 is given under section 62, elects in writing that the relevant provision shall so apply to him.(8) An election under subsection (7), once made, is irrevocable.(9) In this section, commencement date (生效日期)— (a) in relation to any machinery, plant, building or structure, means 27 June 2008; (b) in relation to any vehicle, means the date on which the Inland Revenue (Amendment) (No. 3) Ordinance 2010 (10 of 2010) came into operation*. (Added 10 of 2010 s. 6) (Added 21 of 2008 s. 4) Editorial Note: * In operation on 18 June 2010. 16L. Environmental protection installations owned before 1 April 2018 (1) If—(a) a person has incurred capital expenditure (or is otherwise entitled to the relevant interest in relation to the capital expenditure incurred) on the construction of a building or structure before 1 April 2018;(b) the building or structure is an environmental protection installation; and(c) no deduction has previously been allowed under this Part for the expenditure,the person is, for the purposes of section 16I(3B), taken to have incurred specified capital expenditure in relation to the building or structure on 1 April 2018.(2) The specified capital expenditure is to be the residue of expenditure incurred in relation to the building or structure immediately before 1 April 2018.(3) The person may elect in writing for this section to apply if the person wishes to claim a deduction under section 16I(3B) in relation to the specified capital expenditure for the year of assessment commencing on 1 April 2018.(4) An election may only be made within 1 month after a notice of assessment for the year of assessment is given to the person under section 62.(5) An election is irrevocable.(Added 32 of 2018 s. 17) Subdivision 7A Spectrum Utilization Fees (Subdivision 7A added 1 of 2024 s. 4) 16M. Interpretation of Subdivision 7A of Division 4 of Part 4 (1) In this Subdivision—assignment term (指配期), in relation to the use of the radio spectrum that falls within any frequency band pursuant to an assignment under Cap. 106, means the period for which a person (including a person to whom the frequency band is unilaterally transferred or transferred on a swap) may so use the radio spectrum;Cap. 106 (《第106章》) means the Telecommunications Ordinance (Cap. 106);Communications Authority (通訊事務管理局) means the Communications Authority established by section 3 of the Communications Authority Ordinance (Cap. 616);frequency band (頻帶) includes any frequencies or combination of frequencies;radio spectrum (無線電頻譜) has the meaning given by section 2(1) of Cap. 106;spectrum utilization fee (頻譜使用費) means a fee (however described) payable under section 32I of Cap. 106 for the use of the radio spectrum (including, for a payment of such a fee by instalments, any increment amount that is payable under or pursuant to Cap. 106 in respect of any of the instalments).(2) For the purposes of this Subdivision—(a) the use of the radio spectrum that falls within a frequency band assigned to a person (Person A) under Cap. 106 is unilaterally transferred from Person A to another person (Person B) if—(i) with effect from a date, Person B replaces Person A as the person to whom the frequency band is assigned under Cap. 106 for use; and(ii) Person A does not, with effect from that date, replace Person B as the person to whom any other frequency band of the radio spectrum is assigned under Cap. 106 for use,and a reference to a unilateral transfer of the use of the radio spectrum that falls within a frequency band in this Subdivision is to be construed accordingly; and(b) the use of the radio spectrum that falls within a frequency band assigned to a person (Person C) under Cap. 106 is transferred from Person C to another person (Person D) on a swap if—(i) with effect from a date, Person D replaces Person C as the person to whom the frequency band is assigned under Cap. 106 for use;(ii) with effect from that date, Person C replaces Person D as the person to whom another frequency band of the radio spectrum is assigned under Cap. 106 for use; and(iii) despite the replacements—(A) the assignment term that was applicable for Person C’s and Person D’s respective use of the radio spectrum that falls within the original frequency band (original use) continues to apply for their use of the radio spectrum that falls within the changed frequency band (changed use); and(B) the respective spectrum utilization fee payable by Person C and Person D for the original use continues to be so payable for the changed use.(3) In subsection (2), a reference to a person’s replacing another person as the person to whom a frequency band of the radio spectrum is assigned under Cap. 106 for use—(a) is a reference to such a replacement that occurs pursuant to the Communications Authority’s exercise of a power under Cap. 106; but(b) does not include such a replacement that occurs because of a sale and purchase between the persons in respect of the use of the radio spectrum that falls within the frequency band. 16N.

Deductions for spectrum utilization fees (1) Despite section 17, this section applies in ascertaining the profits from a trade, profession or business in respect of which a person is chargeable to tax under this Part for any year of assessment.(2) Any capital expenditure that is a spectrum utilization fee incurred by the person is, to the extent that it is so incurred in the production of the profits for the person’s use of the radio spectrum in the carrying on of the trade, profession or business, to be allowed as a deduction from the profits.(3) The deduction is to be allowed in accordance with—(a) if the spectrum utilization fee is payable by annual instalments—section 16Q; or(b) in any other case—section 16R,but, in any event, the total amount of the deduction must not exceed the amount of the capital expenditure mentioned in subsection (2).(4) This section does not apply to—(a) any capital expenditure that is reimbursed by way of or attributable to any grant, subsidy or similar financial assistance; and(b) any capital expenditure incurred as a spectrum utilization fee that is prescribed or otherwise determined under Cap. 106 before the date on which the Inland Revenue (Amendment) (Tax Deductions for Spectrum Utilization Fees) Ordinance 2024 (1 of 2024) comes into operation*. Editorial Note: * In operation on 19 January 2024. 16O. Capital expenditures deemed as incurred in case of unilateral transfers for spectrum utilization fees payable other than by annual instalments (1) This section applies if—(a) a spectrum utilization fee is payable other than by annual instalments by a person (preceding assignee) for the use of the radio spectrum that falls within any frequency band; and(b) subsequently, such use of the radio spectrum is unilaterally transferred from a preceding assignee to another person (subsequent assignee).(2) For the purposes of section 16N—(a) on the date of the transfer, a spectrum utilization fee of the specified amount is deemed to be payable by the subsequent assignee for the subsequent assignee’s use of the radio spectrum that falls within the frequency band; and(b) accordingly, the subsequent assignee is deemed to incur on that date a capital expenditure that is a spectrum utilization fee of the specified amount for the subsequent assignee’s use of the radio spectrum.(3) In subsection (2), a reference to the specified amount is a reference to an amount arrived at by deducting from the total amount of the spectrum utilization fee that was paid before the transfer—(a) if a preceding assignee has used the radio spectrum that falls within the frequency band in the production of profits chargeable to tax under this Part—the total amount of the deduction allowable to the preceding assignee under this Subdivision in respect of the preceding assignee’s use of the radio spectrum that falls within the frequency band (total deduction amount for the preceding assignee); or(b) in any other case—an amount that would be the total deduction amount for the preceding assignee had a preceding assignee used the radio spectrum that falls within the frequency band in the production of profits chargeable to tax under this Part. 16P. Deductions not affected by transfers of frequency bands on swap To avoid doubt, even if the use of the radio spectrum that falls within a frequency band is transferred from a person to another person on a swap, for applying this Subdivision to each of those persons, the use of the radio spectrum by either person is taken to remain the same one throughout the assignment term concerned as if the transfer had never occurred. 16Q. Deductions for spectrum utilization fees payable by annual instalments (1) Unless subsection (2) applies, for the purposes of section 16N(3)(a)—(a) if the relevant use of the radio spectrum by the person begins in the basis period for the year of assessment in which the assignment term concerned begins (assignment year of assessment)—for each year of assessment in the basis period for which an instalment of the spectrum utilization fee is payable by the person, a deduction is allowable to the person for the relevant instalment amount; or(b) if the relevant use of the radio spectrum by the person begins in the basis period for a year of assessment (year of assessment A) other than the assignment year of assessment—(i) for year of assessment A, a deduction is allowable to the person for an amount equal to the sum of—(A) the relevant instalment amount of the spectrum utilization fee payable by the person in the basis period for year of assessment A; and(B) the aggregate amount of all such instalments that were payable by the person in the basis period for any years of assessment that fall before year of assessment A; and(ii) for each year of assessment falling after year of assessment A in the basis period for which such an instalment is payable by the person, a deduction is allowable to the person for the relevant instalment amount.(2) If an instalment of the spectrum utilization fee is payable by the person for the person’s use of the radio spectrum that falls within a frequency band pursuant to a unilateral transfer of such use to the person, then for the purposes of section 16N(3)(a)—(a) if the use begins in the basis period for the year of assessment in which the transfer is effected (transfer year of assessment)—for each year of assessment in the basis period for which an instalment of the spectrum utilization fee is payable by the person, a deduction is allowable to the person for the relevant instalment amount; or(b) if the use begins in the basis period for a year of assessment (year of assessment B) other than the transfer year of assessment—(i) for year of assessment B, a deduction is allowable to the person for an amount equal to the sum of—(A) the relevant instalment amount of the spectrum utilization fee payable by the person in the basis period for year of assessment B; and(B) the aggregate amount of all such instalments that were payable by the person in the basis period for any years of assessment that fall before year of assessment B; and(ii) for each year of assessment falling after year of assessment B in the basis period for which such an instalment is payable by the person, a deduction is allowable to the person for the relevant instalment amount. 16R. Deductions for spectrum utilization fees payable other than by annual instalments (1) Unless subsection (2) applies, for the purposes of section 16N(3)(b)—(a) if the relevant use of the radio spectrum by the person begins in the basis period for the year of assessment in which the assignment term concerned begins (assignment year of assessment)—for each eligible year of assessment, a deduction is allowable to the person for an amount equal to the total amount of the spectrum utilization fee payable by the person, divided by the total number of eligible years of assessment; or(b) if the relevant use of the radio spectrum by the person begins in the basis period for a year of assessment (year of assessment C) other than the assignment year of assessment—(i) for year of assessment C, a deduction is allowable to the person for an amount equal to the sum of—(A) an amount (subsection (1)(b)(i)(A) amount) equal to the total amount of the spectrum utilization fee payable by the person, divided by the total number of eligible years of assessment; and(B) an amount arrived at by multiplying the subsection (1)(b)(i)(A) amount by the total number of eligible years of assessment that fall before year of assessment C; and(ii) for each eligible year of assessment that falls after year of assessment C, a deduction is allowable to the person for the subsection (1)(b)(i)(A) amount.(2) If the spectrum utilization fee is payable by the person for the person’s use of the radio spectrum that falls within a frequency band pursuant to a unilateral transfer of such use to the person, then for the purposes of section 16N(3)(b)—(a) if the use begins in the basis period for the year of assessment in which the transfer is effected (transfer year of assessment)—for each remaining eligible year of assessment, a deduction is allowable to the person for an amount equal to the total amount of the spectrum utilization fee deemed under section 16O to be payable by the person, divided by the total number of remaining eligible years of assessment; or(b) if the use begins in the basis period for a year of assessment (year of assessment D) other than the transfer year of assessment—(i) for year of assessment D, a deduction is allowable to the person for an amount equal to the sum of—(A) an amount (subsection (2)(b)(i)(A) amount) equal to the total amount of the spectrum utilization fee deemed under section 16O to be payable by the person, divided by the total number of remaining eligible years of assessment; and(B) an amount arrived at by multiplying the subsection (2)(b)(i)(A) amount by the total number of remaining eligible years of assessment that fall before year of assessment D; and(ii) for each remaining eligible year of assessment that falls after year of assessment D, a deduction is allowable to the person for the subsection (2)(b)(i)(A) amount.(3) In this section, in relation to the use of the radio spectrum that falls within a frequency band by a person—(a) a reference to an eligible year of assessment is a reference to a year of assessment the basis period for which is—(i) unless subparagraph (ii) applies—(A) the first basis period; or(B) every subsequent basis period that ends before the last day of the assignment term; or(ii) if the assignment term and the first basis period begin on the same date—every basis period that overlaps with the assignment term; and(b) a reference to a remaining eligible year of assessment is a reference to an eligible year of assessment other than one for which—(i) a deduction is allowable to a transferor under this Subdivision in respect of the transferor’s use of the radio spectrum that falls within the frequency band; or(ii) a deduction would have been allowable to a transferor under this Subdivision had the transferor used the radio spectrum that falls within the frequency band.(4) Despite any other provision to the contrary in this section, if the use of the radio spectrum that falls within a frequency band is unilaterally transferred, no deduction under this Subdivision is allowable to the transferor for any year of assessment the basis period for which begins after the date of the transfer.(5) In this section, a reference to the first basis period is, in relation to the use of the radio spectrum for an assignment term, a reference to a period—(a) that is a basis period of the person to whom such use is first assigned for the assignment term; and(b) in which the assignment term begins.(6) For the purposes of subsection (3)(a)(i)(B) and (ii), every period of 12 months after the first basis period is, in relation to the use of the radio spectrum for an assignment term, taken to be a basis period (in addition to the first basis period).(7) In this section, a reference to a transferor is, in relation to the use of the radio spectrum that falls within a frequency band, a reference to a person from whom the frequency band is unilaterally transferred to another person. 16S. Released liabilities to pay spectrum utilization fees treated as trading receipts If, in ascertaining the profits from a trade, profession or business carried on in Hong Kong, any capital expenditure incurred by a person has been deducted under section 16N, but the person’s liability to pay the whole, or any part, of the spectrum utilization fee concerned is subsequently released, the amount of the liability so released is to be treated as a trading receipt arising in or derived from Hong Kong of the trade, profession or business accruing—(a) subject to paragraph (b), at the time of the release; or(b) if the release occurs on or after the date on which the trade, profession or business is permanently discontinued—immediately before the discontinuance. Subdivision 8 Non-deductible Expenditure (Added 15 of 2020 s. 2) 17. Deductions not allowed (1) For the purpose of ascertaining profits in respect of which a person is chargeable to tax under this Part no deduction shall be allowed in respect of— (Amended 36 of 1955 s. 25; 49 of 1956 s. 13)(a) domestic or private expenses, including—(i) the cost of travelling between the person’s residence and place of business; and*(ii) subject to section 16AA, contributions made to a mandatory provident fund scheme in the person’s capacity as a member of the scheme; (Replaced 4 of 1998 s. 6. Amended 31 of 1998 s. 25)*(b) subject to section 16AA, any disbursements or expenses not being money expended for the purpose of producing such profits; (Amended 36 of 1955 s. 25; 31 of 1998 s. 11)(c) any expenditure of a capital nature or any loss or withdrawal of capital;(d) the cost of any improvements;(e) any sum recoverable under an insurance or contract of indemnity;(f) rent of, or expenses in connection with, any premises or part of premises not occupied or used for the purpose of producing such profits; (Amended 36 of 1955 s. 25)(g) any tax paid or payable under this Ordinance other than salaries tax paid in respect of employees’ remuneration; (Replaced 3 of 1949 s. 7. Amended 36 of 1955 s. 25)(h) any sums that the person has, as an employer, paid in respect of an employee as—(i) an ordinary annual contribution to a fund established under a recognized occupational retirement scheme; or(ii) an ordinary annual premium for a contract of insurance under such a scheme; or(iii) regular contributions paid to a mandatory provident fund scheme, to the extent that the total of the payments exceeds 15 per cent of the total emoluments of the employee for the period to which the payments relate; (Replaced 4 of 1998 s. 6)(i) any provision made for the payment in respect of an employee of any sum referred to in paragraph (h), to the extent that the aggregate of such provision and any such payment as is referred to in that paragraph exceeds 15% of the total emoluments of that employee for the period in respect of which the provision is made; (Added 7 of 1986 s. 5. Amended 76 of 1993 s. 7)(j) any provision made in respect of an occupational retirement scheme other than for the payment of any sum referred to in paragraph (h); (Added 7 of 1986 s. 5. Amended 76 of 1993 s. 7)(k) any sum that the person has, as an employer, paid in respect of an employee as—(i) a contribution to a fund established under a recognized occupational retirement scheme; or(ii) a premium for a contract of insurance under such a scheme; or(iii) a contribution to a mandatory provident fund scheme,where provision for payment of the sum has been made in a prior year of assessment and a deduction has been allowed for the provision in that or another prior year of assessment; or (Replaced 4 of 1998 s. 6)(l) any—(i) contribution that the person has, as an employer, made to the funds of; or(ii) payment that that person has made as an employer for the purposes of the operation of,an occupational retirement scheme other than a recognized occupational retirement scheme. (Added 76 of 1993 s. 7. Amended 4 of 1998 s. 6)(2) In computing the profits or losses of a person carrying on a trade, profession or business, no deduction is allowable for—(a) salaries or other remuneration of the person’s spouse; or(b) interest on capital or loans provided by that spouse; or(c) a contribution made to a mandatory provident fund scheme in respect of that spouse; or(d) in the case of a partnership—(i) salaries or other remuneration of a partner or a partner’s spouse; or(ii) interest on capital or loans provided by a partner or by a partner’s spouse; or*(iii) subject to section 16AA, a contribution made to a mandatory provident fund scheme in respect of a partner or a partner’s spouse. (Replaced 4 of 1998 s. 6. Amended 31 of 1998 s. 25)(3) In this section—regular contributions (固定供款) has the same meaning as in section 16A(3). (Added 4 of 1998 s. 6) Editorial Note: * The amendments made by Ord. No. 31 of 1998 to section 17(1)(a)(ii) and (b) and (2)(d)(iii) apply in relation to the year of assessment commencing on 1 April 2000 and to all subsequent years of assessment. (31 of 1998 s. 2(2); L.N. 175 of 2000) Division 5 Treatment of Regulatory Capital Securities (Added 15 of 2020 s. 2) 17A. Financial institution: interpretation (1) In this section and sections 17B, 17C, 17D, 17E, 17F and 17G—Additional Tier 1 capital instrument (額外一級資本票據) means a capital instrument that qualifies as Additional Tier 1 capital under Schedule 4B to the Banking (Capital) Rules (Cap. 155 sub. leg. L), or under the equivalent laws or regulatory requirements of another member jurisdiction of the Basel Committee;associate (相聯者) has the meaning given by section 16(3);associated corporation (相聯法團) has the meaning given by section 16(3);banking LAC debt instrument (銀行LAC債務票據) means a LAC debt instrument as defined by rule 2(1) of the Financial Institutions (Resolution) (Loss-absorbing Capacity Requirements—Banking Sector) Rules (Cap. 628 sub. leg. B); (Added 4 of 2019 s. 8. Amended E.R. 6 of 2019)banking loss-absorbing capacity (銀行吸收虧損能力) means loss-absorbing capacity as defined by rule 2(1) of the Financial Institutions (Resolution) (Loss-absorbing Capacity Requirements—Banking Sector) Rules (Cap. 628 sub. leg. B); (Added 4 of 2019 s. 8. Amended E.R. 6 of 2019)banking non-capital LAC debt instrument (銀行非資本LAC債務票據) means a non-capital LAC debt instrument as defined by rule 2(1) of the Financial Institutions (Resolution) (Loss-absorbing Capacity Requirements—Banking Sector) Rules (Cap. 628 sub. leg. B); (Added 4 of 2019 s. 8. Amended E.R. 6 of 2019)Basel Committee (巴塞爾委員會) has the meaning given by section 2(1) of the Banking Ordinance (Cap. 155);Common Equity Tier 1 capital instrument ((普通股權一級資本票據) means a capital instrument that qualifies as Common Equity Tier 1 capital under Schedule 4A to the Banking (Capital) Rules (Cap. 155 sub. leg. L), or under the equivalent laws or regulatory requirements of another member jurisdiction of the Basel Committee;debt instrument (債務票據) means an instrument specified in Part 1 of Schedule 6 that is in respect of a debt issue; fair value (公平價值), in relation to a regulatory capital security— (a) if the security is accounted for in accordance with the International Financial Reporting Standards issued by the International Accounting Standards Board—has the meaning given by International Financial Reporting Standard 13 (Fair Value Measurement) as issued by the board and in force from time to time; and (b) otherwise—has the meaning given by Hong Kong Financial Reporting Standard 13 (Fair Value Measurement) as issued by the Hong Kong Institute of Certified Public Accountants and in force from time to time; (Replaced 4 of 2019 s. 8) fair value accounting (公平價值會計), in relation to a regulatory capital security, means a basis of accounting under which the security is shown in a balance sheet at its fair value; (Amended 4 of 2019 s. 8)paid-up amount (已付數額), in relation to a regulatory capital security or debenture or debt instrument, means the sum paid to the issuer for the issue of the security or debenture or instrument;regulatory capital security (監管資本證券) means, subject to subsection (2)—(a) a security that, for the purposes of the Banking (Capital) Rules (Cap. 155 sub. leg. L) or of the equivalent laws or regulatory requirements of another member jurisdiction of the Basel Committee—(i) qualifies or has qualified as an Additional Tier 1 capital instrument; and(ii) forms or formed a component of Additional Tier 1 capital;(b) a security that, for the purposes of the Banking (Capital) Rules (Cap. 155 sub. leg. L) or of the equivalent laws or regulatory requirements of another member jurisdiction of the Basel Committee—(i) qualifies or has qualified as a Tier 2 capital instrument; and(ii) forms or formed a component of Tier 2 capital;(c) an instrument issued by a financial institution that, for the purposes of the Financial Institutions (Resolution) (Loss-absorbing Capacity Requirements—Banking Sector) Rules (Cap. 628 sub. leg. B)— (Amended E.R. 6 of 2019)(i) qualifies or has qualified as a banking non-capital LAC debt instrument; and(ii) forms or formed a component of banking loss-absorbing capacity;(d) an instrument issued by a LAC banking entity that, for the purposes of the Financial Institutions (Resolution) (Loss-absorbing Capacity Requirements—Banking Sector) Rules (Cap. 628 sub. leg. B)— (Amended E.R. 6 of 2019)(i) qualifies or has qualified as a banking LAC debt instrument; and(ii) forms or formed a component of banking loss-absorbing capacity; or(e) in relation to an entity established or incorporated outside Hong Kong (other than a re-domiciled entity as defined by section 2(1) of the Banking Ordinance (Cap. 155)), an instrument that— (Amended 14 of 2025 s. 145)(i) is not a security referred to in paragraph (a) or (b); and(ii) constitutes a liability that is recognized in the way as described in paragraph (c) of the definition of loss-absorbing capacity in rule 2(1) of the Financial Institutions (Resolution) (Loss-absorbing Capacity Requirements—Banking Sector) Rules (Cap. 628 sub. leg. B); (Replaced 4 of 2019 s. 8. Amended E.R. 6 of 2019)Tier 2 capital instrument (二級資本票據) means a capital instrument that qualifies as Tier 2 capital under Schedule 4C to the Banking (Capital) Rules (Cap. 155 sub. leg. L), or under the equivalent laws or regulatory requirements of another member jurisdiction of the Basel Committee.(2) For the purposes of subsection (1), regulatory capital security does not include— (Replaced 4 of 2019 s. 8)(a) a share;(b) any debt instrument the terms and conditions of which provide for the issuer of the instrument converting, or having an option to convert, the instrument into a Common Equity Tier 1 capital instrument of the issuer or any other corporation after a certain period of time; or(c) subject to subsection (3), any debt instrument—(i) that carries a contractual right to any distribution or redemption payment that depends to any extent on the results of the business of the issuer of the instrument or of any part of that business; or(ii) that provides discretion to the issuer of the instrument to make any distribution or redemption payment that depends to any extent on the results of the business of that issuer or of any part of that business.(3) A debt instrument does not fall within subsection (2)(c) by reason only that the terms and conditions of the instrument provide for the reduction in distribution or redemption payment if the results of the business of the issuer of the instrument, or of any part of that business, worsen. (Amended 4 of 2019 s. 8)(Added 12 of 2016 s. 14) 17B. Financial institution: regulatory capital security treated as debt security (1) For the purposes of this Part—(a) a regulatory capital security is to be treated as a debt security; and(b) any sum payable in respect of a regulatory capital security by its issuer, other than a repayment of the paid-up amount of the security, is to be treated as interest payable on money borrowed by the issuer of an amount equal to the paid-up amount of the security.(2) Subsection (1) has effect subject to sections 17C, 17D, 17E, 17F and 17G.(Added 12 of 2016 s. 14) 17C. Financial institution: general provisions on issuer of regulatory capital security (1) This section applies in ascertaining profits in respect of which the issuer of a regulatory capital security is chargeable to tax under this Part for a year of assessment.(2) Profits of the issuer are to be determined as if fair value accounting were not generally accepted accounting practice in relation to the security or part of the security.(3) A sum representing—(a) the paid-up amount of the security being written down on a permanent or temporary basis in accordance with any laws or regulatory requirements or the terms and conditions of the security; or(b) the paid-up amount of the security being converted to a Common Equity Tier 1 capital instrument in accordance with any laws or regulatory requirements or the terms and conditions of the security,is not to be treated as a receipt arising in or derived from Hong Kong by the issuer from a trade, profession or business carried on in Hong Kong.(4) No deduction is to be allowed to the issuer under section 16(1) for any sum representing the paid-up amount of the security being written up in accordance with any laws or regulatory requirements or the terms and conditions of the security, following a write-down of the paid-up amount on a temporary basis in accordance with those laws or requirements or those terms and conditions.(Added 12 of 2016 s. 14) 17D. Financial institution: general provisions on regulatory capital security held by, or for benefit of, issuer’s specified connected person (1) This section applies in ascertaining profits in respect of which a specified connected person of the issuer of a regulatory capital security is chargeable to tax under this Part for a year of assessment if, during the basis period for the year of assessment, the security is held by or for the benefit of the specified connected person.(2) Profits of the specified connected person are to be determined as if fair value accounting were not generally accepted accounting practice in relation to the security or part of the security.(3) No deduction is to be allowed to the specified connected person under section 16(1) for any sum representing—(a) the paid-up amount of the security being written down on a permanent or temporary basis in accordance with any laws or regulatory requirements or the terms and conditions of the security; or(b) the paid-up amount of the security being converted to a Common Equity Tier 1 capital instrument in accordance with any laws or regulatory requirements or the terms and conditions of the security.(4) A sum representing the paid-up amount of the security being written up in accordance with any laws or regulatory requirements or the terms and conditions of the security, following a write-down of the paid-up amount on a temporary basis in accordance with those laws or requirements or those terms and conditions, is not to be treated as a receipt arising in or derived from Hong Kong by the specified connected person from a trade, profession or business carried on in Hong Kong.(5) In this section— connected person (有關連者), in relation to the issuer of a regulatory capital security, means— (a) an associated corporation of the issuer; or (b) a person (other than a corporation) who—(i) controls the issuer;(ii) is controlled by the issuer; or(iii) is under the control of the same person as is the issuer; market maker (市場莊家) means a person who— (a) is licensed or registered for dealing in securities under the Securities and Futures Ordinance (Cap. 571) or is authorized to do so by a regulatory authority in a major financial centre outside Hong Kong recognized by the Commissioner for the purposes of this section; (b) in the ordinary course of conduct of the person’s trade, profession or business in respect of market making, holds oneself out as being willing to buy and sell securities for the person’s own account and on a regular basis; and (c) is actively involved in market making in securities issued by a wide range of unrelated institutions; specified connected person (指明有關連者), in relation to the issuer of a regulatory capital security, means a connected person of the issuer who is not excepted within the meaning of subsection (6).(6) In this section, a connected person of the issuer of a regulatory capital security is excepted if the connected person—(a) (Repealed 4 of 2019 s. 9)(b) is entitled to a sum payable in respect of the security in the capacity of—(i) a person acting as a trustee of a trust estate, or holding property belonging to others pursuant to the terms of a contract, where the person is not beneficially entitled to the sum;(ii) a beneficiary of a unit trust to which section 26A(1A)(a)(i) or (ii) applies, where the sum is payable to a trustee of the unit trust in respect of a specified investment scheme referred to in section 26A(1A)(b); or(iii) a member of a retirement scheme that is either a recognized retirement scheme or a substantially similar retirement scheme established outside Hong Kong, where the Commissioner is satisfied that the latter scheme complies with the requirements of a supervisory authority within an acceptable regulatory regime;(c) is a market maker who, in the ordinary course of conduct of the market maker’s trade, profession or business in respect of market making, holds the security for the purpose of providing liquidity for the security;(d) is a public body; or(e) is a body corporate, where the Government owns beneficially more than half of the issued share capital of that body corporate for the time being.(Added 12 of 2016 s. 14) 17E. Financial institution: profits adjusted if associates deal not at arm’s length in connection with regulatory capital security (1) This section applies if—(a) conditions are made or imposed between a financial institution or LAC banking entity (specified institution or entity) and a person who is an associate of the specified institution or entity, in their commercial or financial relations in connection with a regulatory capital security; and(b) the conditions differ from those that would be made if the person were not such an associate.(2) Any profits that, but for the conditions referred to in subsection (1)(a), would have accrued to the specified institution or entity or the person and, by reason of those conditions, have not so accrued, are to be included in the profits of the specified institution or entity or the person and taxed in accordance with this Part.(Added 12 of 2016 s. 14. Amended 4 of 2019 s. 10) 17F. Financial institution: issuer’s deduction if regulatory capital security is issued to, held by or issued or held for benefit of specified connected person (1) No deduction is to be allowed to the issuer of a regulatory capital security (specified issuer) under section 16(1) for any sum payable in respect of the security if it is issued to, held by or issued or held for the benefit of a specified connected person of the specified issuer.(2) Subsection (1) does not apply to a sum payable in respect of a regulatory capital security issued to or for the benefit of a specified connected person of the specified issuer if both of the following conditions are met—(a) the money paid by or on behalf of the specified connected person for the issue of the security has been entirely funded, either directly or indirectly, by the proceeds of an external issue of a regulatory capital security or debenture or debt instrument by the specified connected person or an associated corporation of the specified issuer;(b) the externally issued regulatory capital security or debenture or debt instrument is not, at any time during the basis period of the specified issuer for the year of assessment concerned, held by or for the benefit of a specified connected person of the specified issuer.(3) The amount of any deduction allowable under subsection (2) is not to exceed the sum payable by the specified connected person or associated corporation (as the case requires) in respect of the externally issued regulatory capital security or debenture or debt instrument (other than the repayment of the paid-up amount).(4) Subsection (5) applies to a deduction allowable under subsection (2) if the externally issued regulatory capital security or debenture or debt instrument is held by or for the benefit of an associate (other than a specified connected person) of the specified issuer.(5) The amount of the deduction that, but for this subsection, would have been allowed under section 16(1) is to be reduced by any amount by which the sum payable to, or for the benefit of, that associate exceeds a reasonable commercial return on money borrowed of an amount equal to the paid-up amount for the externally issued regulatory capital security or debenture or debt instrument.(6) For the purposes of subsection (5), a reasonable commercial return means a return that, at the time the security or debenture or instrument was issued, would be regarded in the prevailing market conditions as a reasonable commercial return between persons dealing with each other at arm’s length in the open market.(7) In this section, a regulatory capital security or debenture or debt instrument is externally issued if the security or debenture or instrument is not issued to, or for the benefit of, a specified connected person of the specified issuer.(8) (Repealed 4 of 2019 s. 11)(9) The definition of market maker in section 17D(5) applies to this section as if a reference to “this section” in paragraph (a) of that definition were a reference to this section. (Amended 4 of 2019 s. 11)(9A) For the purposes of this section, a connected person (as defined by section 17D(5)) of the issuer of a regulatory capital security is a specified connected person of the issuer unless the connected person—(a) is chargeable to tax under this Part in respect of a sum payable in respect of the security;(b) is entitled to a sum payable in respect of the security in the capacity of—(i) a person acting as a trustee of a trust estate, or holding property belonging to others pursuant to the terms of a contract, where the person is not beneficially entitled to the sum;(ii) a beneficiary of a unit trust to which section 26A(1A)(a)(i) or (ii) applies, where the sum is payable to a trustee of the unit trust in respect of a specified investment scheme referred to in section 26A(1A)(b); or(iii) a member of a retirement scheme that is either a recognized retirement scheme or a substantially similar retirement scheme established outside Hong Kong, where the Commissioner is satisfied that the latter scheme complies with the requirements of a supervisory authority within an acceptable regulatory regime;(c) is a market maker who, in the ordinary course of conduct of the market maker’s trade, profession or business in respect of market making, holds the security for the purpose of providing liquidity for the security;(d) is a public body; or(e) is a body corporate, where the Government owns beneficially more than half of the issued share capital of that body corporate for the time being. (Added 4 of 2019 s. 11)(10) However, subsection (9A) applies for the purposes of construing a reference to specified connected person appearing in subsection (2)(b), (4) or (7) as if— (Amended 4 of 2019 s. 11)(a) the reference to “the issuer of a regulatory capital security” in subsection (9A) were a reference to the specified issuer; and(b) each reference to “the security” in subsection (9A)(a), (b) or (c) were a reference to the externally issued regulatory capital security or debenture or debt instrument referred to in subsection (2)(b), (4) or (7) (as the case requires). (Amended 4 of 2019 s. 11)(Added 12 of 2016 s. 14) 17G. Financial institution: non-resident financial institution’s Hong Kong branch treated as separate enterprise (1) This section applies in ascertaining profits in respect of which a non-resident financial institution with capital raised through the issue of a regulatory capital security is chargeable to tax under this Part in relation to its Hong Kong branch.(2) The profits of the Hong Kong branch of the non-resident financial institution are those that the Hong Kong branch would have made if it were a distinct and separate enterprise that—(a) engaged in the same or similar activities under the same or similar conditions; and(b) dealt wholly independently of the non-resident financial institution.(3) In applying subsection (2), account is to be taken of the functions performed, assets used and risks assumed by the non-resident financial institution—(a) through the Hong Kong branch; and(b) through the other parts of the non-resident financial institution.(4) In applying subsection (2), it is to be assumed that the Hong Kong branch—(a) has the same credit rating as the non-resident financial institution; and(b) has such equity and loan capital as it could reasonably be expected to have if it were a distinct and separate enterprise as described in that subsection.(5) In accordance with subsection (2), transactions in connection with a regulatory capital security between the Hong Kong branch and any other part of the non-resident financial institution are treated as taking place on such terms and conditions as would have been agreed between parties dealing at arm’s length.(6) No deduction is to be allowed for costs and expenses in excess of those that would have been incurred on the assumptions in subsection (4).(7) In this section—(a) non-resident financial institution (境外財務機構) means any financial institution whose head office is situated outside Hong Kong;(b) Hong Kong branch (香港分行) means any business carried on in Hong Kong by a non-resident financial institution.(Added 12 of 2016 s. 14) Division 6 Basis Period and Computation of Assessable Profits (Added 15 of 2020 s. 2) 18. Basis for computing profits (1) Save as provided in this section, the assessable profits for any year of assessment from any trade, profession or business carried on in Hong Kong shall be computed on the full amount of the profits therefrom arising in or derived from Hong Kong during the year preceding the year of assessment.(2) Where the Commissioner is satisfied that the accounts of a trade, profession or business carried on in Hong Kong are usually made up to some day other than 31 March, he may direct that the assessable profits from that source be computed on the amount of the profits therefrom arising in or derived from Hong Kong during the year ending on that day in the year preceding the year of assessment. Where, however, the assessable profits from any trade, profession or business have been computed by reference to an account made up to a certain day, and no account is made up to the corresponding day in the year following, the assessable profits from that source both for the year of assessment in which such failure occurs and for the 2 years of assessment following shall be computed on such basis as the Commissioner in his discretion thinks fit.(3) Subject to section 18C, where a person commences to carry on a trade, profession or business in Hong Kong on a day within a year of assessment, the assessable profits from that source for such year of assessment shall be computed on the amount of the profits therefrom arising in or derived from Hong Kong during the period beginning on the date of commencement and ending on the last day of that year of assessment. (Amended 7 of 1975 s. 11)(4) Where a person has commenced to carry on a trade, profession or business in Hong Kong on a day within the year preceding a year of assessment, the assessable profits from that source for that year of assessment shall be computed on the amount of the profits therefrom arising in or derived from Hong Kong for 1 year from such day:Provided that such person may claim, by giving notice in writing to the Commissioner, to have the assessable profits from the source for that year of assessment and for the following year of assessment (but not for one or other of those years) recomputed on the basis of the actual profits therefrom arising in or derived from Hong Kong during each such year respectively, but where the commencement is in the year of assessment commencing on 1 April 1973, such claim for recomputation shall relate only to the year of assessment commencing on 1 April 1974. (Amended 7 of 1975 s. 11)(5) Where a person ceases to carry on a trade, profession or business in Hong Kong the assessable profits from that source for the year of assessment in which the cessation occurs shall be computed on the amount of the profits therefrom arising in or derived from Hong Kong during the period beginning on 1 April in that year and ending on the date of cessation:Provided that where the profits arising in or derived from Hong Kong from that source during the year of assessment immediately preceding the year in which the cessation occurs exceed what would otherwise have been the assessable profits from that source for that preceding year such assessable profits shall be recomputed on the basis of the actual profits therefrom arising in or derived from Hong Kong during that preceding year and an additional assessment shall be made accordingly.(6) Notwithstanding the provisions of section 70 a claim made for an adjustment of any assessment because of a change in the basis period required or authorized under the provisions of this section shall be entertained if it is made in writing within 2 years after the end of the relevant year of assessment or, where the claim has been made under the proviso to subsection (4), within 2 years after the end of the second of the 2 years of assessment referred to in such proviso. A claim so made shall be regarded as an objection to an assessment under section 64 for the purposes of Part 11. (Amended 35 of 1965 s. 11)(7) This section shall apply to the years of assessment up to and including the year of assessment commencing on 1 April 1974. (Replaced 7 of 1975 s. 11)(Replaced 49 of 1956 s. 14. Amended 7 of 1986 s. 12; E.R. 1 of 2012) 18A. Assessable profits for the year of assessment 1974/5 (1) Where the assessable profits for the year of assessment commencing on 1 April 1974 from any trade, profession or business fall to be computed under section 18(1) but the actual profits from that source for that year of assessment exceed those assessable profits as so computed, then, notwithstanding section 18, the assessable profits for the year of assessment commencing on 1 April 1974 shall be computed on the basis of those actual profits.(2) Where the assessable profits for the year of assessment commencing on 1 April 1974 from any trade, profession or business fall to be computed under section 18(2) on the amount of profits from that source for the year ending on a day other than 31 March in the year preceding that year of assessment but the actual profits from that source—(a) for the year ending on the corresponding day in the year of assessment; or(b) if the accounts for that trade, profession or business were made up to more than 1 day in the year of assessment, for the year ending on such of those days as the Commissioner may direct,exceed those assessable profits as so computed, then, notwithstanding section 18, the assessable profits for the year of assessment commencing on 1 April 1974 shall be computed on the basis of those actual profits.(3) Where the assessable profits for the year of assessment commencing on 1 April 1974 from any trade, profession or business fall to be computed under section 18(4) but the lesser of the actual profits from that source for—(a) the year ending on the day in that year of assessment to which the accounts of that trade, profession or business were made up; or(b) that year of assessment,exceed those assessable profits as so computed, then notwithstanding section 18, the assessable profits for the year of assessment commencing on 1 April 1974 shall be computed on the basis of those actual profits.(4) For the purposes of applying this section there shall be disregarded any loss brought forward to the year of assessment commencing on 1 April 1974 under section 19(2).(Added 7 of 1975 s. 12) 18B. Basis for computing assessable profit for years of assessment commencing on 1 April 1975 (1) Subject to subsection (2) and to sections 18C, 18D and 18E, the assessable profits for any year of assessment commencing on or after 1 April 1975 from any trade, profession or business carried on in Hong Kong shall be computed on the full amount of the profits therefrom arising in or derived from Hong Kong during the year of assessment. (2) Subject to sections 18C, 18D and 18E, where the Commissioner is satisfied that the accounts of a trade, profession or business carried on in Hong Kong are made up to some day other than 31 March, he may direct that the assessable profits from that source for any year of assessment be computed on the full amount of profits therefrom arising in or derived from Hong Kong during the year ending on that day in the year of assessment. (Added 7 of 1975 s. 12. Amended 7 of 1986 s. 12) 18C. Commencement of source of profits in years of assessment commencing on or after 1 April 1974 (1) Subject to subsection (2) where a person commences to carry on a trade, profession or business in Hong Kong within any year of assessment commencing on or after 1 April 1974 and the Commissioner is satisfied that the first accounts of such trade, profession or business after its commencement are made up to some day other than 31 March, the assessable profits from that source for that year of assessment shall—(a) if the first accounts are made up to a day within that year of assessment, be computed on the full amount of the profits from that source arising in or derived from Hong Kong during the period beginning on the day of commencement and ending on the day to which the accounts are made up; or(b) if the first accounts are for a period in excess of a year and are made up to a day within a year of assessment following that in which the commencement occurred, be computed on such basis as the Commissioner thinks fit. (Amended 7 of 1986 s. 12)(2) Where the first accounts of a trade, profession or business commenced in any year of assessment commencing on or after 1 April 1974 are for a period of 1 year or less and are made up to a day within the year of assessment following that in which the commencement occurred, there shall be deemed to be no assessable profits for the year of assessment in which the commencement occurred.(Added 7 of 1975 s. 12) 18D. Cessation of source of profits in years of assessment commencing on 1 April 1975 (1) Save as provided in this section, where, in any year of assessment commencing on or after 1 April 1975, a person ceases to carry on a trade, profession or business in Hong Kong, the assessable profits from that source for the year of assessment in which the cessation occurs shall be computed on the amount of the profits therefrom arising in or derived from Hong Kong during the period beginning on the day following the end of the basis period for the year preceding the year of assessment and ending on the date of cessation.(2) Where in any year of assessment commencing on or after 1 April 1975 a person ceases to carry on a trade, profession or business in Hong Kong which was commenced by him in Hong Kong before 1 April 1974, the assessable profits from that source for the year of assessment in which the cessation occurs shall be computed on the amount of the profits therefrom arising in or derived from Hong Kong during the period beginning on 1 April in that year and ending on the date of cessation: Provided that where a person ceases to carry on such trade, profession or business in Hong Kong other than by reason of the death of an individual previously carrying on a trade, profession or business as the sole proprietor thereof, and the trade, profession or business, or any part thereof, is transferred to or carried on by any other person as his trade, profession or business, this subsection shall not apply, but the cessation shall be deemed to be a cessation for the purposes of subsection (1). (Amended 71 of 1983 s. 16; 4 of 2010 s.

5)(2A) Where a person ceases to carry on a relevant trade, profession or business on or after 1 April 1979, the following amount shall be treated as assessable profits therefrom for the year of assessment in which the cessation occurs and shall be in addition to the assessable profits therefrom which, apart from this subsection, fall to be computed for that year of assessment—(a) in the case of an excepted trade, profession or business, the amount, if any, by which the relevant profits therefrom arising in or derived from Hong Kong during the relevant period exceed the transitional amount;(b) in the case of any other relevant trade, profession or business, the full amount of any relevant profits therefrom arising in or derived from Hong Kong during the relevant period,and, for the purposes of this subsection, profits are relevant profits if, but for subsection (2) and apart from Part 6, the assessable profits for that year of assessment would have included those profits, and—excepted trade, profession or business (特定行業、專業或業務) means a relevant trade, profession or business referred to in the definition in this subsection of transitional amount;relevant period (有關期間) means the period beginning on the day next following the end of the basis period for the year preceding the year of assessment in which the cessation occurs and ending on 31 March in the year preceding the year of assessment in which the cessation occurs;relevant trade, profession or business (有關行業、專業或業務) means a trade, profession or business to which subsection (2) applies and in the case of which the basis period for the year preceding the year of assessment in which the cessation occurs ends on a day other than 31 March; transitional amount (過渡期款額) means— (a) where the assessable profits from a relevant trade, profession or business for the year of assessment commencing on 1 April 1974 fell to be computed under section 18(2) on the amount of profits therefrom for the year ending on a day other than 31 March in the year preceding that year of assessment, the amount of profits from the relevant trade, profession or business arising in or derived from Hong Kong during the period beginning on the day next following the corresponding day in that year of assessment and ending on 31 March 1975; (b) where the assessable profits from a relevant trade, profession or business for the year of assessment commencing on 1 April 1974 fell to be computed under section 18A(2), the amount of profits from the relevant trade, profession or business arising in or derived from Hong Kong during the period beginning on the day next following the end of the basis period for that year of assessment and ending on 31 March 1975, and where a loss was incurred in the carrying on of a relevant trade, profession or business referred to in paragraph (a) or (b) of this definition during the period therein referred to, transitional amount, in relation to that trade, profession or business, shall be construed to mean a nil amount. (Added 34 of 1980 s. 2) (3)-(4) (Repealed 56 of 1993 s. 12)(5) Where a person who commenced to carry on a trade, profession or business in Hong Kong in a year of assessment commencing on or after 1 April 1975—(a) ceases to carry on such trade, profession or business in the year of assessment following that in which such commencement occurred; and(b) by virtue of section 18C(2), there has been deemed to be no assessable profits for the year of assessment in which the commencement occurred,the assessable profits for the year of assessment in which the cessation occurs shall be recomputed on the basis of the actual profits arising in or derived from Hong Kong from the date of the commencement to the date of cessation.(6)-(7) (Repealed 19 of 1996 s. 6)(Added 7 of 1975 s. 12. Amended 7 of 1986 s. 12; E.R. 1 of 2012) 18E. Change of accounting date and apportionments (1) Where the assessable profits of a person from any trade, profession or business carried on in Hong Kong have been computed by reference to an account made up to a certain day in any year of assessment and either— (Amended 7 of 1986 s. 12)(a) that person fails to make up an account to the corresponding day in the following year of assessment; or(b) that person makes up accounts to more than one day in the following year of assessment,then—(i) the assessable profits from that source for the year of assessment in which the circumstances described in either paragraph (a) or (b) prevail shall be computed on such basis as the Commissioner thinks fit; and(ii) the assessable profits for the year preceding that year of assessment shall be recomputed on such basis as the Commissioner thinks fit.(2) For the purposes of subsection (1)—(a) where the accounts of any trade, profession or business are made up to the end of the Lunar year, the Commissioner may accept those accounts as being made up to a corresponding day in each year of assessment; and(b) in the case of a trade, profession or business which was commenced on or after 1 April 1974, the Commissioner may, if he considers it necessary, make a computation under subsection (1) in respect of a basis period which exceeds 12 months.(3) For the purposes of this Part, where in the case of a trade, profession or business it is necessary in order to arrive at the assessable profits or the losses for any year of assessment to divide or apportion to specific periods the profits and losses for any period for which accounts have been made up, or to aggregate any such profits or losses or any apportioned parts thereof, it shall be lawful to make such division and apportionment or aggregation, and any such apportionment shall be made in proportion to the number of days or months in the respective periods unless the Commissioner, having regard to any special circumstances, otherwise directs.(4) For the purposes of section 18D(2A), where in the case of a trade, profession or business it is necessary in order to arrive at the profits or losses for any period to divide or apportion to specific periods the profits and losses for any period for which accounts have been made up, or to aggregate any such profits or losses or any apportioned parts thereof, the Commissioner may make such division and apportionment or aggregation as he may deem proper in that case. (Added 34 of 1980 s. 3)(Added 7 of 1975 s. 12) 18F. Adjustment of assessable profits (1) The amount of assessable profits for any year of assessment of a person chargeable to tax under this Part shall be increased by the amount of any balancing charge directed to be made on that person under Part 6 and decreased by the allowances made to that person under Part 6 for that year of assessment to the extent to which the relevant assets are used in the production of the assessable profits.(2) When in any year of assessment the amount of the allowances made under Part 6 to any person chargeable to tax under this Part exceeds the total amount of that person’s assessable profits, as increased by any balancing charge, the amount of such excess shall, for the purposes of section 19C, be deemed to be a loss of that person for that year of assessment.(3) This section shall apply to the year of assessment commencing on 1 April 1975 and to subsequent years of assessment.(Added 7 of 1975 s. 12. Amended E.R. 1 of 2012) Division 7 Treatment of Financial Instruments (Added 15 of 2020 s. 2) Note without legislative effect on sections 18G, 18H, 18I, 18J, 18K and 18L— 1. The specified financial reporting standards (as defined in section 18G(1)) require enterprises to account for financial instruments on a fair value basis (that is, both realized and unrealized profits of the instruments have to be accounted for in the financial statements) in certain circumstances. Sections 18G, 18H, 18I, 18J, 18K and 18L provide for the alignment of the treatment of financial instruments for profits tax purpose with their accounting treatment. 2. Sections 18I, 18J, 18K and 18L apply to a taxpayer who follows a specified financial reporting standard and elects that those sections apply to the taxpayer (see section 18H). 3. Section 18I explains the effect of sections 18J, 18K and 18L on the other Part 4 provisions in determining whether any profit, gain, loss, income or expense is chargeable to tax or allowable for deduction. (The other Part 4 provisions are provisions of this Part other than sections 18G, 18H, 18I, 18J, 18K and 18L.) In summary—(a) for the purposes of this Part, profits are not limited to realized profits despite the other Part 4 provisions and a change in fair value of a financial instrument is to be brought into account in assessing profits tax in certain circumstances;(b) also, the way in which a profit, gain, loss, income or expense is computed is changed in certain circumstances (for example, interest is computed in some cases at the effective rate instead of the contractual rate); and(c) apart from the changes described in paragraphs (a) and (b), sections 18J and 18L apply subject to the other Part 4 provisions. 4. Under section 18J, the amount of profit, gain, loss, income or expense computed for a financial instrument for profits tax purpose for a period is the amount of profit, gain, loss, income or expense recognized for the instrument for accounting purpose for the period. 5. Sections 18K and 18L provide for special treatment of an impairment loss, an equity instrument or financial liability on revenue account, an embedded derivative, a preference share, a loan made or debt security issued otherwise than on an arm’s length basis and a hedging instrument. (Added 6 of 2019 s. 3) 18G. Financial instrument: interpretation of this section and sections 18H, 18I, 18J, 18K and 18L (1) In this section and sections 18H, 18I, 18J, 18K and 18L—recognized (確認)—see subsection (2)(a); specified financial reporting standard (指明財務報告準則)— (a) unless paragraph (b) applies, means—(i) the Hong Kong Financial Reporting Standard 9 (Financial Instruments) issued by the Hong Kong Institute of Certified Public Accountants, as in force from time to time;(ii) the International Financial Reporting Standard 9 (Financial Instruments) issued by the International Accounting Standards Board, as in force from time to time; or(iii) a financial reporting standard adopted by a relevant authority of a jurisdiction other than Hong Kong, as in force from time to time, which is, in the Commissioner’s opinion, equivalent to the standard referred to in subparagraph (ii); or (b) in relation to a person for a year of assessment for which the person prepares financial statements in accordance with a standard referred to in paragraph (a)(i), (ii) or (iii), means that standard; (Amended 21 of 2025 s. 8) tax (稅) means tax charged under this Part. (Added 21 of 2025 s. 8)(2) If a person prepares financial statements for the basis period for a year of assessment in accordance with a specified financial reporting standard—(a) recognized in this section or section 18H, 18I, 18J, 18K or 18L (other than section 18L(6)(c)), in relation to the person and the year, means recognized in accordance with the standard; and(b) an expression used in this section or section 18H, 18I, 18J, 18K or 18L has the same meaning in relation to the person and the year as the expression has in the standard if the expression is—(i) defined in the standard; and(ii) not defined in this section or section 18H, 18I, 18J, 18K or 18L.(Added 6 of 2019 s. 3) 18H. Financial instrument: application of sections 18I, 18J, 18K and 18L (1) Sections 18I, 18J, 18K and 18L apply for ascertaining profits in respect of which a person is chargeable to tax under this Part for a year of assessment only if— (Amended 21 of 2025 s. 9)(a) the person prepares financial statements for the basis period for the year in accordance with a specified financial reporting standard; and(b) the person has elected in writing that those sections apply to the person (election) and the election has effect for the year.(2) A person may make an election for a year of assessment (election year) and, subject to subsections (4), (5), (6) and (7), the election—(a) is irrevocable; and(b) has effect for the election year and all subsequent years of assessment.(3) The amount of any profit, gain, loss, income or expense which would have been brought into account for computing the person’s assessable profits for the basis period for any year of assessment preceding the election year, had the assessable profits been computed on the basis set out in sections 18I, 18J, 18K and 18L, must be brought into account for computing the person’s assessable profits for the election year.(4) Despite subsection (2), an election may be revoked with the Commissioner’s approval under subsection (5) and, on the revocation, the election ceases to have effect from the year of assessment specified by the Commissioner.(5) The Commissioner may, on a person’s application in writing, approve the revocation of the person’s election if the person proves to the Commissioner’s satisfaction—(a) that there are good commercial reasons for the revocation; and(b) that avoidance of tax is not the main purpose, or one of the main purposes, of the revocation.(6) If, after a person has made an election, the person ceases to prepare, in accordance with a specified financial reporting standard, financial statements for the basis period for a year of assessment, the election ceases to have effect from the year.(7) If an election ceases to have effect from a year of assessment under subsection (4) or (6) (cessation year)—(a) sections 18I, 18J, 18K and 18L do not apply to the person for the cessation year and all subsequent years of assessment; and(b) every financial instrument held by the person at the end of the basis period for the year of assessment immediately preceding the cessation year is taken to have been disposed of and reacquired, or released and reassumed, at its fair value on the first day of the basis period for the cessation year.(Added 6 of 2019 s. 3) 18I. Financial instrument: effect of sections 18J, 18K and 18L on other Part 4 provisions (1) This section applies in determining whether any profit, gain, loss, income or expense is chargeable to tax or allowable for deduction in relation to a person to whom this section applies under section 18H for a year of assessment.(2) Sections 18J, 18K and 18L do not affect the operation of sections 17C and 17D.(3) Subject to subsection (2), sections 18J, 18K and 18L apply despite any other Part 4 provisions to the extent that—(a) those other provisions (regardless of how they are expressed) would otherwise limit the profit, gain, loss, income or expense chargeable to tax or allowable for deduction to that which is realized, received, receivable, accrued, paid, payable or incurred; or(b) under those other provisions (regardless of how they are expressed), any profit, gain, loss, income or expense would otherwise be computed in a way different from that provided for in any of sections 18J, 18K and 18L (whether or not by having the profit, gain, loss, income or expense wholly or partly brought into account for a different year of assessment).(4) Except as provided for in subsection (3), sections 18J and 18L apply subject to the other Part 4 provisions.(5) In this section—other Part 4 provisions (第4部其他條文) means provisions of this Part other than sections 18G, 18H, 18I, 18J, 18K and 18L.(Added 6 of 2019 s. 3) 18J. Financial instrument: generally, profits etc. for accounting purpose taken to be profits etc. for taxation purpose (1) In relation to a person to whom this section applies under section 18H for a year of assessment, the tax-relevant amount in respect of a financial instrument is the accounting-relevant amount in respect of the instrument.(2) Subsection (1) applies subject to sections 18K and 18L.(3) For subsection (1)—(a) the tax-relevant amount in respect of a financial instrument is the amount of profit, gain, loss, income or expense to be brought into account for computing the person’s assessable profits in respect of the instrument for the basis period for the year of assessment; and(b) the accounting-relevant amount in respect of a financial instrument is the amount which is recognized in determining any profit, gain, loss, income or expense of the person in respect of the instrument for the basis period for the year of assessment.(4) In applying subsection (1) to a financial instrument that is measured at fair value through profit or loss—(a) if the person derives interest from the instrument—the amount of interest chargeable to tax is the amount recognized in profit or loss;(b) if the person incurs interest on any money borrowed by the person for the purpose of producing the person’s assessable profits—the amount of interest allowable as a deduction is the amount recognized in profit or loss;(c) if the instrument is a debt security and the person derives a gain from a discount or premium on the debt security—the amount of gain chargeable to tax is the amount recognized in profit or loss; and(d) if the instrument is a debt security that the person issues at a discount or redeems at a premium, and the proceeds of the issue of the debt security are applied for the purpose of producing the person’s assessable profits—the amount of discount or premium allowable as a deduction is the amount recognized in profit or loss.(5) In applying subsection (1) to a financial instrument that is measured at amortized cost or fair value through other comprehensive income—(a) if the person derives interest from the instrument—the amount of interest chargeable to tax is the amount recognized in profit or loss at the effective interest rate;(b) if the person incurs interest on any money borrowed by the person for the purpose of producing the person’s assessable profits—the amount of interest allowable as a deduction is the amount recognized in profit or loss at the effective interest rate;(c) if the instrument is a debt security and the person derives a gain from a discount or premium on the debt security—the amount of gain chargeable to tax is the amount recognized in profit or loss at the effective interest rate; and(d) if the instrument is a debt security that the person issues at a discount or redeems at a premium, and the proceeds of the issue of the debt security are applied for the purpose of producing the person’s assessable profits—the amount of discount or premium allowable as a deduction is the amount recognized in profit or loss at the effective interest rate.(Added 6 of 2019 s. 3) 18K. Financial instrument: special treatment of impairment loss (1) This section applies in relation to a person to whom this section applies under section 18H for a year of assessment.(2) Any impairment loss recognized by the person in respect of a financial instrument that is not credit-impaired is not deductible and any subsequent reversal of any amount of the impairment loss is not chargeable to tax.(3) If an impairment loss is recognized by the person in respect of a financial instrument that is credit-impaired—(a) if the instrument represents a debt that was included as a trading receipt in ascertaining the person’s assessable profits for the basis period in which the debt arose—the impairment loss is allowable as a deduction up to the amount of the debt so included;(b) if the instrument represents a debt in respect of money lent, in the ordinary course of the business of lending money in Hong Kong, by the person who carries on that business—the impairment loss is allowable as a deduction up to the amount of the debt; and(c) in any other case—the impairment loss is not deductible.(4) If—(a) a deduction of an amount was previously allowed to the person for a year of assessment—(i) under section 16(1)(d) in respect of a bad debt or doubtful debt in respect of a financial instrument; or(ii) under subsection (3) in respect of an impairment loss in respect of a financial instrument; and(b) recovery or reversal of an amount of the bad debt, doubtful debt or impairment loss is recognized by the person for a subsequent year of assessment,the amount recovered or reversed is chargeable to tax for the subsequent year of assessment.(5) If—(a) a financial instrument purchased or originated by the person is credit-impaired on initial recognition; and(b) the instrument is on revenue account,any impairment gain recognized by the person in respect of the instrument for a year of assessment is treated as the person’s trading receipt for the year.(6) Subsection (7) or (8) applies if—(a) the person (transferor), being a financial institution, transfers to another person (transferee)—(i) a credit-impaired loan; with(ii) a loss allowance, for an expected credit loss arising from that loan, that is made in accordance with the specified financial reporting standard;(b) the transfer is not by way of a sale in the ordinary course of the transferor’s business; and(c) in respect of the loss allowance made, a deduction of an amount was previously allowed to the transferor under section 16(1)(d) in respect of a bad debt or doubtful debt or under subsection (3) in respect of an impairment loss.(7) If, on the date of the transfer referred to in subsection (6), both the transferor and the transferee are in the business of lending money in Hong Kong, the deduction referred to in subsection (6)(c) is treated as having been allowed to the transferee, despite any provision of this Part.(8) If, on the date of the transfer referred to in subsection (6), the transferor or the transferee is, or both are, not in the business of lending money in Hong Kong, the amount of deduction referred to in subsection (6)(c) is treated as the transferor’s trading receipt arising in or derived from Hong Kong from a trade, profession or business carried on by the transferor in Hong Kong and accruing on the date of the transfer.(Added 6 of 2019 s. 3) 18L. Financial instrument: special treatment of equity instrument, financial liability, embedded derivative, preference share, non-arm’s length loan, etc. (1) This section applies in relation to a person to whom this section applies under section 18H for a year of assessment.(2) If an equity instrument on revenue account of the person that is measured at fair value through other comprehensive income is disposed of during the basis period for a year of assessment (year of disposal)—(a) a gain to the person that is derived from the disposal, including any cumulative gain recognized in other comprehensive income, is chargeable to tax for the year of disposal; and(b) a loss to the person that is derived from the disposal, including any cumulative loss recognized in other comprehensive income, is allowable as a deduction for the year of disposal.(3) Subsections (4) and (5) apply if a financial instrument—(a) is on revenue account of the person and is a financial liability measured at fair value through profit or loss; and(b) matures or is sold, bought back or redeemed (each an event) during the basis period for a year of assessment (event year).(4) A gain to the person that is derived from the event, including any cumulative gain recognized in other comprehensive income, is chargeable to tax for the event year.(5) A loss to the person that is derived from the event, including any cumulative loss recognized in other comprehensive income, is allowable as a deduction for the event year.(6) If—(a) the person issues a debt security;(b) the debt security is issued with an embedded derivative to acquire shares or units in the person; and(c) the embedded derivative is recognized as an equity component in accordance with—(i) the Hong Kong Accounting Standard 32 (Financial Instruments: Presentation) issued by the Hong Kong Institute of Certified Public Accountants, as in force from time to time;(ii) the International Accounting Standard 32 (Financial Instruments: Presentation) issued by the International Accounting Standards Board, as in force from time to time; or(iii) an accounting standard adopted by a relevant authority of a jurisdiction other than Hong Kong, as in force from time to time, which is, in the Commissioner’s opinion, equivalent to the standard referred to in subparagraph (ii),the part of the interest, discount, premium or expense recognized by the person in respect of the debt security that is attributable to the embedded derivative is not deductible.(7) Any interest, discount, premium or expense recognized by the person in respect of a preference share issued by the person is not deductible.(8) Subsection (9) has effect without affecting the operation of sections 50AAF and 50AAK.(9) If—(a) the person is the lender or borrower of a loan or is the issuer or holder of a debt security; and(b) the loan is made, or the debt security is issued, otherwise than at arm’s length to or by another person,the amount of profit, gain, loss, income or expense in respect of the loan or debt security that is chargeable to tax, or allowable as a deduction, is the amount computed in accordance with the contractual terms of the loan or debt security.(10) An amount of profit, gain, loss, income or expense recognized by the person in respect of a hedging instrument must be disregarded if—(a) the hedging instrument is designated, under a hedging arrangement made in good faith, for the purpose of hedging against any risk associated with a hedged item; and(b) the hedged item is on capital account.(Added 6 of 2019 s. 3) Division 8 Treatment of Losses (Added 15 of 2020 s. 2) 19. Treatment of losses (1) Where a loss is incurred in any year of assessment up to and including the year of assessment commencing on 1 April 1974 by a person chargeable to tax under this Part the amount of such loss attributable to activities in Hong Kong shall notwithstanding the provisions of section 70 be set off against what would otherwise have been the assessable profits of such person for that year of assessment. (Amended 49 of 1956 s. 15; 7 of 1975 s. 13; 7 of 1986 s. 12; 32 of 1998 s. 11)(2) Where the amount of loss which may set off under subsection (1) is such that it cannot be wholly set off against the assessable profits of a person chargeable to tax under this Part for the year of assessment in which the loss occurred, the amount not so set off shall be carried forward and shall be set off against what would otherwise have been assessable profits of that person for the future years of assessment in succession:Provided that—(a) the amount of any such loss allowed to be set off in computing the assessable profits for any year of assessment shall not be set off in computing the assessable profits for any other year of assessment; and(b) where a loss is set off under this subsection in respect of the year of assessment commencing on 1 April 1975 or any subsequent year of assessment, that loss shall be set off before the set off of any loss under section 19C. (Replaced 7 of 1975 s. 13)(3)-(4) (Repealed 56 of 1993 s. 13)(Replaced 36 of 1955 s. 28) 19A. (Repealed 56 of 1993 s. 14) 19B. (Repealed 56 of 1993 s. 15) 19C. Treatment of losses after 1 April 1975* (1) Subject to sections 19CB and 19CF, where in any year of assessment— (Amended 17 of 2024 s. 4)(a) an individual sustains a loss in any trade, profession or business carried on by him; and (b) either of the following conditions is met—(i) the individual (whether married or not) does not elect for personal assessment under section 41(1) for the year of assessment;(ii) the individual and the individual’s spouse do not jointly elect for personal assessment under section 41(1A) for the year of assessment, (Replaced 32 of 2018 s. 4)the amount of that loss shall be carried forward and set off against the amount of his assessable profits from that trade, profession or business for subsequent years of assessment. (Amended 71 of 1983 s. 17; 43 of 1989 s. 9)(2) Subject to sections 19CB and 19CF, where in any year of assessment— (Amended 17 of 2024 s. 4)(a) an individual incurs a share of a loss of a partnership in any trade, profession or business carried on by that partnership; and(b) either of the following conditions is met—(i) the individual (whether married or not) does not elect for personal assessment under section 41(1) for the year of assessment;(ii) the individual and the individual’s spouse do not jointly elect for personal assessment under section 41(1A) for the year of assessment, (Replaced 32 of 2018 s. 4)the amount of that share of the loss shall be carried forward and set off against the amount of his share of assessable profits of the partnership from that trade, profession or business for subsequent years of assessment: (Amended 71 of 1983 s. 17; 43 of 1989 s. 9) Provided that where at the end of the year of assessment commencing on 1 April 1983 a share of a loss to be carried forward under this subsection is one that was incurred by a husband and wife, not being a wife living apart from her husband, in partnership with each other, whether or not also with other persons— (i) the share of the loss shall be deemed to be apportioned between the husband and wife in the proportions in which they were entitled to share profits between themselves as at the last day of the basis period for that year of assessment; and (ii) each such portion of the share of the loss shall be carried forward and set off against the husband’s or, as the case may be, the wife’s respective share of assessable profits of the partnership from that trade, profession or business for subsequent years of assessment. (Added 71 of 1983 s. 17) (3) Subject to subsection (3A), where in any year of assessment an individual has sustained a loss or has incurred a share of a loss of a partnership and—(a) the individual (whether married or not) is personally assessed under Part 7; or (Replaced 32 of 2018 s. 4)(b) the individual and the individual’s spouse have jointly elected to be personally assessed under Part 7, (Replaced 32 of 2018 s. 4)the amount of the loss or share of the loss shall be dealt with in accordance with that Part. (Replaced 71 of 1983 s. 17)(3A) For the purposes of Part 7, where the loss or the share of the loss referred to in subsection (3) consists solely of the balance of an unabsorbed loss calculated in accordance with section 19CAB(3), the amount of the loss or the share of the loss shall be deemed to be the amount arrived at by dividing such balance by the adjustment factor within the meaning of section 19CA. (Added 32 of 1998 s. 12. Amended 15 of 2020 s. 6)(4) Subject to sections 19CB and 19CF, where in any year of assessment a corporation or a person, who is not an individual, a partnership or a corporation, carrying on a trade, profession or business sustains a loss in that trade, profession or business, the amount of that loss shall be set off against the assessable profits of the corporation or person (including its share of the assessable profits of a partnership in which it is a partner) for that year of assessment and to the extent not so set off, shall be carried forward and set off against the corporation’s or the person’s assessable profits and its share of assessable profits of such a partnership for subsequent years of assessment. (Amended 17 of 2024 s. 4)(5) Subject to sections 19CB and 19CF, where— (Amended 17 of 2024 s. 4)(a) a trade, profession or business is carried on in Hong Kong by persons in partnership and any one of those persons is a corporation or is a person who is not an individual, a partnership or a corporation; and (Amended 7 of 1986 s. 12)(b) in any year of assessment a loss is incurred in that trade, profession or business,then the corporation’s or the person’s share of that loss shall be set off against the assessable profits of the corporation or the person for the year of assessment in which the loss was incurred and to the extent not so set off, be carried forward and, for subsequent years of assessment, be set off first against the corporation’s or the person’s share of the assessable profits of such partnership and, to the extent not so set off, then against the assessable profits of the corporation or the person.(6) For the purposes of this section—(a) the amount of any loss set off in computing the assessable profits for any year of assessment shall not be set off in computing the assessable profits for any other year of assessment;(b) the amount of any loss carried forward to any year of assessment to be set off against the assessable profits for that year shall not be set off more than once in that year of assessment;(c) the total amount set off against assessable profits shall not exceed the amount of the loss;(d) the amount of any loss to be set off under this section shall be the loss attributable to activities in Hong Kong; (Amended 30 of 1981 s. 4; 7 of 1986 s. 12)(e) the amount of any loss sustained in any trade, profession or business carried on for the benefit of a trust by a person in his capacity as trustee shall not be available for set off except against the assessable profits of that trust from that trade, profession or business for subsequent years of assessment; (Added 30 of 1981 s. 4. Amended 17 of 2024 s. 4)(f) if, because of a concession provision (as defined by section 19CA), a person is exempt from payment of tax, or chargeable to tax at 0%, in respect of the person’s assessable profits derived from the activities or transactions specified in the concession provision for the basis period of the person for a year of assessment, the amount of any loss sustained from any of those activities or transactions by the person is not available for set off against—(i) any of the person’s assessable profits for that basis period; and(ii) any of the person’s assessable profits for the basis period for any subsequent year of assessment. (Added 17 of 2024 s. 4)(7) (Repealed 30 of 2004 s. 3)(8) This section shall apply to the year of assessment commencing on 1 April 1975 and to subsequent years of assessment.(Added 7 of 1975 s. 16. Amended 32 of 1998 s. 12; E.R. 1 of 2012) Editorial Note: * The amendments made by Part 2 of Ord. No. 32 of 2018 to this section apply in relation to all years of assessment commencing on or after 1 April 2018. (Please see 32 of 2018 s. 3) 19CA. Treatment of unabsorbed losses under sections 19CAB and 19CAC (concessionary trading receipts chargeable to tax at same rate and normal trading receipts): interpretation (Amended 17 of 2024 s. 5)In this section and sections 19CAB and 19CAC—adjustment factor (調整分數), in relation to a year of assessment, means the factor calculated in accordance with the formula— A B where: A means the rate specified in Schedule 1 or 8, as may be applicable, for that year of assessment; and B in relation to any concessionary trading receipts, means the rate specified in the relevant concession provision for that year of assessment; chargeable concessionary trading receipts (應課稅的獲特惠的營業收入), in relation to any person for any year of assessment, means— (a) if the assessable profits in respect of the concessionary trading receipts fall within none of the descriptions in sections 14B(1)(a), (b) and (c), 14H(1) and 14P(1) and section 4(1) of Schedule 16D—the amount of the concessionary trading receipts as— (Amended 9 of 2021 s. 5; 5 of 2024 s. 12)(i) reduced by the aggregate of—(A) the amount of any outgoings and expenses deductible under this Part to the extent to which they are incurred during the basis period for that year of assessment by the person in the production of the concessionary trading receipts; and(B) the amount of any allowances made under Part 6 for that year of assessment to the person to the extent to which the relevant assets are used during the basis period for that year of assessment in the production of the concessionary trading receipts; and(ii) increased by the amount of any balancing charge directed to be made on the person under Part 6 for that year of assessment to the extent to which the relevant assets are used in the production of the concessionary trading receipts; (b) if the assessable profits in respect of the concessionary trading receipts fall within the description in section 14B(1)(a), (b) or (c)—the amount of the assessable profits ascertained in accordance with Subdivision 1 of Division 11; (ba) if the assessable profits in respect of the concessionary trading receipts fall within the description in section 14H(1)—the amount of the assessable profits calculated in accordance with section 14HB; (Added 5 of 2024 s. 12) (c) if the assessable profits in respect of the concessionary trading receipts fall within the description in section 14P(1)—the amount of the assessable profits calculated in accordance with section 14R or 14S; (Amended 9 of 2021 s. 5; 17 of 2024 s. 5) (d) if the assessable profits in respect of the concessionary trading receipts fall within the description in section 4(1) of Schedule 16D—the amount of the assessable profits calculated in accordance with section 6 of that Schedule; and (Added 9 of 2021 s. 5. Amended 17 of 2024 s. 5) (e) if the assessable profits in respect of the concessionary trading receipts fall within the description in section 3(1) and (2) of Schedule 17FD—the amount of the concessionary portion of the assessable profits ascertained in accordance with section 10 of that Schedule; (Added 17 of 2024 s. 5) chargeable normal trading receipts (應課稅的一般營業收入), in relation to any person for any year of assessment, means— (a) if the person has only normal trading receipts that are not in respect of a business of insurance for the year of assessment—the amount of the normal trading receipts as—(i) reduced by the aggregate of—(A) the amount of any outgoings and expenses deductible under this Part to the extent to which they are incurred during the basis period for that year of assessment by the person in the production of the normal trading receipts; and(B) the amount of any allowances made under Part 6 for that year of assessment to the person to the extent to which the relevant assets are used during the basis period for that year of assessment in the production of the normal trading receipts; and(ii) increased by the amount of any balancing charge directed to be made on the person under Part 6 for that year of assessment to the extent to which the relevant assets are used in the production of the normal trading receipts; (b) if the person has only normal trading receipts in respect of a business of insurance for the year of assessment—the amount of the assessable profits of the business ascertained in accordance with Subdivision 1 of Division 11 (excluding sections 23AB and 23AC), as—(i) reduced by the chargeable concessionary trading receipts of the business, ascertained in accordance with section 23AB; or(ii) increased by the amount of the unabsorbed loss in respect of the concessionary trading receipts of the business, ascertained in accordance with sections 19D and 23AB; and (c) if the person has both the normal trading receipts described in paragraph (a) and the normal trading receipts described in paragraph (b) for the year of assessment—the aggregate of—(i) the chargeable normal trading receipts ascertained in accordance with paragraph (a) for the normal trading receipts described in the paragraph; and(ii) the chargeable normal trading receipts ascertained in accordance with paragraph (b) for the normal trading receipts described in the paragraph; concession provision (寬減條文) means— (a) section 14A(1); (b) section 14B(1); (c) section 14D(1); (d) section 14H(1); (e) section 14J(1); (f) section 14P(1); (Amended 9 of 2021 s. 5) (g) section 14T(1); (Amended 9 of 2021 s. 5; 10 of 2022 s. 6) (ga) section 14ZD(1); (Added 10 of 2022 s. 6) (gb) section 14ZM(1); (Added 10 of 2022 s. 6) (gc) section 14ZV(1); (Added 10 of 2022 s. 6. Amended 8 of 2023 s. 3) (h) section 4(1) of Schedule 16D; (Added 9 of 2021 s. 5. Amended 8 of 2023 s. 3; 17 of 2024 s. 5) (i) section 9 or 16 of Schedule 16E; or (Added 8 of 2023 s. 3. Amended 17 of 2024 s. 5) (j) section 3 of Schedule 17FD; (Added 17 of 2024 s. 5) concessionary trading receipts (獲特惠的營業收入) means any trading receipts and other sums in respect of which assessable profits are chargeable to tax at the rate specified in a concession provision;normal trading receipts (一般營業收入) means any trading receipts and other sums in respect of which assessable profits are chargeable to tax at the rate specified in Schedule 1 or 8; unabsorbed loss in respect of the concessionary trading receipts (關乎獲特惠的營業收入的未吸納虧損), in relation to any person for any year of assessment, means— (a) if the assessable profits in respect of the concessionary trading receipts fall within none of the descriptions in sections 14B(1)(a), (b) and (c), 14H(1) and 14P(1) and section 4(1) of Schedule 16D—any loss ascertained by— (Amended 9 of 2021 s. 5; 5 of 2024 s. 12)(i) adding to the amount of the concessionary trading receipts the amount of any balancing charge directed to be made on the person under Part 6 for that year of assessment to the extent to which the relevant assets are used in the production of the concessionary trading receipts; and(ii) reducing from the resulting amount the aggregate of—(A) the amount of any outgoings and expenses deductible under this Part to the extent to which they are incurred during the basis period for that year of assessment by the person in the production of the concessionary trading receipts; and(B) the amount of any allowances made under Part 6 for that year of assessment to the person to the extent to which the relevant assets are used during the basis period for that year of assessment in the production of the concessionary trading receipts; (b) if the assessable profits in respect of the concessionary trading receipts fall within the description in section 14B(1)(a), (b) or (c)—any loss ascertained in accordance with section 19D and Subdivision 1 of Division 11; (ba) if the assessable profits in respect of the concessionary trading receipts fall within the description in section 14H(1)—any loss ascertained in accordance with section 14HB (because of section 19D); (Added 5 of 2024 s. 12) (c) if the assessable profits in respect of the concessionary trading receipts fall within the description in section 14P(1)—any loss ascertained in accordance with section 14R or 14S and section 19D; (Amended 9 of 2021 s. 5; 17 of 2024 s. 5) (d) if the assessable profits in respect of the concessionary trading receipts fall within the description in section 4(1) of Schedule 16D—any loss ascertained in accordance with section 19D and section 6 of that Schedule; and (Added 9 of 2021 s. 5. Amended 17 of 2024 s. 5) (e) if the assessable profits in respect of the concessionary trading receipts fall within the description in section 3(1) and (2) of Schedule 17FD—any loss ascertained in accordance with section 19D and section 10 of that Schedule; (Added 17 of 2024 s. 5) unabsorbed loss in respect of the normal trading receipts (關乎一般營業收入的未吸納虧損), in relation to any person for any year of assessment, means— (a) if the person has only normal trading receipts that are not in respect of a business of insurance for the year of assessment—any loss ascertained by—(i) adding to the amount of the normal trading receipts the amount of any balancing charge directed to be made on the person under Part 6 for that year of assessment to the extent to which the relevant assets are used in the production of the normal trading receipts; and(ii) reducing from the resulting amount the aggregate of—(A) the amount of any outgoings and expenses deductible under this Part to the extent to which they are incurred during the basis period for that year of assessment by the person in the production of the normal trading receipts; and(B) the amount of any allowances made under Part 6 for that year of assessment to the person to the extent to which the relevant assets are used during the basis period for that year of assessment in the production of the normal trading receipts; (b) if the person has only normal trading receipts in respect of a business of insurance for the year of assessment—any loss ascertained in accordance with section 19D and Subdivision 1 of Division 11 (excluding sections 23AB and 23AC), as—(i) reduced by the amount of the unabsorbed loss in respect of the concessionary trading receipts of the business, ascertained in accordance with sections 19D and 23AB; or(ii) increased by the chargeable concessionary trading receipts of the business, ascertained in accordance with section 23AB; and (c) if the person has both the normal trading receipts described in paragraph (a) and the normal trading receipts described in paragraph (b) for the year of assessment—the aggregate of—(i) any loss ascertained in accordance with paragraph (a) for the normal trading receipts described in the paragraph; and(ii) any loss ascertained in accordance with paragraph (b) for the normal trading receipts described in the paragraph. (Replaced 15 of 2020 s. 7) 19CAB. Treatment of unabsorbed losses: concessionary trading receipts (1) This section applies if—(a) a person has chargeable normal trading receipts for any year of assessment; and(b) there is an unabsorbed loss in respect of the concessionary trading receipts of the person for that year of assessment.(2) If the amount of the unabsorbed loss does not exceed the amount arrived at by multiplying the chargeable normal trading receipts by the adjustment factor (adjusted chargeable normal trading receipts amount)—(a) for the purpose of ascertaining the assessable profits of the person—the chargeable normal trading receipts are to be reduced by an amount arrived at by dividing the amount of the unabsorbed loss by the adjustment factor; and(b) for other purposes—the amount of the unabsorbed loss is taken to be zero.(3) If the amount of the unabsorbed loss exceeds the adjusted chargeable normal trading receipts amount—(a) for the purpose of ascertaining the loss sustained by the person—(i) the amount of the unabsorbed loss is to be reduced by the adjusted chargeable normal trading receipts amount; and(ii) the balance of the unabsorbed loss is to be dealt with in accordance with sections 19C and 19CB; and(b) for other purposes—the chargeable normal trading receipts are taken to be zero.(Added 15 of 2020 s. 8) 19CAC. Treatment of unabsorbed losses: normal trading receipts (1) This section applies if—(a) a person has chargeable concessionary trading receipts for any year of assessment; and(b) there is an unabsorbed loss in respect of the normal trading receipts of the person for that year of assessment.(2) If the amount of the unabsorbed loss does not exceed the amount arrived at by dividing the chargeable concessionary trading receipts by the adjustment factor (adjusted chargeable concessionary trading receipts amount)—(a) for the purpose of ascertaining the assessable profits of the person—the chargeable concessionary trading receipts are to be reduced by an amount arrived at by multiplying the amount of the unabsorbed loss by the adjustment factor; and(b) for other purposes—the amount of the unabsorbed loss is taken to be zero.(3) If the amount of the unabsorbed loss exceeds the adjusted chargeable concessionary trading receipts amount—(a) for the purpose of ascertaining the loss sustained by the person—(i) the amount of the unabsorbed loss is to be reduced by the adjusted chargeable concessionary trading receipts amount; and(ii) the balance of the unabsorbed loss is to be dealt with in accordance with sections 19C and 19CB; and(b) for other purposes—the chargeable concessionary trading receipts are taken to be zero.(Added 15 of 2020 s. 8) 19CB. Set off:

concessionary trading receipts (1) Where, in accordance with section 19C(1), (2), (4) or (5), a loss is to be set off against assessable profits for any year of assessment, this section shall apply for the purpose of ascertaining the amount of the loss set off and the resulting reduction in the assessable profits.(2) Where the loss is in respect of concessionary trading receipts and it is to be set off against the assessable profits in respect of normal trading receipts—(a) where the amount of the loss does not exceed the amount of the assessable profits in respect of normal trading receipts as multiplied by the adjustment factor, the amount of the assessable profits in respect of normal trading receipts shall, for the purpose of ascertaining the assessable profits of the person, be deemed to be reduced by the amount arrived at by dividing the amount of the loss by the adjustment factor, and the loss shall, for any other purposes, be deemed to have been fully set off;(b) in any other case, the loss shall, for the purpose of the set off, be deemed to have been set off to the extent of the amount arrived at by multiplying the amount of the assessable profits in respect of normal trading receipts by the adjustment factor, and the amount of the assessable profits in respect of normal trading receipts shall, for any other purposes, be deemed to be nil.(3) Where the loss is in respect of normal trading receipts and it is to be set off against the assessable profits in respect of concessionary trading receipts—(a) where the amount of the loss does not exceed the amount of the assessable profits in respect of concessionary trading receipts as divided by the adjustment factor, the amount of the assessable profits in respect of concessionary trading receipts shall, for the purpose of ascertaining the assessable profits of the person, be deemed to be reduced by the amount arrived at by multiplying the amount of the loss by the adjustment factor, and the loss shall, for any other purposes, be deemed to have been fully set off;(b) in any other case, the loss shall, for the purpose of the set off, be deemed to have been set off to the extent of the amount arrived at by dividing the amount of the assessable profits in respect of concessionary trading receipts by the adjustment factor, and the amount of the assessable profits in respect of concessionary trading receipts shall, for any other purposes, be deemed to be nil.(4) In this section—adjustment factor (調整分數) has the meaning given by section 19CA; (Added 15 of 2020 s. 9)concessionary trading receipts (獲特惠的營業收入) has the meaning given by section 19CA; (Added 15 of 2020 s. 9)loss (虧損) includes part of a loss; (Amended 15 of 2020 s, 9)normal trading receipts (一般營業收入) has the meaning given by section 19CA. (Added 15 of 2020 s. 9)(Amended 15 of 2020 s. 9)(Added 32 of 1998 s. 13) 19CC. Treatment of unabsorbed losses under sections 19CD and 19CE: interpretation In this section and sections 19CD and 19CE—adjustment factor (調整分數), in relation to a year of assessment, means the factor calculated in accordance with the formula— A B where: A in relation to any concessionary trading receipts, means the concessionary tax rate that applies to the receipts for that year of assessment; and B in relation to any concessionary trading receipts other than those referred to in A, means the concessionary tax rate that applies to the receipts for that year of assessment that is lower than A; chargeable concessionary trading receipts (應課稅的獲特惠的營業收入) has the meaning given by section 19CA;concession provision (寬減條文) has the meaning given by section 19CA;concessionary tax rate (特惠稅率), in relation to any concessionary trading receipts for a year of assessment, means the rate specified in the relevant concession provision at which the receipts are chargeable to profits tax for that year of assessment;concessionary trading receipts (獲特惠的營業收入) has the meaning given by section 19CA;unabsorbed loss in respect of the concessionary trading receipts (關乎獲特惠的營業收入的未吸納虧損) has the meaning given by section 19CA.(Added 17 of 2024 s. 6) 19CD. Treatment of unabsorbed losses: concessionary trading receipts chargeable to tax at lower rate (1) This section applies if, for a year of assessment—(a) a person has chargeable concessionary trading receipts;(b) there is an unabsorbed loss in respect of the concessionary trading receipts of the person; and(c) the concessionary tax rate applicable to the receipts described in paragraph (b) is lower than the concessionary tax rate applicable to the receipts described in paragraph (a).(2) If the amount of the unabsorbed loss does not exceed the amount arrived at by multiplying the chargeable concessionary trading receipts by the adjustment factor for the year of assessment (adjusted higher rate amount)—(a) for the purpose of ascertaining the assessable profits of the person for the year of assessment—the chargeable concessionary trading receipts are to be reduced by the amount arrived at by dividing the amount of the unabsorbed loss by the adjustment factor; and(b) for other purposes—the amount of the unabsorbed loss is taken to be zero.(3) If the amount of the unabsorbed loss exceeds the adjusted higher rate amount—(a) for the purpose of ascertaining the loss sustained by the person for the year of assessment—(i) the amount of the unabsorbed loss is to be reduced by the adjusted higher rate amount; and(ii) the balance of the unabsorbed loss is to be dealt with in accordance with sections 19C and 19CF; and(b) for other purposes—the chargeable concessionary trading receipts are taken to be zero.(Added 17 of 2024 s. 6) 19CE. Treatment of unabsorbed losses: concessionary trading receipts chargeable to tax at higher rate (1) This section applies if, for a year of assessment—(a) a person has chargeable concessionary trading receipts;(b) there is an unabsorbed loss in respect of the concessionary trading receipts of the person; and(c) the concessionary tax rate applicable to the receipts described in paragraph (b) is higher than the concessionary tax rate applicable to the receipts described in paragraph (a).(2) If the amount of the unabsorbed loss does not exceed the amount arrived at by dividing the chargeable concessionary trading receipts by the adjustment factor for the year of assessment (adjusted lower rate amount)—(a) for the purpose of ascertaining the assessable profits of the person for the year of assessment—the chargeable concessionary trading receipts are to be reduced by the amount arrived at by multiplying the amount of the unabsorbed loss by the adjustment factor; and(b) for other purposes—the amount of the unabsorbed loss is taken to be zero.(3) If the amount of the unabsorbed loss exceeds the adjusted lower rate amount—(a) for the purpose of ascertaining the loss sustained by the person for the year of assessment—(i) the amount of the unabsorbed loss is to be reduced by the adjusted lower rate amount; and(ii) the balance of the unabsorbed loss is to be dealt with in accordance with sections 19C and 19CF; and(b) for other purposes—the chargeable concessionary trading receipts are taken to be zero.(Added 17 of 2024 s. 6) 19CF. Set off: concessionary trading receipts chargeable to tax at 2 different rates (1) If—(a) in accordance with section 19C(1), (2), (4) or (5), a loss is to be set off against assessable profits for a year of assessment; and(b) the loss is sustained, and the assessable profits arise, in respect of the concessionary trading receipts to which different concessionary tax rates apply,this section applies for the purpose of ascertaining the amount of the loss so set off and the resulting reduction in the assessable profits.(2) Subsection (3) applies if, for a year of assessment, the concessionary tax rate applicable to the concessionary trading receipts in respect of which the loss is sustained is lower than the concessionary tax rate applicable to the concessionary trading receipts in respect of which the assessable profits arise.(3) If—(a) the amount of the loss does not exceed the amount of the assessable profits as multiplied by the adjustment factor—(i) for the purpose of ascertaining the assessable profits—the amount of the assessable profits is taken to be reduced by the amount arrived at by dividing the amount of the loss by the adjustment factor; and(ii) for other purposes—the loss is taken to have been fully set off; and(b) the amount of the loss exceeds the amount of the assessable profits as multiplied by the adjustment factor—(i) for the purpose of the set off—the loss is taken to have been set off to the extent of the amount arrived at by multiplying the amount of the assessable profits by the adjustment factor; and(ii) for other purposes—the amount of the assessable profits is taken to be zero.(4) Subsection (5) applies if, for a year of assessment, the concessionary tax rate applicable to the concessionary trading receipts in respect of which the loss is sustained is higher than the concessionary tax rate applicable to the concessionary trading receipts in respect of which the assessable profits arise.(5) If—(a) the amount of the loss does not exceed the amount of the assessable profits as divided by the adjustment factor—(i) for the purpose of ascertaining the assessable profits—the amount of the assessable profits is taken to be reduced by the amount arrived at by multiplying the amount of the loss by the adjustment factor; and(ii) for other purposes—the loss is taken to have been fully set off; and(b) the amount of the loss exceeds the amount of the assessable profits as divided by the adjustment factor—(i) for the purpose of the set off—the loss is taken to have been set off to the extent of the amount arrived at by dividing the amount of the assessable profits by the adjustment factor; and(ii) for other purposes—the amount of the assessable profits is taken to be zero.(6) In this section—adjustment factor (調整分數) has the meaning given by section 19CC;concessionary tax rate (特惠稅率) has the meaning given by section 19CC;concessionary trading receipts (獲特惠的營業收入) has the meaning given by section 19CA;loss (虧損) includes part of a loss.(Added 17 of 2024 s. 6) 19CG. Application of sections 19CAB, 19CAC, 19CB, 19CD, 19CE and 19CF if both concessionary trading receipts (chargeable to tax at different rates) and normal trading receipts are involved (1) If—(a) a loss is sustained in respect of concessionary trading receipts;(b) assessable profits arise in respect of normal trading receipts; and(c) more than one concessionary tax rate applies to the concessionary trading receipts,subsection (2) applies in relation to the loss in respect of the concessionary trading receipts.(2) For the purposes of subsection (1), sections 19CAB and 19CB(2), if applicable, are to apply—(a) first in relation to—(i) the amount of the loss in respect of the concessionary trading receipts to which the highest concessionary tax rate applies; and(ii) the amount of the assessable profits in respect of the normal trading receipts; and(b) if there is any amount of the assessable profits still remaining afterwards, then in relation to—(i) the amount of the loss in respect of the concessionary trading receipts to which the next highest concessionary tax rate applies; and(ii) the remaining amount of the assessable profits in respect of the normal trading receipts,and so on until either the amount of all the loss in respect of the concessionary trading receipts, or the amount of the assessable profits in respect of the normal trading receipts, is reduced to, or taken to be, zero.(3) If—(a) a loss is sustained in respect of normal trading receipts;(b) assessable profits arise in respect of concessionary trading receipts; and(c) more than one concessionary tax rate applies to the concessionary trading receipts,subsection (4) applies in relation to the loss in respect of the normal trading receipts.(4) For the purposes of subsection (3), sections 19CAC and 19CB(3), if applicable, are to apply—(a) first in relation to—(i) the amount of the loss in respect of the normal trading receipts; and(ii) the amount of the assessable profits in respect of the concessionary trading receipts to which the highest concessionary tax rate applies; and(b) if there is any amount of the loss still remaining afterwards, then in relation to—(i) the remaining amount of the loss in respect of the normal trading receipts; and(ii) the amount of the assessable profits in respect of the concessionary trading receipts to which the next highest concessionary tax rate applies,and so on until either the amount of all the loss in respect of the normal trading receipts, or the amount of the assessable profits in respect of the concessionary trading receipts, is reduced to, or taken to be, zero.(5) If—(a) a loss is sustained in respect of concessionary trading receipts;(b) assessable profits arise in respect of both concessionary trading receipts and normal trading receipts; and(c) more than one concessionary tax rate applies to the concessionary trading receipts,subsections (6) and (7) apply in relation to the loss in respect of the concessionary trading receipts.(6) For the purposes of subsection (5), sections 19CAB and 19CB(2), if applicable, are to apply—(a) first in relation to—(i) the amount of the loss in respect of the concessionary trading receipts to which the highest concessionary tax rate applies; and(ii) the amount of the assessable profits in respect of the normal trading receipts; and(b) if there is any amount of the assessable profits in respect of the normal trading receipts still remaining afterwards, then in relation to—(i) the amount of the loss in respect of the concessionary trading receipts to which the next highest concessionary tax rate applies; and(ii) the remaining amount of the assessable profits in respect of the normal trading receipts,and so on until either the amount of all the loss in respect of the concessionary trading receipts, or the amount of the assessable profits in respect of the normal trading receipts, is reduced to, or taken to be, zero.(7) If there is any amount of the loss in respect of the concessionary trading receipts still remaining after applying sections 19CAB and 19CB(2) in accordance with subsection (6), sections 19CD, 19CE and 19CF, if applicable, are to apply—(a) first in relation to—(i) the remaining amount of the loss in respect of the concessionary trading receipts to which the highest concessionary tax rate applies; and(ii) the amount of the assessable profits in respect of the concessionary trading receipts to which the highest concessionary tax rate applies; and(b) if there is any amount of the loss in respect of the concessionary trading receipts and any amount of the assessable profits in respect of the concessionary trading receipts still remaining afterwards, then in relation to—(i) the remaining amount of the loss in respect of the concessionary trading receipts to which the next highest concessionary tax rate applies; and(ii) the amount of the assessable profits in respect of the concessionary trading receipts to which the next highest concessionary tax rate applies,and so on until either the amount of all the loss in respect of the concessionary trading receipts, or the amount of the assessable profits in respect of the concessionary trading receipts, is reduced to, or taken to be, zero.(8) If—(a) a loss is sustained in respect of both normal trading receipts and concessionary trading receipts;(b) assessable profits arise in respect of concessionary trading receipts; and(c) more than one concessionary tax rate applies to the concessionary trading receipts,subsections (9) and (10) apply in relation to the loss in respect of the normal trading receipts.(9) For the purposes of subsection (8), sections 19CAC and 19CB(3), if applicable, are to apply—(a) first in relation to—(i) the amount of the loss in respect of the normal trading receipts; and(ii) the amount of the assessable profits in respect of the concessionary trading receipts to which the highest concessionary tax rate applies; and(b) if there is any amount of the loss in respect of the normal trading receipts still remaining afterwards, then in relation to—(i) the remaining amount of the loss in respect of the normal trading receipts; and(ii) the amount of the assessable profits in respect of the concessionary trading receipts to which the next highest concessionary tax rate applies,and so on until either the amount of all the loss in respect of the normal trading receipts, or the amount of the assessable profits in respect of the concessionary trading receipts, is reduced to, or taken to be, zero.(10) If there is any amount of the assessable profits in respect of the concessionary trading receipts still remaining after applying sections 19CAC and 19CB(3) in accordance with subsection (9), sections 19CD, 19CE and 19CF, if applicable, are to apply—(a) first in relation to—(i) the amount of the loss in respect of the concessionary trading receipts to which the highest concessionary tax rate applies; and(ii) the remaining amount of the assessable profits in respect of the concessionary trading receipts to which the highest concessionary tax rate applies; and(b) if there is any amount of the loss in respect of the concessionary trading receipts and any amount of the assessable profits in respect of the concessionary trading receipts still remaining afterwards, then in relation to—(i) the remaining amount of the loss in respect of the concessionary trading receipts to which the next highest concessionary tax rate applies; and(ii) the amount of the assessable profits in respect of the concessionary trading receipts to which the next highest concessionary tax rate applies,and so on until either the amount of all the loss in respect of the concessionary trading receipts, or the amount of the assessable profits in respect of the concessionary trading receipts, is reduced to, or taken to be, zero.(11) If the Commissioner is satisfied that it is impracticable to apply subsection (1), (2), (3), (4), (5), (6), (7), (8), (9) or (10) in a particular case, the amounts of the loss and the assessable profits are to be determined in a manner that the Commissioner considers reasonable in the circumstances.(12) For the purposes of applying sections 19CAB and 19CAC to this section—(a) a reference in this section to a loss in respect of concessionary trading receipts is to be read as if it is a reference to an unabsorbed loss in respect of the concessionary trading receipts;(b) a reference in this section to a loss in respect of normal trading receipts is to be read as if it is a reference to an unabsorbed loss in respect of the normal trading receipts;(c) a reference in this section to assessable profits in respect of concessionary trading receipts is to be read as if it is a reference to chargeable concessionary trading receipts; and(d) a reference in this section to assessable profits in respect of normal trading receipts is to be read as if it is a reference to chargeable normal trading receipts.(13) In this section—concessionary tax rate (特惠稅率) has the meaning given by section 19CC;concessionary trading receipts (獲特惠的營業收入) has the meaning given by section 19CA;loss (虧損) has the meaning given by section 19CF(6);normal trading receipts (一般營業收入) has the meaning given by section 19CA.(Added 17 of 2024 s. 6) 19D. Computation of losses after 1 April 1975 (1) For the purposes of section 19C, the amount of loss incurred by a person chargeable to tax under this Part for any year of assessment shall be computed in like manner and for such basis period as the assessable profits for that year of assessment would have been computed. (2) This section shall apply to the year of assessment commencing on 1 April 1975 and to subsequent years of assessment. (Added 7 of 1975 s. 16) 19E. Adjustment of losses (1) For the purposes of section 19D, the amount of loss for any year of assessment of any person chargeable to tax under this Part shall be increased by the allowances made to that person under Part 6 for that year of assessment to the extent to which the relevant assets are used in the production of the losses and decreased by the amount of any balancing charge directed to be made on that person under Part 6.(2) Where in any year of assessment the amount of the balancing charge made under Part 6 to a person chargeable to tax under this Part exceeds the total amount of that person’s losses, as increased by any allowances, the amount of such excess shall be deemed to be assessable profits of that person for that year of assessment.(3) This section shall apply to the year of assessment commencing on 1 April 1975 and to subsequent years of assessment.(Added 7 of 1975 s. 16. Amended E.R. 1 of 2012) Division 9 Non-resident Persons, Funds, etc. (Added 15 of 2020 s. 2) Subdivision 1 Agent of Non-resident Persons (Added 15 of 2020 s. 2) 20. (Repealed 27 of 2018 s. 15) 20A. Persons chargeable on behalf of a non-resident (1) A non-resident person shall be chargeable to tax either directly or in the name of his agent in respect of all his profits arising in or derived from Hong Kong from any trade, profession or business carried on in Hong Kong whether such agent has the receipt of the profits or not, and the tax so charged whether directly or in the name of the agent shall be recoverable by all means provided in this Ordinance out of the assets of the non-resident person or from the agent. Where there are more agents than one they may be charged to tax jointly or severally in respect of the profits of the non-resident person and shall be jointly and severally liable for the tax thereon. (Amended 7 of 1986 s. 12) (2) Every person chargeable to tax as agent, or from whom tax is recoverable in respect of the profits of another person, shall retain out of any assets coming into his possession or control on behalf of such other person or in his capacity as agent so much thereof as shall be sufficient to produce the amount of such tax, and he shall be and is hereby indemnified against any person whomsoever in respect of his retention of such assets. (3) Notwithstanding anything contained in subsections (1) and (2), any person who sells any goods in Hong Kong on behalf of a non-resident person shall furnish quarterly to the Commissioner a return showing the gross proceeds from such sales and shall at the same time pay to the Commissioner a sum equal to 1% of such proceeds or such lesser sum as may have been agreed with the Commissioner. On receipt of such sum the Commissioner shall issue a certificate in the form specified by the Board of Inland Revenue: (Amended 39 of 1969 s. 3; 7 of 1986 s. 12) Provided that the Commissioner may exempt any such person from the provisions of this subsection on such conditions as he may consider fit. (4) In this section—tax (稅) means tax charged under this Part. (Added 21 of 2025 s. 10)(Added 49 of 1956 s. 17) 20AA. Persons not treated as agents (1) For the purposes of section 20A, the following persons are deemed not to be an agent of a non-resident person—(a) where profits are chargeable to tax under this Part by reference to so much of any trade, profession or business as relates to transactions carried out through a broker and falling within subsection (2), the broker;(b) where profits are chargeable to tax under this Part by reference to so much of any trade, profession or business as relates to transactions carried out through an approved investment adviser and falling within subsection (3), the approved investment adviser.(2) Where any profits are chargeable to tax under this Part by reference to so much of any trade, profession or business as relates to a transaction carried out through a broker, the transaction is taken, in relation to the profits (the taxable profits), to fall within this subsection if—(a) at the time of the transaction, the broker was carrying on the business of a broker;(b) the transaction was carried out by the broker for the non-resident person in the ordinary course of the business;(c) the remuneration that the broker received for providing the services of a broker to the non-resident person for the transaction was at a rate not less than the one customary for the class of business;(d) the non-resident person does not fall (apart from this paragraph) to be treated as having the broker as his agent in relation to any other profits not included in the taxable profits under this subsection or subsection (3) but chargeable to tax under this Part for the same year of assessment; and(e) the broker was not an associate of the non-resident person during the year of assessment.(3) Where any profits are chargeable to tax under this Part by reference to so much of any trade, profession or business as relates to a transaction carried out through an approved investment adviser, the transaction is taken, in relation to the profits (the taxable profits), to have been carried out through the approved investment adviser and to fall within this subsection if—(a) (Repealed 32 of 1998 s. 14)(b) at the time of the transaction, the approved investment adviser was carrying on the business of an approved investment adviser;(c) the transaction was carried out by the approved investment adviser for the non-resident person in the ordinary course of the business;(d) the remuneration that the approved investment adviser received for providing the services of an approved investment adviser to the non-resident person for the transaction was at a rate not less than the one customary for the class of business;(e) the non-resident person does not fall (apart from this paragraph) to be treated as having the approved investment adviser as his agent in relation to any other profits not included in the taxable profits under this subsection or subsection (2) but chargeable to tax under this Part for the same year of assessment;(f) the approved investment adviser was not an associate of the non-resident person during the year of assessment; and(g) the approved investment adviser, when he acted for the non-resident person in the transaction, did so in an independent capacity.(4) This section applies to a person who acts as a broker or provides services as an approved investment adviser as part only of a business and as if that part is a separate business.(5) For the purposes of this section, an approved investment adviser is not regarded as acting in an independent capacity when acting on behalf of the non-resident person unless, having regard to the legal, financial and commercial characteristics of the relationship between them, it is a relationship between persons carrying on independent businesses dealing with each other at arm’s length.(6) In this section—approved investment adviser (認可投資顧問) means—(a) a corporation licensed to carry on a business in advising on securities or asset management under Part V of the Securities and Futures Ordinance (Cap. 571); or(b) an authorized financial institution registered for carrying on such a business under that Part, only to the extent that the institution carries on such a business; (Replaced 5 of 2002 s. 407)associate (相聯者), in relation to a non-resident person, means—(a) where the person is a natural person—(i) a relative of the person;(ii) a partner of the person and any relative of that partner;(iii) a partnership in which the person is a partner;(iv) any corporation controlled by the person, by a partner of the person or by a partnership in which the person is a partner;(v) any director or principal officer of any such corporation as is referred to in subparagraph (iv);(b) where the person is a corporation—(i) any associated corporation;(ii) any person who controls the corporation and any partner of such person, and, where either such person is a natural person, any relative of such person;(iii) any director or principal officer of that corporation or of any associated corporation and any relative of any such director or officer;(iv) any partner of the corporation and, where such partner is a natural person, any relative of such partner;(c) where the person is a partnership—(i) any partner of the partnership and where such partner is a partnership any partner of that partnership, any partner with the partnership in any other partnership and where such partner is a partnership any partner of that partnership and where any partner of, or with, or in any of the partnerships mentioned in this subparagraph is a natural person, any relative of such partner;(ii) any corporation controlled by the partnership or by any partner thereof or, where such a partner is a natural person, any relative of such partner;(iii) any corporation of which any partner is a director or principal officer;(iv) any director or principal officer of a corporation referred to in subparagraph (ii);associated corporation (相聯法團) in relation to a person means—(a) a corporation over which the person has control;(b) a corporation which has control over such a person, being a corporation; or(c) a corporation which is under the control of the same person, being a corporation;broker (經紀) means—(a) a corporation licensed to carry on a business in dealing in securities under Part V of the Securities and Futures Ordinance (Cap. 571); or(b) an authorized financial institution registered for carrying on such a business under that Part, only to the extent that the institution carries on such a business; (Replaced 5 of 2002 s. 407) control (控制), in relation to a corporation, means the power of a person to secure— (a) by means of the holding of shares or the possession of voting power in or in relation to that or any other corporation; or (b) by virtue of any powers conferred by the articles of association or other document regulating that or any other corporation, that the affairs of the first-mentioned corporation are conducted in accordance with the wishes of that person; (Replaced 9 of 2017 s. 8) principal officer (主要職員) means—(a) a person employed by a corporation who, either alone or jointly with one or more other persons, is responsible under the immediate authority of the directors for the conduct of the business of the corporation; or(b) a person so employed who, under the immediate authority of a director of the body corporate or a person to whom paragraph (a) applies, exercises managerial functions in respect of the body corporate;relative (親屬) means the spouse, parent, child, brother or sister of the relevant person, and, in deducing such a relationship, an adopted child shall be deemed to be a child both of the natural parents and the adopting parent and a step child to be the child of both the natural parents and of any step parent. (Amended 32 of 1998 s. 14)(Added 56 of 1996 s. 3) Subdivision 2 Non-resident Persons (Added 15 of 2020 s. 2) 20AB. Interpretation of sections 20AC, 20ACA, 20AD, 20AE and 20AF and Schedules 15, 15A and 16 (Amended 13 of 2015 s. 3; 12 of 2018 s. 3; 5 of 2019 s. 3)(1) This section applies to the interpretation of sections 20AC, 20ACA, 20AD, 20AE and 20AF and Schedules 15, 15A and 16. (Amended 13 of 2015 s. 3; 12 of 2018 s. 3; 5 of 2019 s. 3)(2) In relation to any year of assessment, a person is to be regarded as a resident person if—(a) where the person is a natural person who is not a trustee of a trust estate, the person—(i) ordinarily resides in Hong Kong in that year of assessment; or(ii) stays in Hong Kong for a period or a number of periods amounting to more than 180 days during that year of assessment or for a period or a number of periods amounting to more than 300 days in 2 consecutive years of assessment one of which is that year of assessment;(b) where the person is a corporation that is not a trustee of a trust estate, the central management and control of the corporation is exercised in Hong Kong in that year of assessment;(c) where the person is a partnership that is not a trustee of a trust estate, the central management and control of the partnership is exercised in Hong Kong in that year of assessment; or(d) where the person is a trustee of a trust estate, the central management and control of the trust estate is exercised in Hong Kong in that year of assessment.(3) In relation to any year of assessment, a person is a non-resident person if he is not a resident person in relation to that year of assessment.(4) A person is to be regarded as having a direct beneficial interest in another person if—(a) where the other person is a corporation that is not a trustee of a trust estate, the person holds any of the issued share capital (however described) of the corporation;(b) where the other person is a partnership that is not a trustee of a trust estate, the person, as a partner in the partnership, is entitled to any of the profits of the partnership; (Amended 13 of 2015 s. 3)(c) where the other person is a trustee of a trust estate, the person—(i) benefits under the trust estate; or(ii) not being a trustee of the trust estate or, where the trustee is a corporation, a director of the trustee, is able or might reasonably be expected to be able to control the activities of the trust estate or the application of its corpus or income,otherwise than through another person; or (Amended 13 of 2015 s. 3)(d) where the other person is an entity that does not fall within any of paragraphs (a), (b) and (c), the person has any of the ownership interests in the entity. (Added 13 of 2015 s. 3)(5) A person (the first person) is to be regarded as having an indirect beneficial interest in another person (the second person) if—(a) where the second person is a corporation that is not a trustee of a trust estate, the first person is interested in any of the issued share capital (however described) of the corporation;(b) where the second person is a partnership that is not a trustee of a trust estate, the first person is entitled to any of the profits of the partnership; (Amended 13 of 2015 s. 3)(c) where the second person is a trustee of a trust estate, the first person—(i) benefits under the trust estate; or(ii) not being a trustee of the trust estate or, where the trustee is a corporation, a director of the trustee, is able or might reasonably be expected to be able to control the activities of the trust estate or the application of its corpus or income; or (Amended 13 of 2015 s. 3)(d) where the second person is an entity that does not fall within any of paragraphs (a), (b) and (c), the first person has any of the ownership interests in the entity, (Added 13 of 2015 s. 3)through another person (interposed person) or through a series of 2 or more interposed persons who is or are related to the first person and the second person in the manner described in subsections (6) and (7).(6) Where there is one interposed person—(a) the first person has a direct beneficial interest in the interposed person; and(b) the interposed person has a direct beneficial interest in the second person.(7) Where there is a series of 2 or more interposed persons—(a) the first person has a direct beneficial interest in the first interposed person in the series;(b) each interposed person (other than the last interposed person) in the series has a direct beneficial interest in the next interposed person in the series; and(c) the last interposed person in the series has a direct beneficial interest in the second person.(8) A reference to an entitlement to the profits of a partnership is, in the case where the partners in a partnership are not entitled to its profits but are only entitled to a distribution of its assets upon its dissolution, to be construed as a reference to an entitlement to a distribution of the assets of the partnership upon its dissolution.(9) A reference to the issued share capital of a corporation does not include a reference to the shares comprised in the issued share capital that do not entitle their holders to receive dividends, whether in cash or in kind, and a distribution of the corporation’s assets upon its dissolution other than a return of capital.(Added 4 of 2006 s. 2) 20AC. Certain profits of non-resident persons exempt from tax (1) Subject to subsections (3), (4) and (5A), a non-resident person is exempt from tax chargeable under this Part in respect of his assessable profits, for any year of assessment commencing on or after 1 April 1996, from— (Amended 13 of 2015 s. 4)(a) transactions falling within subsection (2); and(b) transactions incidental to the carrying out of the transactions referred to in paragraph (a).(1A) On and after 1 April 2019, a reference in this section to a non-resident person does not include a fund within the meaning of section 20AM. (Added 5 of 2019 s. 4)(1B) Subsection (1A) applies only for any year of assessment commencing on or after 1 April 2019. (Added 5 of 2019 s. 4)(2) A transaction falls within this subsection if— (Amended 13 of 2015 s. 4)(a) the transaction is a transaction specified in Part 1 of Schedule 16; and(b) either of the following conditions is satisfied—(i) the transaction has been carried out through or arranged by a specified person;(ii) the non-resident person is a qualifying fund. (Amended 13 of 2015 s. 4)(3) Subsection (1) does not apply to a non-resident person in a year of assessment if, at any time in that year of assessment, the person carries on any trade, profession or business in Hong Kong involving any transaction other than a transaction referred to in that subsection.(4) Subsection (1)(b) does not apply to a non-resident person in a year of assessment if, in that year of assessment, his trading receipts from the incidental transactions referred to in that subsection exceed 5% of the total trading receipts from the transactions referred to in subsection (1)(a) and (b).(5) The Commissioner may by notice published in the Gazette amend Schedule 16.(5A) This section does not apply to a special purpose vehicle as defined by section 20ACA(2) that is a non-resident person. (Added 13 of 2015 s. 4)(5B) To avoid doubt, subsection (2) as in force on the date of commencement# of the Inland Revenue (Amendment) (No. 2) Ordinance 2015 (13 of 2015) applies to transactions carried out within the period from 1 April 2015 to the day before that date of commencement#. (Added 13 of 2015 s. 4)(6) In this section—aggregate capital commitment (資本認繳總額), in relation to a fund, means the total of the capital commitments made by the investors, the originator and the originator’s associates; associate (相聯者)— (a) in relation to a natural person, means—(i) a relative of the person;(ii) a partner of the person;(iii) if a partner of the person is a natural person, a relative of that partner;(iv) a partnership in which the person is a partner;(v) a corporation controlled by—(A) the person;(B) a relative of the person;(C) a partner of the person;(D) if a partner of the person is a natural person, a relative of that partner; or(E) a partnership in which the person is a partner; or(vi) a director or principal officer of the corporation mentioned in subparagraph (v); (b) in relation to a corporation, means—(i) a person who controls the corporation;(ii) a partner of the person mentioned in subparagraph (i);(iii) if the person mentioned in subparagraph (i) is a natural person, a relative of that person;(iv) if the partner mentioned in subparagraph (ii) is a natural person, a relative of that partner;(v) a director or principal officer of—(A) the corporation; or(B) an associated corporation of the corporation;(vi) a relative of the director or principal officer mentioned in subparagraph (v);(vii) a partner of the corporation;(viii) if a partner of the corporation is a natural person, a relative of that partner;(ix) a partnership in which the corporation is a partner; or(x) an associated corporation of the corporation; (c) in relation to a partnership, means—(i) a partner in the partnership;(ii) if a partner in the partnership is a natural person, a relative of that partner;(iii) if a partner in the partnership is another partnership—(A) a partner in that other partnership (Partner A); or(B) a partner with that other partnership in any other partnership (Partner B);(iv) if Partner A is a partnership, a partner in Partner A (Partner C);(v) if Partner B is a partnership, a partner in Partner B (Partner D);(vi) if Partner A, Partner B, Partner C or Partner D is a natural person, a relative of that partner;(vii) a corporation controlled by—(A) the partnership;(B) a partner in the partnership;(C) if a partner in the partnership is a natural person, a relative of that partner; or(D) a partnership in which the partnership is a partner;(viii) a director or principal officer of the corporation mentioned in subparagraph (vii);(ix) a corporation of which a partner in the partnership is a director or principal officer; or(x) an associated partnership of the partnership; associated corporation (相聯法團), in relation to a corporation, means— (a) another corporation over which the corporation has control; (b) another corporation that has control over the corporation; or (c) another corporation that is under the control of the same person as is the corporation; associated partnership (相聯合夥), in relation to a partnership, means— (a) another partnership over which the partnership has control; (b) another partnership that has control over the partnership; or (c) another partnership that is under the control of the same person as is the partnership; capital commitment (資本認繳), in relation to a fund, means a commitment— (a) that is in the form of an amount of money payable by an investor, the originator or the originator’s associate to the fund under an agreement governing the operation of the fund; and (b) in respect of which the originator may make capital calls from time to time according to the terms of the agreement; control (控制)— (a) in relation to a corporation, means the power of a person to secure—(i) by means of the holding of shares or the possession of voting power in or in relation to that corporation or any other corporation; or(ii) by virtue of any powers conferred by the articles of association or other document regulating that corporation or any other corporation,that the affairs of that corporation are conducted in accordance with the wishes of the person; (b) in relation to a partnership, means the power of a person to secure—(i) by means of the holding of interests or the possession of voting power in or in relation to that partnership or any other partnership; or(ii) by virtue of any powers conferred by the partnership agreement or other document regulating that partnership or any other partnership,that the affairs of that partnership are conducted in accordance with the wishes of the person; final closing of sale of interests (權益出售最終截止日), in relation to a fund, means the date on which the originator last accepts subscriptions from investors for making capital commitments;investor (投資者), in relation to a fund, means a person, other than the originator or the originator’s associates, who makes capital commitment to the fund; net proceeds (淨收益), in relation to a fund at a particular time, means an amount calculated by— (a) adding together—(i) the sum of the cumulative distributions received by the investors, the originator and the originator’s associates from the fund; and(ii) the value at that time of all assets, if any, held by the fund; and (b) subtracting from the sum calculated under paragraph (a) the cumulative capital contributions of the investors, the originator and the originator’s associates; originator (發起人), in relation to a fund, means a person who directly or indirectly— (a) originates or sponsors the fund; and (b) has the power to make investment decisions on behalf of the fund; principal officer (主要職員), in relation to a corporation, means— (a) a person employed by the corporation who, either alone or jointly with one or more other persons, is responsible under the immediate authority of the directors of the corporation for the conduct of the business of the corporation; or (b) a person so employed who, under the immediate authority of a director of the corporation or a person to whom paragraph (a) applies, exercises managerial functions in respect of the corporation; qualifying fund (符合資格的基金) means a fund that falls within the following descriptions— (a) at all times after the final closing of sale of interests—(i) the number of investors exceeds 4; and(ii) the capital commitments made by investors exceed 90% of the aggregate capital commitments; and (b) the portion of the net proceeds arising out of the transactions of the fund to be received by the originator and the originator’s associates, after deducting the portion attributable to their capital contributions (which is proportionate to that attributable to the investors’ capital contributions), is agreed under an agreement governing the operation of the fund to be an amount not exceeding 30% of the net proceeds; relative (親屬), in relation to a person, means the spouse, parent, child, brother or sister of the person, and, in deducing such a relationship— (a) an adopted child is to be regarded as a child of both the natural parents and the adopting parent; and (b) a step child is to be regarded as a child of both the natural parents and any step parent; specified person (指明人士)— (a) in relation to a transaction carried out before 1 April 2003, means—(i) a bank as defined by section 2(1) of the Banking Ordinance (Cap. 155); (ii) a person registered as a dealer or commodity trading adviser under Part IV of the Commodities Trading Ordinance (Cap. 250) repealed under section 406 of the Securities and Futures Ordinance (Cap. 571); (iii) a person registered as a dealer or an investment adviser under Part VI, or as a securities margin financier under Part XA, of the Securities Ordinance (Cap. 333) repealed under section 406 of the Securities and Futures Ordinance (Cap. 571); or (iv) a person licensed as a leveraged foreign exchange trader under Part IV of the Leveraged Foreign Exchange Trading Ordinance (Cap. 451) repealed under section 406 of the Securities and Futures Ordinance (Cap. 571); (b) in relation to a transaction carried out on or after 1 April 2003, means a corporation licensed under Part V of the Securities and Futures Ordinance (Cap. 571) to carry on, or an authorized financial institution registered under that Part for carrying on, a business in any regulated activity as defined by Part 1 of Schedule 5 to that Ordinance. (Replaced 13 of 2015 s. 4) (7) Section 21 of Schedule 17A (specified alternative bond scheme and its treatment under this Ordinance (other than Part 4AA)) provides for modifications to this section. (Added 10 of 2013 s. 9. Amended 21 of 2025 s. 33)(Added 4 of 2006 s. 2) Editorial Note: # Commencement date: 17 July 2015. 20ACA. Certain profits of special purpose vehicles exempt from payment of tax (1) A special purpose vehicle is exempt, to an extent corresponding to the percentage of shares or interests that a non-resident person exempted under section 20AC(1) holds in the vehicle, from the payment of tax chargeable under this Part in respect of its assessable profits, if any, for any year of assessment commencing on or after 1 April 2015, from—(a) transactions in shares, stocks, debentures, loan stocks, funds, bonds or notes of, or issued by, an interposed special purpose vehicle or an excepted private company;(b) transactions in rights, options or interests (whether described as units or otherwise) in, or in respect of, such shares, stocks, debentures, loan stocks, funds, bonds or notes;

and(c) transactions in certificates of interest or participation in, temporary or interim certificates for, receipts for, or warrants to subscribe for or purchase, such shares, stocks, debentures, loan stocks, funds, bonds or notes.(2) In this section— excepted private company (例外私人公司) means a private company incorporated outside Hong Kong that, at all times within the 3 years before a transaction falling within subsection (1)(a), (b) or (c) is carried out— (a) did not carry on any business through or from a permanent establishment in Hong Kong; (b) falls within either of the following descriptions—(i) it did not hold (whether directly or indirectly) share capital (however described) in one or more private companies carrying on any business through or from a permanent establishment in Hong Kong;(ii) it held such share capital, but the aggregate value of the holding of the capital is equivalent to not more than 10% of the value of its own assets; and (c) falls within either of the following descriptions—(i) it neither held immovable property in Hong Kong, nor held (whether directly or indirectly) share capital (however described) in one or more private companies with direct or indirect holding of immovable property in Hong Kong;(ii) it held such immovable property or share capital (or both), but the aggregate value of the holding of the property and capital is equivalent to not more than 10% of the value of its own assets; interposed special purpose vehicle (中間特定目的工具)— (a) in relation to a special purpose vehicle that has an indirect beneficial interest in an excepted private company through an interposed person that is a special purpose vehicle, means the interposed person; (b) in relation to a special purpose vehicle that has an indirect beneficial interest in an excepted private company through a series of 2 or more interposed persons that are special purpose vehicles, means any of the interposed persons; permanent establishment (常設機構)—see section 20ACB;private company (私人公司) means a company incorporated in or outside Hong Kong that is not allowed to issue any invitation to the public to subscribe for any shares or debentures of the company; special purpose vehicle (特定目的工具) means a corporation, partnership, trustee of a trust estate or any other entity that— (a) is wholly or partially owned by a non-resident person; (b) is established solely for the purpose of holding, directly or indirectly, and administering one or more excepted private companies; (c) is incorporated, registered or appointed in or outside Hong Kong; (d) does not carry on any trade or activities except for the purpose of holding, directly or indirectly, and administering one or more excepted private companies; and (e) is not itself an excepted private company. (Added 13 of 2015 s. 5) 20ACB. Permanent establishment of private company (1) For a private company, a permanent establishment is a fixed place of business through which activities of the company are carried on (including a branch and a place of management).(2) Subject to subsection (3), a private company is regarded as having a permanent establishment in Hong Kong if the company has an agent carrying on activities in Hong Kong who—(a) has, and habitually exercises, a general authority to negotiate and conclude contracts on behalf of the company; or(b) has a stock of merchandise from which the agent regularly fills orders on behalf of the company.(3) In relation to the business of the company as a whole, the activities mentioned in subsections (1) and (2) exclude—(a) the use of facilities solely for storage, display or delivery of goods or merchandise belonging to the company;(b) the maintenance of a stock of goods or merchandise belonging to the company solely for storage, display or delivery, or for processing by another business; and(c) the maintenance of a fixed place of business solely for purchasing goods or merchandise or for collecting information, for the company.(4) In this section—private company (私人公司) has the meaning given by section 20ACA(2).(Added 13 of 2015 s. 5) 20AD. Loss from transactions referred to in sections 20AC(1) and 20ACA(1) not available for set off Despite anything in this Part—(a) any loss sustained by a non-resident person from a transaction referred to in section 20AC(1) in a year of assessment in which the non-resident person has not at any time carried on any trade, profession or business in Hong Kong involving any transaction other than a transaction referred to in that section, is not available for set off against any of the person’s assessable profits for any subsequent year of assessment; and(b) any loss sustained by a special purpose vehicle as defined by section 20ACA(2) from a transaction referred to in section 20ACA(1) in a year of assessment in which the special purpose vehicle has not at any time carried on any trade, profession or business in Hong Kong involving any transaction other than a transaction referred to in section 20ACA(1), is not available for set off against any of its assessable profits for any subsequent year of assessment.(Replaced 13 of 2015 s. 6) 20AE. Assessable profits of non-resident persons regarded as assessable profits of resident persons (1) Where, in the year of assessment following the year of assessment in which the Revenue (Profits Tax Exemption for Offshore Funds) Ordinance 2006 (4 of 2006) commences* or in any subsequent year of assessment—(a) a resident person has, during any period of time, a beneficial interest, whether direct or indirect or both, in a non-resident person to the extent set out in subsection (2); and(b) the non-resident person is exempt from tax under section 20AC, the assessable profits of the non-resident person for that period of time that would have been chargeable to tax under this Part but for that section are to be regarded as the assessable profits arising in or derived from Hong Kong of the resident person for that year of assessment from a trade, profession or business carried on by the resident person in Hong Kong.(2) The extent of a resident person’s beneficial interest in a non-resident person referred to in subsection (1) is that the resident person, either alone or jointly with any of his associates (whether a resident person or not)—(a) where the non-resident person is a corporation that is not a trustee of a trust estate, holds or is interested in not less than 30% of the issued share capital (however described) of the corporation;(b) where the non-resident person is a partnership that is not a trustee of a trust estate, is entitled to not less than 30% of the profits of the partnership; or(c) where the non-resident person is a trustee of a trust estate, is interested in not less than 30% in value of the trust estate.(3) Where, in the year of assessment following the year of assessment in which the Revenue (Profits Tax Exemption for Offshore Funds) Ordinance 2006 (4 of 2006) commences or in any subsequent year of assessment—(a) a resident person has, during any period of time, a beneficial interest, whether direct or indirect or both, in a non-resident person who is exempt from tax under section 20AC; and(b) the non-resident person is an associate of the resident person,the assessable profits of the non-resident person for that period of time that would have been chargeable to tax under this Part but for that section are to be regarded as the assessable profits arising in or derived from Hong Kong of the resident person for that year of assessment from a trade, profession or business carried on by the resident person in Hong Kong.(4) Subsections (1) and (3) apply in relation to a resident person irrespective of whether the person has received, or will receive, directly or indirectly, from the non-resident person concerned any money or other property representing the profits of the non-resident person for the relevant year of assessment.(5) A resident person who has a direct or indirect beneficial interest in a trustee of a trust estate by reason of the fact that he is able or might reasonably be expected to be able to control the activities of the trust estate or the application of its corpus or income is, for the purposes of this section, to be regarded as being interested in 100% in value of the trust estate.(6) The extent of a resident person’s beneficial interest in a non-resident person is to be determined in accordance with the provisions in Part 2 of Schedule 15.(7) The amount regarded as the assessable profits of a resident person for a year of assessment under subsection (1) or (3) is to be ascertained in accordance with the provisions in Schedule 15.(8) Subsection (1) or (3) does not apply in relation to a resident person who has a direct or indirect beneficial interest in a non-resident person if the Commissioner is satisfied that beneficial interests in the non-resident person are bona fide widely held.(9) Where a resident person is liable to tax under subsection (1) or (3) in respect of the profits of a non-resident person by reason of his having an indirect beneficial interest in the non-resident person through an interposed person or through a series of 2 or more interposed persons, if the interposed person or any of the interposed persons is a resident person who is also liable to tax under that subsection in respect of the same profits, the first-mentioned resident person is discharged from his liability to tax under that subsection in respect of those profits.(10) In this section—associate (相聯者) has the meaning given by section 20AC(6). (Replaced 13 of 2015 s. 7)(Added 4 of 2006 s. 2)Editorial Note:* Commencement date: 10 March 2006. 20AF. Assessable profits of special purpose vehicles held by non-resident persons regarded as assessable profits of resident persons (1) If, in a year of assessment commencing on or after 1 April 2015—(a) a resident person has, during a period of time, a beneficial interest, whether direct or indirect or both, in a non-resident person to the extent set out in section 20AE(2);(b) the non-resident person is exempt from tax under section 20AC;(c) the non-resident person has, during that period of time, a beneficial interest, whether direct or indirect or both, in a special purpose vehicle as defined by section 20ACA(2); and(d) the special purpose vehicle is exempt from the payment of tax under section 20ACA,the assessable profits of the special purpose vehicle for that period of time that are chargeable to tax under this Part and in respect of which tax would have been payable but for section 20ACA, are to be regarded as the assessable profits arising in or derived from Hong Kong of the resident person for that year of assessment from a trade, profession or business carried on by the resident person in Hong Kong.(2) If, in a year of assessment commencing on or after 1 April 2015—(a) a resident person has, during a period of time, a beneficial interest, whether direct or indirect or both, in a non-resident person who is exempt from tax under section 20AC;(b) the non-resident person is an associate of the resident person;(c) the non-resident person has, during that period of time, a beneficial interest, whether direct or indirect or both, in a special purpose vehicle as defined by section 20ACA(2); and(d) the special purpose vehicle is exempt from the payment of tax under section 20ACA,the assessable profits of the special purpose vehicle for that period of time that are chargeable to tax under this Part and in respect of which tax would have been payable but for section 20ACA, are to be regarded as the assessable profits arising in or derived from Hong Kong of the resident person for that year of assessment from a trade, profession or business carried on by the resident person in Hong Kong.(3) Subsections (1) and (2) apply in relation to a resident person irrespective of whether the person has received, or will receive, directly or indirectly, from the special purpose vehicle concerned any money or other property representing the profits of the special purpose vehicle for the relevant year of assessment.(4) A resident person who has a direct or indirect beneficial interest in a trustee of a trust estate by reason of the fact that the person is able or might reasonably be expected to be able to control the activities of the trust estate or the application of its corpus or income is, for the purposes of this section, to be regarded as being interested in 100% in value of the trust estate.(5) The extent of a non-resident person’s beneficial interest in a special purpose vehicle is to be determined in accordance with Part 2 of Schedule 15A.(6) The amount regarded as the assessable profits of a resident person for a year of assessment under subsection (1) or (2) is to be ascertained in accordance with Schedule 15A.(7) Subsections (1) and (2) do not apply in relation to a resident person who has a direct or indirect beneficial interest in a non-resident person if the Commissioner is satisfied that beneficial interests in the non-resident person are bona fide widely held.(8) If—(a) a resident person is liable to tax under subsection (1) or (2) in respect of the profits of a special purpose vehicle by reason of the person’s having an indirect beneficial interest in the special purpose vehicle through an interposed person or through a series of 2 or more interposed persons (excluding the non-resident person); and(b) the interposed person or any of the interposed persons is a resident person who is also liable to tax under that subsection in respect of the profits,the resident person mentioned in paragraph (a) is discharged from the person’s liability to tax under that subsection in respect of those profits.(9) In this section—associate (相聯者) has the meaning given by section 20AC(6).(Added 13 of 2015 s. 8) Subdivision 3 Funds (Added 15 of 2020 s. 2) 20AG. (Repealed 5 of 2019 s. 5) 20AH. (Repealed 5 of 2019 s. 5) 20AI. (Repealed 5 of 2019 s. 5) 20AJ. (Repealed 5 of 2019 s. 5) 20AK. (Repealed 5 of 2019 s. 5) 20AL. (Repealed 5 of 2019 s. 5) 20AM. What fund means in sections 20AN, 20AO, 20AP, 20AQ, 20AR, 20AS, 20AT, 20AU, 20AV, 20AW, 20AX and 20AY and Schedules 15C, 15D and 16C (1) In sections 20AN, 20AO, 20AP, 20AQ, 20AR, 20AS, 20AT, 20AU, 20AV, 20AW, 20AX and 20AY and Schedules 15C, 15D and 16C, fund (基金) has the meaning given to it by this section.(2) An arrangement in respect of any property is a fund for a year of assessment if at all times during the basis period for the year of assessment—(a) either or both of the following apply—(i) under the arrangement, the property is managed as a whole by, or on behalf of, the person operating the arrangement;(ii) the contributions of the persons participating in the arrangement (participating persons), and the profits or income from which payment is made to them, are pooled under the arrangement;(b) under the arrangement, the participating persons do not have day-to-day control over the management of the property (whether or not they have the right to be consulted on, or to give directions in respect of, the management); and(c) the purpose or effect (or pretended purpose or effect) of the arrangement is to enable the participating persons, whether by acquiring any right, interest, title or benefit in the property or any part of the property or otherwise, to participate in or receive—(i) profits, income or other returns represented to arise (or to be likely to arise) from the acquisition, holding, management or disposal of the property (or any part of the property), or sums represented to be paid (or to be likely to be paid) out of any such profits, income or other returns; or(ii) a payment or other returns arising from the acquisition, holding or disposal of, the exercise of any right in, the redemption of, or the expiry of, any right, interest, title or benefit in the property or any part of the property.(3) In subsection (2)—property (財產) includes—(a) money, goods, choses in action and land (whether in Hong Kong or elsewhere); and(b) obligations, easements and every description of estate, interest and profit, present or future, vested or contingent, arising out of or incidental to property mentioned in paragraph (a).(4) An arrangement (commonly known as a sovereign wealth fund) that is established and funded by a state or government (or any political subdivision or local authority of a state or government) for the purposes of—(a) carrying out financial activities; and(b) holding and managing a pool of assets,for the benefit of the state or government (or the political subdivision or local authority) is also a fund.(5) A fund does not include an arrangement if—(a) the arrangement is operated by a person otherwise than by way of business;(b) each of the persons participating in the arrangement (participating persons) is a corporation in the same group of companies as the operator of the arrangement;(c) each of the participating persons of the arrangement is—(i) a bona fide employee or former employee of a corporation in the same group of companies as the operator of the arrangement; or(ii) a spouse, widow, widower, minor child (natural or adopted) or minor step-child of such employee or former employee;(d) the arrangement is a franchise arrangement under which the franchisor or franchisee earns profits or income by exploiting a right conferred by the arrangement to use a trade name or design or other intellectual property or goodwill attached to it;(e) money under the arrangement is taken by a solicitor (whether from his or her client or as a stakeholder) acting in his or her professional capacity in the ordinary course of practice;(f) the arrangement is made for the purposes of a fund or scheme maintained by—(i) the Securities and Futures Commission within the meaning of the Securities and Futures Ordinance (Cap. 571); or(ii) a recognized exchange company, a recognized clearing house, a recognized exchange controller or a recognized investor compensation company, within the meaning of that Ordinance,under that Ordinance for providing compensation in the event of default by an exchange participant, or a clearing participant, within the meaning of that Ordinance;(g) the arrangement is made by a credit union registered under the Credit Unions Ordinance (Cap. 119) in accordance with the objects of the credit union;(h) the arrangement is made for the purposes of any chit-fund permitted to operate under the Chit-Fund Businesses (Prohibition) Ordinance (Cap. 262); or(i) the arrangement is a mutual fund, unit trust or similar investment scheme falling within the descriptions in section 26A(1A)(a)(i) and (ii).(6) Also, a business undertaking for general commercial or industrial purposes is not a fund.(7) In subsection (6), the reference to a business undertaking for general commercial or industrial purposes includes a business undertaking that directly engages in any one or more of the following—(a) a commercial activity that involves—(i) any purchase, sale or exchange of goods or commodities; or(ii) any supply of services;(b) an industrial activity that involves any production of goods or construction of immovable property as defined by section 20AP(4);(c) property development or property holding;(d) finance, including—(i) banking;(ii) providing capital (other than providing capital to a special purpose entity, or an investee private company, as defined by section 20AO(4)) ;(iii) leasing;(iv) factoring;(v) securitization; and(vi) money-lending;(e) insurance business;(f) construction or direct acquisition of infrastructure as defined by section 20AP(4);(g) making direct investments that derive rent, royalties or lease payments.(Added 5 of 2019 s. 6) 20AN. Certain profits of certain funds exempt from payment of profits tax (1) This section applies subject to section 20AS.(2) If, in respect of a fund, a condition specified in subsection (3) is met at all times during the basis period for a year of assessment, the fund is, subject to sections 20AP and 20AQ, exempt from the payment of tax otherwise chargeable under this Part in respect of its assessable profits for the basis period earned from—(a) transactions in assets of a class specified in Schedule 16C (qualifying transactions);(b) subject to subsection (4), transactions incidental to the carrying out of qualifying transactions (incidental transactions); and(c) if the fund is an open-ended fund company—transactions in assets of a class that is not specified in Schedule 16C.(2A) For the purposes of subsection (2)(a), assets of a class specified in Schedule 16C may be held by a special purpose entity on behalf of a fund that owns the entity and transactions in such assets may be carried out by the entity on behalf of the fund. (Added 9 of 2021 s. 6)(3) The condition is—(a) that the qualifying transactions of the fund are—(i) carried out in Hong Kong by or through a specified person; or(ii) arranged in Hong Kong by a specified person; or(b) that the fund is a qualified investment fund.(4) The exemption under subsection (2) does not apply to assessable profits earned from incidental transactions if the percentage calculated according to the following formula exceeds 5%— A/B × 100% where— A = the fund’s trading receipts from incidental transactions in the basis period; B = the total of the fund’s trading receipts from qualifying transactions and incidental transactions in the basis period. (5) The Commissioner may by notice published in the Gazette amend Schedule 16C.(6) In this section—aggregate capital commitment (資本認繳總額), in relation to a qualified investment fund, means the total of the capital commitments made by the investors, the originator and the originator’s associates;associate (相聯者)—(a) in relation to a natural person, means—(i) a relative of the person;(ii) a partner of the person;(iii) if a partner of the person is a natural person—a relative of the partner;(iv) a partnership in which the person is a partner;(v) a corporation controlled by—(A) the person;(B) if the person is a natural person—a relative of the person;(C) a partner of the person;(D) if a partner of the person is a natural person—a relative of that partner; or(E) a partnership in which the person is a partner; or(vi) a director or principal officer of a corporation mentioned in subparagraph (v);(b) in relation to a corporation, means—(i) a person who controls the corporation;(ii) a partner of the person mentioned in subparagraph (i);(iii) if the person mentioned in subparagraph (i) is a natural person—a relative of the person;(iv) if the partner mentioned in subparagraph (ii) is a natural person—a relative of the partner;(v) a director or principal officer of—(A) the corporation; or(B) an associated corporation of the corporation;(vi) a relative of the director or principal officer mentioned in subparagraph (v);(vii) a partner of the corporation;(viii) if a partner of the corporation is a natural person—a relative of the partner;(ix) a partnership in which the corporation is a partner; or(x) an associated corporation of the corporation;(c) in relation to a partnership, means—(i) a partner in the partnership;(ii) if a partner in the partnership is a natural person—a relative of the partner;(iii) if a partner in the partnership is another partnership—(A) a partner in the other partnership (Partner A); or(B) a partner with the other partnership in any other partnership (Partner B);(iv) if Partner A is a partnership—a partner in Partner A (Partner C);(v) if Partner B is a partnership—a partner in Partner B (Partner D);(vi) if Partner A, Partner B, Partner C or Partner D is a natural person—a relative of the partner;(vii) a corporation controlled by—(A) the partnership;(B) a partner in the partnership;(C) if a partner in the partnership is a natural person—a relative of the partner; or(D) a partnership in which the partnership is a partner;(viii) a director or principal officer of the corporation mentioned in subparagraph (vii);(ix) a corporation of which a partner in the partnership is a director or principal officer; or(x) an associated partnership of the partnership;associated corporation (相聯法團), in relation to a corporation, means—(a) another corporation over which the corporation has control;(b) another corporation that has control over the corporation; or(c) another corporation that is under the control of the same person as is the corporation;associated partnership (相聯合夥), in relation to a partnership, means—(a) another partnership over which the partnership has control;(b) another partnership that has control over the partnership; or(c) another partnership that is under the control of the same person as is the partnership;capital commitment (資本認繳), in relation to a qualified investment fund, means a commitment—(a) in the form of an amount of money payable by an investor, the originator or the originator’s associate to the fund under an agreement governing the operation of the fund; and(b) in respect of which the originator may make capital calls from time to time according to the terms of the agreement;control (控制)—(a) in relation to a corporation, means the power of a person to secure—(i) by means of the holding of shares or the possession of voting power in or in relation to the corporation or any other corporation; or(ii) by virtue of any powers conferred by the articles of association or other document regulating the corporation or any other corporation,that the affairs of the corporation are conducted in accordance with the wishes of the person;(b) in relation to a partnership, means the power of a person to secure—(i) by means of the holding of interests or the possession of voting power in or in relation to the partnership or any other partnership; or(ii) by virtue of any powers conferred by the partnership agreement or other document regulating the partnership or any other partnership,that the affairs of the partnership are conducted in accordance with the wishes of the person;final closing of sale of interests (權益出售最終截止日), in relation to a qualified investment fund, means the date on which the originator last accepts subscriptions from investors for making capital commitments;investor (投資者), in relation to a qualified investment fund, means a person, other than the originator or the originator’s associates, who makes capital commitment to the fund;net proceeds (淨收益), in relation to a qualified investment fund at a particular time, means an amount calculated by—(a) adding together—(i) the sum of the cumulative distributions received by the investors, the originator and the originator’s associates from the fund by the particular time; and(ii) the value at the particular time of all assets, if any, held by the fund; and(b) subtracting the cumulative capital contributions of the investors, the originator and the originator’s associates by the particular time;originator (發起人), in relation to a qualified investment fund, means a person who directly or indirectly—(a) originates or sponsors the fund; and(b) has the power to make investment decisions on behalf of the fund;principal officer (主要職員), in relation to a corporation, means—(a) a person employed by the corporation who, either alone or jointly with one or more other persons, is responsible, under the immediate authority of the directors of the corporation, for the conduct of the business of the corporation; or(b) a person so employed who, under the immediate authority of a director of the corporation or a person to whom paragraph (a) applies, exercises managerial functions in respect of the corporation;qualified investment fund (合資格投資基金) means a fund in relation to which—(a) at all times after the final closing of sale of interests—(i) the number of investors exceeds 4; and(ii) the capital commitments made by investors exceed 90% of the aggregate capital commitments; and(b) an agreement governing the operation of the fund provides that not more than 30% of the net proceeds arising out of the transactions of the fund are to be received by the originator and the originator’s associates, after deducting the portion attributable to their capital contributions (which is proportionate to that attributable to the investors’ capital contributions);relative (親屬), in relation to a person, means the spouse, parent, child, brother or sister of the person, and, in deducing such a relationship—(a) an adopted child is to be regarded as a child of both the natural parents and any adoptive parent; and(b) a step child is to be regarded as a child of both the natural parents and any step parent;special purpose entity (特定目的實體) has the meaning given by section 20AO(4); (Added 9 of 2021 s. 6)specified person (指明人士) means a corporation licensed under Part V of the Securities and Futures Ordinance (Cap. 571) to carry on, or an authorized financial institution registered under that Part for carrying on, a business in any regulated activity as defined by Part 1 of Schedule 5 to that Ordinance.(7) Section 21 of Schedule 17A (specified alternative bond scheme and its treatment under this Ordinance (other than Part 4AA)) provides for modifications to this section. (Amended 21 of 2025 s. 33)(Added 5 of 2019 s. 6) 20AO. Certain profits of special purpose entities exempt from payment of profits tax (1) This section applies to a special purpose entity owned by a fund that is exempt from the payment of tax under section 20AN in respect of its assessable profits for a year of assessment.(2) The special purpose entity is, subject to sections 20AP and 20AQ, exempt to the extent provided by subsection (3) from the payment of tax chargeable under this Part in respect of its assessable profits for the year of assessment earned from—(a) transactions in shares, stocks, debentures, loan stocks, funds, bonds or notes (specified securities) of, or issued by, an investee private company or an interposed special purpose entity;(b) transactions in rights, options or interests (whether described as units or otherwise) in, or in respect of, the specified securities; (c) transactions in certificates of interest or participation in, temporary or interim certificates for, receipts for, or warrants to subscribe for or purchase, the specified securities; (Amended 9 of 2021 s.7)(d) transactions in assets of a class specified in Schedule 16C; and (Added 9 of 2021 s.7)(e) transactions incidental (incidental transactions) to the carrying out of transactions mentioned in paragraph (a), (b), (c) or (d) if, in the basis period for the year of assessment, the entity’s trading receipts from the incidental transactions do not exceed 5% of the total trading receipts from—(i) the transactions mentioned in those paragraphs; and(ii) the incidental transactions. (Added 9 of 2021 s.7)(3) The extent of exemption under subsection (2) is the percentage equal to the percentage of the fund’s ownership of the special purpose entity in the year of assessment.(4) In this section—interposed special purpose entity (中間特定目的實體) means—(a) in relation to a special purpose entity that has an indirect beneficial interest in an investee private company through an interposed person that is a special purpose entity—the interposed person;(b) in relation to a special purpose entity that has an indirect beneficial interest in an investee private company through a series of 2 or more interposed persons each of which is a special purpose entity—any of the interposed persons;investee private company (獲投資私人公司), in relation to a fund, means a private company held by a special purpose entity or an interposed special purpose entity as a shareholder on behalf of the fund;private company (私人公司) means a company (whether incorporated in or outside Hong Kong) that is not allowed to issue any invitations to the public to subscribe for any shares or debentures of the company;special purpose entity (特定目的實體) means a corporation, partnership, trustee of a trust estate or any other entity that—(a) is wholly or partially owned by a fund;(b) is established solely for the purpose of holding (whether directly or indirectly) and administering only one or both of the following—(i) one or more investee private companies;(ii) assets of a class specified in Schedule 16C; (Replaced 9 of 2021 s.7)(c) is incorporated, registered or appointed in or outside Hong Kong;(d) does not carry on any trade or activities except for the purpose of—(i) holding (whether directly or indirectly) and administering one or more investee private companies;(ii) holding (whether directly or indirectly) and administering assets of a class specified in Schedule 16C; or(iii) executing a legal document relating to an activity mentioned in subparagraph (i) or (ii) on behalf of the fund mentioned in paragraph (a); and (Replaced 9 of 2021 s.7)(e) is not itself a fund or an investee private company.(Added 5 of 2019 s. 6) 20AP. When does exemption under section 20AN or 20AO not apply to specified body holding immovable property through another company (1) Subject to section 20AR, this section applies if, during the basis period for a year of assessment—(a) a specified body carries out transactions in shares, stocks, debentures, loan stocks, funds, bonds or notes (specified securities) of, or issued by, a private company (relevant company); and(b) the relevant company holds (whether directly or indirectly)—(i) immovable property in Hong Kong; or(ii) share capital (however described) in another private company that holds (whether directly or indirectly) immovable property in Hong Kong.(2) If the aggregate value of the immovable property and share capital held by the relevant company—(a) exceeds 10% of the value of its assets—the specified body is not exempt from the payment of tax under this Part in respect of its assessable profits for the period earned from the transactions; or(b) does not exceed 10% of the value of its assets—the specified body is not, unless a condition specified in subsection (3) is met in good faith by the specified body, exempt from the payment of tax under this Part in respect of its assessable profits for the period earned from the transactions.(3) The condition is—(a) that the specified body disposes of, through a transaction or a series of transactions, the specified securities not less than 2 years after they are acquired (whether or not the specified body has control over the relevant company); or(b) that the specified body disposes of, through a transaction or a series of transactions, the specified securities less than 2 years after they are acquired and—(i) the specified body does not have control over the relevant company; or(ii) if the specified body has control over the relevant company—the relevant company holds (whether directly or indirectly) short-term assets the aggregate value of which does not exceed 50% of the value of the relevant company’s assets.(4) In this section—control (控制) has the meaning given by section 20AN(6);immovable property (不動產) means—(a) land (whether covered by water or not);(b) any estate, right, interest or easement in or over any land; and(c) things attached to land or permanently fastened to anything attached to land,but does not include infrastructure;infrastructure (基礎設施) means any publicly or privately owned facility providing or distributing services for the benefit of the public, and includes any water, sewage, energy, fuel, transportation or communication facility;private company (私人公司) has the meaning given by section 20AO(4);short-term asset (短期資產), in relation to a private company the shares, stocks, debentures, loan stocks, funds, bonds or notes of, or issued by, which are being disposed of by a fund, means an asset—(a) that is of a class not specified in Schedule 16C;(b) that is not immovable property in Hong Kong; and(c) that has been held by the company for less than 3 consecutive years before the date of disposal;special purpose entity (特定目的實體) has the meaning given by section 20AO(4);specified body (指明團體) means a fund or a special purpose entity.(Added 5 of 2019 s. 6) 20AQ. When does exemption under section 20AN or 20AO not apply to specified body not holding immovable property through another company (1) Subject to section 20AR, this section applies if, during the basis period for a year of assessment—(a) a specified body carries out transactions in shares, stocks, debentures, loan stocks, funds, bonds or notes (specified securities) of, or issued by, a private company (relevant company); and(b) the relevant company does not hold (whether directly or indirectly)—(i) immovable property in Hong Kong; or(ii) share capital (however described) in another private company that holds (whether directly or indirectly) immovable property in Hong Kong.(2) The specified body is not, unless a condition specified in subsection (3) is met in good faith by the specified body, exempt from the payment of tax chargeable under this Part in respect of its assessable profits for the period earned from the transactions.(3) The condition is—(a) that the specified body disposes of, through a transaction or a series of transactions, the specified securities not less than 2 years after they are acquired (whether or not the specified body has control over the relevant company); or(b) that the specified body disposes of, through a transaction or a series of transactions, the specified securities less than 2 years after they are acquired and—(i) the specified body does not have control over the relevant company; or(ii) if the specified body has control over the relevant company—the relevant company holds (whether directly or indirectly) short-term assets the aggregate value of which does not exceed 50% of the value of the relevant company’s assets.(4) In this section—control (控制) has the meaning given by section 20AN(6);immovable property (不動產) has the meaning given by section 20AP(4);private company (私人公司) has the meaning given by section 20AO(4);short-term asset (短期資產) has the meaning given by section 20AP(4);special purpose entity (特定目的實體) has the meaning given by section 20AO(4);specified body (指明團體) has the meaning given by section 20AP(4).(Added 5 of 2019 s. 6) 20AR. Supplementary provision to sections 20AP and 20AQ (1) Sections 20AP and 20AQ do not apply to a partner fund carrying on a trade, profession or business that involves transactions in shares of an investee company during the basis period for a year of assessment.(2) In this section—investee company (獲投資公司) means—(a) a corporation that has ITVFC and a partner fund as shareholders under the ITVF Scheme; or(b) a corporation that—(i) had, at any time, ITVFC and a partner fund (Fund A) as shareholders under the ITVF Scheme; and(ii) has, since that time, continued to have a partner fund (whether Fund A or another partner fund) as a shareholder;ITVF Scheme (創基計劃) means the Innovation and Technology Venture Fund Scheme established by the Innovation and Technology Commission;ITVFC (創基公司) means The Innovation and Technology Venture Fund Corporation incorporated under the Companies Ordinance (Cap. 622);partner fund (夥伴基金) means a fund that is a party (whether or not through an agent) to an agreement—(a) to which ITVFC is also a party;(b) that stipulates the overall rights and obligations of ITVFC and the fund in respect of their participation in the ITVF Scheme; and(c) that is valid and in force.(Added 5 of 2019 s. 6) 20AS. When does exemption under section 20AN not apply to open-ended fund companies Despite section 20AN, if, during the basis period for a year of assessment, an open-ended fund company—(a) carries on a direct trading or direct business undertaking in Hong Kong in assets of a class that is not specified in Schedule 16C (non-Schedule 16C class); or(b) holds assets of a non-Schedule 16C class that are utilized to generate income,the company is not exempt from the payment of tax chargeable under this Part in respect of its assessable profits for the basis period earned from the trading, business undertaking or utilization.(Added 5 of 2019 s. 6) 20AT. Sub-funds of open-ended fund companies (1) This section applies in relation to an open-ended fund company.(2) If the instrument of incorporation of the company (main company) provides for the division of its scheme property into separate parts (each of which is a sub-fund), then, when applying section 14 to the main company—(a) a reference to assessable profits in that section is a reference to the total of the assessable profits of all of its sub-funds; and(b) for computing the assessable profits of the sub-funds—(i) each sub-fund is to be regarded as an open-ended fund company;(ii) the main company is to be regarded as not being an open-ended fund company; and(iii) the provisions of this Part apply to a sub-fund as if it were an open-ended fund company.(3) The part of the profits tax chargeable on the main company that is attributable to the assessable profits of one of the sub-funds may only be paid out of the assets of the sub-fund.(4) If the condition for exemption from payment of tax under section 20AN is met in respect of a sub-fund, the sub-fund is exempt under that section even if the condition is not met in respect of another sub-fund of the main company.(5) Any loss sustained by a sub-fund is not available for set off against any assessable profits of another sub-fund of the main company.(6) In this section—scheme property (計劃財產) has the meaning given by section 112A of the Securities and Futures Ordinance (Cap. 571).(Added 5 of 2019 s. 6) 20AU. Losses sustained by funds (other than open-ended fund companies) and special purpose entities (1) This section applies in relation to a fund (other than an open-ended fund company) and a special purpose entity.(2) If a fund is exempt from the payment of tax under section 20AN in respect of its assessable profits for a year of assessment, any loss sustained by the fund from a transaction referred to in section 20AN(2)(a) or (b) in the year of assessment is not available for set off against any of its assessable profits for the year of assessment or any subsequent year of assessment.(3) If a special purpose entity is exempt from the payment of tax under section 20AO in respect of its assessable profits for a year of assessment, any loss sustained by the entity from a transaction referred to in section 20AO(2) in the year of assessment is not available for set off against any of its assessable profits for the year of assessment or any subsequent year of assessment.(4) In this section—special purpose entity (特定目的實體) has the meaning given by section 20AO(4).(Added 5 of 2019 s. 6) 20AV. Losses sustained by open-ended fund companies (1) This section applies in relation to an open-ended fund company.(2) If the company is exempt from the payment of tax under section 20AN in respect of its assessable profits for a year of assessment, any loss sustained by the company from a transaction referred to in section 20AN(2)(a), (b) or (c) in the year of assessment is not available for set off against any of its assessable profits for the year of assessment or any subsequent year of assessment.(3) Any loss sustained by the company from a specified activity in respect of which there is not an exemption from the payment of tax for assessable profits under section 20AN or 20AS for a year of assessment is only available for set off against any assessable profits of the company earned from the specified activity for the year of assessment or any subsequent year of assessment.(4) In this section—specified activity (指明活動) means a transaction, a direct trading, a direct business undertaking or utilization of assets.(Added 5 of 2019 s. 6) 20AW. Interpretation of sections 20AX and 20AY and Schedules 15C and 15D (1) This section applies to the interpretation of sections 20AX and 20AY and Schedules 15C and 15D.(2) In relation to any year of assessment, a person is to be regarded as a resident person if—(a) where the person is a natural person who is not a trustee of a trust estate, the person—(i) ordinarily resides in Hong Kong in the year of assessment; or(ii) stays in Hong Kong for a period or a number of periods amounting to—(A) more than 180 days during the year of assessment; or(B) more than 300 days in 2 consecutive years of assessment one of which is the year of assessment;(b) where the person is a corporation that is not a trustee of a trust estate—the central management and control of the corporation is exercised in Hong Kong in the year of assessment;(c) where the person is a partnership that is not a trustee of a trust estate—the central management and control of the partnership is exercised in Hong Kong in the year of assessment; or(d) where the person is a trustee of a trust estate—the central management and control of the trust estate is exercised in Hong Kong in the year of assessment.(3) In relation to any year of assessment, a person is a non-resident person if the person is not a resident person in relation to the year of assessment.(4) A person (the person) is to be regarded as having a direct beneficial interest in another person (the other person) if—(a) where the other person is a corporation that is not a trustee of a trust estate—the person holds any of the issued share capital (however described) of the corporation;(b) where the other person is a partnership that is not a trustee of a trust estate—the person, as a partner in the partnership, is entitled to any of the profits of the partnership;(c) where the other person is a trustee of a trust estate, the person—(i) benefits under the trust estate; or(ii) not being a trustee of the trust estate or, if the trustee is a corporation, a director of the trustee—is able (or might reasonably be expected to be able) to control the activities of the trust estate or the application of its corpus or income,otherwise than through the other person; or(d) where the other person is an entity that does not fall within any of paragraphs (a), (b) and (c)—the person has any of the ownership interests in the entity.(5) A person (the person) is to be regarded as having an indirect beneficial interest in another person (the other person) if—(a) where the other person is a corporation that is not a trustee of a trust estate—the person is interested in any of the issued share capital (however described) of the corporation;(b) where the other person is a partnership that is not a trustee of a trust estate—the person is entitled to any of the profits of the partnership;(c) where the other person is a trustee of a trust estate, the person—(i) benefits under the trust estate; or(ii) not being a trustee of the trust estate or, if the trustee is a corporation, a director of the trustee—is able (or might reasonably be expected to be able) to control the activities of the trust estate or the application of its corpus or income; or(d) where the other person is an entity that does not fall within any of paragraphs (a), (b) and (c)—the person has any of the ownership interests in the entity,through a third person (interposed person), or through a series of 2 or more interposed persons, who is or are related to the person and the other person in the way described in subsections (6) and (7).(6) If there is one interposed person—(a) the person has a direct beneficial interest in the interposed person; and(b) the interposed person has a direct beneficial interest in the other person.(7) If there is a series of 2 or more interposed persons—(a) the person has a direct beneficial interest in the first interposed person in the series;(b) each interposed person (other than the last interposed person) in the series has a direct beneficial interest in the next interposed person in the series;

and(c) the last interposed person in the series has a direct beneficial interest in the other person.(8) If the partners in a partnership are not entitled to its profits but are only entitled to a distribution of its assets on its dissolution—a reference to an entitlement to the profits of a partnership is taken to be a reference to an entitlement to a distribution of the assets of the partnership on its dissolution.(9) A reference to the issued share capital of a corporation does not include the shares comprised in the issued share capital that do not entitle their holders to receive dividends (whether in cash or in kind) and a distribution of the corporation’s assets on its dissolution other than a return of capital.(Added 5 of 2019 s. 6) 20AX. Assessable profits of funds regarded as assessable profits of resident persons (1) If, in a year of assessment commencing on or after 1 April 2019—(a) a resident person has, during any period of time, a beneficial interest (whether direct or indirect or both) in a fund to the extent set out in subsection (2); and(b) the fund is exempt from the payment of tax under section 20AN,the assessable profits of the fund for the period of time that would have been chargeable to tax under this Part but for that section are to be regarded as the assessable profits arising in, or derived from, Hong Kong of the resident person for the year of assessment from a trade, profession or business carried on by the resident person in Hong Kong.(2) The extent of a resident person’s beneficial interest in a fund referred to in subsection (1) is that the person, either alone or jointly with any of the person’s associates (whether a resident person or not)—(a) if the fund is a corporation that is not a trustee of a trust estate—holds or is interested in not less than 30% of the issued share capital (however described) of the corporation;(b) if the fund is a partnership that is not a trustee of a trust estate—is entitled to not less than 30% of the profits of the partnership;(c) if the fund is a trustee of a trust estate—is interested in not less than 30% in value of the trust estate; or(d) if the fund is an entity that does not fall within any of paragraphs (a), (b) and (c)—has not less than 30% of the ownership interests in the fund.(3) If, in a year of assessment commencing on or after 1 April 2019—(a) a resident person has, during any period of time, a beneficial interest (whether direct or indirect or both) in a fund;(b) the fund is exempt from the payment of tax under section 20AN; and(c) the fund is an associate of the resident person,the assessable profits of the fund for the period of time that would have been chargeable to tax under this Part but for that section are to be regarded as the assessable profits arising in, or derived from, Hong Kong of the resident person for the year of assessment from a trade, profession or business carried on by the resident person in Hong Kong.(4) Subsections (1) and (3) apply in relation to a resident person irrespective of whether the person has received or will receive (whether directly or indirectly) from the fund concerned any money or other property representing the profits of the fund for the relevant year of assessment.(5) A resident person who has a direct or indirect beneficial interest in a trustee of a trust estate because of the fact that the resident person is able (or might reasonably be expected to be able) to control the activities of the trust estate or the application of its corpus or income is, for the purposes of this section, to be regarded as being interested in 100% of the value of the trust estate.(6) The extent of a resident person’s beneficial interest in a fund is to be determined in accordance with Part 2 of Schedule 15C.(7) The amount regarded as the assessable profits of a resident person for a year of assessment under subsection (1) or (3) is to be ascertained in accordance with Schedule 15C.(8) Subsections (1) and (3) do not apply in relation to a resident person who has a direct or indirect beneficial interest in a fund if the Commissioner is satisfied that the beneficial interests in the fund are bona fide widely held.(9) If—(a) a resident person is liable to tax in respect of the profits of a fund by the operation of subsection (1) or (3) because the person has an indirect beneficial interest in the fund through an interposed person (or through a series of 2 or more interposed persons); and(b) the interposed person (or any of the interposed persons) is a resident person who is also liable to tax in respect of the profits by the operation of subsection (1) or (3),the resident person mentioned in paragraph (a) is discharged from the person’s liability to tax in respect of the profits.(10) In this section—associate (相聯者) has the meaning given by section 20AN(6).(Added 5 of 2019 s. 6) 20AY. Assessable profits of special purpose entities held by funds regarded as assessable profits of resident persons (1) If, in a year of assessment commencing on or after 1 April 2019—(a) a resident person has, during any period of time, a beneficial interest (whether direct or indirect or both) in a fund to the extent set out in section 20AX(2);(b) the fund is exempt from the payment of tax under section 20AN;(c) the fund has, during the period of time, a beneficial interest (whether direct or indirect or both) in a special purpose entity; and(d) the special purpose entity is exempt from the payment of tax under section 20AO,the assessable profits of the special purpose entity for the period of time that are chargeable to tax under this Part and in respect of which tax would have been payable but for section 20AO are to be regarded as the assessable profits arising in, or derived from, Hong Kong of the resident person for the year of assessment from a trade, profession or business carried on by the resident person in Hong Kong.(2) If, in a year of assessment commencing on or after 1 April 2019—(a) a resident person has, during any period of time, a beneficial interest (whether direct or indirect or both) in a fund;(b) the fund is exempt from the payment of tax under section 20AN;(c) the fund is an associate of the resident person;(d) the fund has, during the period of time, a beneficial interest (whether direct or indirect or both) in a special purpose entity; and(e) the special purpose entity is exempt from the payment of tax under section 20AO,the assessable profits of the special purpose entity for the period of time that are chargeable to tax under this Part and in respect of which tax would have been payable but for section 20AO are to be regarded as the assessable profits arising in, or derived from, Hong Kong of the resident person for the year of assessment from a trade, profession or business carried on by the resident person in Hong Kong.(3) Subsections (1) and (2) apply in relation to a resident person irrespective of whether the person has received or will receive (whether directly or indirectly) from the special purpose entity concerned any money or other property representing the profits of the special purpose entity for the relevant year of assessment.(4) A resident person who has a direct or indirect beneficial interest in a trustee of a trust estate because of the fact that the resident person is able (or might reasonably be expected to be able) to control the activities of the trust estate or the application of its corpus or income is, for the purposes of this section, to be regarded as being interested in 100% of the value of the trust estate.(5) The extent of a fund’s beneficial interest in a special purpose entity is to be determined in accordance with Part 2 of Schedule 15D.(6) The amount regarded as the assessable profits of a resident person for a year of assessment under subsection (1) or (2) is to be ascertained in accordance with Schedule 15D.(7) Subsections (1) and (2) do not apply in relation to a resident person who has a direct or indirect beneficial interest in a fund if the Commissioner is satisfied that the beneficial interests in the fund are bona fide widely held.(8) If—(a) a resident person is liable to tax in respect of the profits of a special purpose entity by the operation of subsection (1) or (2) because the person has an indirect beneficial interest in the special purpose entity through an interposed person (or through a series of 2 or more interposed persons); and(b) the interposed person (or any of the interposed persons) is a resident person who is also liable to tax in respect of the profits by the operation of subsection (1) or (2),the resident person mentioned in paragraph (a) is discharged from the person’s liability to tax in respect of the profits.(9) In this section—associate (相聯者) has the meaning given by section 20AN(6);special purpose entity (特定目的實體) has the meaning given by section 20AO(4).(Added 5 of 2019 s. 6) Subdivision 4 Persons Chargeable in respect of Certain Profits of Non-resident Persons (Added 15 of 2020 s. 2) 20B. Persons chargeable in respect of certain profits of a non-resident (1) Without prejudice to section 20A, this section applies in respect of a non-resident person who is chargeable to tax in respect of—(a) sums deemed by virtue of section 15(1)(a), (b), (ba) or (bb) to be receipts arising in or derived from Hong Kong from a trade, profession or business carried on in Hong Kong; or (Amended 12 of 2004 s. 7; 24 of 2018 s. 7)(b) sums received in respect of, or which in any way derive directly or indirectly from, the performance in Hong Kong by a non-resident entertainer or sportsman (whether or not he is the non-resident person who is so chargeable) of an activity in his character as entertainer or sportsman on or in connection with a commercial occasion or event, including—(i) any appearance of the entertainer or sportsman by way of or in connection with the promotion of any such occasion or event; and(ii) any participation by the entertainer or sportsman in or for sound recording, films, videos, radio, television or other similar transmissions (whether live or recorded).(2) Where this section applies, the non-resident person is chargeable to tax in respect of the sums described in subsection (1) in the name of any person in Hong Kong who paid or credited those sums to that or any other non-resident person, and the tax so charged shall be recoverable by all means provided in this Ordinance from that person in Hong Kong.(3) Where a person in Hong Kong from whom tax is recoverable by virtue of this section pays or credits to a non-resident person (whether or not he is the non-resident person who is chargeable to tax) sums described in subsection (1) he shall, at the time he makes the payment or credit, deduct from those sums so much thereof as is sufficient to produce the amount of such tax, and he is hereby indemnified against any person in respect of his deduction of such sum.(4) In this section— commercial occasion or event (商業場合或事項) includes any description of occasion or event— (a) for which an entertainer or sportsman (or other person) might, by virtue of his performance of the activity, receive or become entitled to receive anything by way of cash or any other form of property; or (b) which is designed to promote commercial sales or activity by advertising, the endorsement of goods or services, sponsorship, or other promotional means of any kind; entertainer or sportsman (演藝人員或運動員) means a person, other than a corporation, who gives performances (whether alone or with others) in his character as entertainer or sportsman in any kind of entertainment or sport, including any activity of a physical kind which (whether in a live or recorded form) the public or any section of the public is or may be permitted (whether for payment or not) to see or hear; (Amended 21 of 2025 s. 11)tax (稅) means tax charged under this Part. (Added 21 of 2025 s. 11)(Added 4 of 1989 s. 2) Subdivision 5 Assessable Profits of Certain Businesses of Non-resident Persons (Added 15 of 2020 s. 2) 21. Assessable profits of certain businesses to be computed on a percentage of the turnover Where the true amount of the assessable profits arising in or derived from Hong Kong of a non-resident person in respect of a trade, profession or business carried on in Hong Kong cannot be readily ascertained, such assessable profits may be computed on a fair percentage of the turnover of that trade or business in Hong Kong.(Amended 36 of 1955 s. 30; 7 of 1975 s. 17; 7 of 1986 s. 12) 21A. Computation of assessable profits from cinematograph films, patents, trade marks, etc. (Amended 21 of 2011 s. 7)(1) The assessable profits of a person arising in or derived from Hong Kong in respect of a sum deemed by section 15(1)(a), (b) or (ba) to be a receipt arising in or derived from Hong Kong from a trade, profession or business carried on in Hong Kong shall, for the purposes of this Ordinance and notwithstanding any other provisions of this Part, be taken to be— (Amended 12 of 2004 s. 7)(a) 100% of the sum in the case of a sum derived from an associate: Provided that this paragraph shall not apply in the case where the Commissioner is satisfied that no person carrying on a trade, profession or business in Hong Kong has at any time wholly or partly owned the property in respect of which the sum is paid; or (b) the following percentages of the sum in any other case, including any case of the description mentioned in the proviso to paragraph (a)—(i) for any sum received by or accrued to the person before 1 April 2003, 10%;(ii) for any sum received by or accrued to the person on or after 1 April 2003, 30%. (Replaced 24 of 2003 s. 5)(2) For the purpose of ascertaining whether a sum was derived from an associate in the application of subsection (1), where the sum was derived from or by a trustee of a trust estate or a corporation controlled by such a trustee, that sum shall be deemed to have been derived from or by, as the case may be, each of the trustee, the corporation and the beneficiary under the trust.(3) In this section— associate (相聯者), in relation to a person, means— (a) where the person is a natural person—(i) a relative of the person;(ii) a partner of the person and any relative of that partner;(iii) a partnership in which the person is a partner;(iv) any corporation controlled by the person, by a partner of the person or by a partnership in which the person is a partner;(v) any director or principal officer of any such corporation as is referred to in subparagraph (iv); (b) where the person is a corporation—(i) any associated corporation;(ii) any person who controls the corporation and any partner of such person, and, where either such person is a natural person, any relative of such person;(iii) any director or principal officer of that corporation or of any associated corporation and any relative of any such director or officer;(iv) any partner of the corporation and, where such partner is a natural person, any relative of such partner; (c) where the person is a partnership—(i) any partner of the partnership and where such partner is a partnership any partner of that partnership, any partner with the partnership in any other partnership and where such partner is a partnership any partner of that partnership and where any partner of, or with, or in any of the partnerships mentioned in this subparagraph is a natural person, any relative of such partner;(ii) any corporation controlled by the partnership or by any partner thereof or, where such a partner is a natural person, any relative of such partner;(iii) any corporation of which any partner is a director or principal officer;(iv) any director or principal officer of a corporation referred to in subparagraph (ii); associated corporation (相聯法團), in relation to a person, means— (a) a corporation over which the person has control; (b) if the person is a corporation—(i) a corporation which has control over the person; or(ii) a corporation which is under the control of the same person as is the first-mentioned person; beneficiary under the trust (信託的受益人) means any person who benefits or is capable (whether by the exercise of a power of appointment or otherwise) of benefiting under a trust estate, either directly or through any interposed person, or who is able or might reasonably be expected to be able, whether directly or indirectly, to control the activities of the trust estate or the application of its corpus or income; control (控制), in relation to a corporation, means the power of a person to secure— (a) by means of the holding of shares or the possession of voting power in or in relation to that or any other corporation; or (b) by virtue of any powers conferred by the articles of association or other document regulating that or any other corporation, that the affairs of the first-mentioned corporation are conducted in accordance with the wishes of that person; principal officer (主要職員) means— (a) a person employed by a corporation who, either alone or jointly with one or more other persons, is responsible under the immediate authority of the directors for the conduct of the business of the corporation; or (b) a person so employed who, under the immediate authority of a director of the corporation or a person to whom paragraph (a) applies, exercises managerial functions in respect of the corporation; relative (親屬) means the spouse, parent, child, brother or sister of the relevant person, and, in deducing such a relationship, an adopted child shall be deemed to be a child both of the natural parents and the adopting parent and a step child to be the child of both the natural parents and of any step parent.(Replaced 65 of 1993 s. 3) 21B. Transitional (1) Subject to subsection (2), the amendments to section 21A effected by the Inland Revenue (Amendment) (No. 4) Ordinance 1993 (65 of 1993) shall apply to any sum received by or accrued to any person on or after 4 March 1993.(2) The provisions of section 21A in force immediately prior to the coming into operation of the Inland Revenue (Amendment) (No. 4) Ordinance 1993 (65 of 1993) shall continue to apply to any sum received by or accrued to any person prior to 4 March 1993 as if that Ordinance had not been enacted.(Added 65 of 1993 s. 3) Division 10 Partnerships (Added 15 of 2020 s. 2) 22. Assessment of partnerships (1) Where a trade, profession or business is carried on by 2 or more persons jointly the assessable profits therefrom shall be computed in one sum and the tax in respect thereof shall be charged in the partnership name. (Replaced 36 of 1955 s. 31)(2) The precedent partner shall make and deliver a statement of the profits or losses of such trade, profession or business, on behalf of the partnership, ascertained in accordance with the provisions of this Part relating to the ascertainment of profits. Where no active partner is resident in Hong Kong the return shall be furnished by the manager or agent of the partnership in Hong Kong. (Amended 7 of 1986 s. 12)(2A) The general partner in a limited partnership fund must make and deliver a statement of the profits or losses of such trade, profession or business, on behalf of the fund, ascertained in accordance with the provisions of this Part relating to the ascertainment of profits. (Added 14 of 2020 s. 108)(2B) For the purposes of subsection (2A), if a limited partnership fund has an authorized representative, the reference to the general partner in the fund in that subsection is a reference to the authorized representative. (Added 14 of 2020 s. 108)(3) If a change occurs in a partnership of persons carrying on any trade, profession or business, by reason of retirement or death, or the dissolution of the partnership as to one or more of the partners, or the admission of a new partner, in such circumstances that one or more of the persons who until that time were engaged in the trade, profession or business continue to be engaged therein, or if a person previously engaged in any trade, profession or business on his own account continues to be engaged in it, but as a partner in a partnership, the tax payable by the person or persons who carry on the trade, profession or business after that time shall, notwithstanding the change be computed on what would otherwise have been the assessable profits of such person or persons or the aggregation of such assessable profits as if no such change had occurred. (Amended 30 of 1950 Schedule; 36 of 1955 s. 31; 49 of 1956 s. 18; 7 of 1975 s. 19; 56 of 1993 s. 16)(4) Tax upon the partnership shall be recoverable by all means provided in this Ordinance out of the assets of the partnership, or from any partner. (Amended 36 of 1955 s. 31)(5) Tax may be assessed on the profits of a partnership notwithstanding the cessation or dissolution of such partnership and shall be recoverable from the former partners and from the assets of the partnership at the time of its cessation.(6) In this section—authorized representative (獲授權代表) has the meaning given by section 2 of the Limited Partnership Fund Ordinance (Cap. 637); (Amended E.R. 5 of 2020)general partner (普通合夥人) has the meaning given by section 2 of the Limited Partnership Fund Ordinance (Cap. 637); (Added 14 of 2020 s. 108. Amended E.R. 5 of 2020; 21 of 2025 s. 12)tax (稅) means tax charged under this Part. (Added 21 of 2025 s. 12) 22A. Ascertainment of share of partnership profits or losses (1) In order to ascertain the share of a partner of the assessable profits or losses of a partnership, such assessable profits or losses for the relevant year of assessment shall be apportioned amongst the persons who were partners during the basis period in the ratio in which the profits or losses of the basis period for that year of assessment were divided; and the profits or losses as so apportioned shall constitute the shares of the assessable profits and losses of the individual partners for that year of assessment.(2) For the purposes of subsection (1), there shall be excluded from the assessable profits of a partnership any loss brought forward under section 19C.(3) (Repealed 30 of 2004 s. 3)(Added 7 of 1975 s. 20) 22B. Limited partner loss relief (1) In this section— limited partner (有限責任合夥人) means a person who is a partner in a partnership which is carrying on a trade, profession or business and that person is— (a) a limited partner in a limited partnership registered under the Limited Partnerships Ordinance (Cap. 37); (ab) a limited partner (as defined by section 2 of the Limited Partnership Fund Ordinance (Cap. 637)) in a limited partnership fund; (Added 14 of 2020 s. 109. Amended E.R. 5 of 2020) (b) not being a general partner (as defined by section 2 of the Limited Partnership Fund Ordinance (Cap. 637)) in a limited partnership fund, a general partner in a partnership in which he is not entitled to or does not take part in the management of the partnership but is entitled to have his liabilities, or his liabilities beyond a certain limit, for debts or obligations incurred by the partnership for the purposes of the trade, profession or business discharged or reimbursed by some other person; or (Amended 14 of 2020 s. 109; E.R. 5 of 2020) (c) under the law of any place outside Hong Kong, not entitled to or does not take part in the management of the partnership and is not liable beyond a certain limit for debts or obligations incurred by the partnership for the purposes of the trade, profession or business; relevant sum (有關款項) means the amount of the person’s contribution to the partnership as at the end of the relevant year of assessment in which the loss is sustained, except that where the person ceased to be a partner in the partnership during that year of assessment it is the time when he so ceased.(2) For the purposes of this section, a person’s contribution to the partnership at any time is the aggregate of—(a) the amount which he has contributed to it as capital less the sum of—(i) the amounts of capital that he has directly or indirectly drawn out or received back; and(ii) anything that he is or may be entitled at any time while the partnership carries on the trade, profession or business to draw out, receive back or be reimbursed from another person, whether or not the entitlement is enforceable or is pursuant to an unenforceable undertaking or practice; and(b) the amount of any profits or gains of the partnership to which he is entitled but which he has not received in money or money’s worth.(3) Notwithstanding section 19C, where in any year of assessment a person who is a limited partner in a partnership has incurred a share of a loss of that partnership the amount of the loss which may be set off against the assessable profits of the person is limited to the lesser of—(a) the amount of the loss; or(b) the relevant sum.(4) This section applies to years of assessment that commence on or after 1 April 1991 and to that part of any basis period for a year of assessment that occurs on or after 15 November 1990 but before 1 April 1991 but does not apply in respect of a share of a loss incurred under a transaction which was the subject of an application for advance clearance made to the Commissioner before 15 November 1990 and the Commissioner before or after that date expressed the opinion that the transaction would not fall within the terms of section 61A or, where no such application was made in respect of a loss incurred under a transaction entered into before that date, the transaction is, in the Commissioner’s opinion, of the same type as any for which, in the circumstances prevailing as at 14 November 1990, he would have expressed the opinion that the transaction would not fall within the terms of section 61A.(Added 15 of 1992 s. 3) 22C. Transitional: partnerships consisting of more than 20 members Where a partnership, which immediately before the commencement* of sections 6, 7, 8 and 9 of Part 2 of Schedule 4 to the Companies (Amendment) Ordinance 2004 (30 of 2004), was a person, but was not an individual, a corporation or a partnership as defined in sections 19C(7) and 22A(3) that were in force immediately before that commencement, has any losses brought forward under section 19C(4), then, notwithstanding section 22A(2)—(a) any such losses shall be used to set off against the assessable profits of that partnership in the subsequent years of assessment the basis periods of which are ended after that commencement until those losses are fully utilized; and(b) the assessable profits of that partnership for a year of assessment the basis period of which is ended after that commencement shall be reduced by the amount of loss set off mentioned in paragraph (a) before they are apportioned amongst the partners of that partnership in accordance with section 22A(1).(Added 30 of 2004 s. 3)Editorial Note:* Commencement date: 14 December 2007. Division 11 Assessable Profits of Certain Businesses (Added 15 of 2020 s. 2) Subdivision 1 Insurance (Added 15 of 2020 s. 2) 22D. Interpretation of Subdivision 1 of Division 11 of Part 4 In this Subdivision—Cap. 41 (《第41章》) means the Insurance Ordinance (Cap. 41);Cap. 41 amendment date (《第41章》修訂日期) means the commencement date of section 11 of the Insurance (Amendment) Ordinance 2023 (20 of 2023);life insurance business (人壽保險業務) means the business of any of the following classes specified in Part 2 of Schedule 1 to Cap. 41—(a) class A (life and annuity);(b) class B (marriage and birth);(c) class C (linked long term);(d) class E (tontines);life insurance fund (人壽保險基金) means—(a) if the corporation maintains only 1 separate fund relating to its life insurance business—that fund; or(b) if the corporation maintains 2 or more separate funds relating to its life insurance business—the aggregate of the funds;non-life long term insurance business (非人壽長期保險業務) means the business of any of the following classes specified in Part 2 of Schedule 1 to Cap. 41—(a) class D (permanent health);(b) class F (capital redemption);(c) class I (retirement scheme management category III);non-life long term insurance fund (非人壽長期保險基金) means—(a) if the corporation maintains only 1 separate fund relating to its non-life long term insurance business—that fund; or(b) if the corporation maintains 2 or more separate funds relating to its non-life long term insurance business—the aggregate of the funds;report (報告) means—(a) an abstract of the latest report of the actuary submitted to the Insurance Authority under section 18 of Cap. 41 (as in force before the Cap. 41 amendment date); or(b) all of the latest statements, reports and information that—(i) relate to all the funds maintained under Part IV of Cap. 41 (as in force on and after the Cap. 41 amendment date); and(ii) are submitted to the Insurance Authority annually under a requirement prescribed by rules made under section 129 of Cap. 41 by virtue of section 17 of Cap. 41 (as in force on and after the Cap. 41 amendment date);separate fund (獨立基金) means a fund maintained separately under Part IV of Cap. 41.(Added 20 of 2023 s. 102) 23. Ascertainment of assessable profits: life insurance business (Amended 20 of 2023 s. 103)(1) The assessable profits for any year of assessment of a corporation, whether mutual or proprietary, from its life insurance business— (Amended 20 of 2023 s. 103)(a) are deemed to be 5% of the premiums from life insurance business in Hong Kong of the corporation during the basis period for that year; or (Amended 7 of 1986 s. 12)(b) should the corporation so elect, are that part of the adjusted surplus deemed to arise in the basis period for that year, as ascertained in accordance with subsections (4), (4A), (4B), (5) and (7), less any receipt or income received by or accrued to the corporation that is not chargeable to tax or is required to be excluded under this Part: (Amended 49 of 1956 s. 19; 20 of 2023 s. 103) Provided that— (i) any such election once made is irrevocable and applies to all future years of assessment; and (Added 49 of 1956 s. 19) (ii) until such part of the adjusted surplus is ascertained, the assessable profits are to be calculated provisionally in accordance with paragraph (a) of this subsection, and tax charged and collected as if no such election had been made. (Amended 49 of 1956 s. 19) (2) A corporation which elects to be assessed in the manner provided in subsection (1)(b) must submit to the Commissioner a certified true copy of the latest report. (Replaced 11 of 1985 s. 2. Amended 12 of 2015 s. 103; 17 of 2018 s. 49)(3) Any election under subsection (1)(b) is effective only if the report is submitted not later than 2 years after the end of the period in respect of which it is made. Where an effective election has been made it is lawful to give effect to such election notwithstanding the provisions of section 70. (Amended 49 of 1956 s. 19)(4) If any separate fund constituting, or forming part of, the life insurance fund is maintained for life insurance business only, the surplus in respect of that separate fund is ascertained in accordance with the following formula—A – B + C – D where: A means the value of the separate fund at the end of the period in respect of which the report is made (reporting period); B means the estimated liability of the corporation on the separate fund at the end of the reporting period; C any loss or expenditure that is debited to the separate fund during the reporting period and is incurred by a subsidiary of the corporation; D any receipt or income that is credited to the separate fund during the reporting period and is received by or accrued to a subsidiary of the corporation. (Replaced 20 of 2023 s. 103)(4A) If any separate fund constituting, or forming part of, the life insurance fund is maintained for both life insurance business and non-life long term insurance business, the surplus in respect of that separate fund that is deemed to be arising in or derived from the life insurance business is the amount that bears the following ratio to the amount calculated in accordance with the formula specified in subsection (4)— A B where: A means the total amount of the premiums from life insurance business to which the separate fund relates accrued to the separate fund during the basis period for the year of assessment; B means the total amount of the premiums from any life insurance business and non-life long term insurance business to which the separate fund relates accrued to the separate fund during the basis period for the year of assessment. (Added 20 of 2023 s. 103)(4B) Subject to sections 7 and 8 of Schedule 17L, the adjusted surplus is to be ascertained by— (Amended 14 of 2025 s. 146)(a) adding to the surplus of the separate fund constituting, or the total amount of surplus of all separate funds each of which forms part of, the life insurance fund ascertained in accordance with subsections (4) and (4A) (relevant surplus)—(i) any deficit in respect of a period, that is prior to the period in respect of which the report is made (reporting period), where the deficit is included in the report to the extent to which the deficit has been sustained in the life insurance business carried on by the corporation;(ii) any outgoing or expense charged against the life insurance fund in the report which is not such that it would be allowed as a deduction in ascertaining assessable profits under section 16 to the extent to which the outgoing or expense is incurred in the production of the relevant surplus;(iii) any expense disbursement or loss charged against the life insurance fund in the report which is such that it would not be allowed as a deduction in ascertaining assessable profits under section 17 to the extent to which the disbursement or loss is incurred in the production of the relevant surplus;(iv) any income or profits of the corporation that arise from the life insurance business in the reporting period and are not credited to the life insurance fund in the report;(v) any appropriations of profits or transfers to reserve charged against the life insurance fund during the reporting period (other than appropriations or transfers to policy holders in their capacity as such) to the extent to which the appropriations or transfers relate to the life insurance business; and(vi) the amount of a balancing charge directed to be made under Part 6 to the extent to which the relevant assets are used in the production of the relevant surplus; and(b) deducting from the relevant surplus—(i) any surplus in respect of a period prior to the reporting period where the surplus has been retained in the life insurance fund in the report to the extent to which the surplus has arisen from the life insurance business carried on by the corporation;(ii) any appropriations or transfers to policy holders in their capacity as such, effected during the reporting period where the appropriations or transfers have not been charged against the life insurance fund in the report to the extent to which the appropriations or transfers relate to the life insurance business;(iii) any outgoing or expense not charged against the life insurance fund during the reporting period which is such that it would be allowed as a deduction in ascertaining assessable profits under section 16 to the extent to which the outgoing or expense is incurred in the production of the relevant surplus;(iv) any receipt of a capital nature, or transfer from reserve, credited to the life insurance fund during the reporting period to the extent to which the receipt or transfer relates to the life insurance business; and(v) the allowances provided by Part 6 to the extent to which the relevant assets are used in the production of the relevant surplus. (Added 20 of 2023 s. 103)(5) The part of adjusted surplus that is deemed to be the profits arising in or derived from Hong Kong from the life insurance business is the amount that bears the following ratio to the adjusted surplus ascertained in accordance with subsection (4B)— A B where: A means the total amount of the premiums from life insurance business in Hong Kong to which the life insurance fund relates accrued to the corporation during the basis period for the year of assessment; B means the total amount of the premiums from life insurance business to which the life insurance fund relates accrued to the corporation during the basis period for the year of assessment. (Replaced 20 of 2023 s. 103)(6) (Repealed 20 of 2023 s. 103)(7) Any adjusted surplus ascertained in accordance with subsections (4), (4A), (4B) and (5) is deemed to arise during the years or other periods which make up the period in respect of which the relevant report is made in the proportion which the aggregate of the premiums from life insurance business in Hong Kong in each such period bears to the aggregate of such premiums for the total period in respect of which the relevant report is made. (Amended 49 of 1956 s. 19; 7 of 1986 s. 12)(8) (a) Where the making of the adjustments required by subsections (4), (4A) and (4B) results in a deficit, such deficit is deemed to be the loss attributable to activities in Hong Kong sustained by the corporation during the period in respect of which the relevant report is made.(b) In ascertaining for the purposes of sections 19 and 19C what part of such loss so calculated is attributable to activities in Hong Kong subsection (5) applies mutatis mutandis. (Amended 11 of 1985 s. 2)(c) Any such loss attributable to activities in Hong Kong is deemed to have been sustained during the years which make up the period in respect of which the relevant report is made in the proportion which the aggregate of the premiums from life insurance business in Hong Kong in each such year bears to the aggregate of such premiums for the total period in respect of which the relevant report is made. (Amended 49 of 1956 s. 19; 7 of 1986 s. 12)(9) In this section— premiums from life insurance business in Hong Kong (從在香港經營人壽保險業務所得的保費) includes— (a) all premiums from life insurance business received or receivable in Hong Kong from both residents and non-residents; and (b) all premiums from life insurance business receivable outside Hong Kong from residents of Hong Kong where such premiums are in respect of policies the proposals for which were received by the corporation in Hong Kong: Provided that any such premiums returned to the insured and any corresponding premiums paid on reinsurance shall be deducted from the premiums so receivable; (Amended 7 of 1986 s. 12; 20 of 2023 s. 103) subsidiary (附屬公司) has the meaning given by section 15 of the Companies Ordinance (Cap. 622) for the purposes of that Ordinance. (Added 20 of 2023 s. 103)(Amended E.R. 1 of 2012; 20 of 2023 s. 103)(Replaced 36 of 1955 s. 32. Amended 20 of 2023 s. 103) 23AAA. Ascertainment of assessable profits: non-life long term insurance business (1) The assessable profits for any year of assessment of a corporation, whether mutual or proprietary, from its non-life long term insurance business, are that part of the adjusted surplus deemed to arise in the basis period for that year, as ascertained in accordance with section 23(4), (4A), (4B), (5) and (7) (as applied and modified under subsection (2)).(2) Section 23(4), (4A), (4B), (5), (7), (8) and (9) applies in relation to the non-life long term insurance business as if—(a) a reference in that section to life insurance business were a reference to non-life long term insurance business;(b) a reference in that section to non-life long term insurance business were a reference to life insurance business; and(c) a reference in that section to life insurance fund were a reference to non-life long term insurance fund.(2A) Despite subsections (1) and (2), sections 9 and 10 of Schedule 17L apply to a re-domiciled insurer in relation to its assessable profits for the year of assessment to which its critical basis period (as defined by section 1 of that Schedule) relates. (Added 14 of 2025 s. 147)(3) A corporation that carries on any non-life long term insurance business in or from Hong Kong must submit to the Commissioner a certified true copy of the latest report.(4) In this section—re-domiciled insurer (經遷冊保險人) has the meaning given by section 3BA or 3BB of Cap. 41. (Added 14 of 2025 s. 147)(Added 20 of 2023 s. 104) 23AAAB. Adjustment to assessable profits due to change in insurance capital requirements: interpretation (1) In this section and sections 23AAAD and 23AAAE—Cap. 41E (《第41E章》) means the Insurance (Determination of Long Term Liabilities) Rules (Cap. 41 sub. leg. E);material date (關鍵日期), in relation to a corporation, means—(a) if the application of Cap. 41E to the corporation is relaxed under section 130 of Cap. 41 before the Cap. 41 amendment date so as to allow the corporation to maintain its capital levels in accordance with a risk-based capital framework—the date on which the relaxation takes effect; or(b) otherwise—the Cap. 41 amendment date;net asset value (淨資產值), in relation to a fund, means the value of the fund less the estimated liability of the corporation on the fund;new separate fund (新獨立基金) means a separate fund maintained on the material date relating to any life insurance business or non-life long term insurance business;pre-existing fund (先前基金)—(a) in relation to any new separate fund constituting, or forming part of, the life insurance fund, means—(i) if, immediately before the material date, the corporation has maintained only 1 separate fund for the life insurance business to which the new separate fund relates—that 1 separate fund; or(ii) if, immediately before the material date, the corporation has maintained 2 or more separate funds for the life insurance business to which the new separate fund relates—the aggregate of those 2 or more separate funds; or(b) in relation to any new separate fund constituting, or forming part of, the non-life long term insurance fund, means—(i) if, immediately before the material date, the corporation has maintained only 1 separate fund for the non-life long term insurance business to which the new separate fund relates—that 1 separate fund; or(ii) if, immediately before the material date, the corporation has maintained 2 or more separate funds for the non-life long term insurance business to which the new separate fund relates—the aggregate of those 2 or more separate funds;premiums from non-life long term insurance business in Hong Kong (從在香港經營非人壽長期保險業務所得的保費)—(a) includes—(i) all premiums from non-life long term insurance business received or receivable in Hong Kong from both residents and non-residents; and(ii) all premiums from non-life long term insurance business receivable outside Hong Kong from residents of Hong Kong where such premiums are in respect of policies the proposals for which were received by the corporation in Hong Kong; but(b) does not include any premiums returned to the insured and any corresponding premiums paid on reinsurance.(2) For the purposes of sections 23AAAC, 23AAAD and 23AAAE, if the material date for a corporation falls within the basis period of the corporation for a year of assessment, that year of assessment is the corporation’s material year of assessment.(Added 20 of 2023 s. 104) 23AAAC. Adjustment to assessable profits due to change in insurance capital requirements: election (1) Subject to subsections (3) and (4) and despite sections 23(1) and 23AAA(1) and sections 7, 8, 9 and 10 of Schedule 17L— (Amended 14 of 2025 s. 148)(a) if, for the material year of assessment of a corporation, an election under section 23(1)(b) is effective in relation to the corporation—(i) if the corporation carries on life insurance business (but not non-life long term insurance business) in Hong Kong in the basis period for its material year of assessment—the corporation may elect in writing that section 23AAAD applies to the corporation; or(ii) if the corporation carries on both life insurance business and non-life long term insurance business in Hong Kong in the basis period for its material year of assessment—the corporation may elect in writing that sections 23AAAD and 23AAAE apply to the corporation; or(b) if, for the material year of assessment of a corporation, no election under section 23(1)(b) is effective in relation to the corporation, and the corporation carries on non-life long term insurance business in Hong Kong in the basis period for its material year of assessment—the corporation may elect in writing that section 23AAAE applies to the corporation.(2) An election made under subsection (1)(a)(i) or (ii) or (b) is irrevocable.(3) If a corporation that makes an election under subsection (1)(a)(i) or (ii) no longer carries on life insurance business in Hong Kong as at the end of the basis period for its material year of assessment—(a) for an election under subsection (1)(a)(i)—the election has no effect; or(b) for an election under subsection (1)(a)(ii)—the election has no effect to the extent that it relates to the application of section 23AAAD.(4) If a corporation that makes an election under subsection (1)(a)(ii) or (b) no longer carries on non-life long term insurance business in Hong Kong as at the end of the basis period for its material year of assessment—(a) for an election under subsection (1)(a)(ii)—the election has no effect to the extent that it relates to the application of section 23AAAE; or(b) for an election under subsection (1)(b)—the election has no effect.(Added 20 of 2023 s. 104) 23AAAD. Adjustment to assessable profits due to change in insurance capital requirements: life insurance business (1) The assessable profits of a corporation from its life insurance business for its material year of assessment are ascertained by deducting four-fifths of the specified amount from the assessable profits as ascertained under section 23(4), (4A), (4B), (5) and (7) for that year of assessment. (Amended 14 of 2025 s. 149)(2) Subject to subsection (3), the assessable profits of the corporation from its life insurance business for each of the 4 consecutive years of assessment next following its material year of assessment are ascertained by adding one-fifth of the specified amount to the assessable profits as ascertained under section 23(4), (4A), (4B), (5) and (7) for the year of assessment concerned. (Amended 14 of 2025 s. 149)(3) If the corporation ceases to carry on life insurance business in Hong Kong at any time in the basis period for any year of assessment (cessation year) among the 3 consecutive years of assessment next following its material year of assessment, the portion of the specified amount that is required to be added to the assessable profits of the corporation for a year of assessment after the cessation year (subsequent year) under subsection (2) is to be added to the assessable profits of the corporation for the cessation year (instead of the subsequent year).(4) For subsections (1) and (2), if, on the material date, any new separate fund constituting, or forming part of, the life insurance fund is maintained for life insurance business only, the specified amount in relation to the assessable profits from the life insurance business to which that new separate fund relates is the amount calculated in accordance with the following formula— (NAV1 – NAV2) × A B where: NAV1 means the net asset value of the new separate fund as at the material date; NAV2 means the net asset value of the pre-existing fund in relation to the new separate fund immediately before the material date; A means the total amount of the premiums from life insurance business in Hong Kong (as defined by section 23(9)) to which the new separate fund relates accrued to the corporation during the period specified in subsection (6); B means the total amount of the premiums from life insurance business to which the new separate fund relates accrued to the corporation during the period specified in subsection (6).

(5) For subsections (1) and (2), if, on the material date, any new separate fund constituting, or forming part of, the life insurance fund is maintained for both life insurance business and non-life long term insurance business, the specified amount in relation to the assessable profits from the life insurance business to which that new separate fund relates is the amount calculated in accordance with the following formula— NAV1× A NAV2× A B C where: NAV1 means the net asset value of the new separate fund as at the material date; A means the total amount of the premiums from life insurance business in Hong Kong (as defined by section 23(9)) to which the new separate fund relates accrued to the corporation during the period specified in subsection (6); B means the total amount of the premiums from any life insurance business and non-life long term insurance business to which the new separate fund relates accrued to the corporation during the period specified in subsection (6); NAV2 means the net asset value of the pre-existing fund in relation to the new separate fund immediately before the material date; C means the total amount of the premiums from life insurance business to which that new separate fund relates accrued to the corporation during the period specified in subsection (6). (6) For subsections (4) and (5), the specified period is─(a) if the corporation has carried on life insurance business in or from Hong Kong for not less than 1 year of assessment but less than 2 consecutive years of assessment immediately before the corporation’s material year of assessment—the basis period for the year of assessment immediately before the material year of assessment;(b) if the corporation has carried on life insurance business in or from Hong Kong for not less than 2 consecutive years of assessment but less than 3 consecutive years of assessment immediately before the corporation’s material year of assessment—the basis periods for the 2 years of assessment immediately before the material year of assessment;(c) if the corporation has carried on life insurance business in or from Hong Kong for not less than 3 consecutive years of assessment immediately before the corporation’s material year of assessment—the basis periods for the 3 years of assessment immediately before the material year of assessment; or(d) in any other case—the period beginning with the commencement of the basis period for the material year of assessment and ending immediately before the material date.(Added 20 of 2023 s. 104) 23AAAE. Adjustment to assessable profits due to change in insurance capital requirements: non-life long term insurance business (1) The assessable profits of a corporation from its non-life long term insurance business for its material year of assessment are ascertained by deducting four-fifths of the specified amount from the assessable profits as ascertained under section 23AAA for that year of assessment. (Amended 14 of 2025 s. 150)(2) Subject to subsection (3), the assessable profits of the corporation from its non-life long term insurance business for each of the 4 consecutive years of assessment next following its material year of assessment are ascertained by adding one-fifth of the specified amount to the assessable profits as ascertained under section 23AAA for the year of assessment concerned. (Amended 14 of 2025 s. 150)(3) If the corporation ceases to carry on non-life long term insurance business in Hong Kong at any time in the basis period for any year of assessment (cessation year) among the 3 consecutive years of assessment next following its material year of assessment, the portion of the specified amount that is required to be added to the assessable profits of the corporation for a year of assessment after the cessation year (subsequent year) under subsection (2) is to be added to the assessable profits of the corporation for the cessation year (instead of the subsequent year).(4) For subsections (1) and (2), if, on the material date, any new separate fund constituting, or forming part of, the non-life long term insurance fund is maintained for non-life long term insurance business only, the specified amount in relation to the assessable profits from the non-life long term insurance business to which that new separate fund relates is the amount calculated in accordance with the following formula— (NAV1 – NAV2) × A B where: NAV1 means the net asset value of the new separate fund as at the material date; NAV2 means the net asset value of the pre-existing fund in relation to the new separate fund immediately before the material date; A means the total amount of the premiums from non-life long term insurance business in Hong Kong to which the new separate fund relates accrued to the corporation during the period specified in subsection (6); B means the total amount of the premiums from non-life long term insurance business to which the new separate fund relates accrued to the corporation during the period specified in subsection (6). (5) For subsections (1) and (2), if, on the material date, any new separate fund constituting, or forming part of, the non-life long term insurance fund is maintained for both life insurance business and non-life long term insurance business, the specified amount in relation to the assessable profits from the non-life long term insurance business to which that new separate fund relates is the amount calculated in accordance with the following formula— NAV1× A NAV2× A B C where: NAV1 means the net asset value of the new separate fund as at the material date; A means the total amount of the premiums from non-life long term insurance business in Hong Kong to which the new separate fund relates accrued to the corporation during the period specified in subsection (6); B means the total amount of the premiums from any life insurance business and non-life long term insurance business to which the new separate fund relates accrued to the corporation during the period specified in subsection (6); NAV2 means the net asset value of the pre-existing fund in relation to the new separate fund immediately before the material date; C means the total amount of the premiums from non-life long term insurance business to which that new separate fund relates accrued to the corporation during the period specified in subsection (6). (6) For subsections (4) and (5), the specified period is─(a) if the corporation has carried on non-life long term insurance business in or from Hong Kong for not less than 1 year of assessment but less than 2 consecutive years of assessment immediately before the corporation’s material year of assessment—the basis period for the year of assessment immediately before the material year of assessment;(b) if the corporation has carried on non-life long term insurance business in or from Hong Kong for not less than 2 consecutive years of assessment but less than 3 consecutive years of assessment immediately before the corporation’s material year of assessment—the basis periods for the 2 years of assessment immediately before the material year of assessment;(c) if the corporation has carried on non-life long term insurance business in or from Hong Kong for not less than 3 consecutive years of assessment immediately before the corporation’s material year of assessment—the basis periods for the 3 years of assessment immediately before the material year of assessment; or(d) in any other case—the period beginning with the commencement of the basis period for the material year of assessment and ending immediately before the material date.(Added 20 of 2023 s. 104) 23A. Ascertainment of assessable profits: general insurance business (Amended 20 of 2023 s. 105)(1) The assessable profits for any year of assessment of an insurance corporation, whether mutual or proprietary, from its general insurance business, are ascertained in accordance with the formula— (Amended 20 of 2023 s. 105) P + X – Y where: P = P1 – P2 X = X1 + X2 + X3 Y = Y1 + Y2 + Y3 + Y4 + Y5 and where each variable set out in column 1 of the Table represents the amount of the item set out in column 2 of the Table opposite to it. Table Column 1 Column 2 P1 gross premiums from general insurance business in Hong Kong P2 the aggregate of any premiums from general insurance business in Hong Kong returned to an insured and any premiums paid on corresponding reinsurance X1 interest or other income arising in or derived from Hong Kong attributable to general insurance business in Hong Kong X2 balancing charge directed to be made under Part 6, to the extent to which the relevant assets are used in the production of the assessable profits X3 premium liabilities attributable to general insurance business in Hong Kong at the end of the basis period for the year preceding the year of assessment Y1 premium liabilities attributable to general insurance business in Hong Kong at the end of the basis period for the year of assessment Y2 actual losses incurred for general insurance business in Hong Kong less any amount recoverable in respect of the losses under reinsurance Y3 agency expenses in Hong Kong attributable to general insurance business in Hong Kong Y4 allowances made under Part 6 to the extent to which the relevant assets are used in the production of the assessable profits Y5 a fair proportion of any expenses of the head office of the corporation attributable to general insurance business in Hong Kong (2) However, if the Commissioner is satisfied that it would be unreasonable to require a non-resident insurance corporation to furnish the particulars necessary for ascertaining the assessable profits according to subsection (1) because of the limited extent of the general insurance business transacted in Hong Kong by the corporation, subsection (3) applies.(3) The Commissioner may allow the assessable profits of the corporation from the general insurance business to be ascertained— (Amended 20 of 2023 s. 105)(a) by reference to the proportion of the total profits and income of the corporation corresponding to the proportion that its premiums from general insurance business in Hong Kong bears to its total premiums; or(b) on any other basis that appears to the Commissioner to be fair.(4) In this section—contract of insurance (保險合約) has the meaning given by section 14AB(1);general insurance business (一般保險業務) has the meaning given by section 14AB(1); (Added 20 of 2023 s. 105)premium liabilities (保費負債)—(a) in relation to a basis period at the end of which section 11 of the Insurance (Amendment) Ordinance 2023 (20 of 2023) has not come into operation—means reserve for unexpired risks; or(b) otherwise—means the premium liabilities of an insurer, as determined in accordance with the rules made under section 129 of Cap. 41 with respect to the determination of the amount of any liabilities, on or after the Cap. 41 amendment date; (Added 20 of 2023 s. 105)reserve for unexpired risks (未過期風險儲備金) means any reserve that—(a) is set aside for the unexpired risks of the general insurance business in Hong Kong; and(b) is calculated at the percentage adopted by the corporation in relation to its operations as a whole for those unexpired risks. (Added 20 of 2023 s. 105)(Amended 20 of 2023 s. 105)(5) For the purposes of this section, any general insurance business is general insurance business in Hong Kong if, in relation to the general insurance business—(a) the contracts of insurance of the business are made in Hong Kong; or(b) the proposals for the contracts of insurance of the business are made to the corporation in Hong Kong. (Added 20 of 2023 s. 105)(Replaced 15 of 2020 s. 10. Amended 20 of 2023 s. 105) 23AA. Mutual insurance corporations (1) For the purposes of this Part and Schedule 17L, a mutual insurance corporation is taken to carry on an insurance business.(2) The assessable profits from the insurance business is— (Amended 20 of 2023 s. 106)(a) to be ascertained in the way provided in sections 23, 23AAA, 23AAAB, 23AAAC, 23AAAD, 23AAAE, 23A, 23AB, 23AC, 23AD and 23AE and sections 7, 8, 9 and 10 of Schedule 17L for ascertaining assessable profits; and (Amended 20 of 2023 s. 106)(b) taken to be assessable profits chargeable to tax under section 14.(Replaced 15 of 2020 s. 11. Amended 14 of 2025 s. 151) 23AB. Ascertainment of assessable profits: general reinsurance business or specified general insurance business of specified insurer (1) The assessable profits for any year of assessment of a specified insurer from a qualifying insurance business are ascertained in accordance with the formula— P + X – Y where: P = P1 – P2 X = X1 + X2 + X3 Y = Y1 + Y2 + Y3 + Y4 + Y5 and where each variable set out in column 1 of the Table represents the amount of the item set out in column 2 of the Table opposite to it. Table Column 1 Column 2 P1 gross premiums from the qualifying insurance business P2 the aggregate of any premiums from the qualifying insurance business returned to an insured and any premiums paid on corresponding reinsurance X1 interest or other income arising in or derived from Hong Kong attributable to the qualifying insurance business X2 balancing charge to the extent to which the relevant assets are used in the production of the assessable profits, as directed to be made under Part 6 X3 premium liabilities attributable to the qualifying insurance business at the end of the basis period for the year preceding the year of assessment Y1 premium liabilities attributable to the qualifying insurance business at the end of the basis period for the year of assessment Y2 actual losses incurred for the qualifying insurance business less any amount recoverable in respect of the losses under reinsurance Y3 agency expenses in Hong Kong attributable to the qualifying insurance business Y4 allowances made under Part 6 to the extent to which the relevant assets are used in the production of the assessable profits Y5 a fair proportion of any expenses of the head office of the specified insurer attributable to the qualifying insurance business (Amended 20 of 2023 s. 107)(2) However, if the Commissioner is satisfied that it would be unreasonable to require a non-resident specified insurer to furnish the particulars necessary for ascertaining the assessable profits according to subsection (1) because of the limited extent of the qualifying insurance business transacted in Hong Kong by the specified insurer, subsection (3) applies.(3) The Commissioner may allow the assessable profits from the qualifying insurance business of the specified insurer to be ascertained—(a) by reference to the proportion of the total profits and income of the specified insurer corresponding to the proportion that its premiums from the qualifying insurance business bears to its total premiums; or(b) on any other basis that appears to the Commissioner to be fair.(4) In this section—contract of insurance (保險合約) has the meaning given by section 14AB(1);general reinsurance business (一般再保險業務) has the meaning given by section 14AB(1);premium liabilities (保費負債)—(a) in relation to a basis period at the end of which section 11 of the Insurance (Amendment) Ordinance 2023 (20 of 2023) has not come into operation—means reserve for unexpired risks; or(b) otherwise—means the premium liabilities of an insurer, as determined in accordance with the rules made under section 129 of Cap. 41 with respect to the determination of the amount of any liabilities, on or after the Cap. 41 amendment date; (Added 20 of 2023 s. 107) premiums from the qualifying insurance business (從有關合資格保險業務所得的保費) includes— (a) all premiums on contracts of insurance of the qualifying insurance business made in Hong Kong; and (b) all premiums on contracts of insurance of the qualifying insurance business the proposals for which were made to a specified insurer in Hong Kong; qualifying insurance business (合資格保險業務) means any of the following businesses carried on by a specified insurer— (a) specified general insurance business; (b) general reinsurance business; reserve for unexpired risks (未過期風險儲備金) means any reserve that—(a) is set aside for the unexpired risks of the qualifying insurance business; and(b) is calculated at the percentage adopted by the specified insurer in relation to its operations as a whole for those unexpired risks; (Added 20 of 2023 s. 107)specified general insurance business (指明一般保險業務) has the meaning given by section 14AB(1);specified insurer (指明保險人) has the meaning given by section 14AB(1).(Amended 20 of 2023 s. 107)(Added 15 of 2020 s. 12) 23AC. Ascertainment of assessable profits under section 23AB: Commissioner’s powers to exclude or apportion certain sums (1) For the purposes of section 23AB, if the Commissioner is of the opinion that any part of the investment fund or shareholders’ fund of a specified insurer is not required to support a qualifying insurance business of the specified insurer, the Commissioner may exercise the power under subsection (3)(a).(2) For the purposes of this section or section 23AB, if the Commissioner is of the opinion that an item of allowance, balancing charge, expenditure, gain, income or profit falls to be apportioned between the qualifying insurance business and other businesses of the specified insurer, the Commissioner may exercise the power under subsection (3)(b).(3) The Commissioner may—(a) for the purposes of subsection (1)—exclude from the total interest, profits or other income of the qualifying insurance business, a portion of the income, gains or profits derived from the funds referred to in that subsection, as the Commissioner considers reasonable in the circumstances; and(b) for the purposes of subsection (2)—apportion an item referred to in that subsection as the Commissioner considers reasonable in the circumstances.(4) In this section—qualifying insurance business (合資格保險業務) has the meaning given by section 23AB(4);specified insurer (指明保險人) has the meaning given by section 14AB(1).(Added 15 of 2020 s. 12) 23AD. Adjustment to assessable profits due to change in insurance capital requirements: general insurance business (1) Subject to subsections (3) and (4) and despite sections 23A and 23AB—(a) subject to paragraph (b), if a corporation carries on general insurance business in Hong Kong in the basis period for its material year of assessment—the corporation may elect in writing that subsections (5), (6) and (7) apply to the corporation; or(b) if a corporation has made an election under section 14B(2)(b) such that section 14B(1) applies to the corporation for its material year of assessment—the corporation may elect in writing that subsections (5), (6), (7), (8), (9) and (10) apply to the corporation.(2) An election made under subsection (1)(a) or (b) is irrevocable.(3) An election made under subsection (1)(a) or (b) has no effect if the corporation that makes the election no longer carries on general insurance business in Hong Kong as at the end of the basis period for its material year of assessment.(4) An election made under subsection (1)(b) has no effect to the extent that it relates to the application of subsections (8), (9) and (10) if the corporation that makes the election no longer carries on qualifying insurance business in Hong Kong as at the end of the basis period for its material year of assessment.(5) The assessable profits of the corporation from its general insurance business for its material year of assessment are ascertained by deducting four-fifths of the specified amount from the assessable profits as ascertained in accordance with section 23A for that year of assessment.(6) Subject to subsection (7), the assessable profits of the corporation from its general insurance business for each of the 4 consecutive years of assessment next following its material year of assessment are ascertained by adding one-fifth of the specified amount to the assessable profits as ascertained in accordance with section 23A for the year of assessment concerned.(7) If the corporation ceases to carry on general insurance business in Hong Kong at any time in the basis period for any year of assessment (cessation year) among the 3 consecutive years of assessment next following its material year of assessment, the portion of the specified amount that is required to be added to the assessable profits of the corporation for a year of assessment after the cessation year (subsequent year) under subsection (6) is to be added to the assessable profits of the corporation for the cessation year (instead of the subsequent year).(8) The assessable profits of the corporation from its qualifying insurance business for its material year of assessment are ascertained by deducting four-fifths of the specified amount from the assessable profits as ascertained in accordance with sections 23AB and 23AC for that year of assessment.(9) Subject to subsection (10), the assessable profits of the corporation from its qualifying insurance business for each of the 4 consecutive years of assessment next following its material year of assessment are ascertained by adding one-fifth of the specified amount to the assessable profits as ascertained in accordance with sections 23AB and 23AC for the year of assessment concerned.(10) If the corporation ceases to carry on qualifying insurance business in Hong Kong at any time in the basis period for any year of assessment (cessation year) among the 3 consecutive years of assessment next following its material year of assessment, the portion of the specified amount that is required to be added to the assessable profits of the corporation for a year of assessment after the cessation year (subsequent year) under subsection (9) is to be added to the assessable profits of the corporation for the cessation year (instead of the subsequent year).(11) For the purposes of this section, if the Cap. 41 amendment date falls within the basis period of a corporation for a year of assessment, that year of assessment is the corporation’s material year of assessment.(12) In this section—general insurance business (一般保險業務) has the meaning given by section 14AB(1);general insurance business in Hong Kong (香港一般保險業務) has the meaning given by section 23A(5);premium liabilities (保費負債) means the premium liabilities of an insurer, as determined in accordance with the rules made under section 129 of Cap. 41 with respect to the determination of the amount of any liabilities, on or after the Cap. 41 amendment date;qualifying insurance business (合資格保險業務) has the meaning given by section 23AB(4);specified amount (指明款額)—(a) in relation to general insurance business—means the amount arrived at by deducting the premium liabilities attributable to general insurance business in Hong Kong as at the Cap. 41 amendment date from the reserve for unexpired risks (as defined by section 23A(4)) immediately before that date; or(b) in relation to qualifying insurance business—means the amount arrived at by deducting the premium liabilities attributable to qualifying insurance business as at the Cap. 41 amendment date from the reserve for unexpired risks (as defined by section 23AB(4)) immediately before that date.(Added 20 of 2023 s. 108) 23AE. Transitional provisions for ascertainment of assessable profits from life insurance business, non-life long term insurance business and general insurance business (1) In relation to a corporation in any year of assessment before the corporation’s material year of assessment (within the meaning of section 23AAAB(2)), the pre-amended Subdivision, to the extent that it relates to the ascertainment of assessable profits from life insurance business or non-life long term insurance business, continues to apply as if the Insurance (Amendment) Ordinance 2023 (20 of 2023) had not been enacted.(2) In relation to a corporation in any year of assessment before the corporation’s material year of assessment (within the meaning of section 23AD(11)), the pre-amended Subdivision, to the extent that it relates to the ascertainment of assessable profits from general insurance business, continues to apply as if the Insurance (Amendment) Ordinance 2023 (20 of 2023) had not been enacted.(3) In this section—pre-amended Subdivision (原有次分部) means this Subdivision as in force immediately before the commencement date* of Part 3 of the Insurance (Amendment) Ordinance 2023 (20 of 2023).(Added 20 of 2023 s. 108) Editorial Note: * Commencement date: 14 July 2023. Subdivision 2 Ship-owners and Aircraft-owners (Added 15 of 2020 s. 2) 23B. Ascertainment of the assessable profits of a ship-owner carrying on business in Hong Kong* (1) Where a person carries on a business as an owner of ships and—(a) the business is normally controlled or managed in Hong Kong; or(b) the person is a company incorporated in Hong Kong,that person shall be deemed to be carrying on that business in Hong Kong.(2) Subject to subsection (6), where a person to whom subsection (1) does not apply carries on a business as an owner of ships, and any ship owned by that person calls at any location within the waters of Hong Kong, that person shall be deemed to be carrying on that business in Hong Kong.(3) Subject to subsections (4), (4AA) and (5) and section 26AB, where a person is deemed to be carrying on a business as an owner of ships in Hong Kong under subsection (1) or (2), as the case may be, the assessable profits of that person from that business for a year of assessment shall be the sum bearing the same ratio to the aggregate of the relevant sums earned by or accrued to that person during the basis period for that year of assessment as that person’s total shipping profits for the basis period bear to the aggregate of the total shipping income earned by or accrued to that person during that basis period for that year of assessment. (Amended 27 of 2018 s. 32)(4) Subject to subsections (4AA) and (5) and section 26AB, where in the opinion of the assessor the provisions in subsection (3) for computing assessable profits cannot for any reason be satisfactorily applied in the case of a person to whom subsection (2) applies, the assessable profits of that person for any year of assessment may instead be computed on a fair percentage of the aggregate of the relevant sums earned by or accrued to that person during the basis period for that year of assessment. (Amended 27 of 2018 s. 32)(4AA) For the purposes of subsection (3) or (4), in determining the amount of relevant sums earned by or accrued to a person during the basis period for a year of assessment, the exempt sums are to be excluded if, in that period, the activities that produce the exempt sums are—(a) carried out in Hong Kong by the person; or(b) arranged by the person to be carried out in Hong Kong. (Added 27 of 2018 s. 32)(4A) For the purposes of this section, where a person who is deemed to be carrying on a business as an owner of ships in Hong Kong under subsection (2) is resident in any territory outside Hong Kong, he shall be regarded as having a reciprocity status, if the Commissioner is satisfied that any profits earned by or accrued to a person to whom subsection (1) applies from a business carried on in the territory as an owner of ships are, under the laws of that territory, exempt from a tax which is of substantially the same nature as the tax chargeable under this Part. (Added 32 of 1998 s. 16)(5) Notwithstanding section 70, where the assessable profits of any person have been computed for any year of assessment in accordance with subsection (4), the person shall, upon the submission to the assessor of accounts computed in accordance with the provisions of this Part relating to the ascertainment of assessable profits, be entitled to elect at any time within 2 years from the end of the year of assessment that his assessable profits for that year be re-computed in accordance with subsection (3).(6) Where the Commissioner is satisfied that the call at any location within the waters of Hong Kong of any ship owned by a person to whom subsection (2) applies is of a casual nature, and that further calls at any location within those waters by that or any other ship in the same ownership are improbable, he may in his discretion direct that that person shall be deemed not to be carrying on a business as an owner of ships in Hong Kong under subsection (2) by reason of the casual call of that ship and accordingly, in the event of his making such a direction, that person shall be so deemed not to be carrying on that business.(7) For the purposes of this section, it is declared that where a ship is operated during the basis period for a year of assessment by a person deemed to be carrying on a business as an owner of ships in Hong Kong under subsection (1) or (2), as the case may be—(a) if the ship is a registered ship (in respect of which paragraph (a) of the definition of exempt sums (豁免款項) applies) at any time during that basis period, only losses incurred by that person in respect of the operation of that ship while it is not such a registered ship shall be set off against the assessable profits of that person in accordance with section 19C; (Amended 32 of 1998 s. 16)(b) sections 18F and 19E shall apply in respect of the operation of the ship (treated as machinery or plant for the purposes of Part 6) by that person, and—(i) subject to subsections (8) and (9), in the case of any initial allowance or annual allowance, as the case may be, that may be made to that person under Part 6, that allowance shall only be made in respect of that portion of the basis period during which the ship is not a registered ship (in respect of which paragraph (a) of the definition of exempt sums (豁免款項) applies) to the extent that that ship is operated in that portion of that basis period for that year of assessment for the purpose of producing assessable profits; (Amended 32 of 1998 s. 16)(ii) in the case of any balancing allowance or balancing charge, as the case may be, that may be made to that person under Part 6, that allowance or charge shall be limited to a sum which is in the same proportion as the aggregate of the initial and annual allowances made to that person in computing his assessable profits since the acquisition of the ship bears to the aggregate of the initial and annual allowances that would have been made had the ship been operated by that person at all times since its acquisition for the purpose of producing assessable profits.(8) Where in the basis period for any year of assessment a registered ship (in respect of which paragraph (a) of the definition of exempt sums (豁免款項) applies) ceases to be a registered ship, any allowances that may be made under Part 6 in respect of the operation of that ship (treated as machinery or plant for the purposes of that Part) for that year of assessment and subsequent years, shall be computed on the reducing value of the ship after taking into account the amounts of— (Amended 32 of 1998 s. 16) (a) any initial allowance made under section 37(1), 37A(1) or 39B(1); and (b) subject to subsection (9), any annual allowance that would have been made under section 37(2), 37A(2) or 39B(2) had the ship, since its acquisition by a person deemed to be carrying on a business as an owner of ships in Hong Kong under subsection (1) or (2), as the case may be, been operated for the purpose of producing assessable profits. (9) For the purposes of subsections (7)(b)(i) and (8)(b)—(a) in the case of subsection (7)(b)(i), the reference to Part 6 (which Part contains sections 37(2) and 37A(2) amongst others); and(b) in the case of subsection (8)(b), the reference to sections 37(2) and 37A(2),shall, in both cases, be construed as if the words “at the end of the basis period” (在評稅基期結束時) (in the first place where they appear in section 37(2), and where they appear in section 37A(2)) read “during the basis period” (在該評稅基期內).(10) For the purposes of this section, any sums earned by or accrued to the owner of a ship under a charter-party that does not, or does not purport to, extend to the whole of that ship shall, to the extent that those sums are derived from, attributable to, or in respect of, any voyage or voyages of that ship commencing from any location within the waters of Hong Kong, be deemed to be derived from, attributable to, or in respect of, any relevant carriage shipped in Hong Kong.(11) A copy of, or extract from, the register of ships in legible form issued and certified under the Merchant Shipping (Registration) Ordinance (Cap. 415) shall—(a) in relation to any year of assessment, be proof that a ship was a registered ship or was not a registered ship, or be proof that a ship had commenced to be a registered ship or had ceased to be a registered ship, as the case may be; and(b) in relation to the date of the provisional registration of that ship under that Ordinance, be proof that that registered ship was so registered from that date of provisional registration.(12) In this section—bill of lading (提單) has the same meaning as in the Import and Export Ordinance (Cap. 60), but does not include a bill of lading which describes any port or other location within the waters of Hong Kong as the port of origin or the port of destination;business as an owner of ships (以船舶擁有人身分經營業務) means a business of chartering or operating ships, but does not include dealing in ships or agency business in connection with shipping;charter hire (租船費) means any sums earned by or accrued to an owner of a ship under a charter-party in respect of the operation of the ship, but does not include any sums so earned or accrued where that charter-party does not, or does not purport to, extend to the whole of that ship; exempt sums (豁免款項)— (a) means any sums derived from, attributable to, or in respect of—(i) any relevant carriage shipped aboard a registered ship at any location within the waters of Hong Kong and proceeding to sea from that location or any other location within those waters; or(ii) any towage operation undertaken by a registered ship proceeding to sea from any location within the waters of Hong Kong; (b) in relation to a person who has a reciprocity status, means any sums derived from, attributable to, or in respect of—(i) any relevant carriage shipped aboard a ship at any location within the waters of Hong Kong and proceeding to sea from that location or any other location within those waters; or(ii) any towage operation undertaken by a ship proceeding to sea from any location within the waters of Hong Kong; (Replaced 32 of 1998 s. 16) goods (貨品) includes livestock and mails; goods in transit (過境貨品), in relation to the shipment of goods aboard a ship, means goods— (a) specified in a bill of lading; (b) brought to Hong Kong by sea solely for the purpose of the onward carriage of those goods; and (c) in respect of which any freight charges for that onward carriage are not paid or payable in Hong Kong; operation (營運), in relation to a ship, includes the use or possession of the ship, and operated (運作) shall be construed accordingly;owner (擁有人), in relation to a ship, includes a charterer of the ship under a charter-party;passengers (乘客) does not include re-embarking passengers;re-embarking passengers (重新登船的乘客), in relation to a voyage of a ship, means passengers whose passenger tickets in respect of the voyage do not specify Hong Kong as the place of departure or as the place of destination; registered ship (註冊船舶) means a ship registered under the Merchant Shipping (Registration) Ordinance (Cap. 415);relevant carriage (有關運載), in relation to a ship, means the carriage by sea of passengers or goods, or both passengers and goods, as the case may be, but does not include the carriage of goods in transit; relevant limited partnership (有關的有限責任合夥) means a limited partnership— (a) registered in accordance with the provisions of the Limited Partnerships Ordinance (Cap. 37) on or before 2 December 1990 and continuing to be so registered after that date; and (b) whose principal assets include any ship, or any interest therein, acquired by or on behalf of that partnership on or before that date; relevant sums (有關款項) means— (a) any sums derived from, attributable to, or in respect of—(i) any relevant carriage shipped in Hong Kong;(ii) any towage operation undertaken by a ship within the waters of Hong Kong, or any towage operation undertaken by that ship commencing from any location within those waters, as the case may be;(iii) any dredging operation undertaken by a ship within the waters of Hong Kong;(iv) any charter hire in respect of—(A) the operation of a ship navigating solely or mainly within the waters of Hong Kong; or(B) a charter-party where one of the parties thereto is a relevant limited partnership; (b) one half of any sums derived from, attributable to, or in respect of, any charter hire in respect of the operation of a ship navigating between any location within the waters of Hong Kong and any location within river trade waters; (Amended 27 of 2018 s. 32) river trade waters (內河貿易水域) means the waters contained within river trade limits other than the waters of Hong Kong contained within those limits;sea (海), except in relation to relevant carriage, means the waters of the sea other than those contained within river trade limits;ship (船舶) includes any dynamically supported craft within the meaning of the Shipping and Port Control Ordinance (Cap. 313);shipped (裝運), in the case of passengers, means embarked;shipped in Hong Kong (在香港裝運的), in relation to the shipment of relevant carriage, means shipped aboard a ship at any location within the waters of Hong Kong;total shipping income (總航運入息), in relation to any basis period, means the worldwide income of a person from the person’s business as an owner of ships, and indicated as such by that person’s accounts for that period;total shipping profits (總航運利潤), in relation to any basis period, means the worldwide profits of a person from the person’s business as an owner of ships, and indicated as such by that person’s accounts for that period.(Replaced 47 of 1992 s. 3. Amended E.R. 1 of 2012) Editorial Note: * As to the operation of this section, see 47 of 1992 s. 1(3). 23C. Ascertainment of the assessable profits of a resident aircraft-owner (1) Where a person carries on a business as an owner of aircraft and—(a) the business is normally controlled or managed in Hong Kong; or (b) the person is a company incorporated in Hong Kong, that person shall be deemed to be carrying on that business in Hong Kong. (2) Where a person is deemed to be carrying on a business as an owner of aircraft in Hong Kong under this section the assessable profits from that business for any year of assessment shall be the sum bearing the same ratio to the aggregate of the relevant sums earned by or accrued to that person during the basis period for that year of assessment as that person’s total aircraft profits for the basis period bear to the aggregate of the total aircraft income earned by or accrued to that person during that basis period for that year of assessment. (2A) For the purposes of subsection (2) and the expression “relevant sums” in that subsection and in subsection (5), where any arrangement for relief from double taxation has effect by virtue of section 49 in respect of any person of the description mentioned in subsection (1), the relevant sums earned by or accrued to that person shall include any sums derived from, attributable to, or in respect of any relevant carriage shipped in an arrangement territory, any relevant charter hire attributable to an arrangement territory and charter hire in respect of the operation of an aircraft flying between aerodromes or airports within an arrangement territory. (Added 19 of 1996 s. 7) (2B) Where any arrangement for relief from double taxation has effect in the circumstances mentioned in subsection (2A), then in determining the relevant sums earned by or accrued to a person for the purposes of that subsection—(a) subsections (3) and (4), the definitions air waybill, goods in transit, passengers in transit, post office delivery bill, and paragraph (a) of the definition relevant charter hire in subsection (5) shall apply as though in those subsections and definitions and in that paragraph, the words “an arrangement territory” were substituted for the expression “Hong Kong”; and (b) the remainder of the definition relevant charter hire in subsection (5) shall apply as though in that definition the words “outside an arrangement territory” were substituted for the words “outside Hong Kong”. (Added 19 of 1996 s. 7) (2C) The provisions relating to paragraph (a) of the definition relevant charter hire in subsection (2B) shall not be construed so as to exclude from the definition relevant sums in subsection (5), any sum derived from, or attributable to, or in respect of any charter hire in respect of the operation of an aircraft flying between aerodromes or airports within Hong Kong. (Added 19 of 1996 s. 7) (2D) Subsection (2A) shall not apply to any sums derived from, attributable to, or in respect of any relevant carriage shipped in an arrangement territory and any relevant charter hire attributable to an arrangement territory where such sums are chargeable to tax in an arrangement territory. (Added 19 of 1996 s. 7)(3) For the purposes of this section, any sums earned by or accrued to the owner of an aircraft under a charter-party (whether by demise or not) that does not, or does not purport to, extent to the whole of that aircraft shall, to the extent that those sums are derived from, attributable to, or in respect of, any outward flight or flights of that aircraft commencing from any aerodrome or airport within Hong Kong, be deemed to be derived from, attributable to, or in respect of, any relevant carriage shipped in Hong Kong. (4) For the purposes of this section, the following sums earned by or accrued to an owner of aircraft under a charter-party otherwise than by demise shall be deemed to be derived from, attributable to, or in respect of, any relevant carriage shipped in Hong Kong—(a) in the case of a charter-party which is a flight charter, any sums earned by or accrued to that owner under that charter-party and derived from, attributable to, or in respect of, any outward flight or flights of that aircraft commencing from any aerodrome or airport within Hong Kong; (b) in the case of a charter-party which is a time charter, the sum bearing the same ratio to the aggregate of the sums earned by or accrued to that owner under that charter-party as the total number of flying hours of that aircraft flown in respect of all outward flights of that aircraft commencing from any aerodrome or airport within Hong Kong to the final destinations of those flights bear to the aggregate of the total number of flying hours of that aircraft flown in respect of all flights of that aircraft under that charter-party. (5) In this section—aerodrome or airport (機坪或飛機場) includes any helipad; air waybill (空運路單) has the same meaning as in the Import and Export Ordinance (Cap. 60), but does not include an air waybill which describes any aerodrome or airport in Hong Kong as the aerodrome or airport of departure or the aerodrome or airport of destination; aircraft (飛機) includes a helicopter; *arrangement territory (安排地區), in relation to an arrangement for the relief of double taxation, means any territory outside Hong Kong where an arrangement for the relief of double taxation has effect by virtue of section 49 in respect of any person of the description mentioned in subsection (1), deemed to be carrying on a business as an owner of aircraft in Hong Kong; (Added 19 of 1996 s. 7) business as an owner of aircraft (以飛機擁有人身分經營業務) means a business of chartering or operating aircraft, but does not include dealing in aircraft or agency business in connection with air transport; charter hire (租機費) means any sums earned by or accrued to an owner of an aircraft under a charter-party by demise in respect of the operation of the aircraft, but does not include any sums so earned or accrued where that charter-party does not, or does not purport to, extend to the whole of that aircraft; goods (貨品) includes livestock and mails; goods in transit (過境貨品), in relation to the shipment of goods aboard an aircraft, means goods—(a) specified in an air waybill (issued by or on behalf of an owner of aircraft) or a post office delivery bill; (b) brought to Hong Kong by air solely for the purpose of the onward carriage of those goods; and (c) in respect of which any freight charges for that onward carriage are not paid or payable in Hong Kong; operation (營運), in relation to an aircraft, includes the use or possession of the aircraft; owner (擁有人), in relation to an aircraft, includes a charterer of the aircraft under a charter-party; passengers (乘客) does not include passengers in transit; passengers in transit (過境乘客), in relation to a flight of an aircraft, means passengers—(a) whose passenger tickets in respect of the flight do not specify Hong Kong as the place of departure or as the place of destination; or (b) who—(i) travel to Hong Kong in any aircraft owned by an owner of aircraft and leave Hong Kong in that or any other aircraft in the same ownership; and (ii) not more than 24 hours after travelling to and arriving at Hong Kong, leave Hong Kong for a destination other than the one from which they had travelled; permanent establishment (永久機構) means a branch, management or other place of business, but does not include an agency unless the agent has, and habitually exercises, a general authority to negotiate and conclude contracts on behalf of his principal; post office delivery bill (郵政局交接清單), in relation to the carriage of mails, means any document (whether referred to as an “AV7 bill” or otherwise) which does not describe Hong Kong, or the General Post Office of Hong Kong, as the office of origin or the office of destination in respect of those mails; relevant carriage (有關運載), in relation to an aircraft, means the carriage by air of passengers or goods, or both passengers and goods, as the case may be, but does not include the carriage of goods in transit; relevant charter hire (有關的租機費) means charter hire other than charter hire attributable to a permanent establishment maintained outside Hong Kong by a person deemed to be carrying on a business as an owner of aircraft in Hong Kong under this section, but does not include—(a) charter hire in respect of the operation of an aircraft flying between aerodromes or airports within Hong Kong; or (b) charter hire in respect of the operation of an aircraft flying between any aerodrome or airport within Hong Kong and any aerodrome or airport within Macau; relevant sums (有關款項) means—(a) any sums derived from, attributable to, or in respect of—(i) any relevant carriage shipped in Hong Kong; (ii) any relevant charter hire; (iii) any charter hire in respect of the operation of an aircraft flying between aerodromes or airports within Hong Kong; (b) one half of any sums derived from, attributable to, or in respect of, any charter hire in respect of the operation of an aircraft flying between any aerodrome or airport within Hong Kong and any aerodrome or airport within Macau; shipped (裝運), in the case of passengers, means embarked; shipped in an arrangement territory (在安排地區裝運的), in relation to the shipment of relevant carriage, means shipped aboard an aircraft at any aerodrome or airport within an arrangement territory; (Added 19 of 1996 s. 7) shipped in Hong Kong (在香港裝運的), in relation to the shipment of relevant carriage, means shipped aboard an aircraft at any aerodrome or airport within Hong Kong; total aircraft income (總空運入息), in relation to any basis period, means the worldwide income of a person from the person’s business as an owner of aircraft, and indicated as such by that person’s accounts for that period.

total aircraft profits (總空運利潤), in relation to any basis period, means the worldwide profits of a person from the person’s business as an owner of aircraft, and indicated as such by that person’s accounts for that period. (Replaced 47 of 1992 s. 3)Editorial Note:* For application of s. 23C(2A), (2B), (2C) and (2D) in respect of any arrangement with an arrangement territory, please note s. 2 of 19 of 1996, the text of which is reproduced below— “2. Application of amendments affected by section 7 Notwithstanding section 1(2), the amendments to section 23C of the principal Ordinance effected by section 7 of this Ordinance shall, in respect of any arrangement with an arrangement territory as defined in section 23C of the principal Ordinance following its amendment by this Ordinance, be deemed to apply and to have always applied in accordance with the terms specified in that arrangement.”. 23D. Ascertainment of the assessable profits of a non-resident aircraft-owner (1) Subject to subsection (5), where a person to whom section 23C does not apply carries on a business as an owner of aircraft, and any aircraft owned by that person lands at any aerodrome or airport within Hong Kong, that person shall be deemed to be carrying on that business in Hong Kong.(2) Subject to subsections (3) and (4), where a person is deemed to be carrying on a business as an owner of aircraft under this section the assessable profits of that person from that business for any year of assessment shall be the sum bearing the same ratio to the aggregate of the relevant sums earned by or accrued to that person during the basis period for that year of assessment as that person’s total aircraft profits for the basis period bear to the aggregate of the total aircraft income earned by or accrued to that person during that basis period for that year of assessment.(3) Subject to subsection (4), where in the opinion of the assessor the provisions in subsection (2) for computing assessable profits cannot for any reason be satisfactorily applied in the case of a person to whom this section applies, the assessable profits of that person for any year of assessment may instead be computed on a fair percentage of the aggregate of the relevant sums earned by or accrued to that person during the basis period for that year of assessment.(4) Notwithstanding section 70, where the assessable profits of any person have been computed for any year of assessment in accordance with subsection (3), the person shall, upon the submission to the assessor of accounts computed in accordance with the provisions of this Part relating to the ascertainment of assessable profits, be entitled to elect at any time within 2 years from the end of the year of assessment that his assessable profits for that year be re-computed in accordance with subsection (2).(5) Where the Commissioner is satisfied that the landing at any aerodrome or airport within Hong Kong of any aircraft owned by a person to whom this section applies is of a casual nature, and that further landings at any aerodrome or airport within Hong Kong by that or any other aircraft in the same ownership are improbable, he may in his discretion direct that that person shall be deemed not to be carrying on a business as an owner of aircraft in Hong Kong under this section by reason of the casual landing of that aircraft and accordingly, in the event of his making such a direction, that person shall be so deemed not to be carrying on that business.(6) For the purposes of this section, any sums earned by or accrued to the owner of an aircraft under a charter-party (whether by demise or not) that does not, or does not purport to, extend to the whole of that aircraft shall, to the extent that those sums are derived from, attributable to, or in respect of, any outward flight or flights of that aircraft commencing from any aerodrome or airport within Hong Kong, be deemed to be derived from, attributable to, or in respect of, any relevant carriage shipped in Hong Kong.(7) For the purposes of this section, the following sums earned by or accrued to an owner of an aircraft under a charter-party otherwise than by demise shall be deemed to be derived from, attributable to, or in respect of, any relevant carriage shipped in Hong Kong—(a) in the case of a charter-party which is a flight charter, any sums earned by or accrued to that owner under that charter-party and derived from, attributable to, or in respect of, any outward flight or flights of that aircraft commencing from any aerodrome or airport within Hong Kong;(b) in the case of a charter-party which is a time charter, the sum bearing the same ratio to the aggregate of the sums earned by or accrued to that owner under that charter-party as the total number of flying hours of that aircraft flown in respect of all outward flights of that aircraft commencing from any aerodrome or airport within Hong Kong to the final destinations of those flights bear to the aggregate of the total number of flying hours of that aircraft flown in respect of all flights of that aircraft under that charter-party.(8) In this section—aerodrome or airport (機坪或飛機場) includes any helipad;air waybill (空運路單) has the same meaning as in the Import and Export Ordinance (Cap. 60), but does not include an air waybill which describes any aerodrome or airport in Hong Kong as the aerodrome or airport of departure or the aerodrome or airport of destination;aircraft (飛機) includes a helicopter;business as an owner of aircraft (以飛機擁有人身分經營業務) means a business of chartering or operating aircraft, but does not include dealing in aircraft or agency business in connection with air transport;charter hire (租機費) means any sums earned by or accrued to an owner of an aircraft under a charter-party by demise in respect of the operation of the aircraft, but does not include any sums so earned or accrued where that charter-party does not, or does not purport to, extend to the whole of that aircraft;goods (貨品) includes livestock and mails;goods in transit (過境貨品), in relation to the shipment of goods aboard an aircraft, means goods—(a) specified in an air waybill (issued by or on behalf of an owner or aircraft) or a post office delivery bill;(b) brought to Hong Kong by air solely for the purpose of the onward carriage of those goods; and(c) in respect of which any freight charges for that onward carriage are not paid or payable in Hong Kong;operation (營運), in relation to an aircraft, includes the use or possession of the aircraft;owner (擁有人), in relation to an aircraft, includes a charterer of the aircraft under a charter-party;passengers (乘客) does not include passengers in transit;passengers in transit (過境乘客), in relation to a flight of an aircraft, means passengers—(a) whose passenger tickets in respect of the flight do not specify Hong Kong as the place of departure or as the place of destination; or(b) who—(i) travel to Hong Kong in any aircraft owned by an owner of aircraft and leave Hong Kong in that or any other aircraft in the same ownership; and(ii) not more than 24 hours after travelling to and arriving at Hong Kong, leave Hong Kong for a destination other than the one from which they had travelled;permanent establishment (永久機構) means a branch, management or other place of business, but does not include an agency unless the agent has, and habitually exercises, a general authority to negotiate and conclude contracts on behalf of his principal;post office delivery bill (郵政局交接清單), in relation to the carriage of mails means any document (whether referred to as an “AV7 bill” or otherwise) which does not describe Hong Kong, or the General Post Office of Hong Kong, as the office of origin or the office of destination in respect of those mails;relevant carriage (有關運載), in relation to an aircraft, means the carriage by air of passengers or goods, or both passengers and goods, as the case may be, but does not include the carriage of goods in transit;relevant charter hire (有關的租機費) means charter hire attributable to a permanent establishment maintained in Hong Kong by a person deemed to be carrying on a business as an owner of aircraft in Hong Kong under this section, but does not include—(a) charter hire in respect of the operation of an aircraft flying between aerodromes or airports within Hong Kong; or(b) charter hire in respect of the operation of an aircraft flying between any aerodrome or airport within Hong Kong and any aerodrome or airport within Macau;relevant sums (有關款項) means—(a) any sums derived from, attributable to, or in respect of—(i) any relevant carriage shipped in Hong Kong;(ii) any relevant charter hire;(iii) any charter hire in respect of the operation of an aircraft flying between aerodromes or airports within Hong Kong;(b) one half of any sums derived from, attributable to, or in respect of, any charter hire in respect of the operation of an aircraft flying between any aerodrome or airport within Hong Kong and any aerodrome or airport within Macau;shipped (裝運), in the case of passengers, means embarked;shipped in Hong Kong (在香港裝運的), in relation to the shipment of relevant carriage, means shipped aboard an aircraft at any aerodrome or airport within Hong Kong;total aircraft income (總空運入息), in relation to any basis period, means the worldwide income of a person from the person’s business as an owner of aircraft, and indicated as such by that person’s accounts for that period;total aircraft profits (總空運利潤), in relation to any basis period, means the worldwide profits of a person from the person’s business as an owner of aircraft, and indicated as such by that person’s accounts for that period.(Added 47 of 1992 s. 3) 23E. Alternative computation of “total shipping profits” and “total aircraft profits” Where total shipping profits within the meaning of section 23B(12) or total aircraft profits within the meaning of section 23C(5) or 23D(8), as the case may be, have been computed on a basis which differs materially from that provided for in this Part for the ascertainment of assessable profits in respect of which a person is chargeable to tax, those profits may be adjusted so as to correspond as nearly as may be to the sum that would have been arrived at had they been computed in accordance with the provisions of this Part relating to the ascertainment of assessable profits in respect of which a person is chargeable to tax.(Added 47 of 1992 s. 3) Subdivision 3 Clubs, Trade Associations, etc. (Added 15 of 2020 s. 2) 24. Clubs, trade associations, etc. (1) Where a person carries on a club or similar institution which receives from its members not less than half of its gross receipts on revenue account (including entrance fees and subscriptions), such person shall be deemed not to carry on a business; but where less than half of its gross receipts are received from members, the whole of the income from transactions both with members and others (including entrance fees and subscriptions) shall be deemed to be receipts from a business, and such person shall be chargeable in respect of the profits therefrom. (Amended 36 of 1955 s. 23; 49 of 1956 s. 22)(2) Where a person carries on a trade, professional or business association in such circumstances that more than half its receipts by way of subscriptions are from persons who claim or would be entitled to claim that such sums were allowable deductions for the purposes of section 16, such person shall be deemed to carry on a business, and the whole of the income of such association from transactions both with members and others (including entrance fees and subscriptions) shall be deemed to be receipts from business, and such person shall be chargeable in respect of the profits therefrom. (Amended 36 of 1955 s. 34; 2 of 1971 s. 17; 40 of 1972 s. 3)(3) In this section, members (會員) means those persons entitled to vote at a general meeting of the club, or similar institution, or trade, professional or business association. (Replaced 36 of 1955 s. 34. Amended 40 of 1972 s. 3) Division 12 Miscellaneous Provisions (Added 15 of 2020 s. 2) 25. Deduction of property tax from profits tax Where property tax is payable for any year of assessment under Part 2 in respect of any land or buildings owned by a person carrying on a trade, profession or business, any profits tax payable by such person in respect of that year of assessment shall be reduced by a sum not exceeding the amount of such property tax paid by him:Provided that—(a) no reduction shall be allowed unless either the profits derived from such property are part of the profits of the trade, profession or business carried on by such person or the property is occupied or used by him for the purposes of producing profits in respect of which he is chargeable to tax under this Part; (Replaced 11 of 1961 s. 5. Amended 35 of 1965 s. 14)(b) if the amount of property tax paid for a year of assessment exceeds the profits tax payable, the amount so paid in excess shall be refunded in accordance with the provisions of section 79; (Replaced 11 of 1961 s. 5)(c) (Repealed 19 of 1996 s. 8)(Replaced 3 of 1949 s. 9. Amended E.R. 1 of 2012) 25A. Reimbursement for certain top-up tax not taken into account for purposes of Part 4 (1) This section applies to a payment (intra-group payment) made by an entity or permanent establishment of an MNE group (paying entity) to another entity or permanent establishment of the MNE group (receiving entity).(2) An intra-group payment is not to be taken into account in calculating the profits or loss of the receiving entity for the purposes of profits tax under this Part if the payment is proved by the receiving entity, to an assessor’s satisfaction, to be reimbursement for an applicable tax under an applicable assessment.(3) No deduction is allowable for an intra-group payment, for determining the profits tax to which the paying entity is chargeable under this Part, if the payment is reimbursement for an applicable tax under an applicable assessment.(4) An intra-group payment is not reimbursement for an applicable tax under an applicable assessment unless the amount of the payment does not exceed the amount of the applicable tax that—(a) is payable by the paying entity under an allocation of the applicable tax under the applicable assessment specified in subsection (5); but(b) has been paid, or is agreed to be paid, by the receiving entity on behalf of the paying entity.(5) For the purposes of subsection (4)(a), an allocation of the applicable tax under the applicable assessment is—(a) for an applicable tax other than an IIR top-up tax or a foreign IIR top-up tax—such an allocation among the entities and permanent establishments of the MNE group concerned that are relevant to the applicable assessment; or(b) for an IIR top-up tax or a foreign IIR top-up tax—such an allocation among the receiving entity of the intra-group payment and the other entities and permanent establishments of the MNE group concerned each of which (same group entity) meets the descriptions in both subparagraphs (i) and (ii)—(i) the same group entity is relevant to the applicable assessment;(ii) the receiving entity is a parent entity of the same group entity.(6) For the purposes of subsection (5), an entity or permanent establishment is relevant to an applicable assessment if it has been taken into account in determining the ETR of a jurisdiction taken into account in making the applicable assessment.(7) In this section—applicable assessment (適用評稅) means—(a) in relation to a top-up tax, an assessment under Part 4AA; or(b) in relation to a foreign IIR top-up tax, a foreign UTPR top-up tax or a foreign DMTT implemented by a territory outside Hong Kong, an assessment (however described) made by the tax authority of that territory;applicable tax (適用稅項) means—(a) a top-up tax; or(b) a foreign IIR top-up tax, a foreign UTPR top-up tax or a foreign DMTT.(8) An expression used in this section, and defined or otherwise explained in any provision of Part 4AA or Part 1 of Schedule 61 (definition provision), has the same meaning as in the definition provision.(Added 21 of 2025 s. 13) 26. Exclusion of certain dividends and profits from the assessable profits of other persons For the purposes of this Part—(a) a dividend from a corporation which is chargeable to tax under this Part shall not be included in the profits in respect of which any other person is chargeable to tax under this Part; and(b) save as otherwise provided no part of the profits or losses of a trade, profession or business carried on by a person who is chargeable to tax under this Part shall be included in ascertaining the profits in respect of which any other person is chargeable to tax under this Part. (Added 2 of 1971 s. 18)(Replaced 16 of 1951 s. 5. Amended 28 of 1964 s. 10; 2 of 1971 s. 18; 7 of 1975 s. 25; 62 of 1975 s. 2) 26A. Exclusion of certain profits from tax# (1) For the purposes of this Part—(a) interest paid or payable on a Tax Reserve Certificate issued by the Commissioner;(b) interest paid or payable on a bond issued under the Loans Ordinance (Cap. 61) or the Loans (Government Bonds) Ordinance (Cap. 64); (Amended 48 of 1991 s. 2)(c) any profit on the sale or other disposal or on the redemption on maturity or presentment of such a bond; (Amended 48 of 1991 s. 2)(ca) additional payments paid or payable on an alternative bond issued in connection with a borrowing by the Government within the meaning of section 2A(2) of the Loans Ordinance (Cap. 61); (Added 7 of 2014 s. 8)(cb) any profit on the sale or other disposal of, or on the receipt of redemption payment for, such an alternative bond; (Added 7 of 2014 s. 8)(d) interest paid or payable on an Exchange Fund debt instrument; (Added 9 of 1990 s. 2. Amended 17 of 1992 s. 2)(e) any profit on the sale or other disposal or on the redemption on maturity or presentment of such an Exchange Fund debt instrument; (Added 9 of 1990 s. 2)(f) interest paid or payable on a Hong Kong dollar denominated multilateral agency debt instrument; (Added 17 of 1992 s. 2. Amended 34 of 2003 s. 4)(g) any profit on the sale or other disposal or on the redemption or maturity or presentment of such a Hong Kong dollar denominated multilateral agency debt instrument; (Added 17 of 1992 s. 2. Amended 34 of 2003 s. 4)(h) interest paid or payable on a long term debt instrument; and (Added 34 of 2003 s. 4)(i) any gain or profit on the sale or other disposal or on the redemption on maturity or presentment of a long term debt instrument, (Added 34 of 2003 s. 4)shall not be included in the profits of any corporation or other person chargeable to tax under this Part. (Amended 9 of 1990 s. 2)(1A) (a) For the purposes of this Part, there shall not be included in the profits to which a person is chargeable to tax under this Part any sums received or accrued in respect of a specified investment scheme by or to the person as—(i) a person chargeable to tax under this Part in respect of a mutual fund, unit trust or similar investment scheme that is authorized as a collective investment scheme under section 104 of the Securities and Futures Ordinance (Cap. 571); or (Replaced 5 of 2002 s. 407)(ii) a person chargeable to tax under this Part in respect of a mutual fund, unit trust or similar investment scheme where the Commissioner is satisfied that the mutual fund, unit trust or investment scheme is a bona fide widely held investment scheme which complies with the requirements of a supervisory authority within an acceptable regulatory regime. (Replaced 5 of 2002 s. 407)(iii)-(v) (Repealed 5 of 2002 s. 407)(b) For the purposes of paragraph (a), a specified investment scheme is an investment scheme carried on—(i) for the purposes for which the investment scheme was stated to be carried on in the constitutive documents approved in respect of the investment scheme by—(A) in the case of paragraph (a)(i), the Commission;(B) in the case of paragraph (a)(ii), the supervisory authority within the acceptable regulatory regime; and(ii) in accordance with—(A) in the case of paragraph (a)(i), the requirements of the Commission;(B) in the case of paragraph (a)(ii), the requirements of the supervisory authority within the acceptable regulatory regime. (Replaced 32 of 1998 s. 17. Amended 5 of 2002 s. 407)(1B) In relation to a long term debt instrument issued on or after 25 March 2011, subsection (1) does not apply in respect of— (Amended 32 of 2018 s. 20)(a) any interest referred to in paragraph (h) of that subsection; or(b) any gain or profit referred to in paragraph (i) of that subsection,if, at the time the interest or gain or profit is received by or accrued to any corporation or other person, that corporation or person is an associate (as defined in section 14A(4)) of the issuer of the debt instrument. (Added 4 of 2011 s. 4)(2) In this section—additional payments (額外付款) has the same meaning as it has in Schedule 17A; (Added 7 of 2014 s. 8)Commission (證監會) means the Securities and Futures Commission referred to in section 3(1) of the Securities and Futures Ordinance (Cap. 571); (Added 32 of 1998 s. 17. Amended 5 of 2002 s. 407)computer (電腦) means any device for storing, processing or retrieving information;Exchange Fund (外匯基金) means the fund of that name established under section 3(1) of the Exchange Fund Ordinance (Cap. 66);Exchange Fund debt instrument (外匯基金債務票據) means any instrument (whether described as an “Exchange Fund Bill” or otherwise) issued under the Exchange Fund Ordinance (Cap. 66) evidencing the deposit of a sum of money in Hong Kong currency with the Monetary Authority for the account of the Exchange Fund, being an instrument which recognizes an obligation to pay a stated amount, with or without interest, and which is transferable in a manner specified by that Authority; (Amended 82 of 1992 s. 9) instrument (票據) includes— (a) every written document; (b) any information recorded in the form of an entry in a book of account; and (c) any information which is recorded (whether by means of a computer or otherwise) in a non-legible form but is capable of being reproduced in a legible form; long term debt instrument (長期債務票據) means a debt instrument as defined in section 14A that— (a) is issued on or after 5 March 2003 but before 1 April 2018; (Amended 32 of 2018 s. 20) (b) has an original maturity of not less than 7 years or is undated; and (c) cannot be redeemed within 7 years from the date of its issue; (Added 34 of 2003 s. 4) multilateral agency debt instrument (多邊代理機構債務票據) means an instrument specified in Part 1 of Schedule 6 issued by a body specified in Part 2 of that Schedule; (Added 17 of 1992 s. 2)mutual fund (互惠基金) means any arrangement made for the purpose, or having the effect, of providing facilities for investment in shares in a corporation which is or hold itself out as being engaged primarily in the business of investing, reinvesting or trading in securities and which is offering for sale or has outstanding any redeemable shares of which it is the issuer; (Added 5 of 2002 s. 407)redemption payment (贖債付款) has the same meaning as it has in Schedule 17A; (Added 7 of 2014 s. 8)unit trust (單位信託) means any arrangement made for the purpose, or having the effect, of providing facilities for the participation by persons, as beneficiaries under a trust, in profits or income arising from the acquisition, holding, management or disposal of securities or any other property whatsoever. (Replaced 5 of 2002 s. 407)(3) The Legislative Council may by resolution amend Schedule 6. (Added 17 of 1992 s. 2)(4) Section 21 of Schedule 17A (specified alternative bond scheme and its treatment under this Ordinance (other than Part 4AA)) provides for modifications to this section. (Added 10 of 2013 s. 10. Amended 21 of 2025 s. 33)(Replaced 62 of 1975 s. 3. Amended 32 of 1998 s. 17; 5 of 2002 s. 407; E.R. 1 of 2012) Editorial Note: # The amendments made by 34 of 2003 to section 26A(1) and (2) apply in relation to the year of assessment commencing on 1 April 2003 and to all subsequent years of assessment. (Please see 34 of 2003 s. 2) 26AB. Threshold requirements relating to concession condition provisions (1) The Commissioner may, by notice published in the Gazette, prescribe a threshold requirement for determining whether, for the purposes of a concession condition provision, an activity producing—(a) the assessable profits of a corporation that fall within section 14B(1)(a), (b), (c) or (d) or 14D(1)(a), (b) or (c); or (Amended 15 of 2020 s. 13; 5 of 2024 s. 13)(b) the exempt sums mentioned in section 23B(4AA),is carried out in Hong Kong by the corporation or the person concerned (taxpayer) or is arranged by the taxpayer to be carried out in Hong Kong for a year of assessment or a basis period.(2) If a threshold requirement is prescribed for an activity, the activity is not, for the purposes of a concession condition provision, considered to be carried out in Hong Kong by the taxpayer or arranged by the taxpayer to be carried out in Hong Kong for the year of assessment or the basis period unless the threshold requirement is met.(3) To avoid doubt, the fact that the threshold requirement is not met for the purposes of subsection (2) does not imply that the assessable profits or the exempt sums under subsection (1)(a) or (b) do not arise in or are not derived from Hong Kong.(4) In this section—concession condition provision (寬減條件條文) means section 14B(2)(a), 14D(5)(a)(ii) or 23B(4AA); (Amended 5 of 2024 s. 13) Note (with no legislative effect)— Section 14B(2)(a), 14D(5)(a)(ii) or 23B(4AA) imposes a condition for activities producing the assessable profits or the exempt sums concerned to be carried out in Hong Kong or arranged to be carried out in Hong Kong. The condition must be met in order for the tax concession under section 14B(1), 14D(1) or 23B(4AA) to apply. (Amended 5 of 2024 s. 13) threshold requirement (門檻要求), in relation to an activity, means the level of the activity in Hong Kong as measured by various indicators, such as— (a) the number of full time employees in Hong Kong who carry out the activity and have the qualifications necessary for doing so; and (b) the amount of operating expenditure incurred in Hong Kong for the activity. (Added 27 of 2018 s. 33) 26AC. Part 8AA applies Part 8AA applies for the purposes of calculation of profits tax.(Added 27 of 2018 s. 16) Part 4AA Minimum Tax for Multinational Enterprise Groups (Part 4AA added 21 of 2025 s. 14) Notes— 1. The purpose of this Part and Schedules 61 to 64 is to implement, in Hong Kong, the Global Anti-Base Erosion Model Rules (OECD GloBE model rules) as part of the OECD/G20 Base Erosion and Profit Shifting (BEPS) Project.2. The OECD GloBE model rules ensure a multinational enterprise group, with an annual consolidated revenue of at least EUR 750 million in at least 2 of the 4 fiscal years immediately preceding the current fiscal year (in-scope MNE group), pays a minimum level of tax (currently at 15%) on the income arising in each of the jurisdictions where it operates.3. The OECD GloBE model rules consist of the income inclusion rule (IIR) and the undertaxed profits rule (UTPR). The IIR and UTPR, as applied to constituent entities located in a jurisdiction, are explained in Notes 4 to 8 respectively.4. For the purposes of the IIR and UTPR, an in-scope MNE group must—(a) identify, for each jurisdiction in which the group operates (operating jurisdiction), the constituent entities of the group; and(b) for each operating jurisdiction—(i) determine for each constituent entity operating there—(A) its income (or loss) for the purposes of the OECD GloBE model rules; and(B) the tax attributable to the income for the purposes of the OECD GloBE model rules;(ii) determine—(A) the aggregate income (or loss) under subparagraph (i)(A) for all constituent entities in the operating jurisdiction; and(B) the aggregate tax under subparagraph (i)(B) for all constituent entities in the operating jurisdiction; and(iii) determine the effective tax rate for the operating jurisdiction by dividing the result of subparagraph (ii)(B) by the result of subparagraph (ii)(A).5. A low-tax jurisdiction is an operating jurisdiction for which the effective tax rate is below the minimum rate.6. The top-up tax for a low-tax jurisdiction is the product of—(a) the excess income (the result of Note 4(b)(ii)(A) for the jurisdiction less a substance-based income exclusion for the jurisdiction); and(b) the top-up tax percentage (that is, the difference between the minimum tax rate and the effective tax rate for the jurisdiction).7. A parent entity of the MNE group located in Hong Kong is subject to the IIR implemented in Hong Kong. Under the IIR, the top-up tax is charged at the level of the parent entity, in proportion to its ownership interests in those constituent entities in the low-tax jurisdictions, other than Hong Kong.8. The UTPR is a backstop to the IIR, as explained below—(a) all or part of the top-up tax computed for the constituent entities of the MNE group operating in low-tax jurisdictions may not be fully brought into charge under IIR, especially if the ultimate parent entity is not located in a jurisdiction implementing IIR;(b) under the UTPR, that top-up tax not brought into charge is the UTPR top-up tax amount, which—(i) is allocated among Hong Kong and other jurisdictions implementing the UTPR; and(ii) payable by constituent entities of the MNE group located in Hong Kong and those other jurisdictions.9. Apart from its constituent entities located in a jurisdiction, joint ventures, subsidiaries of joint ventures and stateless constituent entities (collectively other entities) of the MNE group located or operating in low-tax jurisdictions outside Hong Kong may render the MNE group liable to top-up tax under the IIR or UTPR in Hong Kong.10. In addition, a domestic minimum top-up tax, intended to be a qualified domestic minimum top-up tax under the OECD GloBE model rules, is imposed under this Part. It is a domestic tax fully credited against tax liability under IIR and UTPR. In effect—(a) should Hong Kong be a low-tax jurisdiction for an MNE group, a domestic minimum top-up tax is payable in Hong Kong by the constituent entities and other entities of the group located or operating in Hong Kong; and(b) the total amount of the domestic minimum top-up tax payable by the entities mentioned in paragraph (a) is equal to the top-up tax that would (in the absence of the domestic minimum top-up tax) have been payable on the income of those entities, under IIR implemented in other jurisdictions by parent entities in those other jurisdictions. 26AD. Interpretation of Part 4AA (1) In this Part—fiscal year (財政年度) has the meaning given by Article 10.1.1 of the GloBE rules; GloBE rules (《全球反侵蝕稅基規則》)— (a) subject to paragraph (b), means the rules set out in Part 1 of Schedule 61 (adopted rules), read together with Part 2 of that Schedule; or (b) in—(i) the definitions of agreed administrative guidance, commentary, GloBE implementation framework, qualified domestic minimum top-up tax, qualified IIR and qualified UTPR in Article 10.1.1 of the adopted rules;(ii) a reference to subject to the GloBE rules in the adopted rules; and(iii) a reference to the scope of the GloBE rules in the adopted rules,means the OECD GloBE model rules (as implemented by any jurisdiction, if applicable); OECD GloBE model rules (經合組織《全球反侵蝕稅基規則範本》) means the rules that are set out in the document entitled OECD/G20 Base Erosion and Profit Shifting Project: Tax Challenges Arising from the Digitalisation of the Economy—Global Anti-Base Erosion Model Rules (Pillar Two) published on 20 December 2021;OECD GloBE rules document (經合組織《全球反侵蝕稅基規則》文件) means a document with its title and other particulars specified in Part 1 of Schedule 64;OECD GloBE rules guidance (經合組織《全球反侵蝕稅基規則》指引) means the guidance in the OECD GloBE rules documents and includes the specified OECD GloBE rules guidance;specified OECD GloBE rules guidance (指明經合組織《全球反侵蝕稅基規則》指引) means any guidance in relation to a provision of the OECD GloBE model rules specified in column 3 of Part 2 of Schedule 64 that has effect in relation to a corresponding provision of the GloBE rules and is specified opposite to that provision in column 4 of that Part.(2) A note located in this Part or in Schedules 61, 62, 63 and 64 is provided for information only and has no legislative effect. 26AE. Charge of top-up tax under IIR and UTPR and charge of domestic minimum top-up tax under HKMTT (1) The GloBE rules have effect for implementing, in Hong Kong, the OECD GloBE model rules to ensure that a multinational enterprise group, with an annual consolidated revenue of at least EUR 750 million in at least 2 of the 4 fiscal years immediately preceding the current fiscal year, pays a minimum level of tax at 15% on the income arising in each of the jurisdictions where it operates.(2) Without limiting subsection (1), the GloBE rules have effect for charging top-up taxes under the IIR and UTPR within the meaning of the OECD GloBE model rules, to be called the IIR top-up tax and UTPR top-up tax respectively.(3) Part 3 of Schedule 61 provides for various transitional and permanent safe harbours in relation to the implementation of the GloBE rules.(4) Schedule 62 has effect for charging a domestic minimum top-up tax within the meaning of the OECD GloBE model rules, to be called the Hong Kong minimum top-up tax or HKMTT.(5) Schedule 63 contains the provisions on the administration of the IIR top-up tax, UTPR top-up tax and HKMTT including—(a) requirements for the filing of returns and notices and provision of information relevant to the determination of liability for any top-up tax; and(b) provisions that disapply provisions of this Ordinance in relation to any top-up taxes or modify them in their application in relation to any top-up tax.(6) The IIR top-up tax is payable in relation to a fiscal year beginning on or after 1 January 2025.(7) The UTPR top-up tax is payable in relation to a fiscal year beginning on or after a date specified by the Secretary for Financial Services and the Treasury by notice published in the Gazette.(8) The HKMTT is payable in relation to a fiscal year beginning on or after 1 January 2025. 26AF. Consistency with the OECD GloBE rules documents (1) This Part and Schedules 61, 62 and 63 are to be construed in accordance with the OECD GloBE rules guidance in a way that best serves the purpose of making provision for the following, within the meaning of the OECD GloBE model rules—(a) a qualified IIR;(b) a qualified UTPR;(c) a qualified domestic minimum top-up tax;(d) safe harbours.(2) The OECD GloBE rules guidance is to be given effect to in a way that supplements, and clarifies the interpretation and operation of, this Part and Schedules 61, 62 and 63. 26AG. Power to amend definition of OECD GloBE model rules and Schedules 61 to 64 (1) The Secretary for Financial Services and the Treasury may, by notice published in the Gazette, amend—(a) the definition of OECD GloBE model rules in section 26AD(1); and(b) Schedules 61, 62, 63 and 64.(2) A notice published under subsection (1) may contain any incidental, supplemental, evidential, consequential, savings and transitional provisions that are expedient in consequence of the amendments made under that subsection. Part 4A Concessionary Deductions (Part 4A added 31 of 1998 s. 12) Division 1 Preliminary (Added 31 of 2018 s. 3) 26B. Concessionary deductions, general provisions (1) This Part prescribes the deductions which shall be allowable to persons chargeable to tax under Part 3 or 7 and the circumstances in which such deductions shall be so allowable.(2) Every person who claims a deduction under this Part shall make his claim in the specified form and the person shall be allowed a deduction only if the claim contains such particulars and is supported by such proof as the Commissioner may require.(3) In this Part—deduction (扣除) means a deduction allowable under this Part;person (人) means a person chargeable to tax under Part 3 or 7, as the case may be.(Amended E.R. 1 of 2012) Division 2 Approved Charitable Donations (Added 31 of 2018 s. 4) 26C. Approved charitable donations (Part 4A)* (Amended 21 of 2008 s. 5)(1) Subject to the other provisions of this section, where a person or his or her spouse, not being a spouse living apart from the person, makes any approved charitable donations during any year of assessment, a deduction in respect of the aggregate amount of the approved charitable donations shall be allowable to the person for that year of assessment, if in any case such aggregate amount is not less than $100.(2) (a) Subject to paragraph (b), where a person is chargeable to tax under Part 3, no deduction shall be allowable to the person under subsection (1) for any year of assessment in respect of—(i) any sum which is allowable as a deduction under Part 4;(ii) any sum by which the aggregate amount of the approved charitable donations within the meaning of subsection (1) is in excess of the percentage specified in subsection (2A) of— (Amended 24 of 2003 s. 6)(A) subject to sub-subparagraph (B), the assessable income of the person for that year of assessment as reduced by the deductions provided for under section 12(1)(a) and (b) for that year of assessment; or(B) where the person and his or her spouse have made an election under section 10(2) for that year of assessment, the aggregate of their assessable incomes for that year of assessment as reduced in each case by the deductions provided for under section 12(1)(a) and (b) for that year of assessment.(b) Where a person has made an election under section 41 in respect of any year of assessment, no deduction shall be allowable to the person under subsection (1) for that year of assessment in respect of—(i) any sum which is allowable as a deduction under Part 4;(ii) any sum which has been allowed as a deduction to his or her spouse against the total income of that spouse under Part 7; (Amended 32 of 2018 s. 5)(iii) any sum by which the aggregate amount of the approved charitable donations within the meaning of subsection (1) is, when aggregated with any sum that is allowable as a deduction under section 16D for that year of assessment, in excess of the percentage specified in subsection (2A) of the total amount of— (Amended 24 of 2003 s. 6)(A) the total income of the person for that year of assessment;(B) any sum which is allowable as a deduction under section 16D for that year of assessment; and(C) any sum which is allowable as a deduction under section 12(1)(e) for that year of assessment.(2A) The percentages specified for the purposes of subsection (2)(a)(ii) and (b)(iii) shall be—(a) for any year of assessment up to and including the year of assessment commencing on 1 April 2002, 10%;(b) for the year of assessment commencing on 1 April 2003 or any subsequent year of assessment up to and including the year of assessment commencing on 1 April 2007, 25%; (Replaced 21 of 2008 s. 5)(c) for any year of assessment commencing on or after 1 April 2008, 35%. (Added 21 of 2008 s. 5)(Added 24 of 2003 s. 6)(3) (a) Subject to paragraph (b), the same approved charitable donation shall not be allowable as a deduction under this section in ascertaining the net chargeable income or the total income of more than one person.(b) Where a deduction of the same approved charitable donation is claimed or allowed in ascertaining the net chargeable income or the total income of more than one person, section 33(2) to (4) shall apply with the necessary modifications to such a deduction as it does to a dependent parent allowance, a dependent grandparent allowance, a dependent brother or dependent sister allowance, a child allowance or a disabled dependant allowance; and section 33 shall, where this paragraph applies, be construed as if a reference therein to such an allowance included, in the case of an approved charitable donation so claimed, a reference to an allowance to which section 33(2) applies and, in the case of an approved charitable donation so allowed, a reference to an allowance to which section 33(3) applies.(Amended E.R. 1 of 2012) Editorial Note: * The amendment made by Part 2 of Ord. No. 32 of 2018 to this section applies in relation to all years of assessment commencing on or after 1 April 2018. (Please see 32 of 2018 s. 3) Division 3 Elderly Residential Care Expenses (Added 31 of 2018 s. 5) 26D. Elderly residential care expenses (1) Subject to the other provisions of this section, where a person or his or her spouse, not being a spouse living apart from the person, pays during any year of assessment any residential care expenses in respect of a parent or grandparent of the person who at any time in that year of assessment is aged 60 or more or, being under the age of 60, is eligible to claim an allowance under the Government’s Disability Allowance Scheme, a deduction in respect of the residential care expenses shall be allowable to that person for that year of assessment.(2) A deduction under subsection (1) is allowable to a person in respect of each parent or grandparent of the person, in so far as any residential care expenses described in that subsection have been paid by the person or his or her spouse in respect of that parent or grandparent.(3) A deduction allowable to a person under subsection (1) in respect of each parent or grandparent of the person for any year of assessment shall not exceed the amount specified in Schedule 3C in relation to that year of assessment.(4) (a) Subject to paragraph (b), a deduction in respect of any residential care expenses shall not be allowable under this section to more than one person for any year of assessment in respect of the same parent or grandparent.(b) Where a deduction in respect of any residential care expenses is claimed by or allowed to more than one person for any year of assessment in respect of the same parent or grandparent, section 33(2) to (4) shall apply with the necessary modifications to such a deduction as it does to a dependent parent allowance, a dependent grandparent allowance, a dependent brother or dependent sister allowance, a child allowance or a disabled dependant allowance; and section 33 shall, where this paragraph applies, be construed as if a reference therein to such an allowance included, in the case of any residential care expenses so claimed, a reference to an allowance to which section 33(2) applies and, in the case of any residential care expenses so allowed, a reference to an allowance to which section 33(3) applies.(5) In this section—parent or grandparent (父母或祖父母), in relation to any person, means—(a) a parent or parent of his or her spouse; or(b) a grandparent or grandparent of his or her spouse;residential care expenses (住宿照顧開支) means any expenses payable in respect of the residential care received at a residential care home and paid to that residential care home or any other person acting on its behalf; residential care home (院舍) means any premises— (Amended 12 of 2011 s. 26) (a) in respect of which a licence issued or renewed under the Residential Care Homes (Elderly Persons) Ordinance (Cap. 459) is for the time being in force; (b) (Repealed 12 of 2023 s. 109) (c) to which the Residential Care Homes (Elderly Persons) Ordinance (Cap. 459) does not apply by virtue of section 3 of that Ordinance; (Replaced 12 of 2011 s. 26) (d) which is a scheduled nursing home within the meaning of the Private Healthcare Facilities Ordinance (Cap. 633) for which an exemption granted under section 128 of that Ordinance is in force; (Replaced 34 of 2018 s. 153 and E.R. 5 of 2018) (e) in respect of which a licence issued or renewed under the Residential Care Homes (Persons with Disabilities) Ordinance (Cap. 613) is for the time being in force; or (Added 12 of 2011 s. 26) (f) in respect of which a certificate of exemption issued or renewed under the Residential Care Homes (Persons with Disabilities) Ordinance (Cap. 613) is for the time being in force. (Added 12 of 2011 s. 26) Division 4 Home Loan Interest (Added 31 of 2018 s. 6) 26E. Home loan interest (1) Subject to the other provisions of this section and to section 26F, where a person pays during any year of assessment any home loan interest for the purposes of a home loan obtained in respect of a dwelling which is used at any time in that year of assessment by the person exclusively or partly as his place of residence, a deduction in respect of the home loan interest shall be allowable to that person for that year of assessment.(2) (a) Subject to paragraphs (b) and (c) and subsection (3), a deduction allowable to a person under subsection (1) in respect of any home loan interest paid by the person during any year of assessment is to be the lesser of the paid amount and capped amount, where— (Amended 10 of 2024 s. 3)(i) the paid amount is—(A) if the dwelling is used by the person exclusively as the person’s place of residence during the whole of that year of assessment—the amount of the home loan interest paid; or(B) in any other case—such amount (whether representing the full amount of the home loan interest paid or any part of that full amount) as is reasonable in the circumstances; and (ii) the capped amount is (regardless of whether the dwelling is used by the person exclusively as the person’s place of residence during the whole of that year of assessment)—(A) if all of the conditions specified in subsection (2A) are met in relation to the person—the aggregate of the HLI basic deduction ceiling amount and HLI additional deduction ceiling amount for that year of assessment; or(B) in any other case—the HLI basic deduction ceiling amount for that year of assessment. (Amended 10 of 2024 s. 3)(b) For the purposes of this section, where a dwelling is held by a person otherwise than as a sole owner, the amount of the home loan interest paid referred to in paragraph (a)(i) shall be regarded as having been paid—(i) where the dwelling is held by the person as a joint tenant, by the joint tenants each in proportion to the number of the joint tenants; or(ii) where the dwelling is held by the person as a tenant in common, by the tenants in common each in proportion to his or her share in the ownership in the dwelling.(c) For the purposes of this section, where a dwelling is held by a person otherwise than as a sole owner, the capped amount is to be regarded as having been reduced— (Amended 10 of 2024 s. 3)(i) where the dwelling is held by the person as a joint tenant, in proportion to the number of the joint tenants; or(ii) where the dwelling is held by the person as a tenant in common, between the tenants in common each in proportion to his or her share in the ownership in the dwelling.(2A) The following conditions are specified for the purposes of subsection (2)(a)(ii)(A)—(a) the person resides, during the year of assessment concerned, with a child of the person in Hong Kong for—(i) a continuous period of not less than 6 months; or(ii) a shorter period that the Commissioner considers reasonable in the circumstances;(b) the child—(i) was born on or after 25 October 2023; and(ii) is, at any time during that year of assessment, under the age of 18;(c) the paid amount is larger than the HLI basic deduction ceiling amount for that year of assessment;(d) the person elects in writing in the person’s claim for a deduction allowable under this section to use both an HLI basic deduction ceiling amount and an HLI additional deduction ceiling amount to determine the amount of deduction so allowable for that year of assessment. (Added 10 of 2024 s. 3)(2B) For the purposes of this section, an election under subsection (2A)(d) for a year of assessment applies to every home loan that is taken into account in determining the total amount of deduction allowable under this section for that year of assessment.

(Added 10 of 2024 s. 3)(3) (a) Where any home loan interest is paid by a person during any year of assessment for the purposes of a home loan obtained in respect of a dwelling which is used at any time in that year of assessment by that person exclusively or partly as his place of residence, but the loan was not applied wholly for the acquisition of the dwelling, the deduction allowable to the person under subsection (1) for that year of assessment in respect of the home loan interest paid shall be such part of the amount of the home loan interest paid as is reasonable in the circumstances of the case.(b) Where any home loan interest is paid by a person during any year of assessment for the purposes of a home loan obtained in respect of a dwelling which is used at any time in that year of assessment by that person exclusively or partly as his place of residence, but the person has paid during that year of assessment any other home loan interest for the purposes of a home loan obtained in respect of any other dwelling which is also used at any time in that year of assessment by that person exclusively or partly as his place of residence, a deduction shall, subject to subsection (4), be allowable to the person under subsection (1) for that year of assessment in respect of both the first-mentioned home loan interest and the second-mentioned home loan interest, and the deduction so allowable shall be such amount (whether representing the full amount of the aggregate of the respective amounts of the first-mentioned home loan interest and the second-mentioned home loan interest or any part thereof) as is reasonable in the circumstances of the case.(4) A deduction shall not be allowable under this section to a person in respect of any home loan interest paid during any year of assessment for the purposes of a home loan obtained in respect of a dwelling where—(a) the sum representing the home loan interest is allowable as a deduction under any other section of this Ordinance;(b) any other home loan interest paid in respect of any other dwelling has been allowed to the person as a deduction for that year of assessment under this section other than by virtue of subsection (3)(b); (Amended 21 of 2012 s. 3)(c) a deduction has been allowed to the person under this section, whether in respect of the same dwelling or in respect of any other dwelling, for 20 years of assessment (whether continuous or not), regardless of whether any HLI additional deduction ceiling amount has been used to determine the amount of deduction for any of those 20 years; or (Amended 9 of 2004 s. 3; 13 of 2006 s. 2; 21 of 2012 s. 3; 3 of 2017 s. 3; 10 of 2024 s. 3)(d) that year of assessment is earlier than the year of assessment commencing on 1 April 2012 and the following occur—(i) a deduction has been allowed to the person under this section, whether in respect of the same dwelling or in respect of any other dwelling, for 10 years of assessment (whether continuous or not); and(ii) those 10 years of assessment are all earlier than the year of assessment commencing on 1 April 2012. (Added 21 of 2012 s. 3)(5) For the purposes of subsection (4)(c) and (d), where a deduction allowable to a person under this section has been taken into account in any year of assessment in ascertaining— (Amended 21 of 2012 s. 3)(a) subject to paragraphs (b) and (c), the net chargeable income of the person;(b) where the person and his or her spouse have made an election under section 10(2), the aggregated net chargeable income of the person and his or her spouse; or(c) where the person or the person and his or her spouse have made an election under section 41, the amount of the assessment made under section 42A(1) in respect of the person or the person and his or her spouse,unless the claim or nomination to which the deduction relates is subsequently regarded as not having been made under subsection (6)(b)(i) or section 26F(4)(b)(i), the person is to be regarded as having been allowed the deduction under this section for that year of assessment. (Amended 10 of 2024 s. 3)(5A) Without limiting subsection (4), an HLI increased deduction is not allowable to a person in respect of any home loan interest paid during a year of assessment if an increased deduction has been allowed (whether in respect of the same dwelling or domestic premises or in respect of any other dwelling or domestic premises) to the person for an aggregate of 19 years of assessment (whether continuous or not). (Added 10 of 2024 s. 3)(5B) For the purposes of subsection (5A), if a person makes an election under subsection (2A)(d) or section 26Y(5A)(d) (subject election) for a year of assessment and, as a result of the subject election, an increased deduction is taken into account in that year of assessment in ascertaining—(a) subject to paragraphs (b) and (c)—the net chargeable income of the person or the person’s spouse;(b) where the person and the person’s spouse have made an election under section 10(2)—the aggregated net chargeable income of the person and the person’s spouse; or(c) where the person or the person’s spouse, or the person and the person’s spouse, have made an election under section 41—the amount of the assessment made under section 42A(1) in respect of the person or the person’s spouse, or in respect of the person and the person’s spouse,unless the subject election is subsequently regarded as not having been made under subsection (6)(b) or section 26F(4)(b), 26YA(2)(a) or 26ZB(3)(b)(ii), the person is to be regarded as having been allowed the deduction for that year of assessment. (Added 10 of 2024 s. 3)(6) (a) A claim by a person to a deduction allowable to him under this section may only be revoked by the person by notice in writing to the Commissioner within 6 months after the date on which the deduction is allowed to him under this section.(ab) For the purposes of paragraph (a), when revoking a claim, a person may revoke—(i) if the amount of the deduction concerned was determined using only an HLI basic deduction ceiling amount—the claim in respect of the whole of the deduction; or(ii) if the amount of the deduction concerned was determined using both an HLI basic deduction ceiling amount and an HLI additional deduction ceiling amount—(A) the claim in respect of the whole of the deduction; or(B) the claim to the extent that the deduction relates to the HLI additional deduction ceiling amount. (Added 10 of 2024 s. 3)(b) Where a claim is revoked under paragraph (a)— (Amended 10 of 2024 s. 3)(i) if the claim is revoked in respect of the whole of the deduction—the claim and (if applicable) the election under subsection (2A)(d) to which the deduction relates (specified election) are to be regarded as not having been made; or(ii) if the claim is revoked to the extent that the deduction relates to the HLI additional deduction ceiling amount—(A) the claim and specified election are to be regarded as not having been made; and(B) the person is to be regarded as having claimed a deduction under this section, the amount of which is determined using only the HLI basic deduction ceiling amount. (Amended 10 of 2024 s. 3)(6A) If a person revokes a claim under subsection (6) (whether in respect of the whole of a claim or part of a claim) after 6 years from the expiration of the year of assessment to which the claim relates, an assessor may, within 2 years after the revocation, make an additional assessment of the tax payable in consequence of the revocation and for this purpose, section 60(1) applies to the additional assessment as if it were an assessment made under that section. (Added 4 of 2010 s. 7. Amended 10 of 2024 s. 3)(7) The Commissioner may, for the purposes of this section, approve in writing any organization or association as a recognized organization or association.*(8) For the purposes of this section, where a person pays any home loan interest for the purposes of a home loan obtained in respect of a dwelling which is used by that person exclusively or partly as his place of residence in the circumstances described in subsection (1), and the home loan was applied also for the acquisition of a car parking space, the car parking space shall be deemed— (Amended 12 of 2004 s. 8)(a) to be part and parcel of the dwelling; and (b) to be used by that person in the same manner and to the same extent as the dwelling is used as his place of residence.(9) In this section—capped amount (上限款額)—see subsection (2)(a)(ii); (Added 10 of 2024 s. 3) child (子女), in relation to a person— (a) means a child of the person or of the person’s spouse or former spouse, whether or not the child was born in wedlock; and (b) includes the adopted or step child of either or both of the following—(i) the person;(ii) the person’s spouse or former spouse; (Added 10 of 2024 s. 3) domestic premises (住宅處所) has the meaning given by section 26W(1); (Added 10 of 2024 s. 3)DR increased deduction (住宅租金經提高的扣除) has the meaning given by section 26ZA(2); (Added 10 of 2024 s. 3) dwelling (住宅) means any building or any part of a building— (a) which is designed and constructed for use exclusively or partly for residential purposes; and (b) the rateable value of which is separately estimated under section 10 of the Rating Ordinance (Cap. 116); HLI additional deduction ceiling amount (居貸利息額外扣除限額), in relation to a deduction allowable under this section in respect of any home loan interest paid during a year of assessment, means the amount specified in Part 2 of Schedule 3D for that year of assessment; (Added 10 of 2024 s. 3)HLI basic deduction ceiling amount (居貸利息基本扣除限額), in relation to a deduction allowable under this section in respect of any home loan interest paid during a year of assessment, means the amount specified in Part 1 of Schedule 3D for that year of assessment; (Added 10 of 2024 s. 3)HLI increased deduction (居貸利息經提高的扣除) means a deduction allowable under this section, the amount of which is determined using both an HLI basic deduction ceiling amount and an HLI additional deduction ceiling amount; (Added 10 of 2024 s. 3) home loan (居所貸款), in relation to a person claiming a deduction under this section for any year of assessment, means a loan of money which is— (a) applied wholly or partly for the acquisition of a dwelling which—(i) during any period of time in that year of assessment is held by the person as a sole owner, or as a joint tenant or tenant in common; and(ii) during that period of time is used by the person exclusively or partly as his place of residence; and (b) secured during that period of time by a mortgage or charge over that dwelling or any other property in Hong Kong; home loan interest (居所貸款利息), in relation to a person claiming a deduction in respect of a dwelling under this section, means interest paid by the person as a sole owner, or as a joint tenant or tenant in common of the dwelling for the purposes of a home loan to— (a) the Government; (b) a financial institution; (c) a credit union registered under the Credit Unions Ordinance (Cap. 119); (d) a money lender licensed under the Money Lenders Ordinance (Cap. 163); (e) the Hong Kong Housing Society; (f) an employer of the person; or (g) any recognized organization or association; increased deduction (經提高的扣除) means— (a) a DR increased deduction; or (b) an HLI increased deduction; (Added 10 of 2024 s. 3) paid amount (已付款額)—see subsection (2)(a)(i); (Added 10 of 2024 s. 3)place of residence (居住地方), in relation to a person who has more than one place of residence, means his principal place of residence;recognized organization or association (認可組織或協會) means any organization or association approved as such by the Commissioner under subsection (7).(10) To avoid doubt, if a person—(a) has been allowed a deduction under the provisions of this section—(i) in force immediately before 1 April 2003;(ii) in force immediately before 1 April 2005; (Amended 3 of 2017 s. 3)(iii) in force immediately before 1 April 2012; or(iv) in force immediately before 1 April 2017; or (Added 3 of 2017 s. 3)(b) has been regarded as having been allowed such a deduction by virtue of section 26F(2)(b), for any year of assessment, that year of assessment is regarded as a year of assessment for which a deduction has been allowed for the purposes of subsection (4)(c) and (d). (Replaced 21 of 2012 s. 3) Editorial Note: *The amendment made by 12 of 2004 to this subsection applies in relation to the year of assessment 1998/99 and to all subsequent years of assessment. (Please see 12 of 2004 s. 2(2)) 26F. Nomination for purposes of section 26E (1) Where—(a) a deduction is allowable to a person under section 26E for any year of assessment; and(b) the person has no income, property or profits chargeable to tax under this Ordinance for that year of assessment,the person may nominate his or her spouse, being a spouse not living apart from the person, to claim the deduction for that year of assessment.(2) Where a person has in accordance with subsection (1) made a nomination in respect of a deduction allowable to him under section 26E for any year of assessment—(a) (i) the deduction shall cease to be allowable to that person; and(ii) the deduction shall be allowable to the spouse of that person; and(b) subject to subsection (4)(b)—(i) the person but not the spouse is, for the purposes of section 26E(4)(c) and (d), to be regarded as having been allowed the deduction under section 26E for that year of assessment; and(ii) without limiting subparagraph (i), if the deduction is an HLI increased deduction, the person but not the spouse is, for the purposes of section 26E(5A), also to be regarded as having been allowed the deduction under section 26E for that year of assessment. (Replaced 10 of 2024 s. 4)(3) Where a person has in accordance with subsection (1) made a nomination in respect of a deduction allowable to the person under section 26E for any year of assessment, and the deduction has been allowed to his or her spouse for that year of assessment, the Commissioner shall give written notification thereof to the person making the nomination.(4) (a) A nomination made by a person under subsection (1) in respect of a deduction allowable to him under section 26E may only be revoked by the person by notice in writing to the Commissioner within 6 months after the date on which the Commissioner has given notification to the person in respect of the deduction in accordance with subsection (3).(ab) For the purposes of paragraph (a), when revoking a nomination, a person may revoke—(i) if the amount of the deduction concerned was determined using only an HLI basic deduction ceiling amount—the nomination in respect of the whole of the deduction; or(ii) if the amount of the deduction concerned was determined using both an HLI basic deduction ceiling amount and an HLI additional deduction ceiling amount—(A) the nomination in respect of the whole of the deduction; or(B) the nomination to the extent that the deduction relates to the HLI additional deduction ceiling amount. (Added 10 of 2024 s. 4)(b) Where a nomination is revoked under paragraph (a)— (Amended 10 of 2024 s. 4)(i) if the nomination is revoked in respect of the whole of the deduction—the nomination, claim and (if applicable) the election under section 26E(2A)(d) to which the deduction relates (specified election) are to be regarded as not having been made; or(ii) if the nomination is revoked to the extent that the deduction relates to the HLI additional deduction ceiling amount—(A) the nomination, claim and specified election are to be regarded as not having been made; and(B) the person is to be regarded as having nominated the person’s spouse under this section to claim a deduction under section 26E, the amount of which is determined using only the HLI basic deduction ceiling amount. (Amended 10 of 2024 s. 4)(5) In this section—HLI additional deduction ceiling amount (居貸利息額外扣除限額) has the meaning given by section 26E(9);HLI basic deduction ceiling amount (居貸利息基本扣除限額) has the meaning given by section 26E(9);HLI increased deduction (居貸利息經提高的扣除) has the meaning given by section 26E(9). (Added 10 of 2024 s. 4) Division 5 Contributions to Recognized Retirement Schemes (Added 31 of 2018 s. 7) 26G. Contributions to recognized retirement schemes* (1) Subject to the other provisions of this section, where a person pays any contributions to a recognized retirement scheme during any year of assessment, a deduction in respect of the contributions shall be allowable to that person for that year of assessment.(2) A deduction shall not be allowable to a person under subsection (1) for any year of assessment—(a) in respect of any sum which is allowable as a deduction under Part 4;(b) in excess of the amount specified in Schedule 3B in relation to that year of assessment.(3) Subject to subsection (2), the amount of the deduction allowable under this section in respect of any contributions to a recognized retirement scheme, in relation to a person, shall be—(a) in the case of a recognized occupational retirement scheme—(i) the amount of the contributions paid by the person as an employee to the scheme; or(ii) the amount of the mandatory contributions that the person would have been required to pay as an employee if at all times whilst an employee during the year of assessment in question he had contributed as a participant in a mandatory provident fund scheme.whichever is of the lesser amount;(b) in the case of a mandatory provident fund scheme, the amount of the mandatory contributions paid by the person as an employee.(Amended E.R. 1 of 2012) Editorial Note: *Section 26G applies in relation to the year of assessment commencing on 1 April 2000 and to all subsequent years of assessment. (31 of 1998 s. 2(2); L.N. 175 of 2000) Division 6 Health Insurance Premiums (Division 6 added 31 of 2018 s. 8) 26H. Application This Division applies in relation to the year of assessment commencing on 1 April 2019 and to all subsequent years of assessment. 26I. Interpretation (1) In this Division—adopted (領養) means adopted in any manner recognized by the laws of Hong Kong;insured person (受保人), in relation to a VHIS policy, means an individual whose risks are covered by the policy;policy holder (保單持有人), in relation to a VHIS policy, means a legal holder of the policy;qualifying premiums (合資格保費), in relation to a VHIS policy, means the net sum of moneys that is payable under the policy to the insurer for writing or renewing the policy in so far as it relates to the insurance plan certified by the Secretary for Health to be in compliance with the Government’s Voluntary Health Insurance Scheme (VHIS); (Amended L.N. 144 of 2022)specified relative (指明親屬)—see section 26J;VHIS policy (自願醫保計劃保單) means an insurance policy that is in whole or in part issued under an insurance plan certified by the Secretary for Health to be in compliance with the VHIS. (Amended L.N. 144 of 2022)(2) A note located in the text of this Division is provided for information only and has no legislative effect. 26J. Meaning of specified relative (1) An individual is a specified relative of a person in a year of assessment if the individual is, in relation to the person, at any time during the year of assessment—(a) a spouse;(b) a parent or grandparent who fulfils the condition mentioned in subsection (2); or(c) a child or sibling who fulfils the conditions mentioned in subsection (3).(2) The condition is that the parent or grandparent is, at any time during the year of assessment—(a) aged 55 or more; or(b) under the age of 55 but eligible to claim an allowance under the Government’s Disability Allowance Scheme.(3) The conditions are that the child or sibling is, at any time during the year of assessment, unmarried and—(a) under the age of 18;(b) aged 18 or more but under the age of 25 and receiving full time education at a university, college, school or other similar educational establishment; or(c) aged 18 or more but incapacitated for work by reason of physical or mental disability.(4) In this section—child (子女), in relation to a person—(a) means a child of the person or of the person’s spouse or former spouse, whether or not the child was born in wedlock; and(b) includes the adopted or step child of either or both of the following—(i) the person;(ii) the person’s spouse or former spouse;grandparent (祖父母或外祖父母), in relation to a person, means a grandparent or grandparent of his or her spouse; Note— See the definition of grandparent or grandparent of his or her spouse in section 2(1). parent (父母), in relation to a person, means a parent or parent of his or her spouse; Note— See the definition of parent or parent of his or her spouse in section 2(1). sibling (兄弟姊妹), in relation to a person, means—(a) a full or half blood sibling of the person or of the person’s spouse;(b) an adopted sibling of the person or of the person’s spouse;(c) a step sibling of the person or of the person’s spouse;(d) if the person or the person’s spouse is adopted—a natural child of an adoptive parent of the person or of the person’s spouse; or(e) if the person’s spouse is deceased—an individual who would have been the sibling of the person under paragraph (a), (b), (c) or (d) if the spouse had not died. 26K. Qualifying premiums paid under VHIS policy (1) Subject to the other provisions of this section and to sections 26L and 26M, a deduction in respect of qualifying premiums paid during a year of assessment for an insured person under a VHIS policy is allowable to a person (taxpayer) for the year of assessment if—(a) the qualifying premiums were paid by the taxpayer or the taxpayer’s spouse, not being a spouse living apart from the taxpayer, as a policy holder of the policy;(b) the insured person is either—(i) the taxpayer; or(ii) a specified relative of the taxpayer in the year of assessment; and(c) the insured person is either—(i) a holder of an identity card issued under the Registration of Persons Ordinance (Cap. 177) (HKID card holder) at any time during the year of assessment; or(ii) under the age of 11 and not an HKID card holder at any time during the year of assessment but an individual—(A) unless the insured person has been adopted—whose natural parent was, at the time of birth of the insured person, an HKID card holder; or(B) if the insured person has been adopted—whose adoptive parent was, at the time of adoption of the insured person, an HKID card holder.(2) If there is more than one policy holder for a VHIS policy, the qualifying premiums paid during a year of assessment for each insured person under the policy are taken as paid by all of the policy holders in equal shares.(3) The maximum deduction allowable to a taxpayer in respect of qualifying premiums paid during a year of assessment for each insured person, whether the insured person is insured under one or more than one VHIS policy, is the amount specified in Schedule 3E in relation to the year of assessment.(4) If the Commissioner is of the opinion that the qualifying premiums paid during a year of assessment for an insured person under a VHIS policy are not commensurate with the risk profile of the insured person—(a) the Commissioner may determine the amount of qualifying premiums that is, in the Commissioner’s opinion, commensurate with the risk profile of the insured person; and(b) the amount so determined is taken to be the qualifying premiums paid.(5) The Commissioner may exercise a power under this Division in the way that the Commissioner considers appropriate having regard only to the information in the Commissioner’s possession when exercising the power. 26L. Claim of deduction by married persons (1) This section applies in relation to a deduction under section 26K claimed by a married person or the person’s spouse or both in respect of the qualifying premiums paid by either or both of them during a year of assessment for an insured person.(2) The qualifying premiums paid are allowable as a deduction under section 26K to either the married person or the person’s spouse, or to both of them, so long as—(a) the deduction allowed to each of them for the insured person does not exceed the amount specified in Schedule 3E in relation to the year of assessment; and(b) the total deduction allowed to them does not exceed the qualifying premiums paid.(3) If the Commissioner has reason to believe that a deduction under section 26K would, if allowed, be contrary to subsection (2)(b), the Commissioner must not consider any claim for the deduction until the Commissioner is satisfied that the married person and the person’s spouse have reached an agreement that would result in a total deduction that accords with that subsection.(4) Subsection (5) applies—(a) if deductions under section 26K have been allowed to a married person and the person’s spouse contrary to subsection (2)(b); or(b) if—(i) a deduction under section 26K has been allowed to a married person; and(ii) within 6 months after the date of allowing the deduction, the person’s spouse claims a deduction under section 26K that would, if allowed, be contrary to subsection (2)(b).(5) The Commissioner may—(a) invite the married person and the person’s spouse to reach an agreement that would result in a total deduction that accords with subsection (2)(b); and(b) make additional assessments under section 60 in consequence of—(i) such an agreement reached by the married person and the person’s spouse within a reasonable time; or(ii) their failure to reach such an agreement within a reasonable time. 26M. Refund of qualifying premiums paid under VHIS policy (1) This section applies if any of the qualifying premiums paid during a year of assessment for an insured person under a VHIS policy is refunded in respect of the insured person.(2) The qualifying premiums paid are taken to be reduced by the amount of the refund.(3) In addition, if the refund is made after a person claims a deduction under section 26K in respect of the qualifying premiums paid—(a) the person must notify the Commissioner in writing of the refund within 3 months after the date of refund; and(b) if the deduction has been allowed, then, despite any time limit for making an additional assessment under section 60, an assessor may, having regard to the reduction, make an additional assessment on the person under that section. Division 7 Annuity Premiums and MPF Voluntary Contributions (Division 7 added 7 of 2019 s. 3) Subdivision 1 Qualifying Annuity Premiums 26N. Interpretation (1) In this Subdivision—annuitant (年金領取人), in relation to a qualifying deferred annuity policy, means an individual who is designated by the policy holder as being entitled to receive a regular payment during an annuity period under the policy;annuity payment (年金款項), in relation to a qualifying deferred annuity policy, means a regular payment receivable by an annuitant during an annuity period under the policy;Insurance Authority (保監局) means the Insurance Authority established under section 4AAA(1) of the Insurance Ordinance (Cap. 41);policy holder (保單持有人), in relation to a qualifying deferred annuity policy, means the legal holder of the policy;qualifying annuity premiums (合資格年金保費), in relation to a qualifying deferred annuity policy, means the net sum of moneys that is payable under the policy to the insurer for writing or renewing the policy in so far as it relates to the provision of annuity payments;qualifying deferred annuity policy (合資格延期年金保單) means an insurance policy—(a) under which a regular payment is receivable by an annuitant during an annuity period; and(b) that is certified by the Insurance Authority to be in compliance with the criteria specified for the purposes of this Subdivision in the guidelines published by the Insurance Authority under section 133 of the Insurance Ordinance (Cap. 41).(2) In this Subdivision, a reference to qualifying annuity premiums paid during a year of assessment is to be interpreted as a reference to those premiums paid to the extent that they are due during the year of assessment. 26O. Deduction for qualifying annuity premiums (1) Subject to the other provisions of this section and to sections 26P, 26Q, 26R, 26T and 26U, a deduction in respect of qualifying annuity premiums paid during a year of assessment for an annuity payment receivable by an annuitant under a qualifying deferred annuity policy is allowable to a person (taxpayer) for the year of assessment if—(a) the policy holder or policy holders are—(i) the taxpayer;(ii) the taxpayer’s spouse; or(iii) the taxpayer and the taxpayer’s spouse;(b) the qualifying annuity premiums were paid by—(i) the taxpayer;(ii) the taxpayer’s spouse, not being a spouse living apart from the taxpayer; or(iii) the taxpayer and the taxpayer’s spouse, not being a spouse living apart from the taxpayer;(c) the annuitant or annuitants are—(i) the taxpayer;(ii) the taxpayer’s spouse at any time during the year of assessment; or(iii) the taxpayer and the taxpayer’s spouse at any time during the year of assessment; and(d) at any time during the year of assessment, the annuitant or annuitants hold an identity card issued under the Registration of Persons Ordinance (Cap. 177).(2) A deduction under subsection (1) is allowable to a taxpayer in respect of qualifying annuity premiums paid during a year of assessment under one or more than one qualifying deferred annuity policy.(3) If the policy holders of a qualifying deferred annuity policy are a taxpayer and the taxpayer’s spouse, the qualifying annuity premiums paid by either or both of them during a year of assessment are taken as paid by them in equal shares. 26P. Claim for deduction by married persons (1) This section applies in relation to a deduction under section 26O claimed by a married person or the person’s spouse or both in respect of the qualifying annuity premiums paid by either or both of them during a year of assessment.(2) The qualifying annuity premiums paid are allowable as a deduction under section 26O to either the married person or the person’s spouse, or to both of them, so long as—(a) the total deductions allowed to each of them under sections 26O and 26S do not exceed the amount specified in Schedule 3F in relation to the year of assessment; and(b) the total deduction or deductions allowed to them under section 26O do not exceed the qualifying annuity premiums paid.(3) If the Commissioner has reason to believe that a deduction under section 26O, if allowed, would be contrary to subsection (2)(b), the Commissioner must not consider any claim for the deduction until the Commissioner is satisfied that the married person and the person’s spouse have reached an agreement that would result in a total deduction that accords with that subsection.(4) Subsection (5) applies—(a) if deductions under section 26O have been allowed to a married person and the person’s spouse contrary to subsection (2)(b); or(b) if—(i) a deduction under section 26O has been allowed to a married person; and(ii) within 6 months after the date of allowing the deduction, the person’s spouse claims a deduction under that section that, if allowed, would be contrary to subsection (2)(b).(5) The Commissioner may—(a) invite the married person and the person’s spouse to reach an agreement that would result in a total deduction that accords with subsection (2)(b); and(b) make additional assessments under section 60 in consequence of—(i) such an agreement reached by the married person and the person’s spouse within a reasonable time; or(ii) their failure to reach such an agreement within a reasonable time. 26Q. Refund of qualifying annuity premiums (1) This section applies if any of the qualifying annuity premiums paid during a year of assessment under a qualifying deferred annuity policy is refunded.(2) The qualifying annuity premiums paid are taken to be reduced by the amount of the refund.(3) In addition, if the refund is made after a person claims a deduction under section 26O in respect of the qualifying annuity premiums paid—(a) the person must notify the Commissioner in writing of the refund within 3 months after the date of refund; and(b) if the deduction has been allowed, then, despite any time limit for making an additional assessment under section 60, an assessor may, having regard to the reduction, make an additional assessment on the person under that section. 26R. Exercise of Commissioner’s power The Commissioner may exercise a power under this Subdivision in the way that the Commissioner, having regard only to the information then in the Commissioner’s possession, considers appropriate. Subdivision 2 Tax Deductible MPF Voluntary Contributions 26S. Deduction for tax deductible MPF voluntary contributions (1) Subject to sections 26T and 26U, a deduction in respect of tax deductible MPF voluntary contributions paid by a person into a TVC account during a year of assessment is allowable to the person for the year of assessment.(2) In this section—tax deductible MPF voluntary contributions (可扣稅強積金自願性供款) means tax deductible voluntary contributions as defined by section 2(1) of the Mandatory Provident Fund Schemes Ordinance (Cap. 485);TVC account (可扣稅自願性供款帳户) has the meaning given by section 2(1) of the Mandatory Provident Fund Schemes Ordinance (Cap. 485). Subdivision 3 Administrative Provisions 26T. Application This Division applies in relation to the year of assessment commencing on 1 April 2019 and to all subsequent years of assessment. 26U. Total deductions allowable under sections 26O and 26S (1) The total deductions allowable to a person (taxpayer) under sections 26O and 26S in relation to a year of assessment may not exceed the amount specified in Schedule 3F for the year of assessment.(2) If deductions are allowable to a taxpayer under both sections 26O and 26S in relation to a year of assessment, the deductions are to be allowed in the following order—(a) firstly, the deductions under section 26S;(b) secondly, the deductions under section 26O. Division 8 Domestic Rents (Division 8 added 7 of 2022 s. 3) 26V. Application This Division applies in relation to the year of assessment commencing on 1 April 2022 and to all subsequent years of assessment. 26W. Interpretation (1) In this Division— child (子女), in relation to a person— (a) means a child of the person or of the person’s spouse or former spouse, whether or not the child was born in wedlock; and (b) includes the adopted or step child of either or both of the following—(i) the person;(ii) the person’s spouse or former spouse; (Added 10 of 2024 s. 5) contractual period (合約期), in relation to a tenancy of any domestic premises, means the period during which the right to the exclusive use of the premises is given under the tenancy; domestic premises (住宅處所) means a building in Hong Kong, or part of such a building (including a bed-space, cubicle, room, floor and portion of a floor), that is not prohibited— (a) by or pursuant to any law; or (b) by any specified instrument, from being used, wholly or partly, for residential purposes, at any time during the term of the Government lease or such term under an agreement for the Government lease (whichever is applicable) in respect of the building; DR additional deduction ceiling amount (住宅租金額外扣除限額)—see section 26Y(7A); (Added 10 of 2024 s. 5)DR basic deduction ceiling amount (住宅租金基本扣除限額)—see section 26Y(7); (Added 10 of 2024 s. 5)place of residence (居住地方), in relation to a person who has more than one place of residence, means the person’s principal place of residence; qualifying tenancy (合資格租賃), in relation to any domestic premises, means a tenancy in writing in respect of the right to the exclusive use of the premises— (a) that is stamped within the meaning of the Stamp Duty Ordinance (Cap. 117); or (b) under which the right is given by the Government (including by The Financial Secretary Incorporated as an agent of the Government) at a rent of a fair market value; rent (租金)—see subsection (2); specified instrument (指明文書), in relation to a building, means— (a) a Government lease or an agreement for a Government lease (whichever is applicable) in respect of the building; (b) a deed of mutual covenant (as defined by section 2 of the Building Management Ordinance (Cap. 344)) in respect of the building; (c) an occupation permit issued in respect of the building under section 21 of the Buildings Ordinance (Cap. 123); or (d) any other instrument that the Commissioner is satisfied effectively restricts the permitted user of the building or any part of it; spouse (配偶)—see subsection (4); tenancy (租賃) includes— (a) an agreement for a tenancy; and (b) a sub-tenancy; The Financial Secretary Incorporated (財政司司長法團) means the corporation sole incorporated under section 2 of the Financial Secretary Incorporation Ordinance (Cap. 1015).(2) In this Division, a reference to a rent does not include any Government rent, rates (as defined by section 2 of the Rating Ordinance (Cap. 116)), management fee, utility charge or charge on any service provided under or in connection with the tenancy concerned (incidental charge) unless—(a) the incidental charge is included as rent under the tenancy; and(b) the tenant concerned has no obligation under the tenancy to pay the incidental charge.(3) In this Division, a reference to any rents paid under a tenancy in relation to a particular period (specified period) is a reference to any rents paid under the tenancy that are attributable to such part of the contractual period of the tenancy that overlaps with the specified period.(4) Without affecting the definitions of marriage and spouse in section 2(1), if a person’s spouse is living apart from the person, in this Division (except section 26ZA(1)(d) and (h) and (2))—(a) a reference to a spouse does not include the person’s spouse; and(b) a reference to a married person does not include the person.(5) A note located in the text of this Division is provided for information only and has no legislative effect. 26X. Deduction for domestic rents (1) A deduction in respect of rents paid under a qualifying tenancy of any domestic premises is allowable to a person for a year of assessment if—(a) the rents are so paid, in relation to the year of assessment, by the person or the person’s spouse as a tenant (or by both of them as co-tenants); and(b) the premises are used at any time during the year of assessment by the person as the person’s place of residence.(2) A deduction under subsection (1) is allowable to the person in respect of rents paid under one or more than one qualifying tenancy in relation to a year of assessment.(3) Subsection (4) applies if a tenant mentioned in subsection (1)—(a) obtains under the qualifying tenancy a right to the exclusive use of not only the domestic premises but also a car parking space; and(b) does not sublet the car parking space.(4) For the purposes of subsection (1), the car parking space is taken—(a) to be part and parcel of the domestic premises; and(b) to be used by the person in the same manner and to the same extent as the premises are used as the person’s place of residence. 26Y. Amount of deduction (1) In this section—prescribed deduction amount (訂明扣除款額)—see subsection (5);qualifying rental amount (合資格租金款額)—see subsection (6).(Amended 10 of 2024 s. 6)(2) Unless subsection (3) applies, the amount of deduction allowable to a person under section 26X for a year of assessment is—(a) if the rents concerned are paid in relation to the year of assessment under only one qualifying tenancy—the prescribed deduction amount for the tenancy for the year of assessment; or(b) if the rents concerned are paid in relation to the year of assessment under 2 or more qualifying tenancies—the aggregate of the prescribed deduction amount for each of the tenancies for the year of assessment.(3) If the person is married, the total amount of deduction allowable to the person or the person’s spouse (or both of them) under section 26X for a year of assessment is—(a) if the rents concerned are paid in relation to the year of assessment under only one qualifying tenancy—the prescribed deduction amount for the tenancy for the year of assessment; or(b) if the rents concerned are paid in relation to the year of assessment under 2 or more qualifying tenancies—the aggregate of the prescribed deduction amount for each of the tenancies for the year of assessment.(4) However, if the person is married during any part, but not the whole, of a year of assessment—(a) subsection (2) applies to the person as if a reference to a year of assessment in that subsection were a reference to such part of the year of assessment during which the person is not married; and(b) subsection (3) applies to the person and the person’s spouse as if a reference to a year of assessment in that subsection were a reference to such part of the year of assessment during which the person is married.(5) For the purposes of this section, the prescribed deduction amount for a qualifying tenancy for a particular period is to be the lesser of— (Amended 10 of 2024 s. 6)(a) the qualifying rental amount for the tenancy for the period; and (Amended 10 of 2024 s. 6)(b) an amount equal to—(i) if all of the conditions specified in subsection (5A) are met in relation to the person—the aggregate of the DR basic deduction ceiling amount and DR additional deduction ceiling amount for the tenancy for the period; or(ii) in any other case—the DR basic deduction ceiling amount for the tenancy for the period. (Replaced 10 of 2024 s. 6)(5A) The following conditions are specified for the purposes of subsections (5)(b)(i) and (9)(c)—(a) the person resides, during the year of assessment concerned, with a child of the person in Hong Kong for—(i) a continuous period of not less than 6 months; or(ii) a shorter period that the Commissioner considers reasonable in the circumstances;(b) the child—(i) was born on or after 25 October 2023; and(ii) is, at any time during that year of assessment, under the age of 18;(c) the qualifying rental amount concerned is larger than the DR basic deduction ceiling amount concerned;(d) the person elects in writing in the person’s claim for a deduction allowable under section 26X to use both a DR basic deduction ceiling amount and a DR additional deduction ceiling amount to determine the amount of deduction so allowable for that year of assessment. (Added 10 of 2024 s. 6)(5B) For the purposes of this section, an election under subsection (5A)(d) for a year of assessment applies to every qualifying tenancy that is taken into account in determining the total amount of deduction allowable under section 26X for that year of assessment. (Added 10 of 2024 s. 6)(6) For the purposes of subsection (5) and subject to subsection (8), the qualifying rental amount for a qualifying tenancy for a particular period is—(a) subject to paragraph (b), the amount of rents paid under the tenancy in relation to the period, divided by the number of tenants under the tenancy; or(b) if the premises are not used by the person exclusively as the person’s place of residence at any time during the period—such part of the amount calculated under paragraph (a) that is reasonable in the circumstances of the case.(7) For the purposes of subsection (5) and subject to subsection (8), the DR basic deduction ceiling amount for a qualifying tenancy for a particular period (specified period) is an amount calculated in accordance with the following formula— (Amended 10 of 2024 s. 6) A = B × C ÷ D 12 where: A means the DR basic deduction ceiling amount; B means the amount specified in Part 1 of Schedule 3G for the year of assessment concerned; C means the number of months (and pro rata for an incomplete month) during which the contractual period of the tenancy overlaps with the specified period; D means the number of tenants under the tenancy. (Amended 10 of 2024 s. 6)(7A) For the purposes of subsection (5) and subject to subsections (8) and (9), the DR additional deduction ceiling amount for a qualifying tenancy for a specified period is an amount calculated in accordance with the following formula— A = B × C ÷ D 12 where: A means the DR additional deduction ceiling amount; B means the amount specified in Part 2 of Schedule 3G for the year of assessment concerned; C means the number of months (and pro rata for an incomplete month) during which the contractual period of the tenancy overlaps with the specified period; D means the number of tenants under the tenancy. (Added 10 of 2024 s. 6)(8) For the purposes of subsection (5), if a qualifying tenancy is one under which any rents are paid by a person and the person’s spouse as co-tenants—(a) for determining the qualifying rental amount for the tenancy for a particular period, the amount calculated under subsection (6) is to be multiplied by 2;(b) for determining the DR basic deduction ceiling amount for the tenancy for a particular period, the amount calculated under subsection (7) is to be multiplied by 2; and (Amended 10 of 2024 s. 6)(c) (if applicable) for determining the DR additional deduction ceiling amount for the tenancy for a particular period, the amount calculated under subsection (7A) is to be multiplied by 2. (Added 10 of 2024 s. 6)(9) For the purposes of subsection (5), if—(a) the person is married;(b) either the person or the person’s spouse (but not both) makes an election under subsection (5A)(d); and(c) the conditions specified in subsection (5A)(a), (b) and (c) are met in relation to the person or spouse making the election,for determining the DR additional deduction ceiling amount concerned, the amount calculated under subsection (7A) is to be divided by 2. (Added 10 of 2024 s. 6) 26YA. Revocation of election under section 26Y(5A)(d) (1) If, when making a claim for a deduction allowable under section 26X, a person makes an election under section 26Y(5A)(d), that election may only be revoked by the person by written notice to the Commissioner within 6 months after the date on which the deduction is allowed to the person under section 26X.(2) If an election under section 26Y(5A)(d) is revoked under subsection (1)—(a) the election is to be regarded as not having been made; and(b) for the purposes of this Division and any additional assessment under section 60(1), section 26Y is to apply to determine the amount of deduction allowable under section 26X as if the claim were made without the election.(3) If a person revokes an election under subsection (1) after 6 years from the expiry of the year of assessment to which the election relates, an assessor may, within 2 years after the revocation, make an additional assessment of the tax payable in consequence of the revocation and for this purpose, section 60(1) applies to the additional assessment as if it were an assessment made under that section.(Added 10 of 2024 s. 7) 26Z. Claim of deduction by married persons (1) If the Commissioner has reason to believe that the total deduction under section 26X claimed by a person and the person’s spouse for a year of assessment, if allowed, would be contrary to section 26Y(3), the Commissioner may, for ensuring that the total deduction allowed to them would accord with section 26Y(3), allow an amount of deduction to each of them that is reasonable in the circumstances of the case.(2) If the Commissioner has exercised a power under subsection (1)—(a) the person may apply for an adjustment of the amount of deduction allowed to the person;(b) the person’s spouse may apply for an adjustment of the amount of deduction allowed to the spouse; or(c) both the person and the person’s spouse may apply for an adjustment of the amount of deduction allowed to each of them.(3) The application must—(a) be made to the Commissioner in writing; and(b) be made within 6 months after—(i) the date on which a deduction under section 26X is allowed to the person for the year of assessment;

or(ii) the date on which a deduction under that section is allowed to the person’s spouse for the year of assessment,whichever is the later.(4) On an application under subsection (2), the Commissioner may—(a) if—(i) the application relies on an agreement reached between the person and the person’s spouse regarding how the amount of deduction under section 26X is to be allowed to each of them for the year of assessment; and(ii) the Commissioner is satisfied that adjusting the amount of deduction that the application concerns (subject amount) in accordance with the agreement would result in a total deduction for the person and the person’s spouse that accords with section 26Y(3)—adjust the subject amount in accordance with the agreement; or(b) in any other case—exercise a power specified in subsection (6).(5) The Commissioner may also, on the Commissioner’s own initiative, exercise a power specified in subsection (6) if deductions have been allowed to a person and the person’s spouse contrary to section 26Y(3).(6) For the purposes of subsections (4)(b) and (5), the Commissioner may—(a) invite the person and the person’s spouse to reach an agreement that would result in a total deduction for them that accords with section 26Y(3); and(b) adjust the amount of deduction allowed to the person or the person’s spouse (or each of them) in consequence of—(i) such an agreement being reached by them within a reasonable time; or(ii) their failure to reach such an agreement within a reasonable time,as may be appropriate in the circumstances.(7) The Commissioner may decide the way in which an adjustment under subsection (4)(a) or (6)(b) is to be made, including by way of—(a) discharge or repayment of tax; or(b) making an assessment.(8) The Commissioner may make an adjustment under subsection (4)(a) or (6)(b) despite any time limit for making such an adjustment under this Ordinance. 26ZA. Deduction not allowable in certain circumstances (1) Despite section 26X, no deduction is allowable under that section to a person (taxpayer) in respect of any rents (specified rents) paid under a qualifying tenancy of any domestic premises (specified premises) in relation to a period (specified period) within a year of assessment if any one or more of the following conditions are met—(a) that the sum representing the specified rents is allowable as a deduction under any other provision of this Ordinance;(b) that a deduction under that section has been allowed to the taxpayer or the taxpayer’s spouse for the specified period in respect of any rents paid for any other domestic premises;(c) that—(i) during the whole of the specified period, a place of residence (whether or not being the specified premises) is provided to the taxpayer or the taxpayer’s spouse in the circumstances described in section 9(1)(b) or (c);(ii) any rents payable by the taxpayer or the taxpayer’s spouse for any domestic premises (whether or not being the specified premises) are paid in relation to the specified period in the circumstances described in section 9(1A)(a)(i); or(iii) any rents paid by the taxpayer or the taxpayer’s spouse for any domestic premises (whether or not being the specified premises) in relation to the specified period are refunded in the circumstances described in section 9(1A)(a)(ii);(d) that a person who receives the specified rents under the tenancy is an associate of the taxpayer or the taxpayer’s spouse;(e) that the taxpayer or the taxpayer’s spouse is, during the whole of the specified period, a legal and beneficial owner of any domestic premises;(f) that the taxpayer or the taxpayer’s spouse is during the whole of the specified period—(i) a tenant, under a tenancy held from the Hong Kong Housing Authority or the Hong Kong Housing Society, of a flat of the kind commonly known as public rental housing; or(ii) a person who is authorized under such a tenancy to reside with the tenant at the flat;(g) that the tenancy is prohibited—(i) by or pursuant to any law; or(ii) by a Government lease or an agreement for a Government lease (whichever is applicable) in respect of the specified premises;(h) that under the tenancy, an option or a right to purchase the specified premises, or a right of pre-emption in respect of the specified premises, is conferred on the taxpayer or the taxpayer’s spouse, or on both of them.(1A) Without limiting subsection (1), despite section 26X, a DR increased deduction is not allowable to a person in respect of any rents paid under a qualifying tenancy of any domestic premises in relation to a period within a year of assessment if an increased deduction has been allowed (whether in respect of the same dwelling or domestic premises or in respect of any other dwelling or domestic premises) to the person for an aggregate of 19 years of assessment (whether continuous or not). (Added 10 of 2024 s. 8)(1B) For the purposes of subsection (1A), if a person makes an election under section 26E(2A)(d) or 26Y(5A)(d) (subject election) for a year of assessment and, as a result of the subject election, an increased deduction is taken into account in that year of assessment in ascertaining—(a) subject to paragraphs (b) and (c)—the net chargeable income of the person or the person’s spouse;(b) where the person and the person’s spouse have made an election under section 10(2)—the aggregated net chargeable income of the person and the person’s spouse; or(c) where the person or the person’s spouse, or the person and the person’s spouse, have made an election under section 41—the amount of the assessment made under section 42A(1) in respect of the person or the person’s spouse, or in respect of the person and the person’s spouse,unless the subject election is subsequently regarded as not having been made under section 26E(6)(b), 26F(4)(b), 26YA(2)(a) or 26ZB(3)(b)(ii), the person is to be regarded as having been allowed the deduction for that year of assessment. (Added 10 of 2024 s. 8)(2) In this section— associate (相聯者), in relation to a person, means— (a) a relative of the person; (b) a partner of the person; (c) if a partner of the person is a natural person—a relative of that partner; (d) a partnership in which the person is a partner; (e) a corporation controlled by—(i) the person;(ii) a relative of the person;(iii) a partner of the person;(iv) if a partner of the person is a natural person—a relative of that partner; or(v) a partnership in which the person is a partner; or (f) a director or principal officer of the corporation mentioned in paragraph (e); control (控制), in relation to a corporation, means the power of a person to secure— (a) by means of the holding of shares or the possession of voting power in or in relation to the corporation or any other corporation; or (b) by virtue of any powers conferred by the articles of association or other document regulating the corporation or any other corporation, that the affairs of the corporation are conducted in accordance with the wishes of the person; DR increased deduction (住宅租金經提高的扣除) means a deduction allowable under section 26X, the amount of which is determined using both a DR basic deduction ceiling amount and a DR additional deduction ceiling amount; (Added 10 of 2024 s. 8)dwelling (住宅) has the meaning given by section 26E(9); (Added 10 of 2024 s. 8)HLI increased deduction (居貸利息經提高的扣除) has the meaning given by section 26E(9); (Added 10 of 2024 s. 8) increased deduction (經提高的扣除) means— (a) a DR increased deduction; or (b) an HLI increased deduction; (Added 10 of 2024 s. 8) parent (父母), in relation to a person, means a parent or parent of his or her spouse;Note—See the definition of parent or parent of his or her spouse in section 2(1). principal officer (主要職員), in relation to a corporation, means— (a) a person employed by the corporation who, either alone or jointly with one or more other persons, is responsible, under the immediate authority of the directors of the corporation, for the conduct of the business of the corporation; or (b) a person so employed who, under the immediate authority of a director of the corporation or a person to whom paragraph (a) applies, exercises managerial functions in respect of the corporation; relative (親屬), in relation to a person, means a spouse, parent, child or sibling; sibling (兄弟姊妹), in relation to a person, means— (a) a full or half blood sibling of the person or of the person’s spouse; (b) an adopted sibling of the person or of the person’s spouse; (c) a step sibling of the person or of the person’s spouse; (d) if the person or the person’s spouse is adopted—a natural child of an adoptive parent of the person or of the person’s spouse; or (e) if the person’s spouse is deceased—an individual who would have been the sibling of the person under paragraph (a), (b), (c) or (d) if the spouse had not died. (Amended 10 of 2024 s. 8) 26ZB. Refund of domestic rents paid (1) This section applies if any rents paid by a person under a qualifying tenancy of any domestic premises are refunded to the person.(2) The amount of rents paid under the tenancy is, for the purposes of this Division, taken to be reduced by the amount of the refund.(3) In addition, if the refund is made after a person has made a claim of deduction under section 26X in respect of the rents—(a) the person must notify the Commissioner in writing of the refund within 3 months after the date of refund; and(b) if the deduction has been allowed, then— (Amended 10 of 2024 s. 9)(i) despite any time limit for making an additional assessment under section 60, an assessor may, having regard to the reduction, make an additional assessment on the person under that section; and (ii) if—(A) when making the claim, the person made an election under section 26Y(5A)(d) to use both a DR basic deduction ceiling amount and a DR additional deduction ceiling amount to determine the amount of the deduction; and(B) as a result of the additional assessment mentioned in subparagraph (i), the deduction is disallowed in whole or to the extent that it relates to the DR additional deduction ceiling amount,the election is to be regarded as not having been made. (Amended 10 of 2024 s. 9) 26ZC. Exercise of Commissioner’s power The Commissioner may exercise a power under this Division in the way that the Commissioner, having regard only to the information then in the Commissioner’s possession, considers appropriate. Division 9 Assisted Reproductive Service Expenses (Division 9 added 2 of 2025 s. 3) 26ZD. Application This Division applies in relation to the year of assessment commencing on 1 April 2024 and to all subsequent years of assessment. 26ZE. Interpretation (1) In this Division—Cap. 561 (《第561章》) means the Human Reproductive Technology Ordinance (Cap. 561);code (守則) has the meaning given by section 2(1) of Cap. 561;gametes obtaining procedure (取得配子程序) means a procedure mentioned in paragraph (c) of the definition of reproductive technology procedure in section 2(1) of Cap. 561;qualifying AR service (合資格輔助生育服務)—see section 26ZF;qualifying AR service expenses (合資格輔助生育服務開支) means any expenses payable for receiving a qualifying AR service;recipient (接受對象), in relation to an RT procedure or service, means the person to whom the procedure or service is or is to be provided, and receive (接受) is to be construed accordingly;RT procedure (生殖科技程序) means a reproductive technology procedure as defined by section 2(1) of Cap. 561.(2) For the purposes of this Division, if—(a) Cap. 561 (as read together with the code) does not prohibit an RT procedure (other than a gametes obtaining procedure) to be provided to a person;(b) the person is the person or one of the persons mentioned in paragraph (a)(ii) of the definition of surrogate mother (in section 2(1) of Cap. 561) (commissioning person or persons) in so far as a surrogacy arrangement (as defined by that section) is concerned; and(c) a qualifying AR service is or is to be provided, pursuant to the arrangement, to the woman who is to be the surrogate mother (as defined by section 2(1) of Cap. 561) under the arrangement,the service is taken to be a service provided or to be provided to the commissioning person or persons, and is not a service provided or to be provided to the woman. 26ZF. Meaning of qualifying AR service (1) For the purposes of this Division, the following are qualifying AR services—(a) a service of providing either of the following RT procedures pursuant to an RT licence (including a medical service related to such a procedure)—(i) an RT procedure (other than a gametes obtaining procedure);(ii) a gametes obtaining procedure in relation to which either of the conditions specified in subsection (2) is met;(b) a service, in relation to which either of the conditions specified in subsection (2) is met, of the handling, storing or disposing of gametes or an embryo (used or intended to be used in connection with an RT procedure) pursuant to an RT licence.(2) The conditions are as follows—(a) that Cap. 561 (as read together with the code) does not prohibit an RT procedure (other than a gametes obtaining procedure) to be provided to the recipient of the service;(b) that the recipient of the service is a cancer patient, or any other patient, who may be rendered infertile as a result of chemotherapy, radiotherapy, surgery or other medical treatment.(3) For the purposes of subsection (1)(a), subject to subsection (4), a medical service is related to an RT procedure falling within subsection (1)(a)(i) or (ii) (qualifying procedure) if it is a medical service that—(a) is directly related to the qualifying procedure;(b) is provided—(i) before the qualifying procedure is to be provided, so long as—(A) Cap. 561 (as read together with the code) does not prohibit an RT procedure (other than a gametes obtaining procedure) to be provided to the recipient of the medical service; or(B) if the qualifying procedure is a gametes obtaining procedure and the condition specified in sub-subparagraph (A) is not met in relation to the medical service—the recipient of the medical service is a cancer patient, or any other patient, who may be rendered infertile as a result of chemotherapy, radiotherapy, surgery or other medical treatment; or(ii) during or after the qualifying procedure is provided; and(c) is provided, prescribed or referred by a registered medical practitioner who holds any clinical responsibility for the recipient of the qualifying procedure for the procedure.(4) For the purposes of subsection (3), if—(a) gametes are, or an embryo is, placed in the body of a woman pursuant to a qualifying procedure; and(b) subsequently, the establishment of (or the failure to establish) a clinical pregnancy of the woman is ascertained,a medical service provided to the woman after the ascertainment is not related to the qualifying procedure.(5) In this section—medical service (醫療服務) includes counselling service;registered medical practitioner (註冊醫生) has the meaning given by section 2(1) of the Medical Registration Ordinance (Cap. 161); RT licence (生殖科技牌照) means any of the following licences as defined by section 2(1) of the Human Reproductive Technology (Licensing) Regulation (Cap. 561 sub. leg. A)— (a) an AIH licence; (b) a storage licence; (c) a treatment licence; store (儲存), in relation to gametes or an embryo, means to store the gametes or embryo within the meaning of Cap. 561. 26ZG. Deduction for qualifying AR service expenses (1) Subject to subsection (2) and sections 26ZH and 26ZI, a deduction in respect of the qualifying AR service expenses paid during a year of assessment is allowable to a person for the year of assessment if the expenses—(a) were paid by—(i) the person;(ii) the person’s spouse, not being a spouse living apart from the person; or(iii) the person and the person’s spouse, not being a spouse living apart from the person; and(b) were paid for qualifying AR services received by—(i) the person;(ii) the person’s spouse; or(iii) the person and the person’s spouse.(2) The maximum deduction allowable to a person under subsection (1) for a year of assessment is the amount specified in Schedule 3H in relation to the year of assessment. 26ZH. Claim of deduction by married persons (1) This section applies in relation to a deduction under section 26ZG claimed by a married person or the person’s spouse or both of them in respect of the qualifying AR service expenses paid by either or both of them during a year of assessment.(2) The qualifying AR service expenses paid is allowable as a deduction under section 26ZG to—(a) the married person;(b) the person’s spouse; or(c) both the person and the person’s spouse,so long as the total deduction allowed to them under section 26ZG does not exceed the amount specified in Schedule 3H in relation to the year of assessment, and does not exceed the aggregate amount of the qualifying AR service expenses paid in the year of assessment.(3) Even if a person is married in more than one marriage during a year of assessment, the maximum deduction allowable to the person under section 26ZG for the year of assessment must not exceed the amount specified in Schedule 3H in relation to the year of assessment.(4) If the Commissioner has reason to believe that the total deduction under section 26ZG claimed by a person and the person’s spouse for a year of assessment, if allowed, would be contrary to subsection (2) or (3), the Commissioner may, for ensuring that the total deduction allowed to them would accord with that subsection, allow an amount of deduction to each of them that is reasonable in the circumstances of the case.(5) If the Commissioner has exercised a power under subsection (4)—(a) the person may apply for an adjustment of the amount of deduction allowed to the person;(b) the person’s spouse may apply for an adjustment of the amount of deduction allowed to the spouse; or(c) both the person and the person’s spouse may apply for an adjustment of the amount of deduction allowed to each of them.(6) The application must—(a) be made to the Commissioner in writing; and(b) be made within 6 months after—(i) the date on which a deduction under section 26ZG is allowed to the person for the year of assessment; or(ii) the date on which a deduction under that section is allowed to the person’s spouse for the year of assessment,whichever is the later.(7) On an application under subsection (5), the Commissioner may—(a) if—(i) the application relies on an agreement reached between the person and the person’s spouse regarding how the amount of deduction under section 26ZG is to be allowed to each of them for the year of assessment; and(ii) the Commissioner is satisfied that adjusting the amount of deduction that the application concerns (subject amount) in accordance with the agreement would result in a total deduction for the person and the person’s spouse that accords with subsections (2) and (3),adjust the subject amount in accordance with the agreement; or(b) in any other case—exercise a power specified in subsection (9).(8) The Commissioner may also, on the Commissioner’s own initiative, exercise a power specified in subsection (9) if deductions have been allowed to a person and the person’s spouse contrary to subsection (2) or (3).(9) For the purposes of subsections (7)(b) and (8), the Commissioner may—(a) invite the person and the person’s spouse to reach an agreement that would result in a total deduction for them that accords with subsections (2) and (3); and(b) adjust the amount of deduction allowed to the person or the person’s spouse (or each of them) in consequence of—(i) such an agreement being reached by them within a reasonable time; or(ii) their failure to reach such an agreement within a reasonable time,as may be appropriate in the circumstances.(10) The Commissioner may decide the way in which an adjustment under subsection (7)(a) or (9)(b) is to be made, including by way of—(a) discharge or repayment of tax; or(b) making an assessment.(11) The Commissioner may make an adjustment under subsection (7)(a) or (9)(b) despite any time limit for making such an adjustment under this Ordinance. 26ZI. Refund or reimbursement of qualifying AR service expenses paid (1) This section applies if any qualifying AR service expenses paid during a year of assessment are refunded or reimbursed.(2) The qualifying AR service expenses paid are taken to be reduced by the refunded amount or reimbursed amount.(3) In addition, if the refund or reimbursement is made after a person claims a deduction under section 26ZG in respect of the qualifying AR service expenses—(a) the person must notify the Commissioner in writing of the refund or reimbursement within 3 months after the date of refund or reimbursement; and(b) if the deduction has been allowed, then, despite any time limit for making an additional assessment under section 60, an assessor may, having regard to the reduction, make an additional assessment on the person under that section. 26ZJ. Exercise of Commissioner’s power The Commissioner may exercise a power under this Division in the way that the Commissioner, having regard only to the information then in the Commissioner’s possession, considers appropriate. Part 5 Allowances (Part 5 added 43 of 1989 s. 10) 27. Allowances, general provisions (1) This Part prescribes the allowances which shall be granted to persons chargeable to tax under Parts 3 and 7 and the circumstances in which such allowances are grantable.(2) Every person who claims an allowance under this Part shall make his claim in the specified form and an allowance shall be granted only if the claim contains such particulars and is supported by such proof as the Commissioner may require.(3) In this Part—adopted (領養) means adopted in any manner recognized by the laws of Hong Kong;allowance (免稅額) means an allowance granted under this Part;child (子女) means any child of a person chargeable to tax or of his or her spouse or former spouse whether or not born in wedlock and includes the adopted or step child of either or both of them;person (人) means a person chargeable to tax under Part 3 or, as the case may be, Part 7;prescribed amount (訂明款額) and prescribed percentage (訂明百分率) mean the amount and percentage specified in the second column of Schedule 4 in relation to the provisions of this Part specified in the first column of that Schedule. (Amended 48 of 1995 s. 6)(Amended E.R. 1 of 2012) 28. Basic allowance (1) The following allowance (basic allowance) shall be granted in any year of assessment—(a) an allowance of the prescribed amount;(b) (Repealed 31 of 1998 s. 13)(2) No person may be granted—(a) both a basic allowance and a married person’s allowance; or(b) a basic allowance where his or her spouse has claimed a married person’s allowance. 28A. Personal disability allowance An allowance of the prescribed amount is to be granted in any year of assessment to a person who is eligible to claim an allowance under the Government’s Disability Allowance Scheme in the year of assessment.(Added 20 of 2018 s. 3) 29. Married person’s allowance* (1) An allowance (married person’s allowance) is to be granted to a person in any year of assessment if—(a) the person is, at any time during the year of assessment, married; and(b) either of the following conditions is met—(i) the person’s spouse—(A) did not have assessable income in the year of assessment; and(B) has not made an election under section 41(1) for the year of assessment;(ii) the person and the spouse have made an election under section 10(2) for the year of assessment. (Replaced 32 of 2018 s. 6)(1A) A married person’s allowance is to be granted to a person and the person’s spouse in any year of assessment if—(a) their marriage subsists at any time during the year of assessment; and(b) they have jointly elected to be personally assessed under Part 7. (Added 32 of 2018 s. 6)(2) Where an election has been made under section 10(2) a married person’s allowance shall be granted to the person chargeable to salaries tax under section 10(3).(3) A married person’s allowance grantable under this section is—(a) an allowance of the prescribed amount;(b) (Repealed 31 of 1998 s. 14)(4) Where husband and wife are living apart a married person’s allowance shall only be granted where the spouse claiming the allowance is maintaining or supporting the other.(5) Where a married person’s allowance is granted in respect of a husband and wife living apart, the husband and wife shall be treated as not living apart for the purposes of Part 7.(6) Any claim to an allowance to which subsection (4) applies may be revoked by the claimant within the year of assessment in respect of which it was made or within 6 years after the expiration of that year.(Amended E.R. 1 of 2012) Editorial Note: * The amendments made by Part 2 of Ord. No. 32 of 2018 to this section apply in relation to all years of assessment commencing on or after 1 April 2018. (Please see 32 of 2018 s. 3) 30. Dependent parent allowance* (1AA) In this section, dependent parent allowance means an allowance granted under subsection (1) or (1A). (Added 8 of 2005 s. 3)(1) An allowance shall be granted in any year of assessment to a person—(a) if—(i) the person; or(ii) his or her spouse who is not living apart from that person,maintains a parent or a parent of his or her spouse in that year; and(b) if that parent—(i) was ordinarily resident in Hong Kong; and(ii) was—(A) aged 60 or more; or(B) under the age of 60 and was eligible to claim an allowance under the Government’s Disability Allowance Scheme,at any time in that year. (Replaced 8 of 2005 s. 3)(1A) An allowance shall be granted in any year of assessment to a person—(a) if—(i) the person; or(ii) his or her spouse who is not living apart from that person,maintains a parent or a parent of his or her spouse in that year; and(b) if that parent—(i) at any time in that year was ordinarily resident in Hong Kong;(ii) at any time in that year was aged 55 or more but was under the age of 60;(iii) did not attain the age of 60 in that year; and(iv) was, throughout that year, not eligible to claim an allowance under the Government’s Disability Allowance Scheme. (Added 8 of 2005 s. 3)(2) A dependent parent allowance may be granted in respect of each such parent who is so maintained. (3) A dependent parent allowance grantable in respect of a parent under subsection (1) is— (Amended 8 of 2005 s. 3) (a) an allowance of the prescribed amount; (b) an additional allowance of the prescribed amount if that parent resided, otherwise than for full valuable consideration, with the person who is eligible to claim the allowance under paragraph (a) for a year of assessment continuously throughout that year. (Amended 8 of 2005 s. 3)(3A) A dependent parent allowance grantable in respect of a parent under subsection (1A) is—(a) an allowance of the prescribed amount;(b) an additional allowance of the prescribed amount if that parent resided, otherwise than for full valuable consideration, with the person who is eligible to claim the allowance under paragraph (a) for a year of assessment continuously throughout that year. (Added 8 of 2005 s. 3)(4) For the purposes of this section—(a) a parent shall only be treated as being maintained by a person or his or her spouse if—(i) the parent resides, otherwise than for full valuable consideration, with that person and his or her spouse for a continuous period of not less than 6 months in the year of assessment; or (ii) the person or his or her spouse contributes not less than the prescribed amount in money towards the maintenance of that parent in the year of assessment; (b) (Repealed 31 of 1998 s. 15)(5) Where a deduction has been allowed to a person under section 26D for any year of assessment in respect of a parent or parent of his or her spouse, no person shall be granted a dependent parent allowance under this section for that year of assessment in respect of the same parent. (Added 31 of 1998 s. 15) Editorial Note: *The amendments made by s. 3 of 8 of 2005 to this section apply in relation to the year of assessment commencing on 1 April 2005 and to all subsequent years of assessment. (Please see 8 of 2005 s. 2) 30A. Dependent grandparent allowance* (1AA) In this section, dependent grandparent allowance means an allowance granted under subsection (1) or (1A). (Added 8 of 2005 s. 4)(1) An allowance shall be granted in any year of assessment to a person—(a) if—(i) the person; or(ii) his or her spouse who is not living apart from that person,maintains a grandparent or a grandparent of his or her spouse in that year; and(b) if that grandparent—(i) was ordinarily resident in Hong Kong; and(ii) was—(A) aged 60 or more; or(B) under the age of 60 and was eligible to claim an allowance under the Government’s Disability Allowance Scheme,at any time in that year. (Replaced 8 of 2005 s. 4)(1A) An allowance shall be granted in any year of assessment to a person—(a) if—(i) the person; or(ii) his or her spouse who is not living apart from that person,maintains a grandparent or a grandparent of his or her spouse in that year; and(b) if that grandparent—(i) at any time in that year was ordinarily resident in Hong Kong;(ii) at any time in that year was aged 55 or more but was under the age of 60;(iii) did not attain the age of 60 in that year; and(iv) was, throughout that year, not eligible to claim an allowance under the Government’s Disability Allowance Scheme. (Added 8 of 2005 s. 4)(2) A dependent grandparent allowance may be granted in respect of each such grandparent who is so maintained. (3) A dependent grandparent allowance grantable in respect of a grandparent under subsection (1) is— (Amended 8 of 2005 s. 4)(a) an allowance of the prescribed amount; (b) an additional allowance of the prescribed amount if that grandparent resided, otherwise than for full valuable consideration, with the person who is eligible to claim the allowance under paragraph (a) for a year of assessment continuously throughout that year. (Amended 8 of 2005 s. 4)(3A) A dependent grandparent allowance grantable in respect of a grandparent under subsection (1A) is—(a) an allowance of the prescribed amount;(b) an additional allowance of the prescribed amount if that grandparent resided, otherwise than for full valuable consideration, with the person who is eligible to claim the allowance under paragraph (a) for a year of assessment continuously throughout that year. (Added 8 of 2005 s. 4)(4) For the purposes of this section—(a) a grandparent shall only be treated as being maintained by a person or his or her spouse if—(i) the grandparent resides, otherwise than for full valuable consideration, with that person and his or her spouse for a continuous period of not less than 6 months in the year of assessment; or (ii) the person or his or her spouse contributes not less than the prescribed amount in money towards the maintenance of that grandparent in the year of assessment; (b) (Repealed 31 of 1998 s. 16)(5) Where a deduction has been allowed to a person under section 26D for any year of assessment in respect of a grandparent or grandparent of his or her spouse, no person shall be granted a dependent grandparent allowance under this section for that year of assessment in respect of the same grandparent. (Added 31 of 1998 s. 16)(Added 37 of 1994 s. 4) Editorial Note: *The amendments made by s. 4 of 8 of 2005 to this section apply in relation to the year of assessment commencing on 1 April 2005 and to all subsequent years of assessment. (Please see 8 of 2005 s. 2) 30B. Dependent brother or dependent sister allowance (1) An allowance (dependent brother or dependent sister allowance) shall be granted under this section in the prescribed amount in any year of assessment if a person or the spouse of the person, not being a spouse living apart from the person, maintains an unmarried brother or unmarried sister, or an unmarried brother or unmarried sister of the spouse of the person, in the year of assessment and the person so maintained at any time in the year of assessment was—(a) under the age of 18 years;(b) of or over the age of 18 years but under the age of 25 years and was receiving full time education at a university, college, school or other similar educational establishment; or(c) of or over the age of 18 years and was, by reason of physical or mental disability, incapacitated for work.(2) A dependent brother or dependent sister allowance may be granted for each brother or sister or brother or sister of the spouse maintained.(3) For the purposes of this section—(a) a brother or sister of the person or a brother or sister of the spouse of the person is only treated as maintained by the person or by the spouse of the person if, at any time during the year, the person or the spouse had sole or predominant care of the brother or sister or of the brother or sister of the spouse;(b) brother or sister or brother or sister of the spouse (兄弟姊妹或配偶的兄弟姊妹), in relation to a person, means—(i) a brother of full or half blood or sister of full or half blood of the person or the spouse of the person;(ii) an adopted brother or adopted sister of the person or the spouse;(iii) a step brother or step sister of the person or the spouse;(iv) if the person or the spouse is adopted—a natural child of an adoptive parent of the person or the spouse; or(v) if the spouse is deceased—a person who would have been the brother or sister of the spouse under subparagraph (i), (ii), (iii) or (iv) if the spouse had not died. (Replaced 6 of 2019 s. 11)(Added 24 of 1996 s. 8) 31. Child allowance* (1) An allowance (child allowance) shall be granted under this section in the prescribed amount in any year of assessment if the person had living and was maintaining at any time during the year of assessment an unmarried child who was—(a) under the age of 18;(b) of or over the age of 18 years but under the age of 25 years and was receiving full time education at a university, college, school or other similar educational establishment; or(c) of or over the age of 18 years and was, by reason of physical or mental disability, incapacitated for work.(1A) A child allowance granted in respect of a child under subsection (1) shall be increased in the year of assessment in which the child is born by the prescribed amount. (Added 10 of 2007 s. 4)(1B) In addition, a child allowance granted in respect of a child under subsection (1) is also to be increased by the prescribed amount in the year of assessment following the year of assessment in which the child is born. (Added 2 of 2026 s. 3)(2) Subject to subsection (3), where more than one person is entitled to claim a child allowance under this section in respect of the same child for the same year of assessment, the allowance due shall be apportioned on such basis as the Commissioner may decide having regard to the contributions made by each individual to the maintenance and education of the child during the year of assessment.(3) In the case of a husband and wife, not being a husband and wife living apart, chargeable to tax under Part 3 or 7— (Amended 32 of 2018 s. 7)(a) all child allowances grantable under this section shall be claimed by one spouse; and(b) the claim shall be made by such spouse as the spouses may nominate.(4) A nomination under subsection (3)(b) made in relation to any year of assessment shall not be revoked save with the consent of the Commissioner whose decision in the matter shall be final and not subject to objection or appeal.(5) The total of the child allowances granted to a person in respect of his or her children shall not exceed the prescribed amount.(Amended E.R. 1 of 2012) Editorial Note: * The amendment made by Part 2 of Ord. No. 32 of 2018 to this section applies in relation to all years of assessment commencing on or after 1 April 2018. (Please see 32 of 2018 s. 3) 31A. Disabled dependant allowance* (1) An allowance (disabled dependant allowance) of the prescribed amount shall be granted in any year of assessment to a person in respect of every dependant of his or hers who is eligible to claim an allowance under the Government’s Disability Allowance Scheme.(2) Where a child allowance in respect of a child who is eligible to claim an allowance under the Government’s Disability Allowance Scheme is apportioned under section 31(2) and granted to more than one person, the disabled dependant allowance in respect of the child grantable under this section shall be apportioned between the persons on the same basis of apportionment as that used under section 31(2) in relation to the child allowance.(3) In the case of a husband and wife, not being a husband and wife living apart, chargeable to tax under Part 3 or 7, all disabled dependant allowances grantable under this section in respect of their children shall be claimed by the spouse nominated under section 31(3). (Amended 32 of 2018 s. 8)(4) For the purposes of this section, dependant (受養人), in relation to a person, means— (a) a spouse in respect of whom the person is entitled to be granted an allowance under section 29 for the year of assessment; (b) a parent or a parent of his or her spouse in respect of whom the person is entitled to be granted a deduction under section 26D or an allowance under section 30 for the year of assessment; (Amended 31 of 1998 s. 17) (c) a grandparent or a grandparent of his or her spouse in respect of whom the person is entitled to be granted a deduction under section 26D or an allowance under section 30A for the year of assessment; (Amended 24 of 1996 s. 9; 31 of 1998 s. 17) (d) a child in respect of whom the person is entitled to be granted an allowance under section 31 for the year of assessment; or (Amended 24 of 1996 s. 9) (e) a brother or sister, or a brother or sister of the person’s spouse, for whom the person is entitled to be granted an allowance under section 30B for the year of assessment. (Added 24 of 1996 s. 9) (Added 48 of 1995 s. 7. Amended E.R. 1 of 2012) Editorial Note: * The amendment made by Part 2 of Ord. No. 32 of 2018 to this section applies in relation to all years of assessment commencing on or after 1 April 2018. (Please see 32 of 2018 s. 3) 32. Single parent allowance (1) An allowance (single parent allowance) of the prescribed amount shall be granted if at any time during the year of assessment the person had the sole or predominant care of a child in respect of whom the person was entitled during the year of assessment to be granted a child allowance.(2) A person shall not be entitled to claim single parent allowance—(a) if at any time during the year of assessment the person was married and not living apart from his or her spouse;(b) by reason only that the person made contributions to the maintenance and education of the child during the year of assessment; or(c) in respect of any 2nd or subsequent child.(3) Where 2 or more persons are entitled to claim single parent allowance in respect of the same child for the same year of assessment, the allowance due shall be apportioned on such basis as the Commissioner may decide—(a) having regard to the respective periods for which each person had the sole or predominant care of the child during the year of assessment; or(b) if, in the opinion of the Commissioner, those periods are uncertain, on such basis as the Commissioner may decide as being just. 33. Provisions supplementary to sections 30, 30A, 30B, 31 and 31A (1) Subject to sections 31(2) and 31A(2), a dependent parent allowance, a dependent grandparent allowance, a dependent brother or dependent sister allowance, a child allowance or a disabled dependant allowance shall not be given to more than one person in any year of assessment in respect of the same parent, grandparent, brother, sister or child. (Amended 48 of 1995 s. 8)(1A) In any year of assessment—(a) a dependent parent allowance and a dependent grandparent allowance; or(b) a dependent brother or dependent sister allowance and a child allowance,shall not both be given for the same dependent person. (Replaced 24 of 1996 s. 10)(2) Subject to sections 31(2) and (3) and 31A(2) and (3), where the Commissioner has reason to believe that 2 or more persons are eligible to claim such an allowance in respect of the same parent, grandparent, brother, sister or child for the same year of assessment, the Commissioner shall not consider any claim until he is satisfied that the claimants have agreed which of them shall be entitled to claim in that year. (Amended 48 of 1995 s. 8)(3) Where a dependent parent allowance, a dependent grandparent allowance, a dependent brother or dependent sister allowance, a child allowance or a disabled dependant allowance has been granted— (Amended 48 of 1995 s. 8)(a) otherwise than under section 31(2) or 31A(2) to 2 or more persons in respect of the same parent, grandparent, brother, sister or child; or (Amended 48 of 1995 s. 8)(b) to both a husband and wife, contrary to section 31(3) or 31A(3); or (Amended 48 of 1995 s. 8)(c) to a person and, within 6 months of such allowance being granted, another person appears to the Commissioner to be eligible to be granted that allowance in respect of the same parent, grandparent, brother, sister or child for the same year of assessment,the Commissioner shall invite the persons to whom the allowance has been granted and any other individual who appears to the Commissioner to be eligible to be granted the allowance to agree which of them is to have the allowance (being an agreement consistent with the provisions of this Part) and the Commissioner may in consequence of such agreement, or if the individuals do not so agree within a reasonable time, within the period specified in section 60, raise additional assessments under that section.(3A) Where the Commissioner has reason to believe that there are persons eligible to claim, respectively—(a) a dependent parent allowance and a dependent grandparent allowance; or(b) a dependent brother or dependent sister allowance and a child allowance,in respect of the same dependent person for the same year of assessment, the Commissioner shall not consider any claim until he is satisfied that the claimants have agreed which of the allowances shall be claimed in that year. (Added 37 of 1994 s. 5)(3B) Where—(a) a dependent parent allowance and a dependent grandparent allowance; or(b) a dependent brother or dependent sister allowance and a child allowance,have both been granted in respect of the same dependent person contrary to subsection (1A), the Commissioner shall invite the persons to whom the allowances have been granted to agree which of the allowances is to be given (being an agreement consistent with the provisions of this Part) and the Commissioner may in consequence of such agreement, or if the individuals do not so agree within a reasonable time, within the period specified in section 60, raise additional assessments under that section. (Added 37 of 1994 s. 5)(3C) Where—(a) a dependent parent allowance or a dependent grandparent allowance has been granted for a dependent person; or(b) a dependent brother or dependent sister allowance or a child allowance has been granted for a dependent person,and, within 6 months of the allowance being granted, another person appears to the Commissioner to be eligible to be granted the other allowance for the same dependent person for the same year of assessment, the Commissioner is to invite the person to whom the allowance has been granted and any other person who appears to the Commissioner to be eligible to be granted the other allowance for the same dependent person to agree which of the allowances is to be granted (being an agreement consistent with this Part). (Replaced 24 of 1996 s. 10)(3D) The Commissioner may, in consequence of an agreement under subsection (3C), or, if the persons do not agree under that subsection within a reasonable time, within the time specified in section 60, raise additional assessments under section 60. (Added 24 of 1996 s. 10)(4) The Commissioner shall exercise his powers under this section in such manner as may appear to him to be just having regard to such information only as may be in his possession at the time when he exercises those powers.(Amended 37 of 1994 s. 5; 24 of 1996 s. 10) Part 6 Depreciation, etc. 33A. Annual allowances, commercial buildings and structures (1) Where any person is, at the end of the basis period for any year of assessment, entitled to an interest in a building or structure which is a commercial building or structure and where that interest is the relevant interest in relation to the capital expenditure incurred on the construction of that building or structure, an allowance for depreciation by wear and tear of that building or structure, to be known as an “annual allowance”, of an amount equal to, subject to subsections (2) and (2A), one-twenty-fifth of the expenditure, is to be made to the person for that year of assessment. (Amended 12 of 2004 s. 9; 34 of 2024 s. 4)*(2) Where the interest in the building or structure mentioned in subsection (1) is sold to the person mentioned in that subsection in the basis period for a year of assessment before the year of assessment beginning on 1 April 2024 (pre-2024 basis period), and where the building or structure has been used at any time before the sale, whether as a commercial building or structure or otherwise, the annual allowance, in the years of assessment the basis periods for which end after the time of the sale, is to be computed by reference to the residue of expenditure immediately after the sale and is to be the fraction of that residue of expenditure the numerator of which is 1 and the denominator of which is the number of years of assessment comprised in the period which— (Amended 12 of 2004 s. 9; 34 of 2024 s. 4)(a) begins with the year of assessment in the basis period for which the sale takes place; and (Replaced 12 of 2004 s. 9)(b) ends with the year of assessment which is—(i) in the case of a building or structure to which subsection (4) applies, the 25th year after the year of assessment commencing on 1 April 1998; (Amended 12 of 2004 s. 9)(ii) in any other case, the 25th year after the year of assessment in which the building or structure was first used,and so on for any subsequent sale that takes place in a pre-2024 basis period. (Amended 34 of 2024 s. 4)(2A) If—(a) the interest in the building or structure mentioned in subsection (1) is sold to the person mentioned in that subsection in the basis period for a year of assessment beginning on or after 1 April 2024; and(b) the building or structure has been used at any time before the sale, whether as a commercial building or structure or otherwise,then the annual allowance, in any year of assessment the basis period for which ends after the time of the sale, is to be an amount equal to 4% of the residue of expenditure immediately after the sale, and so on for any subsequent sale. (Added 34 of 2024 s. 4)(3) Notwithstanding anything in the preceding provisions of this section, in no case shall the amount of an annual allowance for any year of assessment in respect of any expenditure exceed such amount as, apart from the writing off falling to be made by reason of the making of that allowance, would be the residue of expenditure at the end of the basis period for that year of assessment.(4) For the purposes of this section, where immediately prior to the commencement# of the Inland Revenue (Amendment) (No. 2) Ordinance 1998 (32 of 1998), a person was entitled to an interest in a building or structure which is a commercial building or structure and where that interest is the relevant interest in relation to the capital expenditure incurred on the construction of the building or structure— (Amended 12 of 2004 s.

9)(a) the capital expenditure incurred on the construction of the building or structure shall be deemed to have been reduced by the aggregate of the amount of the rebuilding allowances that would have been made to the person under section 36 in respect of that building or structure in all prior years of assessment if at all times during the period of the person’s entitlement to the relevant interest it had been used for the purposes of producing profits chargeable to tax under Part 4; and(b) the year of assessment commencing on 1 April 1998 shall be deemed to be the year of assessment in which the building or structure was first used.(Added 32 of 1998 s. 18. Amended E.R. 1 of 2012) Editorial Note: * The amendments made by 12 of 2004 to this subsection apply in relation to the year of assessment 2004/05 and to all subsequent years of assessment. (Please see 12 of 2004 s. 2(3)) # Commencement date: 17 April 1998. 33B. (Repealed 12 of 2004 s. 10)* Editorial Note: * This section was repealed by 12 of 2004. The repeal applies in relation to the year of assessment 2004/05 and to all subsequent years of assessment. (Please see 12 of 2004 s. 2(3)) 34. Initial and annual allowances, industrial buildings and structures (1) Where a person incurs capital expenditure on the construction of a building or structure which is to be an industrial building or structure occupied for the purposes of a trade there shall be made to the person who incurred the expenditure for the year of assessment in the basis period for which the expenditure was incurred an allowance to be known as an “initial allowance” equal to one-fifth thereof: (Amended 30 of 1950 Schedule; 35 of 1965 s. 17) Provided that— (a) no initial allowance shall be made for the 8 successive years of assessment commencing on 1 April in each of the years 1957 to 1964; (b) where any initial allowance has been made in relation to capital expenditure on a building or structure under this subsection before such building or structure comes to be used and when it first comes to be used it is not an industrial building or structure, such allowance shall be disallowed and such additional assessments as may be necessary consequent thereon shall be made. (Replaced 35 of 1965 s. 17) (2) (a) Where any person is, at the end of the basis period for any year of assessment, entitled to an interest in a building or structure which is an industrial building or structure and where that interest is the relevant interest in relation to the capital expenditure incurred on the construction of that building or structure, an allowance for depreciation by wear and tear, to be known as an “annual allowance”, of an amount equal to, subject to paragraphs (b), (ba) and (bb), one-twenty-fifth of that expenditure, is to be made to him for that year of assessment. (Amended 36 of 1955 s. 41; 35 of 1965 s. 17)*(b) Where the interest in the building or structure mentioned in paragraph (a) is sold to the person mentioned in that paragraph in the basis period for a year of assessment before the year of assessment beginning on 1 April 2024 (pre-2024 basis period), and where the building or structure has been used at any time before the sale, whether as an industrial building or structure or otherwise, the annual allowance, in the years of assessment the basis periods for which end after the time of that sale, is to be computed by reference to the residue of expenditure immediately after the sale and is to be the fraction of the said residue the numerator of which is 2, where the building or structure was first used before the commencement of the basis period for the year of assessment commencing on 1 April 1965 (1965 basis period), and one, where the building or structure was first used on or after the commencement of the 1965 basis period, and the denominator of which is the number of years of assessment comprised in the period which— (Amended 12 of 2004 s. 11; 34 of 2024 s. 5)#(i) begins with the year of assessment in the basis period for which the sale takes place; and (Replaced 12 of 2004 s. 11)(ii) ends with the capped year, and so on for any subsequent sale that takes place in a pre-2024 basis period. (Replaced 35 of 1965 s. 17)(ba) If—(i) the interest in the building or structure mentioned in paragraph (a) is sold to the person mentioned in that paragraph in the basis period for a year of assessment (sale year)—(A) after the capped year; and(B) before the year of assessment beginning on 1 April 2024 (2024/25 year);(ii) the building or structure has been used at any time before the sale, whether as an industrial building or structure or otherwise; and(iii) the residue of expenditure immediately after the sale is not 0, but no allowance has ever been made under paragraph (a) (as modified by paragraph (b)) for the sale year and all subsequent years of assessment up to and including the year of assessment beginning on 1 April 2023 because at the time of the sale—(A) where the building or structure was first used before the commencement of the 1965 basis period—50 or more years of assessment have passed after the year of assessment in which the building or structure was first used; or(B) where the building or structure was first used on or after the commencement of the 1965 basis period—25 or more years of assessment have passed after the year of assessment in which the building or structure was first used,then despite paragraph (b), the annual allowance, in the 2024/25 year and any year of assessment after that, is to be an amount equal to 4% of the residue of expenditure. (Added 34 of 2024 s. 5)(bb) If—(i) the interest in the building or structure mentioned in paragraph (a) is sold to the person mentioned in that paragraph in the basis period for a year of assessment beginning on or after 1 April 2024; and(ii) the building or structure has been used at any time before the sale, whether as an industrial building or structure or otherwise,then the annual allowance, in any year of assessment the basis period for which ends after the time of the sale, is to be an amount equal to 4% of the residue of expenditure immediately after the sale, and so on for any subsequent sale. (Added 34 of 2024 s. 5)(c) Notwithstanding anything in the preceding provisions of this section, in no case shall the amount of an annual allowance for any year of assessment in respect of any expenditure exceed such amount as, apart from the writing off falling to be made by reason of the making of that allowance, would be the residue of expenditure at the end of the basis period for that year of assessment. (Amended 12 of 2004 s. 11; 34 of 2024 s. 5)(3) In this section— capped year (上限年度), in relation to a building or structure, means— (a) if the building or structure was first used before the commencement of the 1965 basis period—the 50th year of assessment after the year of assessment in which the building or structure was first used; or (b) if the building or structure was first used on or after the commencement of the 1965 basis period—the 25th year of assessment after the year of assessment in which the building or structure was first used. (Added 34 of 2024 s. 5) Editorial Note: * The amendment made by 12 of 2004 to this paragraph applies in relation to the year of assessment 2004/05 and to all subsequent years of assessment. (Please see 12 of 2004 s. 2(3)) # Section 34(2)(b)(i) applies in relation to the year of assessment 2004/05 and to all subsequent years of assessment. (Please see 12 of 2004 s. 2(3)) 35. Balancing allowances and charges, buildings and structures* (1) Where—(a) any of the following events occurs in relation to a building or structure—(i) the relevant interest in the building or structure is sold;(ii) the relevant interest in the building or structure, being a leasehold interest, comes to an end otherwise than on the person entitled thereto acquiring the interest which is reversionary thereon; or(iii) the building or structure is demolished or destroyed or, without being demolished or destroyed, ceases altogether to be used; and (b) the building or structure has been a commercial building or structure or an industrial building or structure at any time before the occurrence of such event, an allowance, to be known as a “balancing allowance”, or a charge, to be known as a “balancing charge”, shall, in the circumstances mentioned in this section, be made to or, as the case may be, on the person entitled to the relevant interest in the building or structure immediately before the occurrence of such event for the year of assessment in the basis period for which such event occurs.(2) (a) Where—(i) there are no sale, insurance, salvage or compensation moneys arising in respect of the occurrence of an event referred to in subsection (1)(a); or(ii) the residue of expenditure immediately before the occurrence of such event exceeds those moneys,a balancing allowance shall be made and the amount thereof shall be the amount of—(A) in the case of subparagraph (i), the residue of expenditure; or(B) in the case of subparagraph (ii), the excess of the residue of expenditure over those moneys.(b) Notwithstanding anything in this section, a balancing allowance shall not be made to a person where—(i) an event referred to in subsection (1)(a) occurs in relation to a building or structure and the building or structure was not a commercial building or structure or an industrial building or structure immediately before the occurrence of such event; or(ii) a commercial building or structure or an industrial building or structure is demolished for purposes unconnected with, or not in the ordinary course of conduct of, the trade, profession or business for the purposes of which the building or structure was used before the demolition in circumstances qualifying for annual allowances under section 33A or 34(2), as the case may be.(3) (a) Where the sale, insurance, salvage or compensation moneys arising in respect of the occurrence of an event referred to in subsection (1)(a) exceed the residue of expenditure immediately before the occurrence of such event, a balancing charge shall be made and the amount on which it is made shall be an amount equal to the excess of those moneys over the residue of expenditure.(b) Notwithstanding anything in paragraph (a), in no case shall the amount on which a balancing charge is made on a person exceed the aggregate of the allowances, if any, made to him under sections 33A and 34 in respect of the expenditure in question.(Replaced 12 of 2004 s. 12) Editorial Note: * Section 35 applies in relation to the year of assessment 2004/05 and to all subsequent years of assessment. (Please see 12 of 2004 s. 2(3)) 35A. Special provisions on termination of leasehold interest Where, on the termination of a leasehold interest—(a) a lessee of any building or structure remains in possession thereof with the consent of the lessor without a new lease being granted to him, the leasehold interest shall be deemed for the purposes of this Part to continue so long as he so remains in possession;(b) a new lease is granted to the lessee either by way of regrant or in pursuance of an option available to him under the terms of the first lease, this Part shall have effect as if the second lease were a continuation of the first lease.(Added 2 of 1971 s. 27) 35B. Buildings and structures bought unused Where capital expenditure is incurred on the construction of a building or structure and, before that building or structure is used, the relevant interest therein is sold—(a) the expenditure actually incurred on the construction thereof shall be left out of account for the purposes of this Part and any initial allowance made under section 34 shall be disallowed and such additional assessments as may be necessary consequent thereon shall be made; but(b) (i) in a case where the person who sells that interest incurred that expenditure and made that sale in the course of a trade which consists, in whole or part, in the construction or development of buildings or structures for the purpose of sale, the person who buys that interest shall be deemed for those purposes to have incurred, on the date when the purchase price becomes payable, capital expenditure on the construction thereof equal to the net price paid by him for that interest; and(ii) in any other case, the person who buys that interest shall be deemed for those purposes to have incurred, on the date when the purchase price becomes payable, capital expenditure on the construction thereof equal to the expenditure actually incurred on the construction of the building or structure or to the net price paid by him for that interest, whichever is the less: (Replaced 29 of 1982 s. 7)Provided that—(a) where in a case to which paragraph (b)(i) applies the relevant interest in the building or structure is sold more than once before the building or structure is used, only the person who buys that interest on the occasion of the last of those sales shall be deemed to have incurred capital expenditure on the construction of the building or structure and that capital expenditure shall be equal to the net price paid on the first sale or the net price paid by him, whichever is the less;(b) where in a case to which paragraph (b)(ii) applies the relevant interest in the building or structure is sold more than once before the building or structure is used, that paragraph shall have effect only in relation to the last of those sales. (Replaced 29 of 1982 s. 7)(Added 2 of 1971 s. 27) 36. Rebuilding allowance for a commercial building or structure up to and including the year of assessment commencing on 1 April 1997 (1) Subject to subsection (2), where at the end of the basis period for any year of assessment a person is entitled to an interest in a commercial building or structure and where that interest is the relevant interest in relation to the capital expenditure incurred on the construction of that building or structure, an allowance to be known as a “rebuilding allowance” equal to 2% of the capital expenditure incurred on the construction of such building or structure shall be made to him for that year of assessment.(2) No allowance shall be made to any person under subsection (1) for a year of assessment if the basis period for that year of assessment is subsequent to the basis period for the year of assessment commencing on 1 April 1997. (Added 32 of 1998 s. 20)(Replaced 36 of 1955 s. 42. Amended 26 of 1969 s. 18; 30 of 1990 s. 3; 32 of 1998 s. 20) 36A. Application of provisions to machinery or plant (1) Except where otherwise provided, in relation to the initial and annual allowances on machinery or plant—(a) sections 37, 37A, 38 and 39 shall apply to the years of assessment up to and including the year of assessment commencing on 1 April 1979; and(b) sections 39B, 39C and 39D shall apply to the year of assessment commencing on 1 April 1980 and to subsequent years of assessment.(2) Where in relation to any machinery or plant the Commissioner is satisfied that in respect of any year of assessment commencing on or after 1 April 1980 the application of any of the provisions of the sections referred to in subsection (1)(b) is impracticable or inequitable, he may direct that the provisions of the sections referred to in subsection (1)(a) shall apply to the extent and for the duration specified in the direction.(3) Where under subsection (2) the Commissioner directs that the provisions of section 37 shall apply to any machinery or plant in respect of—(a) the year of assessment commencing on 1 April 1980, the initial allowance shall be equal to 35% of the expenditure referred to in subsection (1) of that section;(b) any year of assessment commencing on or after 1 April 1981, the initial allowance shall be equal to 55% of the expenditure referred to in subsection (1) of that section. (Replaced 29 of 1982 s. 8) (c) any year of assessment commencing on or after 1 April 1989, the initial allowance shall be equal to 60% of the expenditure referred to in subsection (1) of that section. (Added 56 of 1993 s. 17) (Added 63 of 1980 s. 2) 37. Initial and annual allowances, machinery or plant (1) Where a person carrying on a trade, profession or business incurs capital expenditure on the provision of machinery or plant for the purposes of producing profits chargeable to tax under Part 4 then, except where such expenditure is expenditure of a kind described in section 6(1)(c) of Schedule 45 or section 16G, there shall be made to him, for the year of assessment in the basis period for which the expenditure is incurred, an allowance, to be known as an “initial allowance”. (Amended 30 of 1950 Schedule; 35 of 1965 s. 19; 26 of 1969 s. 19; 23 of 1974 s. 2; 32 of 1998 s. 21; 29 of 2018 s. 8)(1A) For the purposes of subsection (1), the initial allowance shall be—(a) in respect of a year of assessment up to and including the year of assessment commencing on 1 April 1973, equal to one-fifth of the expenditure referred to in subsection (1); and (b) in respect of the year of assessment commencing on 1 April 1974 and all subsequent years of assessment up to and including the year of assessment commencing on 1 April 1979, equal to one-quarter of such expenditure. (Added 23 of 1974 s. 2. Amended 32 of 1981 s. 4)(2) Where at the end of the basis period for any year of assessment a person owns and has in use machinery or plant for the purposes of producing profits chargeable to tax under Part 4 there shall be made to him in respect of that year of assessment an allowance to be known “annual allowance” for depreciation by wear and tear of those assets. The allowance shall be calculated at the rates prescribed by the Board of Inland Revenue and shall be computed on the reducing value of the asset, which shall be the cost of the asset reduced by—(a) any initial allowance computed in accordance with the provisions of this section; and(b) the annual allowances computed under the provisions of this section: (Amended 56 of 1993 s. 18)Provided that—(a) (Repealed 32 of 1998 s. 21)(b) the Commissioner may in his discretion allow a higher rate than that prescribed by the Board of Inland Revenue. (Amended 16 of 1951 s. 7; 35 of 1965 s. 19; 26 of 1969 s. 19)(2A) For the purposes of subsection (2), in any case where machinery or plant is owned and used by a person for any period immediately before he uses it for the purposes of producing profits chargeable to tax under Part 4, cost of the asset (資產成本) means the sum computed by deducting from the actual cost the notional amount of the annual allowances which would have been made under subsection (2) to the owner if since acquiring the asset he had used it for the purpose of producing profits chargeable to tax under Part 4. (Added 26 of 1969 s. 19)(2B) Subsection (2C) applies if an aircraft was owned and used by a corporation for carrying out a qualifying aircraft leasing activity in respect of which section 14H(1) applies before the corporation uses it in another trade, profession or business to produce profits chargeable to tax under Part 4. (Added 9 of 2017 s. 9)(2C) For the purposes of subsection (2), the cost of the asset, in relation to the aircraft, is the sum computed by deducting from the actual cost the notional amount of annual allowances that would have been made under that subsection to the corporation if such annual allowances had been available to the corporation since it acquired the aircraft. (Added 9 of 2017 s. 9)(2D) In subsections (2B) and (2C)—aircraft (飛機) has the meaning given by section 14G(1);qualifying aircraft leasing activity (合資格飛機租賃活動) has the meaning given by section 14G(6). (Added 9 of 2017 s. 9)(2E) Subsection (2F) applies if a ship was owned and used by a corporation for carrying out a qualifying ship leasing activity in respect of which section 14P(1) applies before the corporation uses it in another trade, profession or business to produce profits chargeable to tax under Part 4. (Added 5 of 2020 s. 10)(2F) For the purposes of subsection (2), the cost of the asset, in relation to the ship, is the sum computed by deducting from the actual cost the notional amount of annual allowances that would have been made under that subsection to the corporation if such annual allowances had been available to the corporation since it acquired the ship. (Added 5 of 2020 s. 10)(2G) In subsections (2E) and (2F)—qualifying ship leasing activity (合資格船舶租賃活動) has the meaning given by section 14O(5);ship (船舶) has the meaning given by section 14O(1). (Added 5 of 2020 s. 10)(3) Nothing in subsection (2) shall apply in respect of any machinery or plant owned and used by a person for the purposes of the person’s trade, profession or business where the machinery or plant represents expenditure or expenditures of a capital nature which have been allowed under section 14IC, 16B or 16G as a deduction or deductions in ascertaining the profits from such trade, profession or business in respect of which such person is chargeable to tax under Part 4 for any year of assessment. (Added 35 of 1965 s. 19. Amended 32 of 1998 s. 21; 29 of 2018 s. 8; 5 of 2024 s. 14)(4) If a person succeeds to any trade, profession or business which immediately before the succession—(a) was carried on by another person; and(b) made use of machinery or plant for the purpose of producing profits chargeable to tax under Part 4,and, immediately after the succession, such machinery or plant, without being sold to the successor, is in use in that trade, profession or business for the same purpose, the reduced value of such machinery or plant shall, for the purpose of computing annual allowances under subsection (2), be taken to be the reduced value thereof still unallowed to that other person as at the time of the succession. (Added 2 of 1971 s. 28)(5) Notwithstanding subsection (4), no initial allowance shall be made under this Part by virtue of subsection (4). (Added 2 of 1971 s. 28)(Amended E.R. 1 of 2012) 37A. Initial and annual allowances in respect of machinery and plant acquired under hire purchase agreement (1) Where a person carrying on a trade, profession or business incurs capital expenditure under a hire purchase agreement on the provision of machinery or plant for the purposes of producing profits chargeable to tax under Part 4 then, except where such expenditure is expenditure of a kind described in section 6(1)(c) of Schedule 45 or section 14IC, there shall be made to him for each year of assessment in the basis period for which he has made an instalment payment under such agreement, an initial allowance. (Amended 35 of 1965 s. 20; 26 of 1969 s. 20; 23 of 1974 s. 3; 29 of 2018 s. 9; 5 of 2024 s. 15)(1A) For the purposes of subsection (1), the initial allowance shall be—(a) in respect of a year of assessment up to and including the year of assessment commencing on 1 April 1973, equal to one-fifth of the capital portion only of the instalment payment referred to in subsection (1);(b) in respect of the year of assessment commencing on 1 April 1974 and all subsequent years of assessment up to and including the year of assessment commencing on 1 April 1979, equal to one-quarter of the capital portion only of such payment;(c) in respect of the year of assessment commencing on 1 April 1980 equal to 35% of the capital portion only of such payment; and (Replaced 29 of 1982 s. 9) (d) in respect of the year of assessment commencing on 1 April 1981 and all subsequent years of assessment up to and including the year of assessment commencing on 1 April 1988, equal to 55% of the capital portion only of such payment. (Added 29 of 1982 s. 9. Amended 17 of 1989 s. 8)(e) in respect of any year of assessment commencing on or after 1 April 1989, equal to 60% of the capital portion only of such payment. (Added 17 of 1989 s. 8)(2) Where at the end of the basis period for any year of assessment a person has in use for the purposes of producing profits chargeable to tax under Part 4, machinery or plant acquired by him under a hire purchase agreement there shall be made to him in respect of that year of assessment an annual allowance for depreciation by wear and tear on such machinery or plant. (Amended 26 of 1969 s. 20)(3) An annual allowance under this section shall be calculated at rates prescribed by the Board of Inland Revenue and shall be computed on the reducing value of such machinery or plant which shall be the full cost thereof, excluding any interest which may be included in such cost under the terms of the agreement and reduced by any initial or previous annual allowances computed under this section: (Amended 35 of 1965 s. 20) Provided that the Commissioner may in his discretion allow a higher rate than that prescribed by the Board of Inland Revenue. *(4) Nothing in subsection (2) shall apply in respect of any machinery or plant used by a person for the purposes of the person’s trade, profession or business where the machinery or plant represents expenditure or expenditures of a capital nature which have been allowed under section 16B as a deduction or deductions in ascertaining the profits from such trade, profession or business in respect of which such person is chargeable to tax under Part 4 for any year of assessment. (Added 35 of 1965 s. 20. Amended 32 of 1998 s. 22; 9 of 2004 s. 4; 29 of 2018 s. 9)(Added 36 of 1955 s. 43. Amended E.R. 1 of 2012) Editorial Note: * The amendment made to this section 37A(4) by 9 of 2004 applies in relation to the year of assessment commencing on 1 April 2004 and to all subsequent years of assessment. (Please see 9 of 2004 s. 1(2)) 38. Balancing allowances and charges, machinery or plant (1) Where any of the following events occurs in the case of any machinery or plant in respect of which an initial allowance or an annual allowance has been made for any year of assessment to a person carrying on a trade, profession or business, that is to say, either— (Amended 30 of 1950 Schedule)(a) the machinery or plant is sold, whether while still in use or not; or(b) the machinery or plant is destroyed; or(c) the machinery or plant is put out of use as being worn out or obsolete or otherwise useless or no longer required,and the event in question occurs either whilst the person is carrying on his trade, profession or business or at the time when he ceases so to do, an allowance or charge, to be known as a “balancing allowance” or a “balancing charge”, shall in the circumstances mentioned in this section, be made to or, as the case may be, on that person for the year of assessment in his basis period for which that event occurs. (Amended 36 of 1955 s. 44)(2) Where there are no sale, insurance, salvage or compensation moneys or where the amount of the capital expenditure of the person in question on the provision of the plant or machinery still unallowed as at the time of the event exceeds those moneys, a balancing allowance shall be made, and the amount thereof shall be the amount of the expenditure still unallowed as aforesaid or, as the case may be, the excess thereof over the said moneys; but in a case where an annual allowance has been computed on the cost of the asset as determined in accordance with section 37(2A), (2C) or (2F), the cost of the asset as computed in accordance with that section shall be deemed to be the capital expenditure for the purposes of this subsection and in a case where an annual allowance has been computed in accordance with section 37(4), the reduced value used for the purpose of that section shall be deemed to be the capital expenditure for the purposes of this subsection. (Amended 26 of 1969 s. 21; 2 of 1971 s. 29; 9 of 2017 s. 10; 5 of 2020 s. 11)(3) If the sale, insurance, salvage or compensation moneys exceed the amount, if any, of the said expenditure still unallowed as at the time of the event, a balancing charge shall be made, and the amount on which it is made shall be an amount equal to the excess or, where the said amount still unallowed is nil, to the said moneys.(4) Where by reason of a person ceasing to carry on his trade, profession or business, machinery or plant in respect of which an initial or an annual allowance has been made is put out of use, such person shall be deemed to have received immediately prior to such cessation, sale moneys for such machinery or plant of such an amount as the Commissioner may consider it would have realized had it been sold in the open market at the time of cessation:Provided that if such person sells such machinery or plant within 12 months of the date of cessation he may claim the adjustment of any balancing allowance or charge which may have been made to or on him as if such sale had taken place immediately prior to the date of cessation and notwithstanding the provisions of section 70 an assessor shall make any necessary correction to any assessment. (Added 36 of 1955 s. 44. Amended 35 of 1965 s. 21)(5) Notwithstanding anything contained in this section, in no case shall the amount on which a balancing charge is made on a person exceed the aggregate of the following amounts, that is to say— (Amended 36 of 1955 s. 44)(a) the amount of any initial allowance made to—(i) the person; or(ii) if the person is the successor under section 37(4)—the person and that other person referred to in that section,in respect of the expenditure in question; (Replaced 18 of 2021 s. 16)(b) the amount of any annual allowance made to—(i) the person; or(ii) if the person is the successor under section 37(4)—the person and that other person referred to in that section,in respect of the expenditure in question, including any allowance computed under paragraph (b) of the proviso to section 37(2) at a rate higher than that prescribed by the Board of Inland Revenue. (Replaced 18 of 2021 s. 16) 38A. Determination of cost of individual assets sold together for one price Where assets which qualify for initial or annual allowances under this Part are sold together or with other assets in pursuance of one bargain the Commissioner shall for the purposes of the calculation of the allowances and charges provided for in this Part, and having regard to all the circumstances of the transaction allocate a purchase price to each individual asset.(Added 36 of 1955 s. 45) 38B. Commissioner’s power to determine the true value of an asset on sale Where an asset which qualifies for initial or annual allowances is sold, and—(a) the buyer is a person over whom the seller has control; or(b) the seller is a person over whom the buyer has control; or (c) both the seller and the buyer are persons over both of whom some other person has control; or (Amended 71 of 1983 s. 18)(d) the sale is between a husband and wife, not being a wife living apart from her husband, (Added 71 of 1983 s. 18)the Commissioner shall, if he is of the opinion that the sale price of such asset does not represent its true market value at the time of such sale, determine such true market value and the amount so determined shall be deemed to be the sale price of such asset for the purpose of calculating the allowances and charges provided for in this Part.(Added 36 of 1955 s. 45) 38C. (Repealed 19 of 1996 s. 9) 39. Replacement of machinery or plant Where machinery or plant in the case of which any of the events mentioned in section 38(1) has occurred is replaced by the owner thereof and a balancing charge falls to be made on him by reason of that event or, but for the provisions of this section, would have fallen to be made on him by reason thereof, then, if by notice in writing to the Commissioner he so elects, the following provisions shall have effect, that is to say— (Amended 30 of 1950 Schedule)(a) if the amount on which the charge would have been made is greater than the capital expenditure on providing the new machinery or plant—(i) the charge shall be made only on an amount equal to the difference; and(ii) no initial allowance, no balancing allowance and no annual allowance shall be made or allowed in respect of the new machinery or plant or the expenditure on the provision thereof; and(iii) in considering whether any, and, if so, what balancing charge falls to be made in respect of the expenditure on the new machinery or plant, there shall be deemed to have been made in respect of that expenditure an initial allowance equal to the full amount of that expenditure;(b) if the capital expenditure on providing the new machinery or plant is equal to or greater than the amount on which the charge would have been made—(i) the charge shall not be made; and(ii) the amount of any initial allowance in respect of the said expenditure shall be calculated as if the expenditure had been reduced by the amount on which the charge would have been made; and(iii) in considering what annual allowance is to be made in respect of the new machinery or plant, there shall be left out of account a proportion of the machinery or plant equal to the proportion which the amount on which the charge would have been made bears to the amount of the said expenditure; and(iv) in considering whether any and, if so, what balancing allowance or balancing charge falls to be made in respect of the new machinery or plant, the initial allowance in respect thereof shall be deemed to have been increased by an amount equal to the amount on which the charge would have been made. 39A. Reduction of allowances not to affect calculation of subsequent allowances Where, by virtue of section 12(2), section 18F(1) or section 19E(1), the amount of any allowance provided for under this Part is reduced, such reduction shall not affect the calculation of subsequent allowances which shall be computed in the first place as if the full amount of the allowance had been granted and shall then where appropriate be apportioned in relation to the extent to which the relevant assets are or have been used in the production of assessable income or assessable profits.(Added 7 of 1975 s. 27) 39B. Initial and annual allowances on machinery or plant under the pooling system (1) Where a person carrying on a trade, profession or business incurs capital expenditure on the provision of machinery or plant for the purposes of producing profits chargeable to tax under Part 4 then, except where such expenditure is expenditure of a kind described in section 6(1)(c) of Schedule 45 or section 14IC or 16G, there shall be made to him, for the year of assessment in the basis period for which the expenditure is incurred, an allowance, to be known as an “initial allowance”. (Amended 32 of 1981 s. 6; 32 of 1998 s. 23; 29 of 2018 s. 10; 5 of 2024 s. 16)(1A) For the purposes of subsection (1), the initial allowance shall be equal to the following percentages of the expenditure referred to in that subsection—(a) for the year of assessment commencing on 1 April 1980, 35%;(b) for the year of assessment commencing on 1 April 1981 and all subsequent years of assessment up to and including the year of assessment commencing on 1 April 1988, 55%; (Amended 17 of 1989 s. 9)(c) for any year of assessment commencing on or after 1 April 1989, 60%. (Added 17 of 1989 s. 9)(Replaced 29 of 1982 s. 10)(2) Where during the basis period for any year of assessment or during the basis period for any earlier year of assessment a person owns or has owned and has in use or has had in use any machinery or plant for the purposes of producing profits chargeable to tax under Part 4, there shall be made to him in respect of each class of machinery or plant for that year of assessment an allowance, to be known as an “annual allowance”, for depreciation by wear and tear of such machinery or plant. (Amended L.N. 262 of 1985)(3) The annual allowance shall be calculated at the rates of depreciation prescribed by the Board of Inland Revenue and shall be computed on the reducing value of each class of machinery or plant.(4) Subject to subsections (5), (6), (6B), (6E) and (7), the reducing value of a class of machinery or plant shall be the aggregate capital expenditure incurred on the provision of the machinery or plant belonging to that class reduced by— (Amended 9 of 2017 s. 11; 5 of 2020 s. 12)(a) the aggregate of any initial allowances computed in accordance with section 37 in respect of any machinery or plant belonging to that class;(b) the aggregate of any annual allowances computed in accordance with section 37 in respect of any machinery or plant belonging to that class;(c) the aggregate of any initial allowances computed in accordance with this section in respect of any machinery or plant belonging to that class;(d) any annual allowance computed in accordance with this section;(e) any sale, insurance, salvage or compensation moneys received in respect of any machinery or plant belonging to that class; and(f) any reducing value of machinery or plant excluded from the total reducing value of a class of machinery or plant under section 39C(3).(5) Where, prior to the commencement of the Inland Revenue (Amendment)(No. 4) Ordinance 1980 (63 of 1980), any machinery or plant has been the subject of a balancing allowance or balancing charge computed in accordance with section 38, such machinery or plant shall, for the purposes of subsection (4), be excluded from the class of machinery or plant. (6) Where any machinery or plant is owned and used by a person for any period immediately before he uses it for the purposes of producing profits chargeable to tax under Part 4, the capital expenditure incurred on the provision of the machinery or plant for the purposes of subsection (4) shall be computed by deducting from the actual cost the notional amount of the annual allowances which would have been made under section 37 to the owner if since acquiring the machinery or plant he had used it for the purpose of producing profits chargeable to tax under Part 4.(6A) Subsection (6B) applies if an aircraft was owned and used by a corporation for carrying out a qualifying aircraft leasing activity in respect of which section 14H(1) applies before the corporation uses it in another trade, profession or business to produce profits chargeable to tax under Part 4. (Added 9 of 2017 s. 11)(6B) For the purposes of subsection (4), the capital expenditure incurred on the provision of the aircraft is to be computed by deducting from the actual cost the notional amount of annual allowances that would have been made under section 37(2) to the corporation if such annual allowances had been available to the corporation since it acquired the aircraft. (Added 9 of 2017 s. 11)(6C) In subsections (6A) and (6B)—aircraft (飛機) has the meaning given by section 14G(1);qualifying aircraft leasing activity (合資格飛機租賃活動) has the meaning given by section 14G(6). (Added 9 of 2017 s. 11)(6D) Subsection (6E) applies if a ship was owned and used by a corporation for carrying out a qualifying ship leasing activity in respect of which section 14P(1) applies before the corporation uses it in another trade, profession or business to produce profits chargeable to tax under Part 4. (Added 5 of 2020 s. 12)(6E) For the purposes of subsection (4), the capital expenditure incurred on the provision of the ship is to be computed by deducting from the actual cost the notional amount of annual allowances that would have been made under section 37(2) to the corporation if such annual allowances had been available to the corporation since it acquired the ship. (Added 5 of 2020 s. 12)(6F) In subsections (6D) and (6E)—qualifying ship leasing activity (合資格船舶租賃活動) has the meaning given by section 14O(5);ship (船舶) has the meaning given by section 14O(1). (Added 5 of 2020 s. 12)(7) If a person succeeds to any trade, profession or business which immediately before the succession—(a) was carried on by another person; and(b) the machinery or plant that was used at any time by that other person for the purpose of producing profits chargeable to tax under Part 4 is not sold to the successor,the reducing value of such machinery or plant shall, for the purpose of computing annual allowances under subsection (3) be taken to be the reducing value thereof still unallowed to that other person as at the time of succession.(8) Notwithstanding subsection (7), no initial allowance shall be made under this Part by virtue of subsection (7).(9) No annual allowance shall be made where the reductions made under subsection (4) exceed the aggregate capital expenditure incurred on the provision of the class of machinery or plant.(10) Nothing in subsection (2) shall apply in respect of any machinery or plant owned and used by a person for the purposes of the person’s trade, profession or business where the machinery or plant represents expenditure or expenditures of a capital nature which have been allowed under section 14IC, 16B or 16G as a deduction or deductions in ascertaining the profits from such trade, profession or business in respect of which such person is chargeable to tax under Part 4 for any year of assessment. (Amended 32 of 1998 s. 23; 29 of 2018 s. 10; 5 of 2024 s. 16)(11) The Commissioner may in his discretion allow a higher rate of depreciation in respect of any class of machinery or plant than that prescribed by the Board of Inland Revenue.(Added 63 of 1980 s. 3. Amended E.R. 1 of 2012) 39C. Pooling system when not to apply (1) The provisions of this Part which applied immediately prior to the commencement of the Inland Revenue (Amendment) (No. 4) Ordinance 1980 (63 of 1980) shall continue to apply—(a) subject to subsection (2), in respect of machinery or plant to which section 37A applies;(b) in respect of machinery or plant to which section 39A applies.(2) Where, pursuant to the terms and conditions of a hire purchase agreement, machinery or plant to which section 37A applies passes into the ownership of the person carrying on a trade, profession or business who incurred the capital expenditure under the hire purchase agreement, the reducing value of such machinery or plant computed in accordance with that section shall be included in the class of machinery or plant for the purposes of section 39B for the years of assessment following the year of assessment during the basis period for which the machinery or plant passed into the ownership of that person.(3) Where any machinery or plant which is included in a class of machinery or plant for the purposes of section 39B and which was used wholly and exclusively in the production of profits chargeable to tax under Part 4 is subsequently not so used wholly and exclusively in the production of such profits, the provisions of this Part which applied immediately prior to the commencement of the Inland Revenue (Amendment) (No. 4) Ordinance 1980 (63 of 1980) shall apply to such machinery or plant in respect of the year of assessment during the basis period for which the machinery or plant is subsequently not used wholly and exclusively in the production of profits chargeable to tax under Part 4, and the reducing value of such machinery or plant shall be deemed to be such an amount as the Commissioner may consider it would have realized had it been sold in the open market at the time it ceased to be used wholly and exclusively in the production of such profits, and such reducing value shall be excluded from the total reducing value of that class of machinery or plant.(4) For the purposes of subsection (2), in the application of section 37A, subsection (2) of that section shall be read as if “during the basis period” was substituted for “at the end of the basis period”.(Added 63 of 1980 s. 3. Amended E.R. 1 of 2012) 39D. Balancing allowances and charges under the pooling system (1) Where at the end of a basis period for a year of assessment the aggregate reductions made under section 39B(4) in respect of a class of machinery or plant exceed the aggregate capital expenditure incurred by a person on the provision of machinery or plant belonging to that class—(a) a charge, to be known as a “balancing charge”, shall be made on him, and the amount on which it is made shall be an amount equal to the excess; and(b) the reducing value at the end of the basis period for that year of assessment shall be nil.(2) Subject to subsection (3) and except where subsection (4) applies, where a person ceases to carry on his trade, profession or business in a year of assessment, the aggregate of the sale, insurance, salvage or compensation moneys, if any, of the machinery or plant in respect of which an initial allowance or annual allowance has been made shall be compared with the amount of the reducing value of the class of machinery or plant at the end of the basis period for that year of assessment and—(a) where there are no sale, insurance, salvage or compensation moneys, or where the amount of the reducing value exceeds the aggregate of such moneys, an allowance, to be known as a “balancing allowance”, shall be made to him, and the amount thereof shall be the amount of the reducing value or, as the case may be, the excess thereof over the aggregate of the said moneys; or(b) where there are sale, insurance, salvage or compensation moneys, and the aggregate of such moneys exceeds the amount, if any, of the reducing value, a charge, to be known as a “balancing charge”, shall be made on him, and the amount on which it is made shall be an amount equal to the excess or, where the reducing value is nil, to the aggregate of the said moneys.(3) Subsection (2) shall not apply on the occasion on which any machinery or plant, to which section 39B(7) applies, passes by way of succession.(4) Where by reason of a person ceasing to carry on his trade, profession or business machinery or plant in respect of which an initial allowance or annual allowance has been made is put out of use and there are no sale, insurance, salvage or compensation moneys, such person shall, subject to subsection (5), be deemed to have received immediately prior to such cessation, sale moneys for such machinery or plant of such an amount as the Commissioner may consider it would have realized had it been sold in the open market at the time of cessation.(5) If a person sells any machinery or plant referred to in subsection (4) within 12 months of the date of cessation he may claim the adjustment of any balancing allowance or balancing charge which may have been made to or on him as if such sale had taken place immediately prior to the date of cessation and notwithstanding section 70 an assessor shall make any necessary correction to any assessment.(6) Notwithstanding anything contained in this section, where the aggregate of any sale, insurance, salvage or compensation moneys in respect of any machinery or plant exceeds the capital expenditure incurred on the provision of that machinery or plant, the aggregate of such moneys shall—(a) for the purposes of calculating a balancing charge under subsection (2)(b); and(b) in calculating the reducing value of the class of machinery or plant under section 39B(4),not exceed the capital expenditure incurred on the provision of that machinery or plant.(7) For the purposes of subsection (6), the capital expenditure incurred on the provision of the machinery or plant shall be taken as— (Amended 7 of 1986 s. 6)(a) in a case where section 37(2A), (2C) or (2F) applies, the “cost of the asset” computed in accordance with that section;(b) in a case where section 39B(6), (6B) or (6E) applies, the capital expenditure computed in accordance with that section; (Amended 18 of 2021 s. 17)(ba) in a case where section 39B(7) applies, the aggregate capital expenditure incurred by that other person referred to in that section on the provision of the machinery or plant for the purposes of producing profits chargeable to tax under Part 4; or (Added 18 of 2021 s.

17)(c) in any other case, the aggregate capital expenditure incurred by the person in question on the provision of the machinery or plant for the purposes of producing profits chargeable to tax under Part 4. (Amended 9 of 2017 s. 12; 5 of 2020 s. 13)(Added 63 of 1980 s. 3. Amended E.R. 1 of 2012) 39E. Allowances under this Part in respect of capital expenditure on leased machinery and plant (1) Notwithstanding anything to the contrary in this Part, a person (in this section referred to as the taxpayer) who incurs capital expenditure on the provision of machinery or plant, being machinery or plant acquired by the taxpayer under a contract entered into after the commencement of the Inland Revenue (Amendment) Ordinance 1986 (7 of 1986), for the purpose of producing profits chargeable to tax under Part 4 shall not have made to him the initial or annual allowances prescribed in section 37, 37A or 39B if, at a time when the machinery or plant is owned by the taxpayer, a person holds rights as lessee under a lease of the machinery or plant, and—(a) the machinery or plant was, prior to its acquisition by the taxpayer, owned and used by that person (whether alone or with others), or any associate of that person (which person or any such associate is hereinafter referred to as the end-user); or(b) the machinery or plant, not being a ship or aircraft or any part thereof, is while the lease is in force—(i) used wholly or principally outside Hong Kong by a person other than the taxpayer; or (Amended 15 of 1992 s. 4)(ii) the whole or a predominant part of the cost of the acquisition or construction of the machinery or plant was financed directly or indirectly by a non-recourse debt; or(c) the machinery or plant is a ship or aircraft or any part thereof and—(i) the person holding rights as lessee is not an operator of a Hong Kong ship or aircraft; or(ii) the whole or a predominant part of the cost of acquisition or construction of the ship or aircraft or the part thereof was financed directly or indirectly by a non-recourse debt. (Replaced 15 of 1992 s. 4)(2) Subsection (1)(a) shall not apply where—(a) the machinery or plant was acquired by the taxpayer on payment from the end-user at not more than the price which the end-user paid to the supplier (not being a supplier who is himself an end-user); and (b) no initial or annual allowances have at any time prior to the acquisition of the machinery or plant by the taxpayer been made under section 37, 37A or 39B to the end-user in respect of such machinery or plant.(3) For the purposes of subsection (2) an allowance shall be deemed not to have been made if the end-user, by notice in writing to the Commissioner within 3 months of the date on which the capital expenditure on the provision of machinery or plant giving rise to the allowance is incurred, or within such further time as the Commissioner may, in any particular case, permit, disclaims such allowance.(4) For the purposes of this section, where a trustee of a trust estate or a corporation controlled by such a trustee owns machinery or plant or holds rights as a lessee under a lease of machinery or plant, the trustee, the corporation and the beneficiary under the trust shall each be deemed to be the owner or holder, as the case may be, of rights as a lessee of the machinery or plant. (Replaced 15 of 1992 s. 4)(5) In this section—acquisition (取得) means acquisition by a person as owner and includes holding or hiring under a hire-purchase agreement or, if the hire-purchase agreement is a conditional sale agreement, holding as purchaser;associate (相聯者), in relation to a person holding rights as lessee under any lease of machinery or plant (including a person who is deemed to be holding such rights), means— (Amended 15 of 1992 s. 4)(a) where the person holding such rights is a natural person—(i) a relative of the person holding such rights;(ii) a partner of the person holding such rights and any relative of that partner;(iii) a partnership in which the person holding such rights is a partner;(iv) any corporation controlled by the person holding such rights, by a partner of the person holding such rights or by a partnership in which the person holding such rights is a partner;(v) any director or principal officer of any such corporation as is referred to in subparagraph (iv);(b) where the person holding such rights is a corporation—(i) any associated corporation;(ii) any person who controls the corporation and any partner of such person, and, where either such person is a natural person, any relative of such person;(iii) any director or principal officer of that corporation or of any associated corporation and any relative of any such director or officer;(iv) any partner of the corporation and, where such partner is a natural person, any relative of such partner;(c) where the person holding such rights is a partnership—(i) any partner of the partnership and where such partner is a partnership any partner of that partnership, any partner with the partnership in any other partnership and where such partner is a partnership any partner of that partnership and where any partner of, or with, or in any of the partnerships mentioned in this subparagraph is a natural person, any relative of such partner; (Replaced 65 of 1993 s. 4)(ii) (Repealed 65 of 1993 s. 4)(iii) any corporation controlled by the partnership or by any partner thereof or, where such a partner is a natural person, any relative of such partner;(iv) any corporation of which any partner is a director or principal officer;(v) any director or principal officer of a corporation referred to in subparagraph (iii);associated corporation (相聯法團) means—(a) a corporation over which the person holding rights under any lease of machinery or plant (including a person who is deemed to be holding such rights) has control; (Amended 15 of 1992 s. 4)(b) a corporation which has control over such person holding rights, being a corporation;(c) a corporation which is under the control of the same person as such person holding rights, being a corporation;beneficiary under the trust (信託的受益人) means any person who benefits or is capable (whether by the exercise of a power of appointment or otherwise) of benefiting under a trust estate, either directly or through any interposed person, or who is able or might reasonably be expected to be able, whether directly or indirectly, to control the activities of the trust estate or the application of its corpus or income; (Replaced 15 of 1992 s. 4)control (控制), in relation to a corporation, means the power of a person to secure—(a) by means of the holding of shares or the possession of voting power in or in relation to that or any other corporation; or(b) by virtue of any powers conferred by the articles of association or other document regulating that or any other corporation,that the affairs of the first-mentioned corporation are conducted in accordance with the wishes of that person;end-user (最終使用者) means any person (whether alone or with others) holding rights as lessee under a lease of machinery or plant or any associate of such person;held for use (持有以供使用) includes installed ready for use and held in reserve;non-recourse debt (無追索權債項), in relation to the financing of the whole or a predominant part of the cost of the acquisition or construction of any machinery or plant, means a debt where the rights of the creditor in the event of default in the repayment of principal or payment of interest—(a) are limited wholly or predominantly to any or all of the following—(i) rights (including a right to moneys payable) in relation to the machinery or plant or the use of the machinery or plant;(ii) rights (including rights to moneys payable) in relation to goods produced, supplied, carried, transmitted or delivered, or services provided, by means of the machinery or plant;(iii) rights (including a right to moneys payable) in relation to the loss or disposal of the whole or a part of the machinery or plant or of the taxpayer’s interest in the machinery or plant;(iv) any conjunction of such rights as are referred to in subparagraphs (i), (ii) and (iii);(v) rights in respect of a mortgage or other security over the machinery or plant; or(vi) rights arising out of any arrangement relating to the financial obligations of the end-user of the machinery or plant towards the taxpayer, being financial obligations in relation to the machinery or plant;(b) are in the opinion of the Commissioner capable of being limited as described in paragraph (a), having regard to either or both of the following—(i) the assets of the taxpayer;(ii) any arrangement to which the taxpayer is a party; or(c) where paragraphs (a) and (b) do not apply, are limited by reason that not all of the assets of the taxpayer (not being assets that are security for a debt of the taxpayer other than a debt arising in relation to the financing of the whole or part of the cost of the acquisition of the machinery or plant) would be available for the purpose of the discharge of the whole of the debt so arising (including the payment of interest) in the event of any action or actions by the creditor or creditors against the taxpayer arising out of the debt;operator of a Hong Kong aircraft (香港飛機的經營者) means a person who—(a) holds an air operators’ certificate issued under the Air Navigation (Hong Kong) Order 1995 (Cap. 448 sub. leg. C); and (Amended 12 of 1999 s. 3)(b) carries on business as an operator of aircraft and the business is controlled and managed in Hong Kong; (Amended 15 of 1992 s. 4)operator of a Hong Kong ship (香港船舶的經營者) means a person who—(a) is responsible for defraying all or a substantial portion of the expenses of operating the ship and the ship operates mainly in the waters of Hong Kong or between the waters of Hong Kong and waters within the river trade limits; and (b) carries on business as an operator of ships and the business is controlled and managed in Hong Kong; (Added 15 of 1992 s. 4)principal officer (主要職員) means—(a) a person employed by a corporation who, either alone or jointly with one or more other persons, is responsible under the immediate authority of the directors for the conduct of the business of the corporation; or(b) a person so employed who, under the immediate authority of a director of the body corporate or a person to whom paragraph (a) applies, exercises managerial functions in respect of the body corporate;relative (親屬) means the spouse, parent, child, brother or sister of the relevant person, and, in deducing such a relationship, an adopted child shall be deemed to be a child both of the natural parents and the adopting parent and a step child to be the child of both the natural parents and of any step parent;used (使用) includes held for use. (Amended 32 of 1998 s. 24)(6) The amendments made to this section by section 4(b) and (d)(iv) of the Inland Revenue (Amendment) Ordinance 1992 (15 of 1992) apply to capital expenditure on the provision of machinery or plant under a transaction entered into on or after 15 November 1990 except expenditure under a transaction which was the subject of an application for advance clearance made to the Commissioner before 15 November 1990 and the Commissioner before or after that date expressed the opinion that the transaction would not fall within the terms of section 61A or, where no such application was made in respect of a transaction entered into before 15 November 1990 under which expenditure was incurred on or after 15 November 1990, the transaction under which the expenditure was made is, in the Commissioner’s opinion, of the same type as any for which, in the circumstances prevailing as at 14 November 1990, he would have expressed the opinion that the transaction would not fall within the terms of section 61A. (Added 15 of 1992 s. 4)(Added 7 of 1986 s. 7. Amended E.R. 1 of 2012) 40. Interpretation *(1) In this Part— basis period (評稅基期) has the meaning assigned to it by section 2 except that— (a) where 2 basis periods overlap the period common to both shall be deemed to fall in the first basis period only, and (b) where there is an interval between the end of the basis period for one year of assessment and the beginning of the basis period for the next year of assessment the interval shall be deemed to fall in the second basis period but where, in respect of salaries tax, the interval is the year ending on 31 March 1973, that interval shall not be deemed to fall in the second basis period; (Replaced 49 of 1956 s. 28. Amended 8 of 1973 s. 8) capital expenditure (資本開支)— (a) includes interest paid and commitment fees incurred in respect of a loan made for the sole purpose of financing the provision of an industrial building or structure or commercial building or structure or machinery or plant; but (b) does not include expenditure which is reimbursed by way of or attributable to any grant, subsidy or similar financial assistance and in relation to the person incurring the expenditure does not include any expenditure which is allowed to be deducted in ascertaining for the purpose of Part 4 the profits of a trade, profession or business carried on by that person; (Replaced 30 of 1981 s. 7. Amended 32 of 1998 s. 25) capital expenditure on the provision of machinery or plant (在提供機械或工業裝置方面的資本開支) includes capital expenditure on alterations to an existing building incidental to the installation of that machinery or plant for the purposes of the trade, profession or business;class of machinery or plant (該類機械或工業裝置、類別的機械或工業裝置) means the items of machinery or plant for which the same rate of depreciation is prescribed by the Board of Inland Revenue; (Added 63 of 1980 s. 4)commercial building or structure (商業建築物或構築物) means any building or structure or part of any building or structure used by the person entitled to the relevant interest for the purposes of his trade, profession or business other than an industrial building or structure; (Replaced 35 of 1965 s. 22. Amended 26 of 1969 s. 22) industrial building or structure (工業建築物或構築物) means any building or structure or part of any building or structure used— (a) for the purposes of a trade carried on in a mill, factory or other similar premises; or (b) for the purposes of a transport, tunnel, dock, water, gas or electricity undertaking or a public telephonic or public telegraphic service; or (Amended 39 of 1969 s. 5) (c) for the purposes of a trade which consists of the manufacture of goods or materials or the subjection of goods or materials to any process; or (d) for the purposes of a trade which consists in the storage—(i) of goods or materials which are to be used in the manufacture of other goods or materials; or(ii) of goods or materials which are to be subjected in the course of a trade to any process; or(iii) of goods or materials on their arrival into Hong Kong; or (Amended 7 of 1986 s. 12) (e) for the purposes of the business of farming; (f) for the purposes of R&D activities within the meaning of section 2 of Schedule 45 related to any trade, profession or business, (Amended 32 of 1998 s. 25; 9 of 2004 s. 5; 29 of 2018 s. 11) and, in particular, the said expression includes any building or structure or part of any building or structure used by a person carrying on a trade, undertaking or business specified in paragraphs (a) to (e) of this definition and provided by him for the welfare of workers employed in his trade, undertaking or business and in use for that purpose: Provided that— (i) where part of the whole of a building or structure is, and part thereof is not, an industrial building or structure, and the capital expenditure which has been incurred on the construction of the second mentioned part is not more than one-tenth of the total capital expenditure which has been incurred on the construction of the whole building or structure, the whole building or structure and every part thereof shall be treated as an industrial building or structure; and (ii) subject to the provisions of paragraph (i) of this proviso but notwithstanding anything else contained in the foregoing provisions of this definition, the expression industrial building or structure (工業建築物或構築物) shall not include any building or structure or part of any building or structure used as a dwelling house (other than as a dwelling house for the housing of manual workers), retail shop, showroom, hotel or office; (Replaced 35 of 1965 s. 22) relevant interest (有關權益) means, in relation to any expenditure incurred on the construction of a building or structure the interest in that building or structure to which the person who incurred the expenditure was entitled when he incurred it; (Amended 49 of 1956 s. 28) +residue of expenditure (開支剩餘額)— (a) in relation to a commercial building or structure— (Amended 12 of 2004 s. 13)(i) subject to subparagraph (ii), means the amount of the capital expenditure incurred on the construction of the building or structure reduced by—(A) the amount of any initial allowance made under section 34(1);(B) the amount of any annual allowance made under section 33A or 34(2);(C) the amount of any balancing allowance made under section 35, or under section 33B or 35 that was in force immediately before the commencement# of the Inland Revenue (Amendment) Ordinance 2004 (12 of 2004),and increased by the amount of any balancing charge made under section 35, or under section 33B or 35 that was in force immediately before the commencement# of the Inland Revenue (Amendment) Ordinance 2004 (12 of 2004); or(ii) where the building or structure is a building or structure to which section 33A(4) applies, means the amount of the capital expenditure incurred on the construction of the building or structure as determined under section 33A(4)(a) reduced by—(A) the amount of any initial allowance made under section 34(1) in respect of any year of assessment commencing on or after 1 April 1998;(B) the amount of any annual allowance made under section 33A or 34(2) in respect of any year of assessment commencing on or after 1 April 1998;(C) the amount of any balancing allowance made under section 35, or under section 33B or 35 that was in force immediately before the commencement# of the Inland Revenue (Amendment) Ordinance 2004 (12 of 2004), in respect of any year of assessment commencing on or after 1 April 1998,and increased by the amount of any balancing charge made under section 35, or under section 33B or 35 that was in force immediately before the commencement# of the Inland Revenue (Amendment) Ordinance 2004 (12 of 2004), in respect of any year of assessment commencing on or after 1 April 1998:Provided that in computing the residue of expenditure there shall be written off, in respect of any year in which no allowance fell to be made under section 33A or 34, an amount of one-twenty-fifth of the capital expenditure, and for the purposes of this proviso year (年) means the period which would have comprised a year of assessment commencing on 1 April 1998 or any subsequent year of assessment in respect of which an annual allowance would have fallen to be made under section 33A if the building or structure had been in use as a commercial building or structure; (Added 32 of 1998 s. 25) (b) in relation to an industrial building or structure, means the amount of the capital expenditure incurred on the construction of the building or structure reduced by—(i) the amount of any initial allowance made under section 34(1);(ii) the amount of any annual allowance made under section 33A or 34(2);(iii) the amount of any balancing allowance made under section 35, or under section 33B or 35 that was in force immediately before the commencement# of the Inland Revenue (Amendment) Ordinance 2004 (12 of 2004),and increased by the amount of any balancing charge made under section 35, or under section 33B or 35 that was in force immediately before the commencement# of the Inland Revenue (Amendment) Ordinance 2004 (12 of 2004):Provided that in computing the residue of expenditure there shall be written off, in respect of any year in which no allowance fell to be made under section 33A or 34, an amount of one-fiftieth of the capital expenditure in the case of a year prior to the year of assessment commencing on 1 April 1965, and one-twenty-fifth of the capital expenditure in the case of such or any subsequent year of assessment, and for the purposes of this proviso year (年) means the period which would have comprised a year of assessment in respect of which an initial or annual allowance would have fallen to be made under section 34(1) or (2), as the case may be, if the building or structure had then been in use as an industrial building or structure and the provisions of section 34 had then been in force. (Replaced 35 of 1965 s. 22. Amended 32 of 1998 s. 25; 12 of 2004 s. 13) (2) For the purposes of this Part, any capital expenditure incurred for the purposes of a trade, profession or business by a person about to carry on such trade, profession or business shall be treated as if it had been incurred by that person on the first day upon which he does carry on such trade, profession or business. (Added 35 of 1965 s. 22)(3) References in this Part to capital expenditure incurred on the construction of a building or structure do not include any expenditure incurred on the acquisition of, or of rights in or over, any land. (Added 29 of 1982 s. 11)(Replaced 36 of 1955 s. 46. Amended E.R. 1 of 2012) Editorial Note: * The amendment made by 9 of 2004 to section 40(1) applies in relation to the year of assessment commencing on 1 April 2004 and to all subsequent years of assessment. (Please see 9 of 2004 s. 1(2)) + The amendments made by 12 of 2004 to this definition apply in relation to the year of assessment 2004/05 and to all subsequent years of assessment. (Please see 12 of 2004 s. 2(3)) # Commencement date: 25 June 2004. 40A. (Repealed 56 of 1993 s. 19) Part 6A Specified Alternative Bond Scheme and its Treatment under this Ordinance (other than Part 4AA) (Part 6A added 10 of 2013 s. 3. Amended 21 of 2025 s. 33) 40AB. Schedule 17A: specified alternative bond scheme and its treatment under this Ordinance (other than Part 4AA) (Amended 21 of 2025 s. 15)Schedule 17A contains provisions about the treatment, under this Ordinance (other than Part 4AA), of specified alternative bond schemes within the meaning of that Schedule.(Amended 21 of 2025 s. 15) Part 6B Eligible Carried Interest and its Tax Treatment (Part 6B added 9 of 2021 s. 8) 40AC. Schedule 16D: eligible carried interest and its tax treatment Schedule 16D contains provisions about the tax treatment of eligible carried interest within the meaning of that Schedule. 40AD. Power to amend Schedule 16D (1) The Secretary for Financial Services and the Treasury may, by notice published in the Gazette, amend sections 2, 5(3), 7 and 9 of Schedule 16D.(2) A notice published under subsection (1) may contain any incidental, supplemental, evidential, consequential, savings and transitional provisions that are necessary and expedient in consequence of the amendments made under that subsection. Part 6C Qualifying Amalgamations (Part 6C added 18 of 2021 s. 3) 40AE. Interpretation In this Part—amalgamated company (合併後公司) means—(a) a company—(i) that amalgamates with one or more of its wholly owned subsidiaries under section 680 of the Companies Ordinance; and(ii) the shares of which are not cancelled on the amalgamation; or(b) a wholly owned subsidiary of a body corporate—(i) that amalgamates with one or more of the other wholly owned subsidiaries of the body corporate under section 681 of the Companies Ordinance; and(ii) the shares of which are not cancelled on the amalgamation;amalgamating company (參與合併公司) means a company—(a) that is amalgamated in a qualifying amalgamation; and(b) the shares of which are cancelled on the amalgamation;body corporate (法人團體) has the meaning given by section 2(1) of the Companies Ordinance;Companies Ordinance (《公司條例》) means the Companies Ordinance (Cap. 622);company (公司) has the meaning given by section 2(1) of the Companies Ordinance;date of amalgamation (合併日期), in relation to a qualifying amalgamation, means the effective date of the amalgamation specified in the certificate of amalgamation for the qualifying amalgamation under section 685(1) of the Companies Ordinance;qualifying amalgamation (合資格合併) means an amalgamation of companies—(a) under section 680 or 681 of the Companies Ordinance; and(b) for which a certificate of amalgamation has been issued by the Registrar of Companies under section 684(3) of the Companies Ordinance;year of cessation (停業年度), in relation to an amalgamating company in a qualifying amalgamation, means the year of assessment in which the amalgamating company is treated as having ceased to carry on its trade, profession or business under section 40AG. 40AF. Application of Part 6C This Part applies in relation to a qualifying amalgamation that takes effect on or after the date of commencement* of the Inland Revenue (Amendment) (Miscellaneous Provisions) Ordinance 2021 (18 of 2021). Editorial Note: * Commencement date: 11 June 2021. 40AG. Amalgamating company treated as having ceased to carry on trade, profession or business For the purposes of this Ordinance, an amalgamating company in a qualifying amalgamation is treated as having ceased to carry on its trade, profession or business on the day immediately before the date of amalgamation. 40AH. Provisional profits tax for amalgamating company Despite section 63H(1), an assessor may, having taken section 40AG into account, estimate the amount of provisional profits tax payable by an amalgamating company in a qualifying amalgamation for its year of cessation. 40AI. Provisional profits tax for amalgamated company Despite section 63H(1), an assessor may estimate the amount of provisional profits tax payable by the amalgamated company in a qualifying amalgamation—(a) for the year of assessment the basis period for which the date of amalgamation falls in; and(b) for the succeeding year of assessment,taking into account the succession of any trade, profession or business from any amalgamating company in the qualifying amalgamation. 40AJ. Obligations and liabilities of amalgamating companies The amalgamated company in a qualifying amalgamation must comply with all obligations, and meet all liabilities, of each of the amalgamating companies under this Ordinance, for the year of cessation of the amalgamating companies and all preceding years of assessment. 40AK. Rights, powers and privileges of amalgamating companies The amalgamated company in a qualifying amalgamation is entitled to all rights, powers and privileges of each of the amalgamating companies under this Ordinance, for the year of cessation of the amalgamating companies and all preceding years of assessment. 40AL. Returns for profits tax for amalgamating companies Without limiting sections 40AJ and 40AK, the amalgamated company in a qualifying amalgamation must furnish a return for profits tax for each of the amalgamating companies for its year of cessation. 40AM. Election for Schedule 17J (1) The amalgamated company in a qualifying amalgamation may, within 1 month after the date of amalgamation (or any further period that the Commissioner may allow), elect for Schedule 17J to apply to the amalgamated company and each amalgamating company in the qualifying amalgamation.(2) If an election under subsection (1) is made, it must be made by the amalgamated company by notice in writing to the Commissioner.(3) An election made under subsection (1) is irrevocable.(4) If the condition specified in subsection (5) is met, the requirement under section 51(6) is regarded as having been complied with in respect of each amalgamating company in the qualifying amalgamation.(5) The condition is that the amalgamated company has given the notice under subsection (2) within 1 month after the date of amalgamation. Part 6D Specified Assets (Part 6D added 18 of 2021 s. 5) 40AN. Interpretation In this Part—amalgamating company (參與合併公司) has the meaning given by section 40AE;qualifying amalgamation (合資格合併) has the meaning given by section 40AE;specified asset (指明資產)—see section 40AO;specified event (指明事件)—see section 40AP. 40AO. Meaning of specified asset (1) A specified asset is, in relation to a person—(aa) any aircraft for which a deduction has been allowed to the person under section 14IC; (Added 5 of 2024 s. 17)(a) any machinery or plant for R&D activities the capital expenditure (as defined by section 40(1)) incurred in the provision of which has been allowed for deduction to the person as R&D expenditure under section 16B;(b) any rights or entitlement to any rights, that were, or would be, generated from one or more R&D activities for which the relevant R&D expenditure has been allowed to the person as a deduction under section 16B;(c) any patent rights (as defined by section 16E(4)), or rights to any know-how (as defined by that section), for which a deduction for the relevant capital expenditure has been allowed to the person under section 16E;(d) any specified intellectual property rights (as defined by section 16EA(11)) for which a deduction for the relevant specified capital expenditure (as defined by that section) has been allowed to the person under section 16EA;(e) any prescribed fixed asset (as defined by section 16G(6)) for which a deduction for the relevant specified capital expenditure (as defined by that section) has been allowed to the person under section 16G;(f) any environmental protection facilities (as defined by section 16H(1)) for which a deduction for the relevant specified capital expenditure (as defined by that section) has been allowed to the person under section 16I;(g) any commercial building or structure (as defined by section 40(1)) for which an annual allowance has been made to the person under section 33A;(h) any industrial building or structure (as defined by section 40(1)) for which an initial allowance or annual allowance has been made to the person under section 34; or(i) any machinery or plant for which an initial allowance or annual allowance has been made to the person under section 37, 37A or 39B.(2) For the purposes of subsection (1), if the asset referred to in subsection (1)(aa), (a), (b), (c), (d), (e), (f), (g), (h) or (i) is an asset succeeded by the person from an amalgamating company in a qualifying amalgamation, and an election has been made by the person under section 40AM(1)— (Amended 5 of 2024 s. 17)(a) the reference to a deduction allowed to the person under subsection (1)(aa), (a), (b), (c), (d), (e) or (f) includes a deduction allowed to the amalgamating company; and (Amended 5 of 2024 s. 17)(b) the reference to an initial allowance or annual allowance made to the person under subsection (1)(g), (h) or (i) includes an initial allowance or annual allowance made to the amalgamating company.(3) In this section—R&D activity (研發活動)—see section 2 of Schedule 45;R&D expenditure (研發開支)—see section 6 of Schedule 45. 40AP. Meaning of specified event A specified event is, in relation to any specified asset of a person (relevant person)—(a) the transfer of the specified asset to another person without sale, other than by way of—(i) succession on the relevant person’s death; or(ii) a qualifying amalgamation; or(b) the succession to the specified asset by another person through a qualifying amalgamation in relation to which no election has been made under section 40AM(1). 40AQ. Application of Part 6D This Part applies in relation to a specified event that occurs on or after the date of commencement* of the Inland Revenue (Amendment) (Miscellaneous Provisions) Ordinance 2021 (18 of 2021). Editorial Note: * Commencement date: 11 June 2021. 40AR. Non-application of certain provisions because of application of Part 6D If this Part applies in relation to a person’s specified asset, sections 14IK(6), 16J(5B), 37(4), 38(4), 39B(7) and 39D(3) and (4) do not apply to the relevant person, or the other person, referred to in section 40AP in relation to the specified asset.(Amended 5 of 2024 s. 18) 40AS. Deemed selling price of specified asset (1) If a specified event occurs in relation to a person, the person’s specified asset is deemed to have been sold for a sum that is the lower of—(a) a price that the Commissioner considers the specified asset would have been realized had it been sold in the open market at the time of the specified event; and(b) if the specified asset is—(i) an asset referred to in section 40AO(1)(a) or (b)—the total amount of deductions allowed to the person under section 16B for the expenditures incurred by the person; or(ii) an asset referred to in section 40AO(1)(aa), (c), (d), (e), (f), (g), (h) or (i)—the capital expenditure incurred by the person. (Amended 5 of 2024 s. 19)(2) For the purposes of subsection (1), if the asset mentioned in subsection (1)(b)(i) or (ii) is an asset succeeded by the person from an amalgamating company in a qualifying amalgamation, and an election has been made by the person under section 40AM(1)—(a) the total amount of deductions allowed to the person mentioned in subsection (1)(b)(i) must also include the deductions allowed to the amalgamating company under section 16B; and(b) the capital expenditure incurred by the person mentioned in subsection (1)(b)(ii) must also include the capital expenditure incurred by the amalgamating company. 40AT. Deemed proceeds of sale For the purposes of section 14IK, 16B(5), 16E(3), 16EB(2), 16G(3), 16J, 35, 38 or 39D, or section 16 or 17 of Schedule 45, if a person’s specified asset is deemed to have been sold under section 40AS(1), the person is deemed to have received proceeds of sale of the specified asset of an amount equal to the sum ascertained under section 40AS(1).(Amended 5 of 2024 s. 20) 40AU. Deemed expenditure For the purpose of computing the chargeable profits, under Part 4, of a person—(a) to whom a specified asset is transferred in a way referred to in section 40AP(a); or(b) who succeeds to a specified asset in the way referred to in section 40AP(b),the person is deemed to have incurred expenditure on the purchase of the specified asset of an amount equal to the sum ascertained under section 40AS(1). Part 6E Tax Treatment of Family-owned Investment Holding Vehicle and Family-owned Special Purpose Entity (Part 6E added 8 of 2023 s. 4) 40AV. Schedule 16E: tax treatment of family-owned investment holding vehicle and family-owned special purpose entity (1) Schedule 16E contains provisions about—(a) the tax treatment of a family-owned investment holding vehicle within the meaning of that Schedule; and(b) the tax treatment of a family-owned special purpose entity within the meaning of that Schedule.(2) Schedules 16F, 16G, 16H, 16I, 16J and 16K contain provisions supplementary to Schedule 16E.(3) Schedules 16E, 16F, 16G, 16H, 16I, 16J and 16K apply in respect of a year of assessment commencing on or after 1 April 2022. 40AW. Power to amend Schedule 16E (1) The Secretary for Financial Services and the Treasury may, by notice published in the Gazette, amend—(a) the number specified in section 10(1)(b)(ii) of Schedule 16E;(b) the amounts specified in sections 10(1)(c)(ii) and 11(2), (4) and (6) of Schedule 16E; and(c) the rates specified in sections 24(2) and 25(2) of Schedule 16E.(2) A notice published under subsection (1) may contain any incidental, supplemental, evidential, consequential, savings and transitional provisions that are necessary and expedient in consequence of the amendments made under that subsection. Part 6F Disposal Gain by Holder of Qualifying Equity Interests (Part 6F added 33 of 2023 s. 3) 40AX. Schedule 17K: disposal gain by holder of qualifying equity interests Schedule 17K contains provisions for a gain or profit that an entity derives from a disposal of equity interests in another entity to be regarded, in circumstances specified in that Schedule, as arising from the sale of capital assets. Part 6G Eligible IP Income and its Tax Treatment (Part 6G added 17 of 2024 s. 7) 40AY. Schedule 17FD: concessionary tax treatment and nexus requirement for ascertaining concessionary portion (1) Schedule 17FD contains provisions about the tax treatment of eligible IP income within the meaning of that Schedule.(2) Schedule 17FD applies in respect of a year of assessment beginning on or after 1 April 2023. 40AZ. Power to amend Schedule 17FD (1) The Secretary for Financial Services and the Treasury may, by notice published in the Gazette, amend Schedule 17FD.(2) A notice published under subsection (1) may contain any incidental, supplemental, evidential, consequential, savings and transitional provisions that are necessary and expedient in consequence of the amendments made under that subsection. Part 6H Tax Treatment for Re-domiciled Company (Part 6H added 14 of 2025 s. 152) 40AZA. Schedule 17L: tax treatment for re-domiciled company Schedule 17L contains supplementary provisions for tax treatment for a re-domiciled company. Part 7 Personal Assessment 40B. Interpretation In this Part, unless the context otherwise requires—adjustment factor (調整分數) has the same meaning as in section 19CA; (Added 32 of 1998 s. 26)concessionary trading receipts (獲特惠的營業收入) has the same meaning as in section 19CA; (Added 32 of 1998 s. 26)income (入息), in relation to any person, means income derived beneficially by that person;individual (個人) means a person electing or who has elected to be chargeable to tax under this Part;joint total income (共同入息總額) means joint total income calculated in accordance with section 42A;loss and losses (虧損) do not include a loss sustained by a person acting in his capacity as trustee of a trust.(Replaced 43 of 1989 s. 11) 41. Election for personal assessment* (1) An individual—(a) who is of or above the age of 18 years or is under that age if both parents are dead; and(b) who is either ordinarily resident in Hong Kong or a temporary resident,may elect for personal assessment on the individual’s total income in accordance with this Part. (Replaced 32 of 2018 s. 9)(1A) If—(a) an individual is married and not living apart from the individual’s spouse;(b) both of them have income assessable under this Ordinance; and(c) either one or both of them are eligible to make an election under subsection (1),they may jointly make an election for personal assessment. (Replaced 32 of 2018 s. 9)(1B) If an individual or the individual’s spouse is chargeable to salaries tax under section 10(3), the individual may not make an election for personal assessment unless the individual and the spouse jointly make an election under subsection (1A). (Added 32 of 2018 s. 9)(2) Where an individual is deceased an executor shall have the same right to elect for personal assessment on the total income of the deceased as the deceased would have if he were alive. (Replaced 35 of 1965 s. 23. Amended 71 of 1983 s. 20; 43 of 1989 s. 12)(2A) Where—(a) a deceased individual, or his executor on his behalf, elected to be personally assessed for the year of assessment in which the deceased died; and(b) that individual was a partner in a partnership; and(c) that individual had a share of the partnership assessable profits or losses in the year of assessment following that in which he died,then his executor may claim to have that share of such assessable profits or losses computed in accordance with Part 4 included in the deceased’s total income for the year of assessment in which he died. (Added 7 of 1975 s. 29)(3) Any election under this section shall be made in writing and lodged with the Commissioner not later than 2 years after the end of the year of assessment in respect of which the election is made or 1 month after an assessment of income or profits forming part of the individual’s total income for such year of assessment becomes final and conclusive under section 70 or within such further period, if any, as the Commissioner may allow as being reasonable in the particular circumstances, whichever is the later. (Amended 2 of 1971 s. 31)(3A) An election made by an individual under subsection (1) may be withdrawn by the individual. An election made by an individual and his or her spouse under subsection (1A) may only be withdrawn by them jointly. (Added 32 of 2018 s. 9)(3B) A withdrawal under subsection (3A) must be effected by giving a notice in writing to the Commissioner—(a) within 6 months after the date on which a personal assessment is issued by the Commissioner pursuant to the election; or(b) within another period that the Commissioner considers reasonable in the circumstances. (Added 32 of 2018 s. 9)(3C) An election withdrawn under subsection (3A) is to be regarded as not having been made. (Added 32 of 2018 s. 9)(3D) An individual who has (or the individual and his or her spouse who have) withdrawn under subsection (3A) an election made for a year of assessment may not make an election again for that year of assessment, unless the Commissioner considers it appropriate to allow a re-election. (Added 32 of 2018 s. 9)(4) In this section—temporary resident (臨時居民) means an individual who stays in Hong Kong for a period or a number of periods amounting to more than 180 days during the year of assessment in respect of which the election is made or for a period or periods amounting to more than 300 days in 2 consecutive years of assessment one of which is the year of assessment in respect of which the election is made.(Amended 32 of 2018 s. 9)(Replaced 36 of 1955 s. 47. Amended 71 of 1983 s. 20; 7 of 1986 s. 12; 56 of 1993 s. 20; E.R. 1 of 2012) Editorial Note: * The amendments made by Part 2 of Ord. No. 32 of 2018 to this section apply in relation to all years of assessment commencing on or after 1 April 2018. (Please see 32 of 2018 s. 3) 42. Calculation of total income* (1) For the purposes of this Part the total income of an individual for any year of assessment shall be the aggregate of the following amounts— (Amended 30 of 2004 s. 3)(a) (i) (Repealed 56 of 1993 s. 21)(ii) in respect of the years of assessment commencing on or after 1 April 1983, the sum equivalent to the net assessable value as ascertained in accordance with sections 5(1A) and 5B: (Added 8 of 1983 s. 12) Provided that where an individual is a joint owner or co-owner of property, that individual’s share of the net assessable value shall be computed by apportioning the value ascertained in accordance with section 5(1A) or 5B— (a) in the case of joint ownership, between the joint owners equally; and (b) in the case of ownership in common, between the owners in common each in proportion to his share in such ownership; (Added 52 of 1993 s. 3) (b) the net assessable income of the individual for that year of assessment; and (Replaced 71 of 1983 s. 21)(c) subject to subsection (1A), the assessable profits of the individual for that year of assessment computed in accordance with Part 4: (Amended 32 of 1998 s. 27)(d) (Repealed 17 of 1989 s. 10)Provided that there shall be deducted from that part of the total income arising from paragraph (a) the amount of any interest payable on any money borrowed for the purpose of producing that part of the total income where the amount of such interest has not been allowed and deducted under Part 4. (Amended 17 of 1989 s. 10)(1A) For the purposes of subsection (1)(c), any assessable profits in respect of concessionary trading receipts shall be deemed to be the amount arrived at by dividing such assessable profits by the adjustment factor. (Added 32 of 1998 s. 27)(2) There shall be deducted from the total income of an individual for any year of assessment—(a) such deductions as are under Part 4A allowable to the individual; and (Replaced 31 of 1998 s. 18)(b) the amount of the individual’s loss or share of loss for that year of assessment computed in accordance with Part 4.(3)-(4) (Repealed 31 of 1998 s. 18)(5) (a) Where in any year of assessment the aggregate amount of the deductions under subsection (2)(a) and the loss under subsection (2)(b) for an individual exceeds the total income of the individual—(i) subject to subparagraph (ii), that part of the amount of such excess not exceeding the amount of the loss under subsection (2)(b) for the individual for that year of assessment shall be carried forward to be set off against the total income of the individual for future years of assessment;(ii) where the total incomes of the individual and his or her spouse are required to be aggregated under section 42A(1), the amount of such excess shall be reduced as far as can be done by being set off against the total income of his or her spouse for that year of assessment as reduced under subsection (2), and that part of the amount of such excess not exceeding the amount of the loss under subsection (2)(b) for the individual for that year of assessment which is not so reduced shall be carried forward to be set off against the total income of the individual for future years of assessment.(b) Where paragraph (a) does not apply and in any year of assessment the amount of the loss under subsection (2)(b) for an individual exceeds the total income of the individual—(i) subject to subparagraph (ii), the amount of such excess shall be carried forward to be set off against the total income of the individual for future years of assessment;(ii) where the total incomes of the individual and his or her spouse are required to be aggregated under section 42A(1), the amount of such excess shall be reduced as far as can be done by being set off against the total income of his or her spouse for that year of assessment as reduced under subsection (2), and that part of the amount of such excess which is not so reduced shall be carried forward to be set off against the total income of the individual for future years of assessment.(c) Where paragraphs (a) and (b) do not apply and in any year of assessment the amount of the deductions under subsection (2)(a) for an individual exceeds the total income of the individual—(i) subject to subparagraph (ii), the amount of such excess shall not be carried forward to be set off against the total income of the individual for future years of assessment;(ii) where the total incomes of the individual and his or her spouse are required to be aggregated under section 42A(1), the amount of such excess shall be reduced as far as can be done by being set off against the total income of his or her spouse for that year of assessment as reduced under subsection (2), and that part of the amount of such excess which is not so reduced shall not be carried forward to be set off against the total income of the individual for future years of assessment. (Replaced 31 of 1998 s. 18)(6) If—(a) an individual has income assessable under this Ordinance for a year of assessment;(b) the individual’s spouse does not have income assessable under this Ordinance for that year of assessment, but an amount of loss is carried forward from a previous year of assessment under this Part to that year of assessment;(c) the individual and the spouse would have been able to jointly make an election for personal assessment under section 41(1A) had the spouse had income assessable under this Ordinance; and(d) the individual has elected to be personally assessed under this Part,subsection (5)(a)(ii) and (b)(ii) applies in relation to the individual and the spouse as if their total income had been required to be aggregated under section 42A(1). (Replaced 32 of 2018 s. 10)(7) The amount of any excess set off under subsection (5) against an individual’s total income or that of the individual’s spouse for any year of assessment shall not be set off for any other year of assessment.(8)-(9) (Repealed 30 of 2004 s.

3)(10) Where an election is made by a husband and wife under section 41(1A) the total income (as reduced under subsections (2) and (5)) of each of them shall be separately calculated under this section before both incomes are aggregated under section 42A. (Replaced 43 of 1989 s. 13)(Replaced 7 of 1975 s. 30. Amended 71 of 1983 s. 21; 43 of 1989 s. 13; E.R. 1 of 2012; E.R. 2 of 2012) Editorial Note: * The amendment made by Part 2 of Ord. No. 32 of 2018 to this section applies in relation to all years of assessment commencing on or after 1 April 2018. (Please see 32 of 2018 s. 3) 42A. Assessment to tax (1) In giving effect to an election under section 41 the assessor shall make a single assessment—(a) in the sum of the total income, as reduced under section 42(2) and (5), of the individual making the election; or(b) in the case of an election under section 41(1A), in the sum of the joint total income resulting from the aggregation of the total income of the one spouse, as so reduced, with that of the other, as also so reduced,as reduced in each case by such of the allowances prescribed in Part 5 as may be appropriate.(2) In the case of an election under section 41(1A) by a husband and wife who married one another in the year of assessment to which the election relates, they shall be deemed for the purpose of ascertaining their joint total income under subsection (1)(b) to have married at the commencement of that year.(Replaced 43 of 1989 s. 14. Amended E.R. 1 of 2012) 42B. (Repealed 43 of 1989 s. 14) 43. Rates of charge (1) Tax shall be charged on the amount of the assessment referred to in section 42A(1) and at the rates specified in Schedule 2— (Amended L.N. 350 of 1990)(a) on the individual; or(b) in the case of a husband and wife making an election under section 41(1A) on both of them subject to apportionment in the manner prescribed by subsection (2B). (Replaced 43 of 1989 s. 15)(1A) Notwithstanding subsection (1), the amount of tax charged under that subsection shall not in any case exceed the amount which would have been chargeable had the standard rate been charged on the total income (as reduced under section 42(2) and (5)) or, as the case may be, the joint total income. (Added 65 of 1970 s. 8. Amended 7 of 1975 s. 32; 71 of 1983 s. 24)(1B) Notwithstanding subsections (1) and (1A), for the year of assessment commencing on 1 April 2006, the amount of tax charged under subsection (1) read together with subsection (1A) shall be reduced by an amount equivalent to—(a) 50% of the amount of the tax as computed under subsection (1) read together with subsection (1A); or(b) $15,000,whichever is the less. (Added 10 of 2007 s. 5)(2) Any property tax, any salaries tax and any profits tax paid under the provisions of Parts 2, 3 and 4 respectively shall, where the relevant amounts on which such taxes were calculated are included in the total income of the person who paid the tax, be set off for the purposes of collection against the tax charged under this Part on that person. (Replaced 26 of 1969 s. 26. Amended 8 of 1973 s. 11; 8 of 1983 s. 13; 71 of 1983 s. 24; 17 of 1989 s. 12; 43 of 1989 s. 15)(2A) (Repealed 17 of 1989 s. 12)(2B) Any tax chargeable on a husband and wife under subsection (1)(b) in any year of assessment (as reduced, for the year of assessment commencing on 1 April 2006, under subsection (1B)) shall be apportioned between them so that each spouse shall, in respect of that year, be charged such proportion of the tax as the total income of that spouse (as reduced under section 42(2) and (5)) bears to joint total income of the husband and wife. (Replaced 43 of 1989 s. 15. Amended 10 of 2007 s. 5)Provided that where an additional assessment is issued under section 60, the whole of the tax payable shall be charged on the individual assessed in respect of that income under Part 2, 3 or 4. (Added 52 of 1993 s. 4)(2C) (Repealed 43 of 1989 s. 15)(3) Where the aggregate of the taxes which may be set off under subsection (2) exceeds the amount of tax charged under this Part, the Commissioner shall, on receipt of a claim from the person charged in the specified form and on being satisfied that the claim is in order, refund such excess to that person. (Added 36 of 1955 s. 50. Amended 26 of 1969 s. 26; 39 of 1969 s. 8; 30 of 1981 s. 8; 71 of 1983 s. 24; 17 of 1989 s. 12; 43 of 1989 s. 15)(Amended E.R.1 of 2012) 43A. (Repealed 19 of 1991 s. 4) Part 8 Double Taxation Relief, Exchange of Information and Other International Tax Cooperation (Amended 49 of 1956 s. 32; 9 of 2013 s. 3; 5 of 2018 s. 3) 44. (Repealed 49 of 1956 s. 33) 45. (Repealed 32 of 1998 s. 28) 46. (Repealed 12 of 1999 s. 3) 47. (Repealed 49 of 1956 s. 35) 48. (Repealed 49 of 1956 s. 35) 48A. Interpretation of Part 8 In this Part—double taxation arrangements (雙重課稅安排) means arrangements that—(a) are made with the government of a territory outside Hong Kong with a view to affording relief from double taxation; and(b) have effect under section 49(1) or (1A);DTA territory (有安排地區) means a territory outside Hong Kong with which double taxation arrangements have been made;DTA territory resident person (有安排地區居民人士) means a person who is resident for tax purposes in a DTA territory;Hong Kong resident person (香港居民人士) means a person who is resident for tax purposes in Hong Kong;resident for tax purposes (稅務居民) in relation to any double taxation arrangements, has the meaning given by the provisions of the arrangements relating to the determination of resident status.(Added 27 of 2018 s. 5) 49. Arrangements: relief from double taxation, exchange of information and other international tax cooperation (Replaced 5 of 2018 s. 4)(1) If the Chief Executive in Council by order declares that arrangements specified in the order have been made with the government of any territory outside Hong Kong with a view to affording relief from double taxation in relation to income tax and any tax of a similar character imposed by the laws of that territory, and that it is expedient that those arrangements should have effect, the arrangements shall have effect in relation to tax under this Ordinance in accordance with subsection (1C) despite anything in any enactment. (Amended 7 of 1986 s. 12; 12 of 1999 s. 3; 1 of 2010 s. 3; 27 of 2018 s. 6)(1A) If the Chief Executive in Council by order declares that arrangements specified in the order have been made with the government of any territory outside Hong Kong, and that it is expedient that those arrangements should have effect, those arrangements shall have effect and, in particular— (Amended 7 of 2013 s. 4)(a) shall have effect in relation to tax under this Ordinance in accordance with subsection (1C) despite anything in any enactment; and (Amended 27 of 2018 s. 6)(b) for the purposes of any provision of those arrangements that requires disclosure of information concerning tax of that territory, shall have effect in relation to any tax of that territory that is the subject of that provision. (Added 1 of 2010 s. 3)(1AB) Arrangements that may be specified in an order under subsection (1A) include—(a) arrangements that are made with more than one government; and(b) arrangements that are made by the Central People’s Government and applied to Hong Kong. (Added 5 of 2018 s. 4)(1B) But only arrangements made for one or more of the following purposes may be specified in an order under subsection (1A)— (Amended 5 of 2018 s. 4)(a) affording relief from double taxation; (b) exchanging information in relation to any tax imposed by the laws of Hong Kong or any territory concerned; (Added 9 of 2013 s. 4. Amended 5 of 2018 s. 4)(c) implementing an initiative of international tax cooperation. (Added 5 of 2018 s. 4)(1C) Arrangements specified in an order made under subsection (1) or (1A) have effect despite any provision in any enactment so far as the arrangements provide for—(a) affording relief from tax charged under this Ordinance;(b) taxing income, profits or gains of DTA territory resident persons arising in, or derived from sources in, Hong Kong;(c) taxing chargeable gains accruing to DTA territory resident persons on the disposal of assets in Hong Kong;(d) determining income, profits or gains to be attributed to DTA territory resident persons;(e) determining income, profits or gains to be attributed to permanent establishments in Hong Kong of DTA territory resident persons; or(f) determining income, profits or gains to be attributed to Hong Kong resident persons who have special relationships with DTA territory resident persons. (Added 27 of 2018 s. 6)(1D) In subsection (1C)—permanent establishment (常設機構) has the meaning given by section 50AAC(5);special relationship (特殊關係) has the meaning given by subsection (1E). (Added 27 of 2018 s. 6)(1E) A person has a special relationship with another person—(a) if both persons are individuals and one of the persons is—(i) the other person’s spouse;(ii) a relative of the other person;(iii) a relative of the other person’s spouse; or(iv) the spouse of a person who falls within subparagraph (ii) or (iii); or(b) if—(i) one of the persons is not an individual or both persons are not individuals; and(ii) the 2 persons are in a relationship by virtue of which the participation condition is met under section 50AAG. (Added 27 of 2018 s. 6)(1F) In subsection (1E)—relative (親屬), in relation to a person, means the parent, child, brother or sister of the person, and, in deducing such a relationship—(a) an adopted child is regarded as a child of both the natural parents and the adopting parents; and(b) a step child is regarded as a child of both the natural parents and any step parent. (Added 27 of 2018 s. 6)(2) (Repealed 49 of 1956 s. 36)(3) (Repealed 32 of 1998 s. 29)(4) Any order made under this section may be revoked by a subsequent order.(5) Where any arrangements have effect by virtue of this section, the obligation as to secrecy imposed by section 4 shall not prevent the disclosure to any authorized officer of the government with which the arrangements are made of such information as is required to be disclosed under the arrangements.(6) The Chief Executive in Council may make rules for carrying out the provisions of any arrangements having effect under this section. (Amended 12 of 1999 s. 3)(7) Rules made under subsection (6) are subject to the approval of the Legislative Council. (Added 1 of 2010 s. 3)(Amended 49 of 1956 s. 36) 50. Tax credits under double taxation arrangements (Amended 17 of 2022 s. 5)(1) Subject to section 50AAAD, this section has effect if, under double taxation arrangements, tax payable in respect of any income in the DTA territory concerned is to be allowed as a credit against tax payable in respect of that income in Hong Kong. (Replaced 27 of 2018 s. 7. Amended 21 of 2025 s. 16)(1A) In this section—(a) foreign tax (外地稅款) means—(i) any tax—(A) that is payable in respect of any income in a DTA territory; and(B) that is, under the double taxation arrangements concerned, to be allowed as a credit against tax payable in respect of that income in Hong Kong; or(ii) any tax that would have been payable under the laws of a DTA territory but for relief—(A) given under the laws of the territory with a view to promoting investment or industrial, commercial, economic, scientific, educational or other development in the territory; and(B) provided for in the double taxation arrangements concerned;(b) tax (稅款), in relation to Hong Kong, means tax chargeable under this Ordinance, other than a top-up tax; and (Amended 21 of 2025 s. 16)(c) income (收入), in relation to a DTA territory, includes profits and gains within the meaning of the double taxation arrangements concerned. (Added 27 of 2018 s. 7)(1B) For the purposes of this section, foreign tax within the meaning of subsection (1A)(a)(ii) is treated as having been payable under the laws of the DTA territory concerned. (Added 27 of 2018 s. 7)(2) The amount of the tax chargeable in respect of the income shall be reduced by the amount of the credit: Provided that credit shall not be allowed against tax for any year of assessment unless the person entitled to the income is a Hong Kong resident person for that year. (Amended 7 of 1986 s. 12; 27 of 2018 s. 7) (3) The credit shall not exceed the amount which would be produced by computing the amount of the income in accordance with the provisions of this Ordinance and then charging it to tax at a rate ascertained by dividing the tax chargeable (before allowance of credit under any double taxation arrangements) on the total income of the person entitled to the income by the amount of his total income. (Amended 27 of 2018 s. 7)(4) Without prejudice to the provisions of subsection (3), the total credit to be allowed to a person for any year of assessment for foreign tax under all double taxation arrangements shall not exceed the total tax payable by him for that year of assessment. (Amended 17 of 1989 s. 13; 27 of 2018 s. 7)(5) In computing the amount of the income—(a) no deduction shall be allowed in respect of foreign tax (whether in respect of the same or any other income);(b) where the tax chargeable depends on the amount received in Hong Kong, the said amount shall be increased by the appropriate amount of the foreign tax in respect of the income; (Amended 7 of 1986 s. 12)(c) where the income includes a dividend and under the arrangements foreign tax not chargeable directly or by deduction in respect of dividend is to be taken into account in considering whether any, and if so what, credit is to be given against tax in respect of the dividend the amount of the income shall be increased by the amount of the foreign tax not so chargeable which falls to be taken into account in computing the amount of the credit,but notwithstanding anything in the preceding provisions of this subsection a deduction shall be allowed of any amount by which the foreign tax in respect of the income exceeds the credit therefor.(6) Subsection (5)(a) and (b) (but not the remainder thereof) shall apply to the computation of total income for the purposes of determining the rate mentioned in subsection (3), and shall apply thereto in relation to all income in the case of which credit falls to be given for foreign tax under double taxation arrangements for the time being in force. (Amended 27 of 2018 s. 7)(7) Subject to subsections (7A) and (7B), where— (Amended 17 of 2022 s. 5)(a) the arrangements provide, in relation to dividends of some classes, but not in relation to dividends of other classes, that foreign tax not chargeable directly or by deduction in respect of dividends is to be taken into account in considering whether any, and if so what, credit is to be given against tax in respect of the dividends; and(b) a dividend is paid which is not of a class in relation to which the arrangements so provide,then, if the dividend is paid to a company which controls, directly or indirectly not less than one-half of the voting power in the company paying the dividend, credit shall be allowed as if the dividend were a dividend of a class in relation to which the arrangements so provide.(7A) Subsection (7B) applies if the arrangements provide that where—(a) the income concerned is a dividend received by a Hong Kong resident person (subject person) from a company that is a DTA territory resident person (investee company); and(b) the dividend is paid out of the investee company’s profits,the tax payable in respect of the profits in the DTA territory concerned (underlying tax) is, subject to the satisfaction of any conditions or provisions stated in the arrangements, to be taken into account in determining the amount of credit and (if any) deduction to be allowed to the subject person in respect of the dividend. (Added 17 of 2022 s. 5)(7B) In determining the amount of credit and (if any) deduction to be allowed to the subject person in respect of the dividend, the underlying tax is to be taken into account in accordance with the arrangements. (Added 17 of 2022 s. 5)(8) Credit shall not be allowed under the arrangements against tax chargeable in respect of the income of any person for any year of assessment if he elects that credits shall not be allowed in the case of his income for that year.(9) A claim for an allowance by way of credit may only be made before—(a) the end of 6 years after the end of the year of assessment; or(b) the end of 6 months after the date on which an assessment is made imposing liability or additional liability to tax in respect of the income on which foreign tax has been assessed,whichever is the later. (Replaced 27 of 2018 s. 7)(9A) If a person makes a claim under subsection (9) for an allowance by way of credit and an assessor refuses to allow a credit pursuant to the claim, the assessor must give the person a written notice of the refusal and the person has the same rights of objection and appeal under Part 11 as if the notice were a notice of assessment. (Added 27 of 2018 s. 7)(10) (Repealed 27 of 2018 s. 7) 50AAA. Unilateral tax credits—no double taxation arrangements or specified DT arrangements made (1) Subject to section 50AAAD, this section applies if— (Amended 21 of 2025 s. 17)(a) no double taxation arrangements have been made with the government of a territory outside Hong Kong (subject territory); or(b) double taxation arrangements have been made with the government of the subject territory, but the arrangements do not incorporate any of the following articles and rules—(i) the exemption article;(ii) the credit article;(iii) any rules in the same or equivalent terms as those articles.(2) Section 50 applies in relation to any similar tax payable in the subject territory in respect of income specified in Part 2 of Schedule 54 (specified income) if the condition specified in that Part for the income is satisfied.(3) For the purposes of subsection (2), section 50 is to apply, with the modifications specified in Part 2 of Schedule 54 (if any) for applying that section in relation to the similar tax, as if—(a) where no double taxation arrangements have been made with the government of the subject territory—(i) double taxation arrangements containing the provisions specified in Part 2 of Schedule 54 for the similar tax (specified provisions) were made with the government of the subject territory; and(ii) the subject territory were a DTA territory; and(b) where double taxation arrangements have been made with the government of the subject territory, but the arrangements do not incorporate any of the articles and rules mentioned in subsection (1)(b)—further double taxation arrangements containing the specified provisions were made with the government of the subject territory.(4) The transitional arrangement specified in Part 2 of Schedule 54 for the specification of the specified income has effect.(5) Section 50AAAB applies in relation to any profits tax payable in Hong Kong in respect of any specified income that is a dividend as if—(a) specified DT arrangements (as defined by subsection (10) of that section) containing the specified provisions were made with the government of the subject territory; and(b) where the subject territory is not already a DTA territory—the territory were a DTA territory.(6) The Secretary for Financial Services and the Treasury may, by notice published in the Gazette, amend—(a) the definitions of the following expressions in subsection (7)—(i) Convention (《協定》);(ii) credit article (抵免條文);(iii) exemption article (豁免條文); and(b) Schedule 54.(7) In this section—Convention (《協定》) means the Model Tax Convention on Income and on Capital as approved by the Organisation for Economic Co-operation and Development on 21 November 2017;credit article (抵免條文) means the rules contained in Article 23B of the Convention;exemption article (豁免條文) means the rules contained in Article 23A of the Convention;similar tax (類似稅項), in relation to specified income, means—(a) a tax that is of substantially the same nature as the tax specified in Part 2 of Schedule 54 for the income; or(b) a foreign DMTT regarded as a similar tax for the purposes of this section under section 50AAAD(3). (Replaced 21 of 2025 s. 17)(Added 17 of 2022 s. 6) 50AAAB. Unilateral tax credits—no relief for underlying profits etc. under specified DT arrangements made (1) Subject to section 50AAAD, this section applies if— (Amended 21 of 2025 s. 18)(a) a Hong Kong resident person (subject person) receives a dividend (subject dividend) from a company that is a DTA territory resident person (subject company);(b) the subject dividend is paid out of the subject company’s profits (underlying profits);(c) when the subject dividend is distributed, the subject person has an adequate interest in the subject company; and(d) specified DT arrangements are made with the government of the DTA territory concerned.(2) Subsection (3) applies if, under the specified DT arrangements, no provision is made for a similar tax payable in the DTA territory in respect of the underlying profits (first-tier UP tax) to be allowed as a credit against profits tax payable in Hong Kong.(3) Subject to subsection (9), the first-tier UP tax is to be allowed under section 50(7B) as a credit against profits tax payable in Hong Kong by the subject person in respect of the subject dividend as if—(a) the specified DT arrangements contained a provision to that effect; and(b) in section 50(7B)—(i) the reference to “dividend” were a reference to the subject dividend;(ii) the reference to “underlying tax” were a reference to the first-tier UP tax; and(iii) the reference to “arrangements” were a reference to the specified DT arrangements.(4) Subsection (5) applies if—(a) the underlying profits consist wholly or partly of dividends (underlying dividends);(b) a similar tax (first-tier D tax) is payable in a territory outside Hong Kong in respect of the underlying dividends;(c) when the underlying dividends are distributed, the subject person has an adequate interest in the subject company; and(d) under the specified DT arrangements, no provision is made for the first-tier D tax to be allowed as a credit against profits tax payable in Hong Kong.(5) Subject to subsection (9), the first-tier D tax is to be allowed under section 50(7B) as a credit against profits tax payable in Hong Kong by the subject person in respect of the subject dividend as if—(a) the specified DT arrangements contained a provision to that effect; and(b) in section 50(7B)—(i) the reference to “dividend” were a reference to the subject dividend;(ii) the reference to “underlying tax” were a reference to the first-tier D tax; and(iii) the reference to “arrangements” were a reference to the specified DT arrangements.(6) Subsections (7) and (8) apply if—(a) the underlying dividends—(i) are paid out of the profits of a direct investee entity of the subject company; or(ii) are derived from the profits of an indirect investee entity of the subject company through another investee entity of the subject company; and(b) the subject person has an adequate interest in—(i) in the case of paragraph (a)(i)—that direct investee entity; or(ii) in the case of paragraph (a)(ii)—that indirect investee entity.(7) If—(a) a similar tax (downstream UP tax) is payable in a territory outside Hong Kong in respect of the profits mentioned in subsection (6)(a)(i) or (ii) (as the case requires); and(b) under the specified DT arrangements, no provision is made for the downstream UP tax to be allowed as a credit against profits tax payable in Hong Kong,subsection (3) applies to the downstream UP tax as if the references to the first-tier UP tax in subsection (3) were references to the downstream UP tax.(8) If—(a) the profits mentioned in subsection (6)(a)(i) or (ii) (as the case requires) consist wholly or partly of dividends (downstream dividends);(b) a similar tax (downstream D tax) is payable in a territory outside Hong Kong in respect of the downstream dividends; and(c) under the specified DT arrangements, no provision is made for the downstream D tax to be allowed as a credit against profits tax payable in Hong Kong,subsection (5) applies to the downstream D tax as if the references to the first-tier D tax in subsection (5) were references to the downstream D tax.(9) Any credit allowed under section 50 because of subsection (3) or (5) must represent the extent of—(a) the direct or indirect beneficial interest the subject person has in, or in relation to, the subject company or investee entity concerned (as the case requires); or(b) the voting rights the subject person is (whether directly or indirectly) entitled to exercise, or control the exercise of, in or in relation to the subject company or investee entity concerned (as the case requires),as ascertained when determining whether the subject person has an adequate interest in that company or investee entity.(10) In this section—adequate interest (足夠權益)—see section 50AAAC;direct investee entity (直接獲投資實體)—see section 15O(1);entity (實體) has the meaning given by section 15H(1);indirect investee entity (間接獲投資實體)—see section 15O(2);investee entity (獲投資實體), in relation to an entity, means a direct investee entity, or an indirect investee entity, of the entity;similar tax (類似稅項) means—(a) a similar tax as defined by section 16(2I)(b); or(b) a foreign DMTT regarded as a similar tax for the purposes of this section under section 50AAAD(3); (Replaced 21 of 2025 s. 18)specified DT arrangements (指明雙重課稅安排) means double taxation arrangements that incorporate—(a) the credit article or exemption article as defined by section 50AAA(7); or(b) any rules in the same or equivalent terms as those articles.(Added 17 of 2022 s. 6) 50AAAC. Supplementary provision to section 50AAAB: determining whether interest is adequate (1) A person (person A) has an adequate interest in another person (person B) if—(a) person A has at least 10% of direct or indirect beneficial interest in, or in relation to, person B; or(b) person A is, directly or indirectly, entitled to exercise, or control the exercise of, at least 10% of the voting rights in, or in relation to, person B.(2) In applying subsection (1), if person A has a direct beneficial interest in person B, the extent of the beneficial interest of person A in person B is—(a) if person B is a corporation that is not a trustee of a trust estate—the percentage of the issued share capital (however described) of the corporation held by person A;(b) if person B is a partnership that is not a trustee of a trust estate—the percentage of the income of the partnership to which person A is entitled;(c) if person B is a trustee of a trust estate—the percentage in value of the trust estate in which person A is interested; or(d) if person B is an entity that does not fall within any of paragraphs (a), (b) and (c)—the percentage of person A’s ownership interest in the entity.(3) In applying subsection (1), if person A has an indirect beneficial interest in, or is indirectly entitled to exercise or control the exercise of voting rights in, person B through another person (interposed person), the extent of the beneficial interest or voting rights of person A in person B is—(a) if there is only one interposed person—the percentage arrived at by multiplying the percentage representing the extent of the beneficial interest or voting rights of person A in the interposed person by the percentage representing the extent of the beneficial interest or voting rights of the interposed person in person B; or(b) if there is a series of 2, 3 or 4 interposed persons—the percentage arrived at by multiplying the percentage representing the extent of the beneficial interest or voting rights of person A in the first interposed person in the series by—(i) the percentage representing the extent of the beneficial interest or voting rights of each interposed person (other than the last interposed person) in the series in the next interposed person in the series; and(ii) the percentage representing the extent of the beneficial interest or voting rights of the last interposed person in the series in person B.(4) In applying subsection (1)—(a) any indirect beneficial interest person A has in, or in relation to, person B through a series of 5 or more persons; and(b) any voting rights person A is indirectly entitled to exercise, or control the exercise of, in or in relation to person B through a series of 5 or more persons,are not to be taken into account.(5) For the purposes of subsection (3)—(a) subsection (2) applies in determining the extent of the beneficial interest of person A in an interposed person as if the references to person B in subsection (2) were references to an interposed person;(b) subsection (2) applies in determining the extent of the beneficial interest of an interposed person in person B as if the references to person A in subsection (2) were references to an interposed person; and(c) subsection (2) applies in determining the extent of the beneficial interest of an interposed person (interposed person X) in another interposed person (interposed person Y) as if—(i) the references to person A in subsection (2) were references to interposed person X; and(ii) the references to person B in subsection (2) were references to interposed person Y.(6) In applying subsection (1)(b), the voting rights attributed to person A include all the voting rights of persons other than person A so far as they are required, or may be required, to be exercised in one or more of the following ways—(a) on behalf of person A;(b) under the direction of person A;(c) for the benefit of person A.(7) For the purposes of this section, if—(a) a reference is made to the exercise of the voting rights in a person; and(b) the person is a corporation,the reference is to be read as a reference to the exercise of the voting rights at general meetings of the person.(Added 17 of 2022 s. 6) 50AAAD. Tax credits denied, or allowed, for certain foreign top-up taxes (1) Neither a foreign IIR top-up tax, nor a foreign UTPR top-up tax, is to be allowed as a credit against tax payable in Hong Kong under section 50 (including that section as applied by section 50AAA or 50AAAB).(2) A foreign DMTT is to be allowed as a credit against tax payable in Hong Kong under section 50 only to the extent to which the foreign DMTT is—(a) a QDMTT payable in a territory in respect of income of a permanent establishment in that territory; or(b) a QDMTT payable in a case described in section 50(5)(c), (7)(a) or (7A) by a company in respect of the profits out of which it pays the dividend.(3) A foreign DMTT is to be regarded as a similar tax, for the purposes of sections 50AAA and 50AAAB, to the extent to which the foreign DMTT is—(a) a QDMTT payable in a territory in respect of income of a permanent establishment in that territory;(b) a QDMTT payable in the case described in section 2(3)(b) of Schedule 54 by the investee company in respect of the profits out of which it pays the dividend; or(c) a QDMTT payable—(i) in the case described in section 50AAAB(2) by the subject company in respect of the profits out of which it pays the subject dividend; or(ii) in the case described in subsection (7) of section 50AAAB in respect of the profits mentioned in subsection (6)(a)(i) or (ii) (as the case requires) of that section.(Added 21 of 2025 s. 19) 50AA. General provisions on relief from double taxation (1) This section applies if, in respect of tax (foreign tax) on any income, profits or gains (relevant income) payable in a territory from where the relevant income was received or receivable by a person (source jurisdiction), the person is entitled to any of the following relief (each of which is referred to in this section as relief from double taxation)— (Amended 18 of 2021 s. 15)(a) relief under section 8(1A)(c) by way of exclusion of any amount of the relevant income;(b) relief under section 16(1)(c) or (ca) by way of deduction of any amount of the foreign tax;(c) relief under section 50 by way of credit and deduction of any amount of the foreign tax.(2) Subject to subsection (2A), the amount of any relief from double taxation granted must not exceed the amount of the relief that would be granted had all foreign tax minimization steps been taken.(2A) In relation to relief under section 16(1)(c) and (ca), if the foreign tax is paid by a person who is not a Hong Kong resident person, the amount of any relief from double taxation granted must not exceed the difference between the following amounts—(a) the amount of tax paid in the source jurisdiction had all foreign tax minimization steps been taken in the source jurisdiction;(b) the amount of foreign tax paid for which the person is entitled to utilize for claiming relief (whether by deduction or otherwise) in the territory of which the person is a resident person (jurisdiction of residence) had all foreign tax minimization steps been taken in the jurisdiction of residence. (Added 18 of 2021 s. 15)(3) For the purposes of subsections (2) and (2A)(a)— (Amended 18 of 2021 s. 15)(a) all foreign tax minimization steps are taken only if all reasonable steps are taken under—(i) the laws of the source jurisdiction; and(ii) if subsection (1)(c) applies—the double taxation arrangements made with the source jurisdiction,to minimize the amount of foreign tax payable in the source jurisdiction in respect of the relevant income; and(b) the reasonable steps mentioned in paragraph (a) include—(i) claiming, or otherwise securing the benefit of, relief, deductions, reductions or allowances; and(ii) making elections for tax purposes.(3A) For the purposes of subsection (2A)(b)—(a) all foreign tax minimization steps are taken only if all reasonable steps are taken under—(i) the laws of the jurisdiction of residence;(ii) the arrangements made between the jurisdiction of residence and the source jurisdiction with a view to affording relief from double taxation (if any); and(iii) the double taxation arrangements made with the jurisdiction of residence (if any),to minimize the amount of tax payable in the jurisdiction of residence; and(b) the reasonable steps mentioned in paragraph (a) include—(i) claiming, or otherwise securing the benefit of, relief, deductions, reductions or allowances; and(ii) making elections for tax purposes. (Added 18 of 2021 s. 15)(4) For the purposes of subsections (2), (2A), (3) and (3A), a question as to the steps which it would have been reasonable for a person to take is to be determined on the basis of what the person might reasonably be expected to have done in the absence of the relief from double taxation.(5) If—(a) relief from double taxation has been granted to a person; and(b) subsequently, the amount of the relief becomes excessive as a result of an adjustment to the amount of the foreign tax under the laws of the source jurisdiction,the person must give the Commissioner written notice of the adjustment within 3 months after the adjustment is made.(6) If the amount of the relief from double taxation becomes excessive or insufficient by reason of an adjustment to the amount of the foreign tax or tax payable in Hong Kong, an assessment, additional assessment or claim to which the adjustment gives rise may be made before—(a) the end of 2 years from the time when all assessments, adjustments and other determinations have been made, whether in the source jurisdiction or in Hong Kong, that are material in determining whether any, and if so what, relief is to be granted; or(b) the expiry of the time limit for making an assessment, additional assessment or claim for relief under this Ordinance,whichever is the later.(7) The amendments made to this section by the Inland Revenue (Amendment) (Miscellaneous Provisions) Ordinance 2021 (18 of 2021) apply only in relation to a year of assessment beginning on or after 1 April 2021. (Added 18 of 2021 s. 15)(Added 27 of 2018 s. 8. Amended 18 of 2021 s. 15) 50AAB. Mutual agreement procedure and arbitration under double taxation arrangements (1) This section applies if a person (taxpayer) presents a case for mutual agreement procedure under double taxation arrangements made in relation to a DTA territory, with or without an issue in the case also being referred for arbitration under the arrangements.(2) The Commissioner may give a notice to the taxpayer requiring the taxpayer to provide information regarding the case that is in the possession, custody or control of the taxpayer.(3) The Commissioner may request the taxpayer—(a) to pay any costs and reasonable expenses incurred by the Commissioner in relation to the mutual agreement procedure and, if an issue in the case is further referred for arbitration, in relation to the arbitration; or(b) to reimburse the Commissioner for the costs and expenses.(4) Any amount payable or reimbursable under subsection (3) is recoverable as a civil debt due to the Government.(5) Subsection (6) applies if, for a case presented for mutual agreement procedure—(a) the Commissioner arrives at a solution unilaterally;(b) the competent authorities of Hong Kong and the DTA territory reach a mutual agreement; or(c) after the case or an issue in the case is referred for arbitration—(i) a solution is arrived at by the Commissioner unilaterally, or a mutual agreement is reached between the competent authorities of Hong Kong and the DTA territory, before a decision is delivered by the arbitrators; or(ii) a decision is delivered by the arbitrators.(6) The Commissioner must give effect to the solution, agreement or decision (MAP solution) by making any adjustment (other than in relation to any additional tax, fines and penalties imposed under Part 14) that is appropriate as a result of the MAP solution, despite any provision in this Ordinance.(7) If the Commissioner considers it appropriate to do so having regard to a MAP solution, the Commissioner may adjust any additional tax imposed under Part 14 unless the Board of Review or the court has delivered a decision, opinion, determination or direction in respect of the assessment of the additional tax.(8) The Commissioner may decide the way in which an adjustment under subsection (6) or (7) is to be made, including by way of discharge or repayment of tax, the allowance of credit against tax payable in Hong Kong, or the making of an assessment.(9) In this section—arbitrator (仲裁員) means a person who is appointed by mutual agreement between the competent authorities of Hong Kong and the DTA territory concerned to conduct arbitration;competent authority (主管當局) has the meaning given by the double taxation arrangements concerned.(Added 27 of 2018 s. 8) Part 8AA Transfer Pricing Rules, Relief and Advance Pricing Arrangement (Part 8AA added 27 of 2018 s. 9) Note (with no legislative effect) providing an overview of Part 8AA— 1. Apart from defining relevant terms, Division 1 applies Part 8AA to determining property tax, salaries tax and profits tax and requires the Part to be read in a way that best secures consistency between its effect and the effect given to Articles 7 and 9 of the Model Tax Convention on Income and on Capital approved by the Organisation for Economic Co-operation and Development. The expression provision is broadly equivalent to the expression condition made or imposed in Article 9. 2. Division 2 incorporates the international transfer pricing rules and has the following effect—(a) in relation to a year of assessment beginning on or after 1 April 2018—(i) a person’s tax liability under this Ordinance is to be determined on the basis that a provision made or imposed between the person and the person’s associated person is made or imposed on an arm’s length basis;(ii) in other words, a person who would have a Hong Kong tax advantage if taxed on the basis of a non-arm’s length provision (advantaged person) will have income adjusted upwards or loss adjusted downwards;(b) similarly, in relation to a year of assessment beginning on or after 1 April 2019, the income or loss of a non-Hong Kong resident person attributable to the person’s permanent establishment in Hong Kong is to be determined as if the permanent establishment were a distinct and separate enterprise. 3. The arm’s length provision is to be determined in accordance with the OECD rules (as defined by section 50AAC(1)). It is possible that application of the OECD rules may not produce a single provision (such as an exact figure as the price) but may produce a range of provisions where each provision constitutes an arm’s length provision. 4. Division 3 provides that, after adjustment to tax assessment is made on the advantaged person to reflect the arm’s length provision, corresponding relief may be applied for by the disadvantaged person (that is, the person who would suffer a tax disadvantage if taxed on the basis of the non-arm’s length provision) to avoid double taxation. Similar relief applies in relation to transactions between parts of the same enterprise in different territories. 5. Under Division 4, a person and the Commissioner may, by an advance pricing arrangement, agree in advance on a method for resolving issues arising from Division 2. Division 1 Preliminary 50AAC. Interpretation of Part 8AA (1) In this Part— actual provision (實際條款)— (a) except in relation to section 50AAN, has the meaning given by section 50AAF(1); and (b) in relation to section 50AAN, has the meaning given by section 50AAN(1); advance pricing arrangement (預先定價安排) has the meaning given by section 50AAP(1); affected person (當事人)— (a) except in relation to section 50AAN, has the meaning given by section 50AAF(1); and (b) in relation to section 50AAN, has the meaning given by section 50AAN(1); arm’s length provision (獨立交易條款)— (a) except in relation to section 50AAN, has the meaning given by section 50AAF(1); and (b) in relation to section 50AAN, has the meaning given by section 50AAN(1); associated enterprise (相聯企業) has the meaning given by subsection (3)(a);associated enterprises article (相聯企業條文) means the rules contained in Article 9 of the Model Tax Convention;associated person (相聯人士) has the meaning given by subsection (3)(a);business (業務) has the meaning given by section 2(1) and includes the performance of professional services and of other activities of an independent character;business profits article (營業利潤條文) means the rules contained in Article 7 of the Model Tax Convention; double taxation arrangements (雙重課稅安排)— (a) in relation to the computation of income or loss with respect to a provision made or imposed between 2 persons by means of a transaction or series of transactions—means double taxation arrangements (as defined by section 48A) that incorporate—(i) the associated enterprises article and the mutual agreement procedure article; or(ii) any rules in the same or equivalent terms as those articles; (b) in relation to the attribution of a person’s income or loss to the person’s permanent establishment in Hong Kong—means double taxation arrangements (as defined by section 48A) that incorporate—(i) the business profits article and the mutual agreement procedure article; or(ii) any rules in the same or equivalent terms as those articles; or (c) in relation to the determination of the question whether a person has a permanent establishment in Hong Kong—means double taxation arrangements (as defined by section 48A) that incorporate—(i) the permanent establishment article; or(ii) any rules in the same or equivalent terms as the article; DTA territory (有安排地區) means a territory outside Hong Kong with which double taxation arrangements have been made;DTA territory resident person (有安排地區居民人士) means a person who is resident for tax purposes in a DTA territory;enterprise (企業) means a person who carries on a trade, profession or business; foreign tax (外地稅項) means any tax (other than a foreign IIR top-up tax, a foreign UTPR top-up tax or a foreign DMTT) that is— (Amended 21 of 2025 s. 20) (a) chargeable in a territory outside Hong Kong; and (b) of substantially the same nature as Hong Kong tax; Hong Kong resident person (香港居民人士) means a person who is resident for tax purposes in Hong Kong;Hong Kong tax (香港稅項) means any tax imposed by this Ordinance other than a top-up tax or an additional tax charged under section 82A; (Amended 21 of 2025 s. 20)income (收入) includes profits or gains;independent enterprise (獨立企業) has the meaning given by subsection (3)(b);independent person (獨立人士) has the meaning given by subsection (3)(b);mutual agreement procedure article (相互協商程序條文) means the rules contained in Article 25 of the Model Tax Convention;non-DTA territory (無安排地區) means a territory outside Hong Kong that is not a DTA territory;non-DTA territory resident person (無安排地區居民人士) means a person who is resident for tax purposes in a non-DTA territory;non-Hong Kong resident person (非香港居民人士) means a person who is not a Hong Kong resident person; OECD rules (《經合組織規則》) means— (a) the commentary on the associated enterprises article or the business profits article (as the case requires); and (b) the Transfer Pricing Guidelines for Multinational Enterprises and Tax Administrations published by the Organisation for Economic Co-operation and Development on 20 January 2022; (Amended 21 of 2025 s. 20) permanent establishment (常設機構) has the meaning given by subsection (5);permanent establishment article (常設機構條文) means the rules contained in Article 5 of the Model Tax Convention;potential advantage (潛在利益) has the meaning given by section 50AAJ; recognized pension fund (認可退休基金), in relation to a territory, means an entity or arrangement established in the territory— (a) that is treated as a separate person under the taxation laws of the territory; and (b) either—(i) that is established and operated exclusively or almost exclusively to administer or provide retirement benefits and ancillary or incidental benefits to individuals and that is regulated as such by the territory or one of its political subdivisions or local authorities; or(ii) that is established and operated exclusively or almost exclusively to invest funds for the benefit of entities or arrangements that meet the description in subparagraph (i); resident for tax purposes (稅務居民)— (a) in relation to Hong Kong, means—(i) an individual who ordinarily resides in Hong Kong;(ii) an individual who stays in Hong Kong—(A) for a period or a number of periods amounting to more than 180 days during a year of assessment; or(B) for a period or a number of periods amounting to more than 300 days in 2 consecutive years of assessment if one of the years is the year of assessment concerned;(iii) a company incorporated in Hong Kong or, if incorporated outside Hong Kong, normally managed or controlled in Hong Kong;(iv) a recognized pension fund of Hong Kong; or(v) any other person, or a trust, constituted under the laws of Hong Kong or, if otherwise constituted, normally managed or controlled in Hong Kong; (b) in relation to a DTA territory, has the meaning given by the provisions relating to the determination of resident status under the double taxation arrangements concerned; (c) in relation to a non-DTA territory—(i) means a person who, under the laws of the territory, is liable to tax in the territory by reason of the person’s domicile, residence, place of management or any other criterion of a similar nature; and(ii) includes the territory, the government of the territory and any political subdivision and local authority of the territory as well as a recognized pension fund of the territory;

transaction (交易) and series of transaction (一系列交易) have the meanings given by section 50AAI.(2) For the purposes of the definitions of associated enterprises article, business profits article, mutual agreement procedure article, OECD rules and permanent establishment article in subsection (1)—(a) a reference to an article of the Model Tax Convention means the article of the Model Tax Convention on Income and on Capital as approved by the Organisation for Economic Co-operation and Development on 21 November 2017; and(b) a reference to the commentary on the associated enterprises article or the business profits article means the commentary on the article so approved on that date.(3) For the purposes of this Part—(a) a person is taken to be associated with another person if, as between them, the participation condition is met under section 50AAG; and a reference to associated person or associated enterprise is to be read accordingly; and(b) a person is taken to be independent of another person if, as between them, the participation condition is not met under section 50AAG; and a reference to independent person or independent enterprise is to be read accordingly.(4) In this Part—(a) an income means a positive or nil amount of income;(b) a loss means a positive or nil amount of loss;(c) a nil amount of income is a smaller amount of income than any other amount of income; and a reference to larger amount of income is to be read accordingly; and(d) a nil amount of loss is a smaller amount of loss than any other amount of loss; and a reference to a larger amount of loss is to be read accordingly.(5) For the purposes of this Part—(a) Schedule 17G has effect for determining whether a non-Hong Kong resident person has a permanent establishment in Hong Kong; and(b) a reference to a permanent establishment in Hong Kong, in relation to a non-Hong Kong resident person, is to be read accordingly.(6) The Secretary for Financial Services and the Treasury may, by notice published in the Gazette, amend—(a) the definitions of the following expressions in subsection (1)— associated enterprises article (相聯企業條文); business profits article (營業利潤條文); mutual agreement procedure article (相互協商程序條文); OECD rules (《經合組織規則》); permanent establishment article (常設機構條文); (b) subsection (2); and(c) Schedule 17G. 50AAD. Application of Part 8AA (1) This Part applies in determining a person’s liability for property tax, salaries tax and profits tax.(2) In so far as this Part relates to a provision made or imposed as between 2 persons by means of a transaction or series of transactions, subsection (1) has effect—(a) regardless of whether either person is, or both persons are, chargeable to foreign tax; and(b) if either person is, or both persons are, chargeable to foreign tax—regardless of whether the foreign tax is chargeable in a DTA territory.(3) In so far as this Part relates to a non-Hong Kong resident person who has a permanent establishment in Hong Kong, subsection (1) has effect—(a) regardless of whether the person is chargeable to foreign tax in respect of income attributable to the permanent establishment or of other income; and(b) if the person is so chargeable to foreign tax—regardless of whether the foreign tax is chargeable in a DTA territory.(4) Subsections (2) and (3) do not apply to sections 50AAN and 50AAO. 50AAE. Consistency with OECD rules This Part is to be read in the way that best secures—(a) consistency between—(i) the effect given to sections 50AAF, 50AAG, 50AAM and 50AAN; and(ii) the effect that, in accordance with the OECD rules, is to be given to double taxation arrangements that incorporate the associated enterprises article or any rules in the same or equivalent terms as that article; and(b) consistency between—(i) the effect given to sections 50AAK and 50AAO; and(ii) the effect that, in accordance with the OECD rules, is to be given to double taxation arrangements that incorporate the business profits article or any rules in the same or equivalent terms as that article. Division 2 Computation of Income or Loss Subdivision 1 Provision between Associated Persons 50AAF. Rule 1: Arm’s length principle for provision between associated persons (1) If the following circumstances happen—(a) a provision (actual provision) has been made or imposed as between 2 persons (each an affected person) by means of a transaction or series of transactions;(b) the participation condition is met under section 50AAG;(c) the actual provision differs from the provision that would have been made or imposed as between independent persons (arm’s length provision); and(d) the actual provision confers a potential advantage in relation to Hong Kong tax on an affected person (advantaged person),then, for the purposes of Hong Kong tax, the advantaged person’s income or loss is to be computed as if the arm’s length provision had been made or imposed instead of the actual provision. (The amount of income or loss computed in accordance with this subsection is referred to as the arm’s length amount.)(2) The cases in which a provision made or imposed as between 2 persons is to be taken to differ from the provision that would have been made or imposed as between independent persons include a case in which provision is made or imposed as between 2 persons but no provision would have been made or imposed as between independent persons. References in this Part to arm’s length provision are to be read accordingly.(3) An assessor may give a notice to the advantaged person requiring the person to prove, within a reasonable time stated in the notice and to the assessor’s satisfaction, that the amount of the person’s income or loss as stated in the person’s tax return is the arm’s length amount.(4) A notice may be given under subsection (3) whether or not any assessment has already been made on, or any computation of loss has already been issued in respect of, the advantaged person.(5) If the advantaged person fails to prove to the assessor’s satisfaction that the amount of the person’s income or loss as stated in the person’s tax return is the arm’s length amount, the assessor must estimate an amount as the arm’s length amount and, taking into account the estimated amount—(a) make an assessment or additional assessment on the person; or(b) issue a computation of loss, or revise a computation of loss resulting in a smaller amount of computed loss, in respect of the person.(6) For all purposes of this Ordinance, the estimated amount under subsection (5) is taken to be the arm’s length amount unless the advantaged person proves that another amount is an equally reliable measure, or a more reliable measure, of the arm’s length amount.(7) Subsections (1) to (6) do not apply in relation to a provision made or imposed in relation to any disposal or acquisition of trading stock if section 15BA(4) or (5) applies in relation to the disposal or acquisition.(8) Subsections (1) to (6) do not apply in relation to a provision made or imposed in relation to any trading stock if section 15C applies in relation to the trading stock. 50AAG. Interpretation: participation condition As between affected persons, the participation condition is met if, at the time of the making or imposition of the actual provision—(a) one of the affected persons was participating in the management, control or capital of the other affected person within the meaning of section 50AAH; or(b) the same person or persons was or were participating in the management, control or capital of each of the affected persons within the meaning of section 50AAH. 50AAH. Interpretation: participation (1) A person (person A) is participating in the management, control or capital of another person (person B) at a particular time only if, at that time, person B is—(a) a corporation, partnership, trustee (whether incorporated or unincorporated) or a body of persons; and(b) controlled by person A.(2) For the purposes of subsection (1)(b), person B is controlled by person A if—(a) person A has the power to secure that the affairs of person B are conducted in accordance with the wishes of person A—(i) because person A has more than half of the direct or indirect beneficial interest in or in relation to person B or any other corporation, partnership, trustee (whether incorporated or unincorporated) or a body of persons;(ii) because person A is, directly or indirectly, entitled to exercise or control the exercise of more than half of the voting rights in or in relation to person B or any other corporation, partnership, trustee (whether incorporated or unincorporated) or a body of persons; or(iii) because of powers conferred on person A by the constitutional document regulating person B or any other corporation, partnership, trustee (whether incorporated or unincorporated) or a body of persons; or(b) person B is accustomed or under an obligation (whether express or implied, and whether or not enforceable or intended to be enforceable by legal proceedings) to act, in relation to person B’s investment or business affairs, in accordance with the directions, instructions or wishes of person A.(3) In applying subsection (2), if person A has a direct beneficial interest in person B, the extent of the beneficial interest of person A in person B is—(a) if person B is a corporation that is not a trustee of a trust estate—the percentage of the issued share capital (however described) of the corporation held by person A;(b) if person B is a partnership that is not a trustee of a trust estate—the percentage of the income of the partnership to which person A is entitled;(c) if person B is a trustee of a trust estate—the percentage in value of the trust estate in which person A is interested; or(d) if person B is an entity that does not fall within any of paragraphs (a), (b) and (c)—the percentage of person A’s ownership interest in the entity.(4) In applying subsection (2), if person A has an indirect beneficial interest in, or is indirectly entitled to exercise or control the exercise of voting rights in, person B through another person (interposed person), the extent of the beneficial interest or voting rights of person A in person B is—(a) if there is only one interposed person—the percentage arrived at by multiplying the percentage representing the extent of the beneficial interest or voting rights of person A in the interposed person by the percentage representing the extent of the beneficial interest or voting rights of the interposed person in person B; or(b) if there is a series of 2 or more interposed persons—the percentage arrived at by multiplying the percentage representing the extent of the beneficial interest or voting rights of person A in the first interposed person in the series by—(i) the percentage representing the extent of the beneficial interest or voting rights of each interposed person (other than the last interposed person) in the series in the next interposed person in the series; and(ii) the percentage representing the extent of the beneficial interest or voting rights of the last interposed person in the series in person B.(5) For the purposes of subsection (4)—(a) subsection (3) applies in determining the extent of the beneficial interest of person A in an interposed person as if references to person B in subsection (3) were references to an interposed person;(b) subsection (3) applies in determining the extent of the beneficial interest of an interposed person in person B as if references to person A in subsection (3) were references to an interposed person; and(c) subsection (3) applies in determining the extent of the beneficial interest of an interposed person (interposed person X) in another interposed person (interposed person Y) as if—(i) references to person A in subsection (3) were references to interposed person X; and(ii) references to person B in subsection (3) were references to interposed person Y.(6) In applying subsections (1) and (2), the rights and powers attributed to person A include all the rights and powers of persons other than person A so far as they are required, or may be required, to be exercised in any one or more of the following ways—(a) on behalf of person A;(b) under the direction of person A;(c) for the benefit of person A.(7) For the purposes of this section, a reference to the exercise of the voting rights in a corporation is to be read as a reference to the exercise of the voting rights at general meetings of the corporation. 50AAI. Interpretation: transaction and series of transactions (1) In this Part, transaction includes any operation, scheme, arrangement, understanding and mutual practice (whether express or implied, and whether or not enforceable or intended to be enforceable by legal proceedings).(2) References in this Part to a series of transactions include a number of transactions each entered into (whether or not one after the other) in pursuance of, or in relation to, the same matter.(3) A series of transactions is not prevented from being regarded as a series of transactions by means of which a provision has been made or imposed as between any 2 persons, even if one or more of the following applies—(a) there is no transaction in the series to which both those persons are parties;(b) the parties to any arrangement or scheme in pursuance of which the transactions in the series are entered into do not include one or both of those persons;(c) there is one or more transactions in the series to which neither of those persons is a party. 50AAJ. Interpretation: potential advantage in relation to tax (1) An actual provision confers a potential advantage in relation to Hong Kong tax or foreign tax on a person if, disregarding this Division, making or imposing the actual provision, instead of the arm’s length provision, would in relation to Hong Kong tax or foreign tax (as the case requires) have either or both of the following effects—(a) a smaller amount would be taken to be the amount of the person’s income;(b) a larger amount would be taken to be the amount of the person’s loss.(2) Despite subsection (1), an actual provision made or imposed as between 2 persons is not taken to confer a potential advantage in relation to Hong Kong tax on either of the affected persons if—(a) the domestic nature condition is met as provided for in subsection (3);(b) either the no actual tax difference condition is met as provided for in subsection (5), or the non-business loan condition is met as provided for in subsection (6); and(c) the actual provision does not, under subsection (7), have a tax avoidance purpose.(3) The domestic nature condition is met—(a) if the actual provision is made or imposed in connection with each affected person’s trade, profession or business carried on in Hong Kong; or(b) if—(i) the actual provision is made or imposed in connection with either affected person’s trade, profession or business carried on in Hong Kong; and(ii) the other affected person is resident for tax purposes in Hong Kong and the provision is not made or imposed in connection with that other person’s trade, profession or business.(4) For the purposes of subsection (3), a trade, profession or business is not regarded as being carried on in Hong Kong by an affected person only because a sum received or receivable by or accrued to the person is deemed under section 15(1) to be a receipt arising in or derived from Hong Kong from a trade, profession or business carried on in Hong Kong.(5) The no actual tax difference condition is met if—(a) each affected person’s income arising from the relevant activities is chargeable to Hong Kong tax or each affected person’s loss so arising is allowable for the purposes of Hong Kong tax; and(b) no concession or exemption for Hong Kong tax applies to any affected person’s income or loss arising from the relevant activities.(6) The non-business loan condition is met if the actual provision relates to lending money otherwise than in the ordinary course of a business of lending money or an intra-group financing business (as defined by section 16(3)).(7) For the purposes of this section, an actual provision has a tax avoidance purpose if the Commissioner is satisfied that the main purpose, or one of the main purposes, of the provision is to utilize a loss sustained by an affected person to avoid, postpone or reduce any liability, whether of the other affected person or any other person, to Hong Kong tax.(8) In this section—relevant activities (有關活動) has the meaning given by section 50AAL. Subdivision 2 Permanent Establishment in Hong Kong 50AAK. Rule 2: Separate enterprises principle for attributing income or loss of non-Hong Kong resident person (1) Without limiting section 14, a non-Hong Kong resident person who has a permanent establishment in Hong Kong is regarded as carrying on a trade, profession or business in Hong Kong for the purposes of charging profits tax.(2) The income or loss of the person that is attributable to the permanent establishment of the person are those that the permanent establishment would have made in circumstances where it were a distinct and separate enterprise that—(a) engaged in the same or similar activities under the same or similar conditions; and(b) dealt wholly independently with the person.(The amount of income or loss of the person that is attributed to the permanent establishment in accordance with this subsection is referred to as the arm’s length amount.)(3) In applying subsection (2), account is to be taken of the functions performed, assets used and risk assumed by the person—(a) through the permanent establishment; and(b) through the other parts of the person.(4) In applying subsection (2), it is assumed that the permanent establishment—(a) has the same credit rating as the person; and(b) has the equity and loan capital that it could reasonably be expected to have in the circumstances set out in that subsection.(5) In applying subsection (2), transactions between the permanent establishment and any other part of the person are treated as taking place on the terms that would have been agreed between parties dealing at arm’s length.(6) No deduction is to be allowed for costs and expenses in excess of those that would have been incurred on the assumptions set out in subsection (4).(7) An assessor may give a notice to the person requiring the person to do the following within a reasonable time stated in the notice—(a) to state the amount of income or loss attributed to the permanent establishment that has been taken into account in the amount of the person’s income or loss as stated in the person’s tax return; and(b) to prove to the assessor’s satisfaction that the amount of income or loss so attributed is the arm’s length amount.(8) A notice may be given under subsection (7) whether or not any assessment has already been made on, or any computation of loss has already been issued in respect of, the person.(9) If the person fails to prove to the assessor’s satisfaction that the amount of income or loss attributed as mentioned in subsection (7)(a) is the arm’s length amount, the assessor must estimate an amount as the arm’s length amount and, taking into account the estimated amount—(a) make an assessment or additional assessment on the person; or(b) issue a computation of loss, or revise a computation of loss resulting in a smaller amount of computed loss, in respect of the person.(10) For all purposes of this Ordinance, the estimated amount under subsection (9) is taken to be the arm’s length amount unless the person proves that another amount is an equally reliable measure, or a more reliable measure, of the arm’s length amount. Division 3 Relief Consequential on Transfer Pricing Adjustment 50AAL. Interpretation: relevant activities (1) In this Division— relevant activities (有關活動), in relation to a person (person A) who is one of the persons as between whom any provision is made or imposed, means activities that— (a) are within subsection (2); and (b) are not within subsection (3). (2) The activities within this subsection are those of person A’s activities that comprise the activities in the course of which, or with respect to which, the provision is made or imposed.(3) The activities within this subsection are any of person A’s activities carried on—(a) separately from the activities mentioned in subsection (2); or(b) for the purposes of a different part of person A’s business. 50AAM. Corresponding relief not involving foreign tax (1) This section applies if, in the circumstances set out in section 50AAF(1)—(a) the affected person on whom a potential advantage in relation to Hong Kong tax is conferred by the actual provision (advantaged person) has income arising from the relevant activities assessed to, or has loss so arising computed for the purposes of, Hong Kong tax on the basis of the arm’s length provision; and(b) the other affected person (disadvantaged person) has income or loss arising from the relevant activities to be computed for the purposes of Hong Kong tax.(2) On a claim by the disadvantaged person, the disadvantaged person’s income or loss arising from the relevant activities is to be computed for the purposes of Hong Kong tax as if the arm’s length provision had been made or imposed instead of the actual provision. (The amount of income or loss computed in accordance with this subsection is referred to as the arm’s length amount.)(3) In applying subsection (2), the way in which the disadvantaged person’s income or loss is to be computed on the basis of the arm’s length provision must be consistent with the way in which the advantaged person’s income has been assessed, or the advantaged person’s loss has been computed, on that basis.(4) If—(a) the disadvantaged person makes a claim seeking to have its income or loss computed for the purposes of Hong Kong tax on the basis of the arm’s length provision under subsection (2); but(b) the disadvantaged person’s income has already been assessed to, or the disadvantaged person’s loss has already been computed for the purposes of, Hong Kong tax other than on that basis,an assessor must revise the assessment, or computation of loss, to reflect the arm’s length provision.(5) A claim under subsection (2) must be made in writing and may only be made before—(a) the end of 6 years after the end of the relevant year of assessment;(b) the end of 6 months after the date on which an assessment is made imposing liability or additional liability to Hong Kong tax on the advantaged person or the disadvantaged person taking into account the income or loss arising from the relevant activities; or(c) the end of 6 months after the date on which a computation of loss, or a revised computation of loss resulting in a smaller amount of computed loss, in respect of the relevant activities is issued to the advantaged person or disadvantaged person,whichever is the latest.(6) For the purposes of subsection (2) or (4), an assessor may give a notice to the disadvantaged person requiring the disadvantaged person to prove, within a reasonable time stated in the notice and to the assessor’s satisfaction, that the amount of the disadvantaged person’s income or loss as stated in the disadvantaged person’s claim under subsection (2) is the arm’s length amount.(7) A notice may be given under subsection (6) whether or not any assessment has already been made on, or any computation of loss has already been issued in respect of, the disadvantaged person.(8) If the disadvantaged person fails to prove to the assessor’s satisfaction that the amount of the disadvantaged person’s income or loss as stated in the disadvantaged person’s claim is the arm’s length amount, the assessor may estimate an amount as the arm’s length amount and, taking into account the estimated amount—(a) make or revise an assessment on the disadvantaged person; or(b) issue or revise a computation of loss in respect of the disadvantaged person.(9) If an assessor refuses to revise the disadvantaged person’s assessment under subsection (4)—(a) the assessor must give a written notice of the refusal to the disadvantaged person; and(b) the disadvantaged person has the same rights of objection and appeal under Part 11 as if the notice of refusal were a notice of assessment.(10) For all purposes of this Ordinance, the estimated amount under subsection (8) is taken to be the arm’s length amount unless the disadvantaged person proves that another amount is an equally reliable measure, or a more reliable measure, of the arm’s length amount.(11) If an assessment on, or computation of loss in respect of, a disadvantaged person has been made, issued or revised under this section, the disadvantaged person must—(a) take reasonable steps to ensure the disadvantaged person has knowledge about any adjustment to the advantaged person’s assessed income or computed loss arising from the relevant activities (adjustment on advantaged person); and(b) give the Commissioner written notice of the adjustment on advantaged person within 3 months after the adjustment is made if the adjustment—(i) renders the disadvantaged person’s assessed income arising from the relevant activities insufficient for the purposes of Hong Kong tax; or(ii) renders the disadvantaged person’s computed loss arising from the relevant activities excessive for the purposes of Hong Kong tax.(12) Subject to subsection (13), the following may be made or issued after the adjustment on advantaged person is made—(a) a corresponding adjustment to the disadvantaged person’s assessed income or computed loss arising from the relevant activities;(b) an assessment or additional assessment on, or computation or revised computation of loss in respect of, the disadvantaged person to reflect the corresponding adjustment.(13) An adjustment to assessed income and an assessment or additional assessment made under subsection (12) may only be made before—(a) the end of 2 years from the time when the adjustment on advantaged person is made; or(b) the expiry of the time limit for making an assessment or additional assessment under this Ordinance,whichever is the later. 50AAN. Corresponding relief involving foreign tax: disadvantaged person (1) This section applies if—(a) a provision (actual provision) has been made or imposed as between 2 persons (each an affected person) by means of a transaction or series of transactions;(b) the participation condition is met under section 50AAG;(c) the actual provision differs from the provision that would have been made or imposed as between independent persons (arm’s length provision);(d) the actual provision confers a potential advantage in relation to foreign tax in a DTA territory on an affected person (advantaged person);(e) the advantaged person has income arising from the relevant activities assessed to, or has loss so arising computed for the purposes of, foreign tax in the DTA territory and the assessment or computation relates to determining what the arm’s length provision is; and(f) the other affected person (disadvantaged person) has income or loss arising from the relevant activities to be computed for the purposes of Hong Kong tax.(2) If—(a) a claim is made by the disadvantaged person pursuant to the provisions relating to mutual agreement procedure under the double taxation arrangements concerned; and(b) a MAP solution within the meaning of section 50AAB is arrived at and it includes a determination of what the arm’s length provision is (MAP arm’s length provision),the disadvantaged person’s income arising from the relevant activities is to be assessed to, or the disadvantaged person’s loss so arising is to be computed for the purposes of, Hong Kong tax as if the MAP arm’s length provision had been made or imposed instead of the actual provision.(3) If a disadvantaged person’s income or loss has been assessed or computed under subsection (2), the disadvantaged person must—(a) take reasonable steps to ensure the disadvantaged person has knowledge about any adjustment made after the date of the MAP solution to the advantaged person’s assessed income or computed loss for the purposes of foreign tax in the DTA territory (advantaged person’s foreign tax-related adjustment); and(b) give the Commissioner written notice of the advantaged person’s foreign tax-related adjustment within 3 months after the adjustment is made if—(i) the adjustment relates to a determination of the arm’s length provision (newly determined arm’s length provision); and(ii) computing the disadvantaged person’s income or loss for the purposes of Hong Kong tax on the basis of the newly determined arm’s length provision, instead of the MAP arm’s length provision, will result in—(A) a larger amount being computed as the disadvantaged person’s income arising from the relevant activities; or(B) a smaller amount being computed as the disadvantaged person’s loss arising from the relevant activities.(4) Subject to subsection (5), the following may be made or issued after the advantaged person’s foreign tax-related adjustment is made—(a) a corresponding adjustment to the disadvantaged person’s assessed income or computed loss arising from the relevant activities;(b) an assessment or additional assessment on, or computation or revised computation of loss in respect of, the disadvantaged person to reflect the corresponding adjustment.(5) An adjustment to assessed income and an assessment or additional assessment made under subsection (4) may only be made before—(a) the end of 2 years from the time when the advantaged person’s foreign tax-related adjustment is made; or(b) the expiry of the time limit for making an assessment or additional assessment under this Ordinance,whichever is the later. 50AAO. Corresponding relief involving foreign tax: non-Hong Kong resident person’s permanent establishment (1) This section applies if—(a) a non-Hong Kong resident person has income or loss, attributable to a permanent establishment in Hong Kong of the person, to be computed for the purposes of Hong Kong tax; and(b) the person’s income has been assessed to, or the person’s loss has been computed for the purposes of, foreign tax in a DTA territory and the assessment or computation relates to determining what amount of the person’s income or loss is attributable to the permanent establishment in Hong Kong.(2) If—(a) a claim is made by the person pursuant to the provisions relating to mutual agreement procedure under the double taxation arrangements concerned; and(b) a MAP solution within the meaning of section 50AAB is arrived at and it includes a determination of what amount of the person’s income or loss is attributable to the permanent establishment in Hong Kong (MAP attribution),the person’s income is to be assessed to, or the person’s loss is to be computed for the purposes of, Hong Kong tax in a way that is consistent with the MAP attribution.(3) If a non-Hong Kong resident person’s income or loss has been assessed or computed under subsection (2), the person must—(a) take reasonable steps to ensure the person has knowledge about any adjustment made after the date of the MAP solution to the person’s assessed income or computed loss for the purposes of foreign tax in the DTA territory (foreign tax-related adjustment); and(b) give the Commissioner written notice of the foreign tax-related adjustment within 3 months after the adjustment is made if—(i) the adjustment relates to a determination of the amount of the person’s income or loss attributable to the person’s permanent establishment in Hong Kong (newly determined attribution); and(ii) computing the person’s income or loss for the purposes of Hong Kong tax on the basis of the newly determined attribution, instead of the MAP attribution, will result in—(A) a larger amount of the person’s income being attributed to the person’s permanent establishment in Hong Kong; or(B) a smaller amount of the person’s loss being attributed to the person’s permanent establishment in Hong Kong.(4) Subject to subsection (5), the following may be made or issued after the foreign tax-related adjustment is made—(a) a corresponding adjustment to the person’s income or loss attributed to the person’s permanent establishment;(b) an assessment or additional assessment on, or computation or revised computation of loss in respect of, the person to reflect the corresponding adjustment.(5) An adjustment to assessed income and an assessment or additional assessment made under subsection (4) may only be made before—(a) the end of 2 years from the time when the foreign tax-related adjustment is made; or(b) the expiry of the time limit for making an assessment or additional assessment under this Ordinance,whichever is the later. Division 4 Advance Pricing Arrangement 50AAP. Advance pricing arrangement may be made (1) On application by a person and if the Commissioner considers appropriate, the Commissioner may make an arrangement (advance pricing arrangement) with the person relating to how the person’s income or loss is to be computed under section 50AAF or 50AAK for a fixed period of time.(2) The advance pricing arrangement must specify—(a) the name of the person to which the arrangement applies;(b) the transactions covered by the arrangement, if applicable;(c) the period covered by the arrangement;(d) the methodology as agreed between the Commissioner and the person for determining the income or loss of the person;(e) the critical assumptions on which the agreed methodology is based;(f) the person’s obligations under the arrangement, including obligations for providing reports on the matters, and at the intervals, as specified in the arrangement; and(g) any other terms as agreed between the Commissioner and the person.(3) The Commissioner may refuse to make an advance pricing arrangement—(a) if—(i) the arrangement is to apply to any provision made or imposed as between any persons any of whom (specified person)—(A) has income or loss to be computed for the purposes of Hong Kong tax; but(B) is not the person, or one of the persons, making the application for the arrangement; and(ii) the specified person fails or refuses to join in the application; or(b) if any fee payable under Schedule 17H for the application for the arrangement, or any deposit for the fee payable under that Schedule, is not paid.(4) Subsection (3) does not limit the grounds on which the Commissioner may refuse to make an advance pricing arrangement.(5) The Commissioner may make an advance pricing arrangement for a period that covers a period earlier than the date of the arrangement but—(a) liability for tax is not to be increased under this subsection after the expiry of the time limit for making an assessment or additional assessment under this Ordinance; and(b) liability for tax is not to be reduced under this subsection after the expiry of the latest of the time limits for raising an objection or applying for relief or revision of assessment (as applicable) under this Ordinance or any relevant double taxation arrangements. 50AAQ. Sections 50AAF and 50AAK to be applied in accordance with advance pricing arrangement (1) This section applies if—(a) an advance pricing arrangement has been made in respect of a person for a period specified in the arrangement (specified period); and(b) the person is required under this Ordinance to provide a return for a year of assessment (year of assessment) that includes all or part of the specified period.(2) The person must disclose in the return for the year of assessment—(a) the existence of the advance pricing arrangement;(b) whether or not the person has relied on the arrangement in preparing and providing the return; and(c) any material change to the facts and circumstances specified in the arrangement.(3) If the person has disclosed in the return for the year of assessment that the person has relied on the advance pricing arrangement in preparing and providing the return, then, subject to section 50AAR, the Commissioner is to apply sections 50AAF and 50AAK in relation to the person in accordance with the arrangement for the year of assessment.(4) The Commissioner may, if the Commissioner considers appropriate, apply the principles developed in an advance pricing arrangement to a period earlier than the date of the arrangement but—(a) liability for tax is not to be increased under this subsection after the expiry of the time limit for making an assessment or additional assessment under this Ordinance; and(b) liability for tax is not to be reduced under this subsection after the expiry of the latest of the time limits for raising an objection or applying for relief or revision of assessment (as applicable) under this Ordinance or any relevant double taxation arrangements. 50AAR. Advance pricing arrangement may be revoked, cancelled or revised (1) The Commissioner may revoke, cancel or revise an advance pricing arrangement made in respect of a person if—(a) any condition or critical assumption specified in the arrangement has not been met or is no longer met;(b) the person has failed to comply with the person’s obligations under the arrangement; or(c) in connection with the application pursuant to which the arrangement was made, the person is found to have—(i) made an incorrect statement;(ii) provided incorrect information; or(iii) omitted to make a statement or provide information,and the statement or information is material to the application.(2) If the Commissioner revokes an advance pricing arrangement, the arrangement is to be treated as having never been made.(3) If the Commissioner cancels an advance pricing arrangement, the arrangement is to cease to apply from a date that the Commissioner determines.(4) If the Commissioner revises an advance pricing arrangement, the revision is to take effect from a date that the Commissioner determines.(5) Any revocation, cancellation or revision of an advance pricing arrangement because of a matter referred to in subsection (1) does not affect any criminal liability that may arise in respect of the matter. 50AAS. Obligation to notify breach of critical assumption, etc. A person in respect of whom an advance pricing arrangement is made—(a) must notify the Commissioner of a breach of any critical assumption specified in the arrangement within a reasonable time after the breach; and(b) must provide the Commissioner from time to time with all reports and other information that the person may be required to provide under the arrangement. 50AAT. Record keeping A person in respect of whom an advance pricing arrangement is made for a period (specified period) must retain, for a period of not less than 7 years after the end of the specified period, all the records and data—(a) relied on in concluding the arrangement;(b) used in applying for the arrangement; and(c) referred to in any reports and other information provided to the Commissioner under the arrangement. 50AAU. Advance pricing arrangement and double taxation arrangements (1) If an advance pricing arrangement being applied for—(a) either—(i) is to cover a transaction in respect of which an applicant for the arrangement or an associated person of the applicant is likely to be liable to tax in a DTA territory; or(ii) relates to the attribution of income or loss to a permanent establishment in Hong Kong of an applicant for the arrangement and the applicant is likely to be liable to tax in a DTA territory; and(b) is relevant to the question how the applicant or the associated person is to be taxed (whether in Hong Kong or the territory) so as to accord with the double taxation arrangements concerned,the Commissioner may resolve the question with the competent authority of the territory through the mutual agreement procedure mentioned in section 50AAB before making the advance pricing arrangement.(2) If a mutual agreement referred to in section 50AAB is not consistent with the terms of an advance pricing arrangement already made, the Commissioner must revise the arrangement so far as may be necessary for enabling effect to be given to the mutual agreement in relation to the subject matter of the arrangement. 50AAV. Application for advance pricing arrangement and application fees (1) Schedule 17H provides for an application for an advance pricing arrangement and for fees payable for the application.(2) The Secretary for Financial Services and the Treasury may by order amend Schedule 17H. 50AAW. Protection of public officer No liability is to rest on the Government, the Commissioner or any other public officer in respect of the exercise of any power or performance of any duty in good faith in relation to an advance pricing arrangement or an application for the arrangement. Part 8A Returns by Reporting Financial Institutions (Part 8A added 22 of 2016 s. 4) 50A. Interpretation (1) In this Part— 2020-covered institution (2020年涵蓋機構) means a reporting financial institution that is— (a) a mandatory provident fund scheme registered under the Mandatory Provident Fund Schemes Ordinance (Cap. 485) (MPF scheme); (b) an occupational retirement scheme registered under the Occupational Retirement Schemes Ordinance (Cap. 426) (ORSO scheme); (c) a pooling agreement as defined by section 2(4) of the Occupational Retirement Schemes Ordinance (Cap. 426) that only applies to 2 or more participating ORSO schemes; (d) an approved pooled investment fund as defined by section 2 of the Mandatory Provident Fund Schemes (General) Regulation (Cap. 485 sub. leg. A), in which only either or both of the following schemes are invested—(i) MPF schemes;(ii) ORSO schemes; or (e) a credit union registered under the Credit Unions Ordinance (Cap. 119); (Added 6 of 2019 s. 5) account holder (帳户持有人), in relation to a financial account maintained by a financial institution— (a) subject to paragraphs (b) and (c), means the individual or entity listed or identified by the financial institution as the holder of the account; (b) if the account is held by an individual or entity, other than a financial institution, for the benefit or account of another individual or entity as an agent, custodian, nominee, signatory, investment advisor or intermediary, means that other individual or entity; (c) if the account is for a cash value insurance contract or an annuity contract that has yet to reach maturity, means—(i) the individual or entity that is entitled to access the cash value, or change the beneficiary, of the contract; or(ii) if there is no such individual or entity mentioned in subparagraph (i)—(A) the individual or entity named as the owner in the contract (if any); and(B) the individual or entity with a vested entitlement to payment under the terms of the contract (if any); or (d) if the account is for a cash value insurance contract or an annuity contract that has reached maturity, means the individual or entity that is entitled to receive a payment on the maturity; active NFE (主動非財務實體) means an NFE that falls within any of the following descriptions—(a) in terms of the NFE’s gross income and its assets—(i) for the calendar year or other appropriate reporting period preceding the year in which the determination as to whether the NFE is an active NFE is made, less than 50% of the NFE’s gross income is passive income; and(ii) less than 50% of the assets held by the NFE during that calendar year or period are assets that produce, or are held for the production of, passive income;(b) the stock of the NFE or the related entity of the NFE is regularly traded on an established securities market;(c) the NFE is—(i) a governmental entity;(ii) an international organization;(iii) a central bank; or(iv) an entity wholly owned by one or more of the entities mentioned in subparagraphs (i), (ii) and (iii);(d) the NFE does not function, or does not hold itself out, as an investment fund (including a private equity fund, venture capital fund, leveraged buyout fund, or any investment vehicle whose purpose is to acquire or fund companies, and then to hold interests in those companies as capital assets for investment purposes) and—(i) 80% or more of the activities of the NFE consist of holding, in whole or in part, the outstanding stock of, or providing financing and services to, one or more subsidiaries that engage in trades or businesses other than the business of a financial institution (holding or group finance activities); or(ii) if less than 80% of the activities of the NFE consist of the NFE’s holding or group finance activities, the sum of the NFE’s holding or group finance activities and the NFE’s other activities that generate income other than passive income constitute in total 80% or more of the activities of the NFE;(e) not more than 24 months have elapsed since the date of the incorporation, formation or constitution of the NFE and the NFE—(i) is not yet operating a business and has no prior operating history; and(ii) is investing capital into assets with the intent to operate a business other than that of a financial institution;(f) the NFE was not a financial institution in the past 5 years, and is in the process of—(i) liquidating its assets; or(ii) is reorganizing with the intent to continue or recommence operations in a business other than that of a financial institution;(g) the NFE falls within all of the following descriptions—(i) the NFE is primarily engaged in financing and hedging transactions with or for its related entities that are not financial institutions;(ii) the group of the related entities mentioned in subparagraph (i) is primarily engaged in a business other than that of a financial institution;(iii) the NFE does not provide financing or hedging services to any entity that is not its related entity;(h) the NFE falls within all of the following descriptions—(i) the NFE is established and operated in its jurisdiction of residence, and—(A) is established and operated exclusively for religious, charitable, scientific, artistic, cultural, athletic or educational purposes; or(B) is a professional organization, business league, chamber of commerce, labour organization, agricultural or horticultural organization, civic league or an organization operated exclusively for the promotion of social welfare;(ii) the NFE is exempt from income tax in its jurisdiction of residence;(iii) the NFE has no shareholders or members who have a proprietary or beneficial interest in its income or assets;(iv) the applicable laws of the NFE’s jurisdiction of residence or the NFE’s formation documents do not permit any income or assets of the NFE to be distributed to, or applied for the benefit of, a private person or non-charitable entity other than—(A) pursuant to the conduct of the NFE’s charitable activities;(B) as payment of reasonable compensation for services rendered; or(C) as payment representing the fair market value of a property which the NFE has purchased;(v) the applicable laws of the NFE’s jurisdiction of residence or the NFE’s formation documents require that, on the NFE’s liquidation or dissolution, all of its assets are to be distributed to a governmental entity or other non-profit organization, or be escheated to the government of that jurisdiction or any political subdivision of that government;Note—See also subsection (4).AML/KYC procedures (打擊洗錢暨認識客户程序) means the customer due diligence procedures required to be carried out by a reporting financial institution pursuant to any anti-money laundering requirements or similar requirements (including requirements to know a customer) to which the reporting financial institution is subject; annuity contract (年金合約)— (a) means a contract under which its issuer agrees to make payments for a period of time determined, in whole or in part, by reference to the life expectancy of one or more individuals;

and (b) includes a contract—(i) that is considered to be an annuity contract in accordance with the law, regulation or practice of the jurisdiction in which the contract was issued; and(ii) under which its issuer agrees to make payments for a term of years; (Replaced 5 of 2018 s. 5) calendar year (公曆年) means a year that begins on 1 January and ends on 31 December; cash value (現金值)— (a) means the greater of the following—(i) the amount that the policyholder of an insurance contract or annuity contract is entitled to receive on surrender or termination of the contract (determined without reduction for any surrender charge or policy loan);(ii) the amount that the policyholder can borrow under, or with regard to, the contract; but (Amended 5 of 2018 s. 5) (b) does not include an amount payable under an insurance contract—(i) solely because of the death of an individual insured under a life insurance contract;(ii) as a personal injury or sickness benefit or other benefit providing indemnification of an economic loss incurred on the occurrence of the event insured against;(iii) as a refund of a previously paid premium (less cost of insurance charges whether or not actually imposed) under an insurance contract (other than an investment-linked life insurance or annuity contract) due to cancellation or termination of the contract, decrease in risk exposure during the effective period of the contract, or arising from the correction of a posting or similar error with regard to the premium for the contract;(iv) as a policyholder dividend (other than a termination dividend) if the dividend relates to an insurance contract under which the only benefits payable are described in subparagraph (ii); or(v) as a return of an advance premium or premium deposit for an insurance contract for which the premium is payable at least annually if the returned amount of the advance premium or premium deposit does not exceed the next annual premium that will be payable under the contract; cash value insurance contract (現金值保險合約) means an insurance contract, other than an indemnity reinsurance contract between 2 insurance companies, that has a cash value;central bank (中央銀行) means an institution in a jurisdiction that is, by law or government sanction, the principal authority in the jurisdiction, other than the government of the jurisdiction itself, issuing instruments intended to circulate as currency, and includes an instrumentality that is separate from the government of the jurisdiction, whether or not owned, in whole or in part, by the government of the jurisdiction;controlled entity (受控制實體), in relation to a jurisdiction, means an entity that falls within all of the following descriptions—(a) the entity is separate in form from the jurisdiction or otherwise constitutes a separate juridical entity;(b) the entity is wholly owned and controlled by one or more governmental entities of the jurisdiction directly or through other controlled entities;(c) the entity’s net earnings are credited to its own account or to the accounts of other governmental entities of the jurisdiction, with no portion inuring to the benefit of any private person;(d) the entity’s assets are vested in other governmental entities of the jurisdiction on dissolution of the entity;Note—See also subsection (5). controlling person (控權人), in relation to an entity— (a) subject to paragraphs (b) and (c), means an individual who exercises control over the entity; (b) if the entity is a trust—(i) means an individual who is the settlor, trustee, protector (if any), enforcer (if any), or a beneficiary or a member of a class of beneficiaries, of the trust; or(ii) if the settlor, trustee, protector, enforcer, or the beneficiary or the member of the class of beneficiaries, of the trust is another entity, means an individual who exercises control over that other entity; or (c) if the entity is equivalent or similar to a trust (regardless of how the entity is described)—(i) means an individual who, in relation to the entity, is in a position similar to the settlor, trustee, protector (if any), enforcer (if any), or a beneficiary or a member of a class of beneficiaries, of a trust; or(ii) if, in relation to the entity, another entity is in a position similar to the settlor, trustee, protector (if any), enforcer (if any), or a beneficiary or a member of a class of beneficiaries, of a trust—means an individual who exercises control over that other entity; (Replaced 6 of 2019 s. 5) custodial account (託管帳户) means an account, other than an insurance contract or annuity contract, maintained by a financial institution to hold one or more financial assets for the benefit of an individual or entity;custodial institution (託管機構) means an entity that holds, as a substantial portion of its business, financial assets for the account of another individual or entity;Note—See also subsection (9). depository account (存款帳户) includes the following accounts maintained by a depository institution— (Amended 5 of 2018 s. 5) (a) a commercial, checking, savings, time and thrift account; (b) an account that is evidenced by a certificate of deposit, thrift certificate, investment certificate, certificate of indebtedness, or other similar instrument; and (c) an amount held by an insurance company to pay or credit interest pursuant to a guaranteed investment contract or similar agreement; depository institution (存款機構) means— (a) an authorized institution as defined by section 2(1) of the Banking Ordinance (Cap. 155); or (b) an entity that accepts deposits in the ordinary course of a banking business or similar business; entity (實體)—(a) means—(i) an entity, other than a natural person, that can establish a permanent customer relationship with a financial institution or otherwise own property; or(ii) a legal arrangement; and(b) includes a corporation, partnership and any other body of persons (incorporated or unincorporated) and a trust; Note without legislative effect— The definition of entity reflects the following— (a) under the Common Reporting Standard and the CRS publications (both expressions are defined in section 50L(4)), entity covers a legal person and a legal arrangement; and (b) under the FATF Recommendations (as defined in this section), legal person means an entity other than a natural person that can establish a permanent customer relationship with a financial institution or otherwise own property. (Replaced 6 of 2019 s. 5) equity interest (股權權益)—(a) in relation to a partnership that is a financial institution, means either a capital or profits interest in the partnership;(b) in relation to a trust that is a financial institution, means—(i) an interest held by a settlor or beneficiary of the whole, or any part, of the trust; or(ii) an interest held by an individual exercising ultimate control over the trust; or(c) in relation to a company or corporation that is a financial institution, means an ownership interest in the company or corporation;Note—See also subsection (10).established securities market (具規模證券市場) means an exchange—(a) that is officially recognized and supervised by a government authority of a territory in which the exchange is located; and(b) that has an annual value of shares traded on it (or on its predecessor) exceeding $7.8 billion during each of the 3 calendar years immediately preceding the calendar year in which the determination as to whether the exchange is an established securities market is made;Note—See also subsection (11).excluded account (豁除帳户) means an account that is described as an excluded account in Part 3 of Schedule 17C;FATF Recommendations (《財務行動特別組織的建議》) means the International Standards on Combating Money Laundering and the Financing of Terrorism & Proliferation—the FATF Recommendations, as adopted by the Financial Action Task Force Plenary in February 2012 incorporating updates made up to February 2018; (Added 6 of 2019 s. 5)financial account (財務帳户) means any of the following accounts maintained by a financial institution—(a) a custodial account;(b) a depository account;(c) (if the financial institution is an investment entity but not an advising manager within the meaning of subsection (12)) any equity interest or debt interest in the financial institution;(d) (if the financial institution is a custodial institution, depository institution or specified insurance company, or an advising manager within the meaning of subsection (12)) any equity interest or debt interest in the financial institution, if the class of interests was established with the purpose of avoiding reporting the required information under section 50F(1) and (2); (Amended 5 of 2018 s. 5)(e) any cash value insurance contract and any annuity contract issued or maintained by the financial institution, other than a non-investment-linked, non-transferable immediate life annuity that is issued to an individual and monetizes a pension or disability benefit provided under an account that is an excluded account,but does not include an excluded account;Note—See also subsection (12). financial asset (財務資產) includes— (a) any security (including share units of a stock in a corporation; partnership or beneficial ownership interest in a widely held or publicly traded partnership or trust; note, bond, debenture, or other evidence of indebtedness); (b) partnership interest; (c) commodity; (d) swap (including interest rate swaps, currency swaps, basis swaps, interest rate caps, interest rate floors, commodity swaps, equity swaps, equity index swaps, and similar agreements); (e) insurance contract or annuity contract; and (f) any interest (including a futures or forward contract or option) in any of the assets mentioned in paragraphs (a), (b), (c), (d) and (e), but does not include a non-debt direct interest in real property; financial institution (財務機構) means— (a) a custodial institution; (b) a depository institution; (c) an investment entity; or (d) a specified insurance company; governmental entity (政府實體) means— (a) the government of a jurisdiction; (b) the political subdivision of a jurisdiction, including a state, a province, a county, and a municipality; (c) a wholly owned agency or instrumentality of a jurisdiction, or of any of the entities mentioned in paragraphs (a) and (b); or (d) an integral part or controlled entity of a jurisdiction; (Amended 6 of 2019 s. 5) insurance company (保險公司) means any of the following— (a) an insurer authorized under the Insurance Ordinance (Cap. 41); (b) an entity the gross income of which arising from insurance, reinsurance and annuity contracts exceeds 50% of the entity’s total gross income for the calendar year immediately preceding the calendar year in which the determination as to whether the entity is an insurance company is made; (c) an entity the aggregate value of the assets of which associated with insurance, reinsurance and annuity contracts exceeds 50% of the entity’s total assets at any time during the calendar year immediately preceding the calendar year in which the determination as to whether the entity is an insurance company is made; (Added 5 of 2018 s. 5) insurance contract (保險合約) means a contract, other than an annuity contract, the issuer of which agrees to pay an amount on the occurrence of a specified contingency involving mortality, morbidity, accident, liability, or property risk;integral part (組成部分), in relation to a jurisdiction—(a) means a person, organization, agency, bureau, fund, instrumentality, or other body, however described—(i) that constitutes the jurisdiction’s governing authority; and(ii) the net earnings of which must be credited to its own account or to other accounts of the jurisdiction, with no portion inuring to the benefit of any private person; but(b) does not include an individual who is a sovereign, official, or administrator of the jurisdiction acting in a private or personal capacity;Note—See also subsection (5). international organization (國際組織)— (a) means an international organization or its wholly owned agency or instrumentality; and (b) includes any inter-governmental organization (including a supranational organization)—(i) that is composed primarily of governments;(ii) that has in effect a headquarters agreement, or substantially similar agreement, applicable to Hong Kong; and(iii) the income of which does not inure to the benefit of private persons; investment entity (投資實體) means—(a) a corporation licensed under the Securities and Futures Ordinance (Cap. 571) to carry out one or more of the following regulated activities (as defined by section 1 of Part 1 of Schedule 1 to that Ordinance)—(i) dealing in securities;(ii) trading in futures contracts;(iii) leveraged foreign exchange trading;(iv) asset management;(b) an institution registered under the Securities and Futures Ordinance (Cap. 571) to carry out one or more of the following regulated activities (as defined by section 1 of Part 1 of Schedule 1 to that Ordinance)—(i) dealing in securities;(ii) trading in futures contracts;(iii) asset management;(c) a collective investment scheme authorized under the Securities and Futures Ordinance (Cap. 571);(d) an entity that primarily conducts as its business one or more of the following activities or operations for its customers—(i) trading in—(A) money market instruments, including cheques, bills, certificates of deposit, and derivatives;(B) foreign exchange;(C) exchange, interest rate and index instruments;(D) transferable securities; or(E) commodity futures;(ii) individual and collective portfolio management;(iii) otherwise investing, administering, or managing financial assets or money on behalf of other entity or individual; or(e) an entity—(i) that is managed by a custodial institution, a depository institution, a specified insurance company, or an entity mentioned in paragraph (a), (b), (c) or (d); and(ii) whose gross income is primarily attributable to investing, reinvesting, or trading in financial assets,but does not include an entity that is an active NFE solely because it falls within any of the descriptions in paragraphs (d), (e), (f) and (g) of the definition of active NFE in this subsection;Note—See also subsection (13).jurisdiction of residence (居留司法管轄區) means a territory of which an individual or entity is a resident for tax purposes;NFE (非財務實體) means an entity that is not a financial institution;non-reporting financial institution (免申報財務機構) means a financial institution that is described as a non-reporting financial institution in Part 2 of Schedule 17C;participating jurisdiction (參與稅務管轄區) means a territory outside Hong Kong that is specified in Part 2 of Schedule 17E; participating jurisdiction financial institution (參與稅務管轄區財務機構) means— (a) a financial institution that is resident in a participating jurisdiction (excluding any branch of the financial institution located outside the participating jurisdiction); or (b) a branch located in a participating jurisdiction of a financial institution that is not resident in the participating jurisdiction; passive income (被動收入) means the portion of gross income that consists of— (a) dividend; (b) interest; (c) income equivalent to interest; (d) rent and royalties (other than rents and royalties derived from the active conduct of a business undertaken, at least in part, by the employees of an NFE); (e) annuities; (f) the excess of gains over losses from the sale or exchange of financial assets that gives rise to the passive income mentioned in any of paragraphs (a), (b), (c), (d) and (e); (g) the excess of gains over losses from transactions (including futures, forwards, options and similar transactions) in any financial assets; (h) the excess of foreign currency gains over foreign currency losses; (i) net income from swaps; or (j) amounts received under cash value insurance contracts; passive NFE (被動非財務實體) means— (a) an NFE that is not an active NFE; or (b) a financial institution that—(i) falls within the description in paragraph (e) of the definition of investment entity in this subsection;(ii) is not a participating jurisdiction financial institution; and(iii) is not a financial institution in Hong Kong; pre-existing account (先前帳户) means— (a) a financial account of an account holder maintained by a reporting financial institution as at the following applicable date (old account)—(i) if the institution is not a 2020-covered institution—31 December 2016;(ii) if the institution is a 2020-covered institution—31 December 2019; or (b) a financial account—(i) that is a financial account of an account holder opened and maintained by a reporting financial institution on or after the following applicable date (subsequent account)—(A) if the institution is not a 2020-covered institution—1 January 2017;(B) if the institution is a 2020-covered institution—1 January 2020; and(ii) in respect of which all of the following conditions are met—(A) the account holder holds with the institution, or its related entity within Hong Kong, any old account;(B) on the opening of the subsequent account, the institution (and, as applicable, its related entity within Hong Kong) treats the subsequent account and the following financial accounts as a single financial account—(I) one or more old accounts of the account holder maintained by the institution or its related entity within Hong Kong; and(II) if there exist one or more subsequent accounts that are treated as pre-existing accounts because all of the conditions in this sub-subparagraph and sub-subparagraphs (C), (D) and (E) are met—all of the subsequent accounts that are so treated;(C) the institution (and, as applicable, its related entity within Hong Kong) acts in the way described in sub-subparagraph (B) for the purposes of—(I) satisfying the requirement set out in section 2 of Part 7 of Schedule 17D; and(II) calculating the balance or value of any of the accounts mentioned in that sub-subparagraph to determine any of the account thresholds;(D) the subsequent account is subject to AML/KYC procedures and the institution is permitted to carry out such AML/KYC procedures for the subsequent account by relying on the AML/KYC procedures carried out for the old account mentioned in sub- subparagraph (B)(I);(E) on the opening of the subsequent account, no new, additional or amended customer information is required to be provided by the account holder other than for the purpose of complying with sections 50B, 50C, 50F and 50G; (Replaced 6 of 2019 s. 5) regularly traded (經常買賣), in relation to a class of stock traded during a calendar year, means that— (a) trades in the class of stock are effected, other than in de minimis quantities, on one or more established securities markets for at least 60 business days during the prior calendar year; and (b) the aggregate number of shares in the class of stock that are traded on such market or markets during the prior calendar year are at least 10% of the average number of shares outstanding in that class during the prior calendar year; reportable account (須申報帳户)— (a) means a financial account—(i) that has been identified as such under the due diligence requirements in Schedule 17D; and(ii) that is held by—(A) at least one reportable person; or(B) a passive NFE with at least one controlling person being a reportable person; and (b) for the purposes of sections 50C, 50D, 50F and 50G, includes a pre-existing account that must be reported as an undocumented account under the due diligence requirements in Schedule 17D; reportable jurisdiction (申報稅務管轄區) means a territory outside Hong Kong that is specified in column 1 of Part 1 of Schedule 17E; (Amended 4 of 2017 s. 3) reportable person (申報對象)— (a) means—(i) an individual or entity that is a resident for tax purposes of a reportable jurisdiction; or(ii) an estate of a decedent who was a resident for tax purposes of a reportable jurisdiction; but (b) does not include—(i) a corporation the stock of which is regularly traded on an established securities markets;(ii) a corporation that is a related entity of a corporation mentioned in subparagraph (i);(iii) a governmental entity;(iv) an international organization;(v) a central bank; or(vi) a financial institution; reporting financial institution (申報財務機構) means—(a) a financial institution that is resident in Hong Kong (excluding any branch of the financial institution located outside Hong Kong); or(b) a branch located in Hong Kong of a financial institution that is not resident in Hong Kong,but does not include a non-reporting financial institution;Note—See also subsection (15). reporting year (申報年), in relation to a reportable jurisdiction— (a) in relation to a reporting financial institution that is not a 2020-covered institution—means the year specified in column 2 of Part 1 of Schedule 17E opposite that jurisdiction; or (b) in relation to a reporting financial institution that is a 2020-covered institution—means the later of the following—(i) the year specified in column 2 of Part 1 of Schedule 17E opposite that jurisdiction;(ii) 2021; (Replaced 6 of 2019 s. 5) resident for tax purposes (稅務居民), in relation to a territory, means— (a) an individual who is subject to taxation as a resident in the territory; or (b) an entity that—(i) is subject to taxation as a resident in the territory; or(ii) has its effective management situated in the territory and is not subject to taxation as a resident in any other territory; service provider (服務提供者) means a service provider engaged to carry out the obligations of a reporting financial institution as referred to in section 50H(1);specified insurance company (指明保險公司) means an entity that is an insurance company, or the holding company of an insurance company, that issues, or is obliged to make payments with respect to, a cash value insurance contract or an annuity contract; (Amended 5 of 2018 s. 5) TIN (稅務編號) means— (a) a taxpayer identification number; or (b) (if there is no taxpayer identification number) the functional equivalent to such number. (2) An entity is a related entity of another entity if—(a) either entity controls the other entity;(b) the 2 entities are under common control; or(c) the 2 entities are investment entities as described in paragraph (e) of the definition of investment entity in subsection (1) and—(i) the entities are under common management; and(ii) the management fulfils the due diligence requirements for the entities under Schedule 17D.(3) For subsection (2)(a) and (b), control of an entity means direct or indirect ownership of both of the following—(a) more than 50% of the voting rights in the entity;(b) more than 50% of the value of the shares in the entity.(4) For paragraph (d) of the definition of active NFE in subsection (1), a subsidiary of an NFE is an entity whose outstanding stock is either directly or indirectly held, in whole or in part, by the NFE.(5) For paragraph (c) of the definition of controlled entity, and paragraph (a) of the definition of integral part, in subsection (1)—(a) (subject to paragraph (b)) an income does not inure to the benefit of a private person if—(i) the person is the intended beneficiary of a governmental programme; and(ii) the programme is performed for the general public with respect to the common welfare, or related to the administration of some phase of government; and(b) an income is taken to inure to the benefit of a private person if the income is derived from the use of a governmental entity to conduct a commercial business that provides financial services to that private person.(6) For the definition of controlling person in subsection (1)—(a) where an entity is a corporation, an individual exercises control over the entity if—(i) the individual—(A) owns or controls, directly or indirectly, including through a trust or bearer share holding, more than the specified percentage of the issued share capital of the entity;(B) is, directly or indirectly, entitled to exercise or control the exercise of more than the specified percentage of the voting rights at general meetings of the entity;(C) exercises ultimate control over the management of the entity; or(D) (if no individual falls within sub-subparagraph (A), (B) or (C)) holds the position of senior managing official of the entity; or (Added 5 of 2018 s. 5)(ii) the entity is acting on behalf of another person over whom the individual exercises control;(b) where an entity is a partnership, an individual exercises control over the entity if—(i) the individual—(A) is entitled to or controls, directly or indirectly, more than the specified percentage of the capital or profits of the entity;(B) is, directly or indirectly, entitled to exercise or control the exercise of more than the specified percentage of the voting rights in the entity;(C) exercises ultimate control over the management of the entity; or(D) (if no individual falls within sub-subparagraph (A), (B) or (C)) holds the position of senior managing official of the entity; or (Added 5 of 2018 s. 5)(ii) the entity is acting on behalf of another person over whom the individual exercises control;(c) where an entity is a trust, an individual exercises control over the entity if the individual—(i) is entitled to a vested interest in more than the specified percentage of the capital of the property of the entity, whether the interest is in possession or in remainder or reversion and whether it is defeasible or not;(ii) is the settlor of the entity;(iii) is the protector or enforcer of the entity; (Amended 6 of 2019 s. 5)(iv) is the trustee of the entity; (Replaced 6 of 2019 s. 5)(v) is a beneficiary or a member of a class of beneficiaries of the entity; or (Added 6 of 2019 s. 5)(vi) has ultimate control over the entity; or (Added 6 of 2019 s. 5)(d) where an entity is not a corporation, partnership or trust, an individual exercises control over the entity if—(i) the individual ultimately owns or controls the entity; or(ii) the entity is acting on behalf of another person over whom the individual exercises control. (Amended 5 of 2018 s. 5)(7) For subsection (6), the specified percentage is— (Amended L.N. 42 of 2020)(a) in relation to paragraph (a) of that subsection—25%;(b) in relation to paragraph (b) of that subsection—0%; and(c) in relation to paragraph (c) of that subsection—0%. (Amended L.N. 42 of 2020)(8) (Repealed 6 of 2019 s. 5)(9) For the definition of custodial institution in subsection (1), an entity holds financial assets for the account of another individual or entity as a substantial portion of its business if the entity’s gross income attributable to the holding of financial assets and related financial services equals or exceeds 20% of the entity’s gross income during the shorter of the following—(a) the 3-year period that ends on 31 December (or the final day of a non-calendar year accounting period) prior to the year in which the determination as to whether the entity is a custodial institution is made;(b) the period during which the entity has been in existence.(10) For paragraph (b)(i) of the definition of equity interest in subsection (1), a person is the beneficiary of all, or a portion, of a trust if the person—(a) has the right to receive, directly or indirectly (including through a nominee), a mandatory distribution from the trust; or(b) may receive, directly or indirectly, a discretionary distribution from the trust.(11) For paragraph (b) of the definition of established securities market in subsection (1), if an exchange has more than one tier of market level on which stock may be separately listed or traded, each such tier is to be treated as a separate exchange.(12) For paragraphs (c) and (d) (in relation to an advising manager) of the definition of financial account in subsection (1), an advising manager is an entity that falls within the definition of investment entity in that subsection solely because it— (Amended 5 of 2018 s. 5)(a) renders investment advice to, and acts on behalf of; or(b) manages portfolios for, and acts on behalf of,a customer for the purpose of investing, administering, or managing financial assets deposited in the name of the customer with a financial institution other than the entity.(13) In relation to the definition of investment entity in subsection (1)—(aa) subject to paragraphs (a) and (b), paragraphs (d) and (e) of the definition must be interpreted in a way consistent with the way in which similar provisions in the definition of financial institution in the FATF Recommendations are interpreted; (Added 6 of 2019 s. 5)(a) for the purposes of paragraph (d) of the definition, an entity is treated as primarily conducting as its business one or more of the activities mentioned in that paragraph if it meets the criterion set out in subsection (14); or(b) for the purposes of paragraph (e) of the definition, an entity’s gross income is treated as primarily attributable to investing, reinvesting, or trading in financial assets if it meets the criterion set out in subsection (14).(14) For subsection (13)(a) and (b), the criterion is that the entity’s gross income attributable to the relevant activities equals or exceeds 50% of the entity’s gross income during the shorter of the following—(a) the 3-year period that ends on 31 December prior to the year in which the determination as to whether the entity is an investment entity is made;(b) the period during which the entity has been in existence.(15) For paragraph (a) of the definition of reporting financial institution in subsection (1), a financial institution is resident in Hong Kong if—(a) subject to paragraph (d) and where the financial institution is a company—it is incorporated in Hong Kong or, if incorporated outside Hong Kong, is normally managed or controlled in Hong Kong;(b) where the financial institution is a trust—(i) it is constituted under the laws of Hong Kong;(ii) if constituted outside Hong Kong, it is normally managed or controlled in Hong Kong; or(iii) if both of the descriptions in subparagraphs (i) and (ii) are not met, one or more of its trustees are resident in Hong Kong;(c) subject to paragraph (d) and where the financial institution is not a company or trust—it is constituted under the laws of Hong Kong or, if constituted outside Hong Kong, is normally managed or controlled in Hong Kong; or (Amended 6 of 2019 s. 5)(d) where the financial institution (other than a trust) is not subject to taxation as a resident in any territory—(i) it is incorporated in Hong Kong or constituted under the laws of Hong Kong;(ii) it has its place of management (including effective management) in Hong Kong; or(iii) it is subject to financial supervision in Hong Kong. (Added 6 of 2019 s. 5)(16) For subsection (15)(b), a trustee is resident in Hong Kong if—(a) (where the trustee is an individual) the trustee ordinarily resides in Hong Kong or stays in Hong Kong for—(i) more than 180 days during a year of assessment; or(ii) more than 300 days in 2 consecutive years of assessment one of which is the relevant year of assessment;(b) (where the trustee is a company) the trustee—(i) is incorporated in Hong Kong; or(ii) (if incorporated outside Hong Kong) is normally managed or controlled in Hong Kong; or(c) (where the trustee is any other entity) the trustee—(i) is constituted under the laws of Hong Kong; or(ii) (if constituted outside Hong Kong) is normally managed or controlled in Hong Kong.(16AA) For the purposes of subsections (15)(a) and (16)(b), a re-domiciled company is to be regarded as a company incorporated in Hong Kong instead of a company incorporated outside Hong Kong. (Added 14 of 2025 s. 153)(16A) The Secretary for Financial Services and the Treasury may, by notice published in the Gazette, amend any of the following—(a) the definition of FATF Recommendations in subsection (1);(b) the percentage in subsection (7). (Added 6 of 2019 s. 5)(17) A note located in the text of this section is provided for information only and has no legislative effect. 50B. Due diligence obligations on reporting financial institutions (1) A reporting financial institution must—(a) establish procedures that are designed to—(i) identify the jurisdiction of residence of—(A) the account holder of a financial account maintained with the institution; and(B) (if the account holder is a passive NFE) the controlling person of the passive NFE;(ii) identify whether a financial account is a reportable account;(iii) secure that any evidence relied on, and any record of the steps taken, for carrying out the procedures in relation to a financial account are kept for a period of 6 years beginning on the date on which the procedures are completed; and (Amended 5 of 2018 s. 6)(iv) enable the institution to identify and collect the required information within the meaning of section 50C(3) (required information); and(b) incorporate into those procedures the due diligence requirements in Schedule 17D.(2) A reporting financial institution must maintain and, for carrying out its obligations under this Part, apply the procedures established in compliance with subsection (1)(a) and (b) (required procedures)—(a) to identify reportable accounts, and to identify and collect the required information; and(b) to ensure that the purpose mentioned in subsection (1)(a)(iii) can be achieved.(3) A reporting financial institution may, in carrying out its obligations under this Part, apply the required procedures—(a) in relation to any financial account, even if—(i) the account holder of the financial account is a resident for tax purposes in a territory outside Hong Kong that is not a reportable jurisdiction; or(ii) (if the account holder of the financial account is a passive NFE) any controlling person of the account holder is a resident for tax purposes in a territory outside Hong Kong that is not a reportable jurisdiction; and(b) for identifying and collecting the required information in respect of any financial account as referred to in paragraph (a). 50C. Obligations of reporting financial institutions to furnish returns (1) A reporting financial institution must furnish a return in accordance with a notice given by an assessor under subsection (2) and in compliance with subsections (4) and (5).(2) An assessor may give a notice in writing to a reporting financial institution requiring it to furnish a return reporting the information referred to in subsection (3) (required information) in relation to reportable accounts with respect to any reportable jurisdiction that are maintained by the institution at any time during the period specified in the notice (specified information period), which must be either of the following—(a) the calendar year preceding the year in which the date of the notice falls;(b) such other period as the Commissioner may decide in appropriate cases.(2A) However, the specified information period for a reportable jurisdiction may not cover any period that is earlier than the date on which the jurisdiction becomes a reportable jurisdiction. (Added 5 of 2018 s. 7)(3) The required information is—(a) the information referred to in sections 50F and 50G; and(b) any other information that the Board of Inland Revenue specifies.(4) The return under subsection (1) must be furnished—(a) within the time specified in the notice;(b) in the manner specified in the notice; and(c) in the form of an electronic record that—(i) is sent by using a system specified by the Board of Inland Revenue; or(ii) contains the required information arranged in a form specified by the Board of Inland Revenue.(5) If, during the specified information period, the reporting financial institution maintains no reportable accounts, the institution must state that fact in the return. 50D. Further obligations of reporting financial institutions relating to returns (1) A reporting financial institution must keep sufficient records to enable the correctness and accuracy of the return furnished under section 50C(1) to be readily ascertained for a period of 6 years beginning on the date on which the return is furnished.(2) A reporting financial institution must give a notice to the Commissioner when any of the following events occur—(a) the first occasion on which it commences to maintain a reportable account;(b) one year has lapsed after it ceased to maintain even a single reportable account;(c) the first occasion on which it commences to maintain a reportable account following the occurrence of an event described in paragraph (b).(3) If a reporting financial institution—(a) has given a notice to the Commissioner under subsection (2)(a) or (c) (first notice); and(b) has changed its address after the first notice but before a notice is given under subsection (2)(b),it must notify the Commissioner of its new address.(4) A notice under subsection (2) or (3) must be given—(a) in the form of an electronic record that is sent by using a system designated by the Commissioner;(b) in the manner that the Commissioner specifies; and(c) within the following period—(i) for a notice under subsection (2)—3 months from the date on which the event occurred;(ii) for a notice under subsection (3)—1 month from the change of the address. 50E. Application of due diligence and other obligations to non-corporate reporting financial institutions In relation to a reporting financial institution that is not a corporation, sections 50B, 50C and 50D apply to a person who acts for the institution to maintain financial accounts as if the obligations under those sections were imposed on that person. 50F. Required information under section 50C(3) (1) A return furnished under section 50C must include the name and identifying number (if any) of the reporting financial institution.(2) The return must also include the following information in relation to each reportable account—(a) if the account holder is an individual who is a reportable person—the name, address, jurisdiction of residence, TIN, and the date and place of birth, of the individual;(b) if the account holder is an entity that is a reportable person—the name, address, jurisdiction of residence and TIN of the entity;(c) if the account holder is an entity and at least one controlling person of the entity is a reportable person—(i) the name, address, jurisdiction of residence and TIN of the entity; and(ii) the name, address, jurisdiction of residence, TIN, and the date and place of birth, of each reportable person;(d) the account number or (if there is no such number) its functional equivalent;(e) the account balance or value (including, for a cash value insurance contract or an annuity contract, the cash value or surrender value) as at the end of the specified information period or other appropriate reporting period, or (if the account was closed during such period) the closure of the account;(f) for a custodial account—(i) the total gross amount of interest paid to the account, or in respect of the account, during the specified information period or other appropriate reporting period;(ii) the total gross amount of dividends paid to the account, or in respect of the account, during the specified information period or other appropriate reporting period;(iii) the total gross amount of other income generated in respect of the financial assets held in the account, and paid to the account, or in respect of the account, during the specified information period or other appropriate reporting period; and(iv) the total gross proceeds from the sale or redemption of financial assets paid to the account during the specified information period or other appropriate reporting period in respect of which the reporting financial institution acts as a custodian, broker, nominee, or otherwise as an agent for the account holder;(g) for a depository account—the total gross amount of interest paid to the account during the specified information period or other appropriate reporting period;(h) for any account in respect of which the reporting financial institution is the obligor or debtor, other than a custodial account or a depository account—the total gross amount paid to the account holder in respect of the account during the specified information period or other appropriate reporting period, including the aggregate amount of any redemption payments made to the account holder during that period.(3) For reporting the information referred to in subsection (2)—(a) references to the balance or value of a reportable account include a nil balance or value;(b) references to paying an amount include crediting an amount; and(c) in any reference to an amount, the currency in which the amount is denominated must be identified.(4) For subsection (2)(e), (f), (g) and (h)—(a) the specified information period means the period specified under section 50C(2); and(b) the appropriate reporting period is the period of 12 months as may be elected by the financial institution, and once the election is made, it is irrevocable. 50G. Modifications of required information (1) Despite section 50F(2)(a), (b) and (c)—(a) for a reportable account that is a pre-existing account maintained by a reporting financial institution—(i) if the TIN or date of birth is not kept in the records of the institution and is not otherwise required to be collected by the institution under the laws of Hong Kong, the TIN or date of birth is not required to be reported; but(ii) subject to paragraph (b), the institution is required to use reasonable efforts to obtain the TIN and date of birth by the end of the second calendar year following the year in which the account is identified as a reportable account;(b) for a reportable account, the TIN is not required to be reported if—(i) a TIN is not issued by the relevant reportable jurisdiction; or(ii) (where a TIN is issued by the relevant reportable jurisdiction) such TIN is not required to be collected under the domestic law of the jurisdiction;(c) the place of birth is not required to be reported unless the reporting financial institution is otherwise required to obtain and report it under the laws of Hong Kong and it is available in the electronically searchable data maintained by the institution.(2) Despite section 50F(2)(f)(iv), the information under that section—(a) is not required to be reported with respect to the calendar year of 2017; and(b) is only required to be reported with respect to the calendar year of 2018 and onwards. 50H. Engagement of service provider (1) A service provider may be engaged to carry out, for or on behalf of a reporting financial institution, the institution’s obligations under any, or all, of the following provisions—(a) section 50B(1);(b) section 50B(2);(c) section 50C(1).(2) To avoid doubt, even if a service provider has been engaged under subsection (1), the reporting financial institution is not relieved from its obligation under section 50B(1) or (2) or 50C(1), as the case requires. 50I. Commissioner may designate system or specify requirements for electronic record, etc. (1) The Commissioner may designate any system in respect of any communication with the Commissioner for the purposes of section 50C or 50D.(2) The Commissioner may by notice published in the Gazette specify requirements as to—(a) the manner of generating or sending an electronic record or any attachment required to be furnished with an electronic record;(b) how a digital signature is to be affixed to a return furnished under section 50C(1); and(c) the software and communication in relation to any attachment required to be furnished with an electronic record.(3) A notice under subsection (2) is not subsidiary legislation. 50J. Power to amend Schedules 17C, 17D and 17E The Secretary for Financial Services and the Treasury may, by notice published in the Gazette, amend Schedule 17C, 17D or 17E. 50K. Use of information provided by reporting financial institutions To avoid doubt, any information reported in a return furnished under section 50C may be used for the administration or enforcement of this Ordinance. 50L. Guidelines published by Commissioner (1) The Commissioner may publish, in the Gazette or in any way the Commissioner considers appropriate, guidelines that the Commissioner considers necessary for providing guidance on the interpretation of the Part 8A-related provisions to best secure consistency between—(a) the effect given to the Part 8A-related provisions; and(b) the effect that, in accordance with the CRS publications, is to be given to the Common Reporting Standard.(2) A failure on the part of a person to comply with the provisions of any guideline published under this section does not by itself render the person liable to any proceedings, whether before a court or otherwise, but in any proceedings under this Ordinance before a court—(a) the guideline is admissible in evidence; and(b) if any provision of the guideline appears to the court to be relevant to the interpretation of any Part 8A-related provisions or relevant to any question arising in the proceedings, the provision of the guideline must be taken into account in interpreting the Part 8A-related provisions or in determining that question.(3) A guideline published under this section is not subsidiary legislation.(4) In this section—Common Reporting Standard (共同匯報標準) means the Common Reporting Standard contained in the Standard for Automatic Exchange of Financial Account Information in Tax Matters (Second Edition), published by the Organisation for Economic Co-operation and Development on 27 March 2017; CRS publications (共同匯報標準刊物) means— (a) the Commentaries on the Common Reporting Standard contained in the Standard for Automatic Exchange of Financial Account Information in Tax Matters (Second Edition), published by the Organisation for Economic Co-operation and Development on 27 March 2017; and (b) the Standard for Automatic Exchange of Financial Information in Tax Matters—Implementation Handbook (Second Edition), published by the Organisation for Economic Co-operation and Development in April 2018; Part 8A-related provisions (第8A部相關條文) means any provisions of Part 8A and Schedules 17C, 17D and 17E.(5) The Secretary for Financial Services and the Treasury may, by notice published in the Gazette, amend the definitions of Common Reporting Standard and CRS publications in subsection (4).(Added 6 of 2019 s. 6) Part 9 Returns, etc. 51. Returns and information to be furnished* (1) An assessor may give notice in writing to any person requiring him within a reasonable time stated in such notice to furnish any return which may be specified by the Board of Inland Revenue for—(a) property tax, salaries tax or profits tax; or(b) property tax, salaries tax and profits tax,under Parts 2, 3, 4, 10A, 10B, and 10C. (Replaced 52 of 1993 s. 5. Amended 5 of 2003 s. 7)(2) Every person chargeable to tax for any year of assessment shall inform the Commissioner in writing that he is so chargeable not later than 4 months after the end of the basis period for that year of assessment unless he has already been required to furnish a return under the provisions of subsection (1). (Replaced 49 of 1956 s. 37)(2A)-(2C) (Repealed 32 of 2018 s.

11)(3) An assessor may give notice in writing to any person when and as often as he thinks necessary requiring him within a reasonable time stated in such notice to furnish fuller or further returns respecting any matter of which a return is required or prescribed by this Ordinance.(4) For the purposes of obtaining full information in regard to any matter which may affect any liability, responsibility or obligation of any person under this Ordinance—(a) an assessor or an inspector may give notice in writing to such person, or to any other person whom he considers may be in possession or control of information or documents in regard to any such matter as aforesaid, requiring him within such reasonable time as is stated in the notice, and in the form and manner specified in it, to furnish all information in his possession or control respecting any such matter, and to produce for examination any deeds, plans, instruments, books, accounts, trade lists, stock lists, vouchers, bank statements or other documents which the assessor or inspector giving the notice considers are or may be relevant for the purpose aforesaid: (Amended 9 of 2013 s. 5; 22 of 2016 s. 5) Provided that in the case of a notice under this paragraph requiring the production of any account kept by a solicitor and relating to the affairs of any client or clients of his, production of a copy of all relevant entries therein respecting any matter upon which information is sought shall be a sufficient compliance with the aforesaid requirement of the notice if the copy is certified by the solicitor as being a correct copy of all relevant entries in such account respecting the matter aforesaid; (b) an assistant commissioner may give notice in writing to such person, or to such other person, requiring him, at a time and place to be named by the assistant commissioner, to attend and be examined, and upon such examination to answer truthfully all questions put to him, respecting any such matter as aforesaid. (Replaced 35 of 1965 s. 26. Amended 40 of 1972 s. 4)(4AA) Subsection (4) also applies for the purposes of obtaining full information in regard to any matter (referred to in this subsection as the matter concerned) that may affect any liability, responsibility or obligation of any person (referred to in this subsection as the person concerned) under the laws of a territory outside Hong Kong concerning any tax of that territory if—(a) arrangements having effect under section 49(1A) are made with the government of that territory; and(b) that tax is the subject of a provision of the arrangements that requires disclosure of information concerning tax of that territory,and, for the purposes of the application of subsection (4) under this subsection, references to “any such matter” and “any such matter as aforesaid” in subsection (4)(a) and (b) are to be construed as references to the matter concerned, and references to “such person” in subsection (4)(a) and (b) are to be construed as references to the person concerned. (Added 1 of 2010 s. 5)(4A) For the avoidance of doubt it is hereby declared that the powers conferred by subsection (4) include the power to require information from, and to require the attendance for the purpose of being examined of,—(a) any person, or any employee of any person, who was a party to any particular land or property transaction;(b) any person, or any employee of any person, who has acted for or is acting for any party to any particular land or property transaction;(c) any person who either paid or received, directly or indirectly, any consideration, brokerage, commission or fee in respect of or in connection with any particular land or property transaction; and(d) any person, or any employee of any person, who was concerned in the passing of any consideration, brokerage, commission or fee, or in the clearing or collection of any cheque or other instrument of exchange, respecting any particular land or property transaction,as to any of the following matters, that is to say—(i) the full names (including aliases) and addresses of any of the persons referred to in paragraphs (a) to (d) and any other information in his possession or control which may be helpful in identifying or locating any such persons; (Amended 9 of 2013 s. 5)(ii) any consideration, brokerage, commission or fee paid or received in respect of or in connection with any such land or property transaction; and(iii) the terms and conditions of any such land or property transaction;and the existence in respect of any communication, whether oral or written, of privilege from disclosure shall not constitute any excuse for the non-disclosure of information as to any of the matters specified in paragraphs (i) to (iii) where disclosure thereof is required from any of the persons referred to in paragraphs (a) to (d), but except as aforesaid nothing in subsection (4) shall require disclosure by counsel or solicitor of any privileged information or communication given or made to him in that capacity. (Added 35 of 1965 s. 26)(4B) (a) Any person who without reasonable excuse, the burden of proof whereof shall lie upon him, fails to comply with the requirements of a notice given to him under subsection (4)(a) or fails to attend in answer to a notice issued under subsection (4)(b) or having attended fails to answer any questions put to him, being questions which under that paragraph may be put to him, shall be liable to a penalty at level 3 recoverable under section 75 as a civil debt due to the Government: (Amended 11 of 1985 s. 3; L.N. 338 of 1995; 19 of 1996 s. 15) Provided that— (i) the Commissioner may compound any such penalty and may before judgment in proceedings therefor stay or compound such proceedings, or may refuse to accept payment of such penalty or any part thereof except under a judgment of the court in proceedings for the recovery thereof; (ii) the court before which any proceedings for such penalty are brought may, if it thinks fit, give judgment for a less amount. (b) In addition to giving judgment for the penalty or any less amount as aforesaid, the court may order the person against whom the proceedings were brought to do, within a time specified in the order, the act which he has failed to do. (Added 35 of 1965 s. 26)(5) A return, statement, or form purporting to be furnished under this Ordinance by or on behalf of any person shall for all purposes be deemed to have been furnished by that person or by his authority, as the case may be, unless the contrary is proved, and any person signing any such return, statement, or form shall be deemed to be cognizant of all matters therein.(6) Any person who ceases to carry on any trade, profession or business or who ceases to own any source of income or to be the owner of any land or buildings or land and buildings in respect of which tax is chargeable under the provisions of Part 2, 3, 4 or 7 shall so inform the Commissioner in writing within 1 month of such cessation. (Replaced 49 of 1956 s. 37. Amended 8 of 1983 s. 14)(7) Any person chargeable to tax under Part 3, 4 or 7 who is about to leave Hong Kong for any period exceeding 1 month shall give notice in writing to the Commissioner of his expected date of departure, and if he intends to return to Hong Kong the approximate date of his return. Such notice shall be given not later than 1 month before the expected date of departure: Provided that— (a) the Commissioner may accept such shorter notice as he may deem reasonable; and (b) this subsection shall not apply in the case of an individual who is required in the course of his employment, business or profession to leave Hong Kong at frequent intervals. (Added 49 of 1956 s. 37. Amended 7 of 1986 s. 12) (8) Any person chargeable to tax under Part 2, 3, 4 or 7 who changes his address shall within 1 month inform the Commissioner in writing of the particulars of the change. (Added 2 of 1971 s. 33. Amended 8 of 1983 s. 14)(9) (Repealed 43 of 1975 s. 2)(Amended E.R. 1 of 2012) Editorial Note: * The amendment made by Part 2 of Ord. No. 32 of 2018 to this section applies in relation to all years of assessment commencing on or after 1 April 2018. (Please see 32 of 2018 s. 3) 51AA. Form and manner of furnishing return, etc. under section 51 (1) Without limiting section 51AAB and except as provided in subsection (2) or (3), a return required to be furnished under section 51(1)—(a) must be furnished in paper form—(i) using a printed form specified by the Board of Inland Revenue and provided by the Commissioner; or(ii) using a template (if available)—(A) specified by the Board of Inland Revenue and made available by the Commissioner; and(B) downloaded from a system specified by the Board of Inland Revenue; and(b) must contain the particulars specified in the printed form or template. (Replaced 18 of 2021 s. 7)(1A) Despite subsection (1)(a), the particulars referred to in subsection (1)(b) may (where appropriate) be furnished in a form other than paper form, as specified by the Board of Inland Revenue. (Added 18 of 2021 s. 7)(2) A return required to be furnished under section 51(1) may, in a case specified by the Commissioner, be furnished in the form of an electronic record that—(a) is sent using a system specified by the Board of Inland Revenue;(b) uses a template specified by the Board of Inland Revenue and made available by the Commissioner; or(c) contains the particulars specified by the Board of Inland Revenue that are arranged in a form specified by the Board of Inland Revenue.(3) A return required to be furnished under section 51(1) may, in a case specified by the Commissioner, be furnished by using a telefiling system which—(a) provides for the furnishing of such particulars as may be specified by the Board of Inland Revenue; and(b) is made available by the Commissioner.(4) A return shall be regarded as furnished under subsection (3) when the particulars and the password are accepted by the telefiling system.(5) Any case to be specified by the Commissioner for the purposes of subsections (2) and (3)—(a) shall be specified by notice published in the Gazette; and(b) may be specified by reference to a class or description of persons or returns.(6) The Commissioner may by notice published in the Gazette specify requirements as to—(aa) for the purposes of subsection (1)(b)—the manner of generating or sending the particulars; (Added 18 of 2021 s. 7)(a) for the purposes of subsection (2)—the manner of generating or sending an electronic record or any attachment required to be furnished with an electronic record; (Amended 18 of 2021 s. 7)(b) how a digital signature is to be affixed to, or a password is to be included with, a return furnished under this section; (Amended 18 of 2021 s. 7)(c) the software and communication in relation to any attachment required to be furnished with an electronic record; and (Amended 18 of 2021 s. 7)(d) any other matter relating to furnishing a return under this section. (Added 18 of 2021 s. 7)(7) The Commissioner may approve a password and designate any system in respect of any communication with the Commissioner for the purposes of this section.(8) A notice under subsection (5) or (6) is not subsidiary legislation.(Added 5 of 2003 s. 8) 51AAB. Specified person must furnish specified return in form of electronic record (1) A person who is required under section 51(1) to furnish a specified return for a specified year of assessment must file it in the form of an electronic record if the person is a specified person for that year of assessment.(2) The requirements relating to a return furnished in the form of an electronic record under section 51AA(2) also apply to a specified return furnished in the form of an electronic record under subsection (1).(3) In this section—specified person (指明人士), in relation to a specified year of assessment, means a person that is specified in column 2 of Part 1 of Schedule 65 opposite that year of assessment;specified return (指明報表), in relation to a specified person, means a return that is specified in column 3 of Part 1 of Schedule 65 opposite that person;specified year of assessment (指明課稅年度) means a year of assessment specified in column 4 of Part 1 of Schedule 65.(4) The Commissioner may, by notice published in the Gazette, amend Schedule 65.(Replaced 21 of 2025 s. 21) 51AAC. Return disregarded if requirement not complied with (1) If an applicable requirement under section 51AA or 51AAB is not complied with in respect of a return, the Commissioner may disregard the return and treat it as not having been furnished for the purposes of section 51(1).(2) Despite subsection (1), the Commissioner may, either generally or in a particular case, accept a return furnished for the purposes of section 51(1).(3) The Commissioner may, by a means that the Commissioner considers appropriate, specify the circumstances or conditions under which a return is to be accepted under subsection (2).(Added 18 of 2021 s. 8) 51AAD. Service provider to be engaged to furnish return (1) A taxpayer may, in a case specified by the Commissioner, engage a service provider to furnish a return under section 51(1) for or on behalf of the taxpayer.(2) In furnishing the return, the service provider must comply with all the applicable requirements under sections 51AA and 51AAB.(3) Before the return is furnished to the Commissioner, the service provider must obtain a confirmation (in a form specified by the Commissioner) from the taxpayer stating that the information contained in the return is correct and complete to the best of the taxpayer’s knowledge and belief.(4) The service provider must retain the confirmation for a period of not less than 7 years beginning on the date on which the return is furnished to the Commissioner.(5) To avoid doubt, despite the engagement of a service provider under subsection (1), the taxpayer is not relieved from the taxpayer’s obligation under section 51(1).(6) For the purposes of subsection (1), a case to be specified by the Commissioner—(a) must be specified by notice published in the Gazette; and(b) may be specified by reference to a class or description of persons or returns.(7) A notice under subsection (6) is not subsidiary legislation.(8) In this section—service provider (服務提供者) means a person engaged to carry out a taxpayer’s obligation under section 51(1);taxpayer (納稅人) means a person who is under the obligation to furnish a return under section 51(1).(Added 18 of 2021 s. 8) 51A. Power to require statement of assets and liabilities, etc. (1) Where the Commissioner or a deputy commissioner is personally of the opinion that a person has made an incorrect return or supplied false information having the effect of understating his income or profits chargeable to tax and has done so without reasonable excuse and not through an innocent oversight or omission, the Commissioner may, with the consent of the Board of Review, give notice in writing to such person requiring him to furnish within the time limited by such notice, not being less than 30 days from the date of service of the notice, a statement containing particulars of— (Amended 43 of 1975 s. 3; L.N. 377 of 1980; 48 of 1995 s. 9)(a) all assets which the person or his spouse possessed in Hong Kong, including any possessed jointly or severally with any other person, at such times as may be specified in the notice; and(b) all liabilities to which the person or his spouse was subject in Hong Kong, including any to which he was subject jointly or severally with any other person, at such times as may be specified in the notice; and(c) all expenditure or disbursements from funds in Hong Kong, including remittances to places outside Hong Kong and gifts, incurred or made by the person or his spouse during such periods as may be specified in the notice; and (Amended 23 of 1998 s. 2)(d) all sums, including remittances, gifts and legacies received in Hong Kong by the person or his spouse during such periods as may be specified in the notice. (Amended 71 of 1983 s. 26; 7 of 1986 s. 12)(1A) For the purposes of subsection (1), engaging a service provider under section 51AAD(1) does not in itself constitute a reasonable excuse. (Added 18 of 2021 s. 9)(2) A notice given under subsection (1) shall not specify any time or period earlier than 7 years before the commencement of the year of assessment in which it is given.(3) An application for the consent of the Board of Review shall be made in writing by the Commissioner to the clerk of the Board and shall be accompanied by a statement of the material on the basis of which it is proposed to exercise the powers of the Commissioner or deputy commissioner under subsection (1).(4) Upon receipt of an application under subsection (3), the Chairman of the Board of Review shall appoint 3 members from the panel of the Board of Review, one of whom shall be the Chairman or a deputy chairman, to consider the application.(5) When the Board is considering an application, the Commissioner or his authorized representative may attend, but the person in respect of whom the application is made may not attend.(6) Subject to subsection (7), neither in the application nor on the consideration thereof shall the identity of the person in respect of whom the application is made be revealed to the Board of Review.(7) If the person on whom a notice under subsection (1) has been given so requests, the Commissioner shall furnish him with a certificate from the Chairman or deputy chairman of the Board of Review certifying that the Board’s consent to the issue of the notice was given, and for the purpose of obtaining such a certificate the Commissioner shall reveal to the Chairman or deputy chairman the identity of that person.(8) The decision of the Board of Review to grant or refuse consent shall be final.(Added 26 of 1969 s. 28. Amended 40 of 1972 s. 5; 43 of 1975 s. 3) 51B. Power to issue search warrant (1) If the Commissioner, or an officer of the Inland Revenue Department not below the rank of chief assessor authorized in writing by the Commissioner for the purpose (in this section referred to as the authorized officer), satisfies a magistrate, by statement made on oath,—(a) that there are reasonable grounds for suspecting that a person has made an incorrect return or supplied false information having the effect of understating his income or profits chargeable to tax and has done so without reasonable excuse and not through an innocent oversight or omission; or(b) that a person has failed to comply with an order of a court made under section 80(1) or (2A) directing him to comply with the requirements of a notice given to him under section 51(1) or (3), (Amended 56 of 1993 s. 22)the magistrate may by warrant authorize the Commissioner or authorized officer to exercise the following powers—(i) without previous notice at any reasonable time during the day, to enter and have free access to any land, buildings, or place where he suspects there to be any books, records, accounts or documents of that person, or of any other person, which may afford evidence material in assessing the liability of the first-mentioned person for tax, and there to search for and examine any books, records, accounts or documents; (Amended 43 of 1975 s. 4)(ii) in carrying out any such search, to open or cause to be removed and opened, any article in which he suspects any books, records, accounts or documents to be contained;(iii) to take possession of any books, records, accounts or documents of that person or that person’s spouse, and to make copies of such parts of any books, records, accounts or documents of any other person, as may afford evidence material in assessing the liability of the first-mentioned person for tax; (Replaced 43 of 1975 s. 4. Amended 71 of 1983 s. 27)(iv) to retain any such books, records, accounts or documents for as long as they may be reasonably required for any assessment to be made or for any proceedings under this Ordinance to be completed: Provided that if the Commissioner or authorized officer shall retain any book, record, account or document for a period of more than 14 days, the person aggrieved may apply in writing to the Board of Review for an order directing the return thereof and the Board of Review, after hearing the applicant or his authorized representative and the Commissioner or his representative, may so order, either unconditionally or subject to any condition which the Board may consider it proper to impose. (Amended 7 of 1975 s. 34) (1AAAA) For the purposes of subsection (1)(a), engaging a service provider under section 51AAD(1) does not in itself constitute a reasonable excuse. (Added 18 of 2021 s. 10)(1AAA) If the Commissioner or authorized officer satisfies a magistrate, by statement made on oath—(a) that a reporting financial institution or its service provider (if any) has failed to comply with an order of a court made under section 80B(3)(a) or 80D(9)(a) directing the institution or its service provider (if any) to comply with a requirement under section 50C(1); or (b) that there are reasonable grounds for suspecting that a reporting financial institution or its service provider (if any) has failed to comply with section 50B(1) or (2) or 50C(1) and has done so without reasonable excuse and not through an innocent oversight or omission,the magistrate may by warrant authorize the Commissioner or authorized officer to exercise the powers specified in subsection (1AAAB). (Added 22 of 2016 s. 6)(1AAAB) The powers are for the Commissioner or authorized officer—(a) without previous notice at any reasonable time during the day, to enter and have free access to any land, buildings, or place where the Commissioner or authorized officer suspects there to be any articles or data of the reporting financial institution or its service provider (if any), or of any other person, that may afford evidence material in assessing—(i) the liability of the institution or its service provider (if any) under this Ordinance; or(ii) the liability of any other person for tax of a reportable jurisdiction,and there to search for and examine such articles or data;(b) in carrying out any such search, to open or cause to be removed and opened, any article which the Commissioner or authorized officer suspects to be containing any articles or data;(c) to—(i) take possession of any articles or data of the reporting financial institution or its service provider (if any); and(ii) make copies of such parts of any articles or data of any other person, as may afford evidence material in assessing the liability of the institution or its service provider (if any) under this Ordinance or the liability of any other person for tax of a reportable jurisdiction;(d) to retain any such articles or data for as long as they may be reasonably required for any assessment to be made or for any proceedings under this Ordinance to be completed. (Added 22 of 2016 s. 6)(1AAAC) If the Commissioner or authorized officer retains any articles or data for a period of more than 14 days, the person aggrieved may apply in writing to the Board of Review for an order directing the return of such articles or data, and the Board, after hearing the applicant or the applicant’s authorized representative and the Commissioner or the Commissioner’s representative, may so order, either unconditionally or subject to any condition that the Board considers proper to impose. (Added 22 of 2016 s. 6)(1AAAD) If, on entering the land, buildings or place under the warrant issued under subsection (1AAA), an authorized officer is of the opinion that the reporting financial institution or service provider is likely to fail to carry out the obligations under section 50B(1) or (2) or 50C(1), the Commissioner or authorized officer may give notice to the institution or service provider requiring it, within a reasonable time and in a manner specified in the notice, to take any action as specified in the notice that is necessary for rectifying its compliance system and process as defined by section 51BA(1). (Added 22 of 2016 s. 6)(1AAAE) In subsections (1AAAB) and (1AAAC), references to articles or data are references to books, records, accounts or documents, or any information or data of the compliance system and process as defined by section 51BA(1). (Added 22 of 2016 s. 6)(1AA) Subsection (1) also applies to any tax (referred to in this subsection as the tax concerned) of a territory outside Hong Kong if—(a) arrangements having effect under section 49(1A) are made with the government of that territory; and(b) the tax concerned is the subject of a provision of the arrangements that requires disclosure of information concerning tax of that territory,and, for the purposes of the application of subsection (1) under this subsection, a reference to a person’s income or profits chargeable to tax in subsection (1)(a) is to be construed as a reference to a person’s income or profits chargeable to the tax concerned or any other sums or values in respect of which a person is chargeable to the tax concerned, and a reference to a person’s liability for tax in subsection (1)(i) and (iii) is to be construed as a reference to a person’s liability for the tax concerned. (Added 1 of 2010 s. 6. Amended 9 of 2013 s. 6)(1A) Any officer of the Inland Revenue Department under the direction of the Commissioner or an authorized officer may assist the Commissioner or an authorized officer in the execution of a warrant issued under subsection (1) or (1AAA) and may exercise any of the powers referred to in subsection (1)(i), (ii) and (iii) or (1AAAB)(a), (b) and (c). (Added 40 of 1972 s. 6)(2) When exercising any power under subsection (1) or (1AAAB), the Commissioner or authorized officer shall produce on demand the warrant issued to him under that subsection. (3) The person to whose affairs any books, records, accounts or documents, or any information or data of a compliance system and process as defined by section 51BA(1), as the case requires, taken possession of under subsection (1) or (1AAAB) relate shall be entitled to examine and make extracts from them at such times and under such conditions as the Commissioner may determine.(4) Any person who obstructs or hinders the Commissioner or an authorized officer acting in the discharge of his duty under subsection (1) or (1AAAB) or an officer assisting him under subsection (1A) commits an offence and is liable on conviction to a fine at level 3 and imprisonment for 6 months. (Amended 56 of 1993 s. 22; L.N. 338 of 1995; 4 of 2010 s. 8)(Added 26 of 1969 s. 28. Amended 40 of 1972 s. 6) 51BA. Assessor’s power to enter business premises of reporting financial institutions and service providers and inspect (1) In this section— business premises (業務處所) means the premises that an assessor has reason to believe— (a) in relation to a reporting financial institution, are used in connection with the carrying on of a business by or on behalf of the institution; or (b) in relation to a service provider, are used in connection with the carrying out of the obligations under section 50B(1) or (2) or 50C(1) by the service provider for a reporting financial institution concerned; compliance system and process (合規系統及程序) means the system and process, including any information or data that is recorded (whether by means of a computer or otherwise) in a legible or non-legible form, that relate to the procedures required to be applied by a reporting financial institution or service provider (as the case requires) for carrying out the obligations under section 50B(1) or (2) or 50C(1).(2) A reporting financial institution or service provider must allow an assessor to enter its business premises, and inspect its compliance system and process for the purpose of checking whether it is carrying out or has carried out, or is likely to be able to carry out, the obligations under section 50B(1) or (2) or 50C(1) if it receives a notice from an assessor requiring it to do so.(3) The notice under subsection (2) may be given only if the inspection is reasonably required for the purposes specified in that subsection.(4) The inspection may only be carried out—(a) at a time agreed to by the reporting financial institution or service provider to whom the notice is given; or(b) on a notice given to the reporting financial institution or service provider at least 7 days before the time of the inspection.(5) The notice under subsection (4)(b) must state the possible consequences under section 80B(1)(c) of obstructing or hindering an assessor in the exercise of the powers under subsection (2).(6) If, during the inspection, an assessor is of the opinion that the reporting financial institution or service provider is likely to fail to carry out the obligations under section 50B(1) or (2) or 50C(1), the assessor may give notice to the institution or service provider requiring it, within a reasonable time and in a manner specified in the notice, to take any action as specified in the notice that is necessary for rectifying its compliance system and process.(Added 22 of 2016 s. 7) 51C. Business records to be kept (1) Subject to subsection (2), every person carrying on a trade, profession or business in Hong Kong shall keep sufficient records in the English or Chinese language of his income and expenditure to enable the assessable profits of such trade, profession or business to be readily ascertained and shall retain such records for a period of not less than 7 years after the completion of the transactions, acts or operations to which they relate. (Amended 7 of 1986 s. 12)(2) Subsection (1) shall not require the preservation of any records—(a) which the Commissioner has specified need not be preserved; or(b) of a corporation which has been dissolved.(3) For the purposes of this section, records (紀錄) includes— (a) books of account (whether kept in a legible form, or in a non-legible form by means of a computer or otherwise) recording receipts and payments, or income and expenditure; and (b) vouchers, bank statements, invoices, receipts, and such other documents as are necessary to verify the entries in the books of account referred to in paragraph (a). (Added 48 of 1995 s. 10) (4) Without limiting the generality of subsection (3), the records required to be kept and retained pursuant to subsection (1) in respect of any trade, profession or business carried on during any year of assessment by any person, include—(a) a record of the assets and liabilities of the person in relation to that trade, profession or business;(b) a record of all entries from day to day of all sums of money received and expended by the person in relation to that trade, profession or business and the matters in respect of which the receipt and expenditure take place;(c) where that trade, profession or business involves dealing in goods—(i) a record of all goods purchased, and of all goods sold in the carrying on of that trade, profession or business (except those sold in the course of cash retail trading customarily conducted in a trade, profession or business of the kind of which that trade, profession or business is one) showing the goods, and the sellers and buyers in sufficient detail to enable the Commissioner to readily verify the quantities and values of the goods and the identities of the sellers and buyers; and all invoices relating thereto; and(ii) statements (including quantities and values) of trading stock held by the person—(A) at the end of each year of assessment; or(B) where the Commissioner is satisfied that the accounts of such trade, profession or business are made up to a day other than 31 March, on that day in the year of assessment,and all records of stocktakings from which any such statement of trading stock has been prepared; and(d) where that trade, profession or business involves the provision of services, records of the services provided in sufficient detail to enable the Commissioner to readily verify the entries referred to in paragraph (b). (Added 48 of 1995 s. 10)(5) The following provisions provide for modifications to this section—(aa) section 15S (records to be kept); (Added 17 of 2022 s. 7)(a) section 10 of Schedule 16D (eligible carried interest and its tax treatment);(b) section 25 of Schedule 17A (specified alternative bond scheme and its treatment under this Ordinance (other than Part 4AA)); (Replaced 9 of 2021 s. 9. Amended 17 of 2022 s. 7; 21 of 2025 s. 33)(c) section 9 of Schedule 17FC (qualifying IP income: nexus requirement for ascertaining excepted portion etc.); (Added 17 of 2022 s. 7. Amended 17 of 2024 s. 8)(d) section 22 of Schedule 17FD (eligible IP income: concessionary tax treatment and nexus requirement for ascertaining concessionary portion). (Added 17 of 2024 s. 8)(Added 26 of 1969 s. 28) 51D. Rent records to be kept (1) Subject to subsection (2), every person who is the owner of land or buildings or land and buildings situated in Hong Kong shall keep sufficient records in the English or Chinese languages of the consideration, in money or money’s worth, payable or deemed to be payable to him, to his order or for his benefit on or after 1 April 1983 in respect of the right of use of that land or buildings or land and buildings to enable the assessable value of that land or buildings or land and buildings to be readily ascertained and shall retain such records for a period of not less than 7 years after the completion of the transactions, acts or operations to which they relate.(2) Subsection (1) shall not require the preservation of any records—(a) which the Commissioner has specified need not be preserved; or(b) of a corporation which has been dissolved.(Added 8 of 1983 s. 15) 52. Information to be furnished by officials and employers (1) The Commissioner may give notice in writing to any officer in the employment of the Government or of any public body requiring him within a reasonable time stated in such notice to furnish any particulars which he may require for the purposes of this Ordinance which may be in the possession or control of such officer: (Amended 9 of 2013 s. 7)Provided that no such officer shall by virtue of this section be obliged to disclose any particulars as to which he is under any express statutory obligation to observe secrecy.(2) Every person who is an employer shall, when required to do so by notice in writing given by an assessor, furnish within a reasonable time stated in such notice a return containing the names and places of residence and the full amount of the remuneration, whether in cash or otherwise, for the period specified in the notice, of—(a) all persons employed by him in receipt of remuneration in excess of a minimum figure to be fixed by the assessor; and(b) any other person employed by him named by the assessor.(3) For the purposes of this section, any director of a company, or person engaged in the management of a company, shall be deemed to be a person employed by the company. (Amended 7 of 1986 s. 9)(4) Where any person who is an employer commences to employ in Hong Kong an individual who is or is likely to be chargeable to tax under Part 3, or any married person, he shall give notice thereof in writing to the Commissioner not later than 3 months after the date of commencement of such employment, stating the full name and address of the individual, the date of commencement and the terms of employment. (Added 49 of 1956 s. 38. Amended 7 of 1986 s. 9; 43 of 1989 s. 17) (5) Where any person who is an employer ceases or is about to cease to employ in Hong Kong an individual who is or is likely to be chargeable to tax under Part 3, or any married person, he shall give notice thereof in writing to the Commissioner not later than 1 month before such individual ceases to be employed in Hong Kong, stating the name and address of the individual and the expected date of cessation: (Amended 7 of 1986 s. 9; 43 of 1989 s. 17)Provided that the Commissioner may accept such shorter notice as he may deem reasonable. (Added 49 of 1956 s. 38)(6) The employer of any individual who is chargeable to tax under Part 3 and is about to leave Hong Kong for any period exceeding 1 month shall give notice in writing to the Commissioner of the expected date of departure of such individual. Such notice shall be given not later than 1 month before the expected date of departure:Provided that—(a) the Commissioner may accept such shorter notice as he may deem reasonable; and(b) this subsection shall not apply in the case of an individual who is required in the course of his employment to leave Hong Kong at frequent intervals. (Added 49 of 1956 s. 38)(7) An employer who is required by subsection (6) to give notice to the Commissioner of the expected departure of an individual shall not, in the case of an individual whom he has ceased, or is about to cease, to employ in Hong Kong, except with the consent in writing of the Commissioner or in the case of money paid to the Commissioner on the direction of the individual, make any payment of money or money’s worth to or for the benefit of the individual for a period of 1 month from the date on which he gave the notice; and compliance with this subsection shall constitute a defence in any proceedings against an employer in respect of his failure to make any payment to or for the benefit of the individual during the said period. (Added 26 of 1969 s. 29. Amended 2 of 1971 s. 34)(8) Notwithstanding anything to the contrary in subsections (4) and (5) an employer shall not be required to give notice under those subsections in respect of a married person if he has reasonable grounds for believing that neither that person nor his or her spouse are, or are likely to be, chargeable to tax under Part 3. (Added 7 of 1986 s. 9. Amended 43 of 1989 s. 17)(Amended 7 of 1986 s. 12; E.R. 1 of 2012) 53. Who may act for incapacitated or non-resident persons An act or thing required by or under this Ordinance to be done by any person shall, if such person is an incapacitated or non-resident person, be deemed to be required to be done by the trustee of such incapacitated person or by the agent of such non-resident person, as the case may be. 54. Liability of executor of deceased taxpayer The executor of a deceased person shall be chargeable with the tax for all periods prior to the date of such person’s death with which the said person would be chargeable if he were alive, and shall be liable to do all such acts, matters or things as the deceased person if he were alive would be liable to do under this Ordinance: Provided that— (a) no proceedings, other than an assessment to additional tax under section 82A, shall be instituted against the executor under the provisions of Part 14 in respect of any act or default of the deceased person; (Amended 43 of 1975 s. 5) (b) where the person dies before 11 February 2006, no assessment or additional assessment, other than an assessment to additional tax under section 82A, in respect of a period prior to the date of the person’s death shall be made after— (Amended 21 of 2005 s. 19; L.N. 210 of 2005)(i) the expiry of 1 year from such date of death; or(ii) the expiry of 1 year from the date of filing any affidavit required under the Estate Duty Ordinance (Cap. 111),whichever is the later; and (Amended 26 of 1969 s. 30; 56 of 1993 s. 23; 21 of 2005 s. 19) (c) where the person dies at any time on or after 11 February 2006 in any year of assessment, no assessment or additional assessment (other than an assessment to additional tax under section 82A) in respect of a period prior to his death shall be made after the expiry of 3 years immediately after that year of assessment. (Added 21 of 2005 s. 19. Amended L.N. 210 of 2005) (Amended E.R. 1 of 2012) 55. (Repealed 49 of 1956 s. 39) 56. Precedent partner to act on behalf of partnership (1) Wherever 2 or more persons in partnership act as agents, or are employers, or are persons in receipt of profits or act in any other capacity whatever, either on behalf of themselves or of any other person, the precedent partner of such partnership shall be answerable for doing all such acts, matters and things as would be required to be done under the provisions of this Ordinance by an individual acting in such capacity: (Amended 49 of 1956 s. 40)Provided that any person to whom a notice has been given under the provisions of this Ordinance as precedent partner of a partnership shall be deemed to be the precedent partner thereof unless he proves that he is not a partner in such partnership, or that some other person resident in Hong Kong is the precedent partner thereof. (Amended 7 of 1986 s. 12)(2) Where 2 or more persons who are not in partnership act jointly in any capacity mentioned in subsection (1), they shall be jointly and severally answerable for doing all such acts, matters, and things as would be required to be done under the provisions of this Ordinance by an individual acting in such capacity. 56AA. General partner in limited partnership fund etc. to act on behalf of fund (1) The general partner in, or the investment manager of, a limited partnership fund is answerable for doing all the acts, matters and things that are required to be done by the fund under this Ordinance.(2) For the purposes of subsection (1), if a limited partnership fund has an authorized representative, the reference to the general partner in the fund in that subsection is a reference to the authorized representative.(3) In this section—authorized representative (獲授權代表) has the meaning given by section 2 of the Limited Partnership Fund Ordinance (Cap. 637); (Amended E.R. 5 of 2020)general partner (普通合夥人) has the meaning given by section 2 of the Limited Partnership Fund Ordinance (Cap. 637); (Amended E.R. 5 of 2020)investment manager (投資經理) has the meaning given by section 2 of the Limited Partnership Fund Ordinance (Cap. 637). (Amended E.R. 5 of 2020)(Added 14 of 2020 s. 110) 56A. Joint owners and co-owners (1) Where 2 or more persons are joint owners or owners in common of any land or buildings or land and buildings, any of those persons appearing from any deed, conveyance, judgment or other instrument in writing registered in the Land Registry under the Land Registration Ordinance (Cap. 128) to be such an owner shall be answerable for doing all such acts, matters and things as would be required to be done under the provisions of this Ordinance by a sole owner. (Amended 56 of 1992 s. 20; 8 of 1993 s. 2)(2) Nothing in subsection (1) shall relieve any person of any obligation under this Ordinance or affect any right and obligation of joint owners or owners in common as between themselves.(3) Where any person pays property tax under subsection (1) and that person is not, apart from that subsection, liable to that tax or part of it, that person may recover from any other person that tax or part of it to which that other person, apart from that subsection, is liable under this Ordinance.(Added 8 of 1983 s. 16) 57. Principal officer to act on behalf of a corporation or body of persons (1) The following person is answerable for doing all the acts, matters or things that are required to be done under the provisions of this Ordinance by a corporation or body of persons—(a) for a corporation that is an open-ended fund company, any director or investment manager or the provisional liquidator or liquidator of the corporation;(b) for any other corporation, the secretary, manager, any director or the provisional liquidator or liquidator of the corporation;(c) for a body of persons, its principal officer. (Replaced 16 of 2016 s. 26)(2) If no person specified in subsection (1) is ordinarily resident in Hong Kong, the corporation or body of persons, as the case may be, shall inform the Commissioner, and keep him so informed at all times, of the name and address of an individual ordinarily resident in Hong Kong who shall be answerable for doing all such acts, matters, or things as are required to be done under the provisions of this Ordinance by such corporation or body of persons. (Amended 7 of 1986 s. 12; 16 of 2016 s. 26)(3) In this section—investment manager (投資經理) means an investment manager within the meaning of section 112Z of the Securities and Futures Ordinance (Cap. 571). (Added 16 of 2016 s. 26)(Replaced 2 of 1971 s. 35) 58. Signature and service of notices (1) Every notice to be given by the Commissioner, a deputy commissioner, an assistant commissioner, an assessor or an inspector under this Ordinance shall bear the name of the Commissioner, deputy commissioner, assistant commissioner, assessor or inspector, as the case may be, and every such notice shall be valid if the name of the Commissioner, deputy commissioner, assistant commissioner, assessor or inspector is duly printed or signed thereon. (Replaced 19 of 1996 s. 10)(2) Every notice given by virtue of this Ordinance may be served on a person either personally or by being delivered at, or sent by post to, his last known postal address, place of abode, business or employment or any place at which he is, or was during the year to which the notice relates, employed or carrying on business or the land or buildings or land and buildings in respect of which he is chargeable to tax under Part 2. (Amended 49 of 1956 s. 42; 26 of 1969 s. 31; 8 of 1983 s. 17; 76 of 1993 s. 8)(3) Any notice sent by post shall be deemed, unless the contrary is shown, to have been served on the day succeeding the day on which it would have been received in the ordinary course by post. (Amended 76 of 1993 s. 8)(4) In proving service by post it shall be sufficient to prove that the letter containing the notice was duly addressed and posted.(5) Every name printed or signed on any notice or signed on any certificate given or issued for the purposes of this Ordinance which purports to be the name of the person authorized to give or issue the same shall be judicially noticed.(6) If a notice given under this Part requires something to be done within a time stated in the notice, the Commissioner or, in the case of a notice given by an assessor, an assessor may by notice in writing extend the time for complying with the notice. (Added 2 of 1971 s. 36)(Amended E.R. 1 of 2012) 58A. (Repealed 43 of 1989 s. 18) Part 9A Transfer Pricing Documentation Including Country-by-Country Reporting (Part 9A added 27 of 2018 s. 17) Note (with no legislative effect) providing an overview of Part 9A— 1. Division 1 provides for interpretation. 2. Division 2 requires a Hong Kong entity of a group in the extended sense to prepare, for each accounting period, a master file and a local file and to retain the files for 7 years. 3. Division 3 gives effect to the country-by-country reporting requirements of the Organisation for Economic Co-operation and Development. Division 1 Interpretation 58B. Interpretation of Part 9A (1) Except for permanent establishment, an expression used in this Part, and defined or otherwise explained in Part 8AA, has the same meaning as in that Part.(2) In this Part—accounting period (會計期), in relation to Division 3 and a multinational enterprise group, means a period with respect to which the ultimate parent entity of the group prepares its financial statements; CbCR documents (國別標準文件) means the following documents published by the Organisation for Economic Co-operation and Development— (a) the consolidated report, entitled Transfer Pricing Documentation and Country-by-Country Reporting, on Action 13 of the OECD/ G20 Action Plan on Base Erosion and Profit Shifting published in 2015; (b) the document entitled Guidance on the Implementation of Country-by-Country Reporting – BEPS Action 13 published in 2024; and (Amended 21 of 2025 s. 22) (c) the document entitled Country-by-Country Reporting: Handbook on Effective Implementation published in 2017;

consolidated financial statements (綜合財務報表), in relation to a group in the usual sense, means the financial statements of the group in which the assets, liabilities, income, expenses and cash flows of the ultimate parent entity and the constituent entities are presented as those of a single economic entity; constituent entity (成員實體)— (a) in relation to a group in the usual sense, means—(i) any separate business unit of the group that is included in the consolidated financial statements of the group for financial reporting purposes, or would be so included if equity interests in the business unit were traded on a public securities exchange;(ii) any such business unit that is excluded from the consolidated financial statements of the group solely on size or materiality grounds; or(iii) any permanent establishment of any separate business unit of the group included in subparagraph (i) or (ii) if the business unit prepares a separate financial statement for the permanent establishment for financial reporting, regulatory, tax reporting, or internal management control purposes; or (b) in relation to a group in the extended sense that falls within paragraph (b) of the definition of group in the extended sense in this section, means—(i) the single enterprise referred to in paragraph (b) of that definition; or(ii) any permanent establishment of the enterprise if the enterprise prepares a separate financial statement for the permanent establishment for financial reporting, regulatory, tax reporting, or internal management control purposes; country-by-country report (國別報告) means a country-by-country report— (a) to be filed annually in respect of a multinational enterprise group by a constituent entity of the group in accordance with the laws or regulations of the constituent entity’s jurisdiction of tax residence; and (b) covering the items of information, and reflecting the format, set out in the CbCR documents; country-by-country return (國別申報表), in relation to a multinational enterprise group, means a return for an accounting period of the group if the requirements of section 58K are met in respect of the return; entity (實體) means a body of persons (corporate or unincorporate) or a legal arrangement, and includes— (a) a corporation; (b) a partnership; (c) a trust; and (d) a permanent establishment; file (提交), in relation to a country-by-country return, means file with the Commissioner;filing deadline (提交期限) has the meaning given by subsections (3) and (4); group in the extended sense (廣義集團) means— (a) a group in the usual sense; or (b) a single enterprise if it is resident for tax purposes in one jurisdiction and is subject to tax in another jurisdiction with respect to the business carried out through a permanent establishment in that other jurisdiction; group in the usual sense (常義集團) means a collection of enterprises related through ownership or control such that— (a) it is required to prepare consolidated financial statements for financial reporting purposes under applicable accounting principles; or (b) it would be so required if equity interests in any of the enterprises were traded on a public securities exchange; HK ultimate parent entity (香港最終母實體), in relation to a multinational enterprise group, means the group’s ultimate parent entity if the entity is resident for tax purposes in Hong Kong; Hong Kong entity (香港實體) means a constituent entity that— (a) is resident for tax purposes in Hong Kong; or (b) is a permanent establishment in Hong Kong; jurisdiction of tax residence (稅務居留地管轄區) is to be read in accordance with the meaning of resident for tax purposes; multinational enterprise group (跨國企業集團) means a group in the usual sense that includes— (a) 2 or more enterprises the tax residence of which is in different jurisdictions; or (b) an enterprise that is resident for tax purposes in one jurisdiction and is subject to tax in another jurisdiction with respect to the business carried out through a permanent establishment in that other jurisdiction; period P (指定期) and period P-1 (對上期) have the same meanings as in section 58D(2);permanent establishment (常設機構) has the meaning given by subsection (5);reportable group (須申報集團) has the meaning given by section 58D(2);reporting entity (申報實體) has the meaning given by section 58J;service provider (服務提供者) means a service provider engaged to carry out the obligations of a reporting entity as referred to in section 58M(1);surrogate parent entity (代母實體), in relation to a reportable group, means a constituent entity of the group appointed as the group’s surrogate parent entity as mentioned in section 58I(3) or (4);tax residence (稅務居留地) is to be read in accordance with the meaning of resident for tax purposes; ultimate parent entity (最終母實體), in relation to a group in the usual sense, means a constituent entity (constituent entity 1) of the group that meets the following conditions— (a) it owns directly or indirectly a sufficient interest in one or more other constituent entities of the group such that it is required to prepare consolidated financial statements under accounting principles generally applied in its jurisdiction of tax residence, or would be so required if its equity interests were traded on a public securities exchange in its jurisdiction of tax residence; and (b) there is no other constituent entity of the group that owns directly or indirectly an interest described in paragraph (a) in constituent entity 1. (3) In this Part— filing deadline (提交期限), in relation to a country-by-country return for an accounting period, means, subject to subsection (4), the earlier of the following dates— (a) the date on which a period of 12 months after the end of the accounting period expires; (b) the date specified in a notice given under section 58G. (4) If—(a) a Hong Kong entity (not being a HK ultimate parent entity) required under section 58F to file a country-by-country return for an accounting period notifies the Commissioner in accordance with section 58H that the SPE-filing-elsewhere exception is to apply within the meaning of section 58I(2)(a); and(b) the date by which a country-by-country report for the accounting period is required to be filed by the laws or regulations of the jurisdiction of tax residence of the surrogate parent entity concerned (foreign filing date) is later than the filing deadline under subsection (3),the filing deadline, in relation to the country-by-country return for the accounting period, is the foreign filing date.(5) For the purposes of this Part—(a) a business unit of a multinational enterprise group, or an enterprise, has a permanent establishment in a jurisdiction if—(i) in the case where the jurisdiction is Hong Kong—the business unit or enterprise has a permanent establishment in Hong Kong under Schedule 17G; or(ii) in the case where the jurisdiction is not Hong Kong—the business unit or enterprise is regarded as having a permanent establishment in the jurisdiction under the laws of the jurisdiction or under a bilateral or multilateral tax convention to which the jurisdiction is a party;(b) a reference to a permanent establishment in a jurisdiction, in relation to a business unit of a multinational enterprise group or to an enterprise, is to be read accordingly; and(c) for the purposes of applying Schedule 17G to determine whether a business unit of a multinational enterprise group has a permanent establishment in Hong Kong, a reference to a person or to an enterprise—(i) in paragraph (c) of the definition of double taxation arrangements in section 50AAC(1); or(ii) in Schedule 17G,is to be construed as including such a business unit.(6) The Secretary for Financial Services and the Treasury may, by notice published in the Gazette, amend the definition of CbCR documents in subsection (2). Division 2 Master File and Local File 58C. Master file and local file to be retained (1) This section applies to a Hong Kong entity of a group in the extended sense, except for an accounting period of the entity in respect of which any 2 of the following conditions are satisfied—(a) the total amount of the entity’s revenue for the accounting period, as reflected in the entity’s financial statement for the accounting period, does not exceed the amount specified in section 4(a) of Schedule 17I;(b) the total value of the entity’s assets at the end of the accounting period, as reflected in the entity’s financial statement for the accounting period, does not exceed the amount specified in section 4(b) of Schedule 17I;(c) the average number of the entity’s employees during the accounting period does not exceed the number specified in section 4(c) of Schedule 17I.(2) The Hong Kong entity must—(a) prepare, within 9 months after the end of each accounting period of the entity, a file in respect of the accounting period (local file) and a file in respect of the corresponding accounting period of the group (master file); and(b) retain the files for a period of not less than 7 years after the end of the accounting period of the entity.(3) The local file and master file must—(a) be in the English or Chinese language; and(b) cover the items of information, and reflect the format (including terminology and order of presentation), set out in Divisions 1 and 2 of Part 3 of Schedule 17I.(4) Despite subsection (2)—(a) a local file of the Hong Kong entity in respect of an accounting period of the entity is not required to cover specified domestic transactions;(b) a local file of the Hong Kong entity in respect of an accounting period of the entity is not required to cover a type of controlled transactions specified in section 5 of Schedule 17I if the total amount of that type of controlled transaction undertaken by the entity for the accounting period does not exceed the amount specified in relation to the type in section 5 of Schedule 17I; and(c) if, because of paragraph (b), all types of controlled transaction specified in section 5 of Schedule 17I undertaken by the Hong Kong entity for the accounting period are not required to be covered in the local file of the entity in respect of an accounting period, neither of the following is required to be prepared or retained by the entity—(i) the local file for the accounting period;(ii) the master file for the corresponding accounting period of the group.(5) Specified domestic transactions are to be disregarded in computing, for the purposes of subsection (4)(b) or (c), the total amount of a type of controlled transaction specified in section 5 of Schedule 17I.(6) In this section, the following expressions have the meanings given by section 2 of Schedule 17I— accounting period (會計期); controlled transaction (受管交易); corresponding accounting period (相應會計期); specified domestic transaction (指明本地交易). (7) The Secretary for Financial Services and the Treasury may, by notice published in the Gazette, amend Schedule 17I. Division 3 Country-by-Country Reporting Note (with no legislative effect) providing an overview of Division 3— 1. Division 3 gives effect to the country-by-country reporting requirements of the Organisation for Economic Co-operation and Development. Under those requirements, a country-by-country report (CbC report) must be filed in respect of a group (reportable group) whose annual consolidated group revenue reaches the specified threshold amount to provide, annually and for each tax jurisdiction in which the group does business, information such as the amount of revenue, profit before tax, tax paid and accrued, capital and assets. 2. Under section 58D, the requirements for filing a country-by-country return (CbC return) (which must include a CbC report) only apply to a reportable group. 3. A reportable group’s ultimate parent entity (UPE) is required to file a CbC return with the Commissioner for each accounting period beginning on or after 1 January 2018 if the UPE is resident for tax purposes in Hong Kong (section 58E(1)). 4. A Hong Kong entity of a reportable group whose UPE is not resident for tax purposes in Hong Kong is required to file a CbC return with the Commissioner if any of the following conditions is met—(a) the UPE is not required to file a CbC report in its jurisdiction of tax residence (jurisdiction U);(b) jurisdiction U has a current international agreement with Hong Kong providing for the automatic exchange of tax information but, by the deadline for filing the CbC return, there are no exchange arrangements in place between jurisdiction U and Hong Kong for CbC reports;(c) there has been a systemic failure to exchange CbC reports by jurisdiction U, which has been notified to the Hong Kong entity by the Commissioner (sections 58F(1) and 58I(1)). 5. Even if one of the conditions mentioned in item 4 of this Note is met, the Hong Kong entity is not required to file a CbC return if—(a) a CbC return for the relevant period is filed by another Hong Kong entity of the reportable group; or(b) a CbC report is filed by the reportable group’s surrogate parent entity resident in another jurisdiction (jurisdiction S) and exchange mechanisms are in place between jurisdiction S and Hong Kong.This and the concept of surrogate parent entity are dealt with in sections 58F(2) and 58I(2) to (7). 6. Also, a reportable group’s UPE resident for tax purposes in Hong Kong may voluntarily file a CbC return for an accounting period beginning on or after 1 January 2016 but before 1 January 2018 (section 58E(2)). 58D. Consistency with CbCR documents and application to reportable group (1) This Division is to be read in the way that best secures its consistency with the requirements and guidance in the CbCR documents.(2) The provisions of this Division about filing a country-by-country return and notices in respect of an accounting period (period P) apply in relation to a multinational enterprise group that meets the threshold requirement in the immediately preceding accounting period (period P-1). (The group is referred to as a reportable group for period P.)(3) A multinational enterprise group meets the threshold requirement for the purposes of subsection (2) if—(a) it has a total consolidated group revenue (as shown in its consolidated financial statements for period P-1) of at least the specified threshold amount; or(b) it has a total consolidated group revenue (as would have been shown in its consolidated financial statements for period P-1 had the group been required to produce them by reason of the trading of equity interests in any of the enterprises in the group on a public securities exchange) of at least the specified threshold amount.(4) However, if—(a) a multinational enterprise group’s ultimate parent entity is resident for tax purposes in a jurisdiction other than Hong Kong (jurisdiction U); and(b) the group draws up its consolidated financial statements in respect of period P-1 in a currency of jurisdiction U (currency U) or would have drawn them up in currency U if the group had been required to produce them,the reference to specified threshold amount in subsection (3) has effect as if it were jurisdiction U’s threshold amount.(5) In this section— jurisdiction U’s threshold amount (終區門檻款額) means— (a) if jurisdiction U requires the filing of a country-by-country report in respect of period P by a multinational enterprise group that has a total consolidated group revenue for period P-1 of at least a threshold amount and that amount is specified under the laws or regulations of jurisdiction U—the threshold amount specified; or (b) in any other case—an amount, in currency U, that is equivalent to EUR 750 million as at January 2015; specified threshold amount (指明門檻款額) means $6.8 billion.(6) The Secretary for Financial Services and the Treasury may, by notice published in the Gazette, amend the definitions in subsection (5). 58E. HK ultimate parent entity required to file country-by-country returns (1) A HK ultimate parent entity of a reportable group must file a country-by-country return in respect of period P by the filing deadline if period P begins on or after 1 January 2018.(2) A HK ultimate parent entity of a reportable group may file a country-by-country return in respect of period P by the filing deadline if period P begins on or after 1 January 2016 but before 1 January 2018. 58F. Other Hong Kong entities required to file country-by-country returns (1) A Hong Kong entity of a reportable group that is not the group’s ultimate parent entity must file a country-by-country return in respect of period P by the filing deadline if, in relation to the group, a condition precedent for Hong Kong to require a Hong Kong entity of the group that is not the ultimate parent entity to file a country-by-country report is met within the meaning of section 58I(1).(2) Subsection (1) does not apply if—(a) the SPE-filing-elsewhere exception or SPE-filing-in-HK exception applies within the meaning of section 58I(2); or(b) by the filing deadline, another Hong Kong entity of the group has filed a country-by-country return in accordance with this section in respect of period P. 58G. Assessor’s notice to entity (1) An assessor may give a written notice to an entity requiring it to file a country-by-country return for an accounting period specified in the notice (specified accounting period) by a date specified in the notice.(2) An entity to whom an assessor has given a notice under subsection (1) is not required to comply with the notice if the entity satisfies the assessor—(a) that the entity is not a Hong Kong entity of a reportable group in respect of the specified accounting period; or(b) where the entity is a Hong Kong entity of a reportable group, any of the following—(i) both—(A) the entity is not the group’s HK ultimate parent entity; and(B) in relation to the group, no condition precedent for Hong Kong to require a Hong Kong entity of the group that is not the ultimate parent entity to file a country-by-country report is met within the meaning of section 58I(1);(ii) by the filing deadline, another Hong Kong entity of the group has filed a country-by-country return in accordance with section 58E or 58F in respect of the specified accounting period;(iii) the SPE-filing-elsewhere exception or SPE-filing-in-HK exception applies within the meaning of section 58I(2) in respect of the specified accounting period. 58H. Notice by Hong Kong entities (1) Subject to subsection (3), each Hong Kong entity of a reportable group must file a written notice with the Commissioner, informing the Commissioner of the following in respect of period P—(a) the name, address and business registration number of each of the group’s Hong Kong entities, identifying among them (as applicable)—(i) the HK ultimate parent entity;(ii) the surrogate parent entity that is resident for tax purposes in Hong Kong; or(iii) a Hong Kong entity (not falling within subparagraph (i) or (ii)) that is to file a country-by-country return in accordance with section 58F;(b) if the group’s ultimate parent entity is resident for tax purposes in a jurisdiction other than Hong Kong—(i) the jurisdiction of tax residence of the ultimate parent entity (jurisdiction U);(ii) the name, address and business registration number (or equivalent particulars) of the ultimate parent entity;(iii) whether, in relation to the group, a condition precedent for Hong Kong to require a Hong Kong entity of the group that is not the ultimate parent entity to file a country-by-country report is met within the meaning of section 58I(1); and(iv) whether the ultimate parent entity has notified the tax authority of jurisdiction U in accordance with the laws or regulations of jurisdiction U that it is the ultimate parent entity (if the laws or regulations of jurisdiction U require the notification);(c) if the SPE-filing-elsewhere exception is to apply within the meaning of section 58I(2)(a)—(i) the jurisdiction of tax residence of the surrogate parent entity (jurisdiction S);(ii) the name, address and business registration number (or equivalent particulars) of the surrogate parent entity; and(iii) whether the surrogate parent entity has notified the tax authority of jurisdiction S in accordance with the laws or regulations of jurisdiction S that it is the surrogate parent entity (if the laws or regulations of jurisdiction S require the notification); and(d) any other information relevant for determining a Hong Kong entity’s obligation to file a country-by-country return under this Division.(2) The notice required by subsection (1) must be filed within 3 months after the end of period P (notification deadline).(3) A Hong Kong entity of a reportable group is not required to comply with subsection (1) if—(a) it is none of the following—(i) the HK ultimate parent entity of the group;(ii) the group’s surrogate parent entity resident for tax purposes in Hong Kong;(iii) a Hong Kong entity of the group (not falling within subparagraph (i) or (ii)) that is to file a country-by-country return in accordance with section 58F in respect of period P; and(b) by the notification deadline, another Hong Kong entity of the group (notifying entity) has filed a notice in accordance with subsection (1) which—(i) identifies the notifying entity as an entity referred to in paragraph (a)(i), (ii) or (iii);(ii) states that, in relation to the group, no condition precedent for Hong Kong to require a Hong Kong entity of the group that is not the ultimate parent entity to file a country-by-country report is met within the meaning of section 58I(1); or(iii) states that the SPE-filing-elsewhere exception is to apply within the meaning of section 58I(2)(a). 58I. Condition precedent for requiring local filing; SPE-filing exceptions (1) For the purposes of this Division, a condition precedent for a jurisdiction (jurisdiction R) to require a jurisdiction R entity of a reportable group that is not the ultimate parent entity to file a country-by-country report is met in relation to the group only if—(a) the ultimate parent entity is not required to file a country-by-country report in the jurisdiction in which it is resident for tax purposes (jurisdiction U);(b) jurisdiction U has entered into an international agreement but has no exchange arrangements in effect with jurisdiction R by the time by which the report is due to be filed in jurisdiction R; or(c) jurisdiction U has exchange arrangements in effect with jurisdiction R but the tax authority of jurisdiction R has notified the jurisdiction R entity that jurisdiction U—(i) has suspended automatic exchange of country-by-country reports (for reasons other than those that are in accordance with the terms of those arrangements); or(ii) has otherwise persistently failed to automatically provide to jurisdiction R country-by-country reports, in jurisdiction U’s possession, of reportable groups that have constituent entities in jurisdiction R.(2) In relation to a requirement under section 58F or 58G for a Hong Kong entity (subject entity) of a reportable group (group) to file a country-by-country return in respect of period P—(a) the SPE-filing-elsewhere exception applies if—(i) the surrogate parent entity is appointed as mentioned in subsection (3);(ii) filing is effected after notification within the meaning of subsection (5); and(iii) exchange mechanisms are in place within the meaning of subsection (7); and(b) the SPE-filing-in-HK exception applies if—(i) the surrogate parent entity is appointed as mentioned in subsection (4); and(ii) filing is effected after notification within the meaning of subsection (6).(3) A constituent entity is appointed as the surrogate parent entity of the group concerned if—(a) it is resident for tax purposes in a jurisdiction other than Hong Kong (jurisdiction S); and(b) it is appointed by the group as the sole substitute for the ultimate parent entity to file the country-by-country report in respect of period P in jurisdiction S on behalf of the group.(4) A constituent entity is appointed as the surrogate parent entity of the group concerned if—(a) it is resident for tax purposes in Hong Kong; and(b) it is appointed by the group as the sole substitute for the ultimate parent entity to file the country-by-country return in respect of period P in Hong Kong on behalf of the group, when a condition precedent for Hong Kong to require a Hong Kong entity of a reportable group that is not the ultimate parent entity to file a country-by-country report is met within the meaning of subsection (1).(5) Filing is effected after notification if—(a) a surrogate parent entity appointed under subsection (3) notifies the tax authority of jurisdiction S, in accordance with the laws or regulations of jurisdiction S, that it is the surrogate parent entity (if the laws or regulations of jurisdiction S require the notification);(b) the surrogate parent entity’s name, address and business registration number (or equivalent particulars) are notified to the Commissioner in accordance with section 58H; and(c) by the filing deadline of the country-by-country return in respect of period P, the surrogate parent entity has filed, in jurisdiction S and in accordance with the laws or regulations of jurisdiction S, a country-by-country report in respect of period P.(6) Filing is also effected after notification if—(a) a surrogate parent entity appointed under subsection (4) has filed a notice with the Commissioner in accordance with section 58H; and(b) by the filing deadline for the country-by-country return in respect of period P, the surrogate parent entity has filed a country-by-country return in accordance with section 58F in respect of period P.(7) For subsection (2)(a)(iii), exchange mechanisms are in place if—(a) jurisdiction S has entered into an international agreement;(b) by the filing deadline of the country-by-country return in respect of period P, jurisdiction S has exchange arrangements in effect with Hong Kong; and(c) the Commissioner has not notified the subject entity that jurisdiction S—(i) has suspended automatic exchange of country-by-country reports (for reasons other than those that are in accordance with the terms of those arrangements); or(ii) has otherwise persistently failed to automatically provide to Hong Kong country-by-country reports, in jurisdiction S’s possession, of reportable groups that have Hong Kong entities.(8) In this section—competent authority (主管當局) has the meaning given by the international agreement concerned; exchange arrangements (交換安排), means arrangements that— (a) are between the authorized representatives or competent authorities of those jurisdictions to which an international agreement applies; and (b) require the automatic exchange of the country-by-country reports between the jurisdictions; international agreement (國際協議) means— (a) unless paragraph (b) applies—(i) the Convention for Mutual Administrative Assistance in Tax Matters; or(ii) any other arrangement or arrangements that—(A) has or have effect under section 49(1) or (1A); and(B) by its or their terms, provides or provide legal authority for the exchange of tax information between Hong Kong and the other territory or territories to which the arrangement or arrangements applies or apply, including automatic exchange of the information; or (b) for the purposes of subsection (1) where jurisdiction R is not Hong Kong—(i) the Convention for Mutual Administrative Assistance in Tax Matters; or(ii) any bilateral or multilateral tax convention or any tax information exchange agreement—(A) to which jurisdiction R is a party; and(B) that by its terms provides legal authority for the exchange of tax information between jurisdictions, including automatic exchange of the information; jurisdiction R entity (申報管轄區實體) means a constituent entity that— (a) is resident for tax purposes in jurisdiction R; or (b) is a permanent establishment in jurisdiction R; jurisdiction S entity (代母管轄區實體) means a constituent entity that— (a) is resident for tax purposes in jurisdiction S; or (b) is a permanent establishment in jurisdiction S. 58J. Reporting entities For the purposes of this Division, each of the following entities is a reporting entity—(a) a HK ultimate parent entity required to file a country-by-country return and provide a notice by sections 58E(1) and 58H;(b) a HK ultimate parent entity that files a country-by-country return under section 58E(2);(c) a Hong Kong entity (not being a HK ultimate parent entity) required to file a country-by-country return by section 58F or to provide a notice by section 58H;(d) an entity required to file a country-by-country return by a notice given under section 58G. 58K. Further requirements concerning country-by-country return and notice (1) A country-by-country return filed for the purposes of this Division for a reportable group must contain—(a) a country-by-country report for the group; and(b) any other information specified by the Board of Inland Revenue.(2) A country-by-country return filed for the purposes of this Division for a reportable group—(a) must be filed in the form of an electronic record that—(i) is sent by using a system designated by the Commissioner; and(ii) contains the required information arranged in a form specified by the Commissioner; and(b) if the return is filed because of a notice given under section 58G—must be filed in the way specified in the notice.(3) A notice filed for the purposes of section 58H for a reportable group must be filed—(a) in the form of an electronic record that is sent by using a system designated by the Commissioner; and(b) in the way that the Commissioner specifies.(4) The Commissioner may designate a system for communication with the Commissioner for the purposes of subsections (2) and (3).(5) The Commissioner may, by notice published in the Gazette, specify requirements as to—(a) the way of generating or sending an electronic record for the purposes of this section or any attachment required to be given with such an electronic record;(b) how a digital signature is to be affixed to a country-by-country return filed under this Division or to a notice filed under section 58H; and(c) the software and communication in relation to any attachment required to be given with an electronic record.(6) The Commissioner may, either generally or in a particular case, accept a country-by-country return for the purpose of this Division, despite a requirement under subsection (2) or (5) not being complied with in respect of the return.(7) The Commissioner may, either generally or in a particular case, accept a notice for the purposes of section 58H, despite a requirement under subsection (3) or (5) not being complied with in respect of the notice.(8) The Commissioner may, by a means that, the Commissioner considers appropriate, specify the circumstances or conditions in or under which a return or notice is to be accepted under subsection (6) or (7).(9) Any notice or other thing that specifies any matter for the purposes of this section is not subsidiary legislation. 58L. Record keeping and other obligations (1) If a reporting entity has changed its address, it must give notice of the change to the Commissioner within 1 month after the change of the address.(2) A reporting entity must—(a) keep sufficient records to enable the accuracy and completeness of the country-by-country return filed under this Division to be readily ascertained; and(b) retain the records for a period of 6 years beginning on the date on which the return is filed.(3) The Commissioner may give a notice to a reporting entity requiring it to provide information for the purposes of determining whether the information in a country-by-country return filed by the entity is accurate and complete.(4) A person who is required to provide information by a notice under subsection (3) must do so—(a) within a period specified in the notice; and(b) at a time, by a means and in a form (if any), specified in the notice. 58M. Engagement of service provider (1) A service provider may be engaged for or on behalf of a reporting entity—(a) to comply with any requirement under—(i) section 58E(1) or 58F;(ii) section 58H; and(iii) section 58L(1); or(b) to file a country-by-country return under section 58E(2).(2) To avoid doubt, even if a service provider has been engaged under subsection (1) to comply with any requirement under a provision referred to in the subsection, the reporting entity is not relieved from its obligations under the provision. Division 4 Provisions Applicable to this Part Generally 58N. Application of obligations to non-corporate reporting entities (1) In relation to a Hong Kong entity that is not a corporation, this Part applies to a person who acts for the entity or is responsible for the management of the entity as if the obligations under this Part were imposed on that person.(2) In relation to a Hong Kong entity that is a permanent establishment of an enterprise, this Part also applies to the enterprise as if the obligations under this Part were also imposed on that enterprise. 58O. Anti-avoidance of obligations under this Part If—(a) a person enters into any arrangements; and(b) the main purpose, or one of the main purposes, of the person in entering into the arrangements is to avoid any obligation under this Part,this Part has effect as if the arrangements had not been entered into. Part 10 Assessments 59. Assessor to make assessments* (1) Every person who is in the opinion of an assessor chargeable with tax under this Ordinance shall be assessed by him as soon as may be after the expiration of the time limited by the notice requiring him to furnish a return under section 51(1): Provided that the assessor may assess any person at any time if he is of opinion that such person is about to leave Hong Kong, or that for any other reason it is expedient to do so. (Amended 7 of 1986 s. 12) (1A) Notwithstanding subsection (1), where an assessor is of the opinion that an election by an individual under section 41 for personal assessment on his total income would result in a refund becoming due of the whole of the amount which he might lawfully be assessed for property tax if such amount were paid, the assessor shall not be obliged to proceed to make an assessment in respect of that tax. (Added 26 of 1969 s. 32)(1B) Despite subsection (1), if an assessor is satisfied that—(a) an individual—(i) carries on (other than jointly with another person) a trade, profession or business in Hong Kong; and(ii) is eligible to elect for personal assessment under section 41 on the individual’s total income;(b) the assessable profits of the individual in respect of the trade, profession or business for any year of assessment do not exceed the amount specified for the year of assessment in the second column of item 1 of Schedule 4; and(c) the individual has no income, property or profits chargeable to tax under this Ordinance for the year of assessment, other than that in respect of the trade, profession or business,the assessor is not obliged to make an assessment of profits tax in respect of the assessable profits. (Replaced 32 of 2018 s. 12)(1C) Despite subsection (1), if an assessor is satisfied that—(a) an individual—(i) carries on a trade, profession or business in Hong Kong, either solely or jointly with another person; and(ii) is eligible to elect for personal assessment under section 41 on the individual’s total income;(b) the individual has no income, property or profits chargeable to tax under this Ordinance for the year of assessment, other than that in respect of the trade, profession or business; and(c) after taking into account the allowances that would have to be deducted under Part 5—(i) if the individual carries on the trade, profession or business solely—the assessable profits of the individual in respect of the trade, profession or business for the year of assessment are such that no tax would be charged on the individual had the individual elected for personal assessment under section 41; or(ii) if the individual carries on the trade, profession or business jointly with another person—the individual’s share of the profits in respect of the trade, profession or business for the year of assessment is such that no tax would be charged on the individual had the individual elected for personal assessment under section 41,the assessor is not obliged to make an assessment of profits tax in respect of the assessable profits. (Replaced 32 of 2018 s. 12)(1D) Subsection (1E) applies if—(a) an assessor has made an assessment of profits tax in respect of the assessable profits of an individual for a year of assessment; and(b) in relation to the individual, the assessor becomes satisfied of the matters specified in subsection (1C)(a), (b) and (c) for the year of assessment. (Added 32 of 2018 s. 12)(1E) The assessor may, despite section 70—(a) annul the assessment; or(b) in case of an assessment of a partnership—reduce the assessment in so far as it relates to the share of profits of the individual. (Added 32 of 2018 s. 12)(2) Where a person has furnished a return in accordance with the provisions of section 51 the assessor may either— (Amended 49 of 1956 s. 43)(a) accept the return and make an assessment accordingly; or(b) if he does not accept the return, estimate the sum in respect of which such person is chargeable to tax and make an assessment accordingly. (Amended 49 of 1956 s. 43; 19 of 1996 s. 11)(c) (Repealed 56 of 1993 s. 24)(3) Where a person has not furnished a return and the assessor is of the opinion that such person is chargeable with tax, he may estimate the sum in respect of which such person is chargeable to tax and make an assessment accordingly, but such assessment shall not affect the liability of such person to a penalty by reason of his failure or neglect to deliver a return. (Amended 49 of 1956 s. 43)(4) In the case of profits from a trade or business, if accounts of such trade or business have not been kept in a satisfactory form, the assessor may assess the profits or income of such trade or business on the basis of the usual rate of net profit on the turnover of such trade or business, and the Board of Inland Revenue may prescribe the amounts of such usual rates of profits in particular classes of trade or business.(Amended E.R. 1 of 2012) Editorial Note: * The amendment made by Part 2 of Ord. No. 32 of 2018 to this section applies in relation to all years of assessment commencing on or after 1 April 2018. (Please see 32 of 2018 s. 3) 59A. (Repealed 52 of 1993 s. 6) 60. Additional assessments (1) Where it appears to an assessor that for any year of assessment any person chargeable with tax has not been assessed or has been assessed at less than the proper amount, the assessor may, within the year of assessment or within 6 years after the expiration thereof, assess such person at the amount or additional amount at which according to his judgment such person ought to have been assessed, and the provisions of this Ordinance as to notice of assessment, appeal and other proceedings shall apply to such assessment or additional assessment and to the tax charged thereunder: (Amended 16 of 1951 s. 10; 49 of 1956 s. 44)Provided that—(a) (Repealed 2 of 1971 s. 39)(b) where the non-assessment or under-assessment of any person for any year of assessment is due to fraud or wilful evasion, such assessment or additional assessment may be made at any time within 10 years after the expiration of that year of assessment. (Amended 49 of 1956 s. 44)(2) Where it appears to an assessor that the whole or part of any tax repaid to a person (otherwise than in consequence of an assessment having been determined on objection or appeal) has been repaid by mistake, whether of fact or law, the assessor may, within the year of assessment to which the repayment relates or within 6 years after the expiration thereof, assess such person in the amount of tax so repaid by mistake, and the provisions of this Ordinance as to notice of assessment, objection, appeal and other proceedings shall apply to such assessment and to the tax charged thereunder. (Added 2 of 1971 s. 39)(3) No assessment shall be made under subsection (2) if the repayment was in fact made on the basis of, or in accordance with, the practice generally prevailing at the time when the repayment was made. (Added 2 of 1971 s. 39)(4) Section 27 of Schedule 17A (specified alternative bond scheme and its treatment under this Ordinance (other than Part 4AA)) provides for modifications to this section. (Added 10 of 2013 s. 12. Amended 21 of 2025 s. 33) 61. Certain transactions and dispositions to be disregarded Where an assessor is of opinion that any transaction which reduces or would reduce the amount of tax payable by any person is artificial or fictitious or that any disposition is not in fact given effect to, he may disregard any such transaction or disposition and the person concerned shall be assessable accordingly. 61A. Transactions designed to avoid liability for tax (1) This section shall apply where any transaction has been entered into or effected after the commencement* of the Inland Revenue (Amendment) Ordinance 1986 (7 of 1986) (other than a transaction in pursuance of a legally enforceable obligation incurred prior to such commencement) and that transaction has, or would have had but for this section, the effect of conferring a tax benefit on a person (in this section referred to as the relevant person), and, having regard to-(a) the manner in which the transaction was entered into or carried out;(b) the form and substance of the transaction;(c) the result in relation to the operation of this Ordinance that, but for this section, would have been achieved by the transaction;(d) any change in the financial position of the relevant person that has resulted, will result, or may reasonably be expected to result, from the transaction;(e) any change in the financial position of any person who has, or has had, any connection (whether of a business, family or other nature) with the relevant person, being a change that has resulted or may reasonably be expected to result from the transaction;(f) whether the transaction has created rights or obligations which would not normally be created between persons dealing with each other at arm’s length under a transaction of the kind in question; and(g) the participation in the transaction of a corporation resident or carrying on business outside Hong Kong,it would be concluded that the person, or one of the persons, who entered into or carried out the transaction, did so for the sole or dominant purpose of enabling the relevant person, either alone or in conjunction with other persons, to obtain a tax benefit.(2) Where subsection (1) applies, the powers conferred upon an assessor under Part 10 shall be exercised by an assistant commissioner, and such assistant commissioner shall, without derogation from the powers which he may exercise under that Part, assess the liability to tax of the relevant person—(a) as if the transaction or any part thereof had not been entered into or carried out; or(b) in such other manner as the assistant commissioner considers appropriate to counteract the tax benefit which would otherwise be obtained.(3) In this section—tax benefit (稅項利益) means the avoidance or postponement of the liability to pay tax or the reduction in the amount thereof;transaction (交易) includes a transaction, operation or scheme whether or not such transaction, operation or scheme is enforceable, or intended to be enforceable, by legal proceedings.(Added 7 of 1986 s. 10. Amended E.R. 1 of 2012) Editorial Note: * Commencement date: 14 March 1986. 61B. Utilization of losses to avoid tax Where the Commissioner is satisfied that—(a) any change in the shareholding in any corporation, as a direct or indirect result of which profits have been received by or accrued to that corporation during any year of assessment, has been effected by any person after the commencement* of the Inland Revenue (Amendment) Ordinance 1986 (7 of 1986); and(b) the sole or dominant purpose of the change was for the purpose of utilizing any loss or any balance of any loss sustained in a trade, profession or business carried on by the corporation, in order to avoid liability on the part of that corporation or any other person for the payment of any tax or to reduce the amount thereof, the set off of any such loss or balance of loss against any such profits shall be disallowed. (Added 7 of 1986 s. 10) Editorial Note: * Commencement date: 14 March 1986. 61C. Avoidance arrangement of no effect If—(a) a person enters into an arrangement; and(b) the main purpose, or one of the main purposes, of the arrangement is to avoid any obligation under section 50B(1) or (2) or 50C(1),then those sections are to have effect as if the arrangement had not been entered into.(Added 22 of 2016 s. 8) 62. Notice to be issued by Commissioner (1) The Commissioner shall give a notice of assessment to each person who has been assessed stating the amount assessed, the amount of tax charged, and such due date for payment thereof as may be fixed by the Commissioner. (Amended 2 of 1971 s. 40)(2) (Repealed 52 of 1993 s. 6)(3) Where by reason of an amendment of the law it is necessary to vary the amount of tax charged in any notice of assessment the Commissioner may give such notification as may be necessary to the person assessed in that notice of assessment, and any notification so given shall, as regards any particulars of the assessment contained in the notification which have not been included in the notice of assessment, have effect as if the notification were a notice of assessment.(Amended 35 of 1965 s. 27) 63. Validity of assessments, etc. No notice, assessment, certificate, or other proceeding purporting to be in accordance with the provisions of this Ordinance shall be quashed, or deemed to be void or voidable, for want of form, or be affected by reason of a mistake, defect, or omission therein, if the same is in substance and effect in conformity with or according to the intent and meaning of this Ordinance, and if the person assessed or intended to be assessed or affected thereby is designated therein according to common intent and understanding. 63A. (Repealed 12 of 1999 s. 3) Part 10A Provisional Salaries Tax (Part 10A added 8 of 1973 s. 13) 63B. Liability for provisional salaries tax (1) Every person who is chargeable to salaries tax under Part 3 in respect of any year of assessment shall be liable to pay provisional salaries tax in respect of that year of assessment in accordance with this Part.(2) In the case of a husband and wife, where either the husband or wife is assessed to salaries tax under section 10(3) on the aggregate of their net chargeable incomes in respect of the year of assessment preceding that in respect of which provisional salaries tax is payable—(a) such provisional salaries tax shall be payable on the net chargeable income adjusted as necessary under section 63C(1); and(b) the person who is assessed to salaries tax in respect of that preceding year of assessment shall be solely liable to pay that provisional salaries tax. (Replaced 43 of 1989 s. 20)(Replaced 71 of 1983 s. 30. Amended E.R. 1 of 2012) 63C. Amount of provisional salaries tax* (1) Subject to subsections (1B), (2) and (3), provisional salaries tax in respect of any year of assessment shall be payable at the rates specified in Schedule 2 for that year of assessment by reference to the amount of the net chargeable income for the preceding year of assessment adjusted, for the purposes of this section, as follows— (Amended 17 of 2022 s. 8)(a) any loss set off under section 12A in calculating the net assessable income, or net assessable incomes, on which that net chargeable income is based, shall be added; (Amended 71 of 1983 s.

31(a)(i))(b) any loss which may be set off under section 12A in the year of assessment shall be set off against that amount: Provided that—(i) (Repealed 20 of 2018 s. 4)(ii) in no case shall the amount of provisional salaries tax charged under this subsection exceed the amount which would have been chargeable had the standard rate been charged on the whole of— (Amended 20 of 2018 s. 4)(A) the net assessable income for the preceding year of assessment as reduced by such deductions as are under Part 4A allowable to that person; or(B) in the case of a husband and wife to whom section 63B(2) applies, the aggregate of their net assessable incomes for the preceding year of assessment as reduced by such deductions as are under Part 4A allowable to them. (Replaced 43 of 1989 s. 21. Amended 31 of 1998 s. 19)(1A) (Repealed 43 of 1989 s. 21)(1B) In computing the amount of provisional salaries tax for a year of assessment, any credit or deduction allowed under section 50 for the preceding year of assessment is to be taken into account. (Added 17 of 2022 s. 8)(2) If a person commences to derive income from a source on a day within any year of assessment, an assessor may estimate the sum in respect of which provisional salaries tax is payable in that year and the succeeding year of assessment. (Amended 71 of 1983 s. 31) (3) If a person ceases to derive income from a source within any year of assessment an assessor may estimate the sum in respect of which provisional salaries tax is payable for that year of assessment and for the year preceding that year of assessment. (Amended 71 of 1983 s. 31)(4) If a person is liable to pay provisional salaries tax, an assessor shall, as soon as may be after the expiration of the time limited by the notice requiring that person to furnish a return under section 51(1), assess or estimate the amount of the provisional salaries tax which he is liable to pay.(5) Notwithstanding subsection (4), an assessor may assess or estimate the amount of provisional salaries tax which any person is liable to pay if he is of the opinion that the person is about to leave Hong Kong or that for any other reason it is expedient to do so. (Amended 7 of 1986 s. 12)(6) When an assessor has assessed or estimated the amount of provisional salaries tax which a person is liable to pay, the Commissioner shall give a notice to that person stating the amount of provisional salaries tax to be paid, and such due date for payment thereof as may be fixed by the Commissioner.(6A) Where in any year of assessment a notice for payment of provisional salaries tax has been given under subsection (6) and thereafter any rate specified in Schedule 2, or any allowance provided for in Part 5, for that year of assessment is amended, the amount of provisional salaries tax stated in the notice shall nevertheless be payable. (Added 32 of 1981 s. 9. Amended 43 of 1989 s. 21)(7) For the purposes of Part 12, provisional salaries tax shall be deemed to be a tax charged under the provisions of this Ordinance and a notice under subsection (6) shall be deemed to be a notice of assessment.(Added 8 of 1973 s. 13. Amended 7 of 1975 s. 36; E.R. 1 of 2012) Editorial Note: * For the calculation of net chargeable income under this section in order to ascertain provisional salaries tax in respect of the year of assessment commencing from 1 April 1990, 1 April 1991, 1 April 1992, 1 April 1993, 1 April 1994, 1 April 1995, 1 April 1996, 1 April 1997, 1 April 1998, 1 April 2003, 1 April 2004, 1 April 2007 or 1 April 2008, please also see the transitional provisions contained in 30 of 1990, 42 of 1991, 34 of 1992, 28 of 1993, 37 of 1994, 48 of 1995, 24 of 1996, 42 of 1997, 31 of 1998, 24 of 2003, 10 of 2007 or 21 of 2008 respectively. 63CA. Calculating net chargeable income for computing provisional salaries tax: meaning of certain references (1) This section applies for the purposes of calculating the net chargeable income of a person for the year preceding a year of assessment to ascertain the provisional salaries tax for the year of assessment (relevant year of assessment) under section 63C(1).(2) For the purposes of deducting any expenses of self-education (as defined by section 12(6)(b)) from a person’s assessable income for the year preceding a year of assessment, the reference in section 12(1)(e) to “the amount prescribed in subsection (6)” is taken to be a reference to the amount specified in Schedule 3A for the relevant year of assessment.(3) For the purposes of deduction from a person’s net assessable income for the year preceding a year of assessment, the reference in section 12B(1)(a) to “such deductions as are under Part 4A allowable to that person” is taken to be a reference to—(a) the deduction under section 26D (elderly residential care expenses) allowable to that person not exceeding the amount specified in Schedule 3C for the relevant year of assessment;(b) the deduction under section 26E (home loan interest) allowable to that person not exceeding— (Amended 31 of 2018 s. 9; 10 of 2024 s. 10)(i) if the deduction allowable under that section for the year preceding the relevant year of assessment is not an HLI increased deduction—the amount specified in Part 1 of Schedule 3D for the relevant year of assessment; or(ii) if the deduction allowable under that section for the year preceding the relevant year of assessment is an HLI increased deduction—the aggregate of the amounts specified in Parts 1 and 2 of Schedule 3D for the relevant year of assessment; (Amended 10 of 2024 s. 10)(c) the deduction under section 26G (contributions to recognized retirement schemes) allowable to that person not exceeding the amount specified in Schedule 3B for the relevant year of assessment; (Amended 31 of 2018 s. 9; 7 of 2019 s. 4)(d) the deduction under section 26K (qualifying premiums paid under VHIS policy) allowable to that person not exceeding the amount specified in Schedule 3E for the relevant year of assessment; (Added 31 of 2018 s. 9. Amended 7 of 2019 s. 4; 7 of 2022 s. 4)(e) either or both of the following deductions allowable to that person, to the extent that the total amount does not exceed the amount specified in Schedule 3F for the relevant year of assessment—(i) the deductions under section 26O (deduction for qualifying annuity premiums);(ii) the deductions under section 26S (deduction for tax deductible MPF voluntary contributions); (Added 7 of 2019 s. 4. Amended 7 of 2022 s. 4; 2 of 2025 s. 4)(f) the deduction under section 26X (deduction for domestic rents) allowable to that person not exceeding— (Added 7 of 2022 s. 4. Amended 10 of 2024 s. 10)(i) if the deduction allowable under that section for the year preceding the relevant year of assessment is not a DR increased deduction—the amount specified in Part 1 of Schedule 3G for the relevant year of assessment; or(ii) if the deduction allowable under that section for the year preceding the relevant year of assessment is a DR increased deduction—the aggregate of the amounts specified in Parts 1 and 2 of Schedule 3G for the relevant year of assessment; and (Amended 10 of 2024 s. 10; 2 of 2025 s. 4)(g) the deduction under section 26ZG (deduction for qualifying AR service expenses) allowable to that person not exceeding the amount specified in Schedule 3H for the relevant year of assessment. (Added 2 of 2025 s. 4)(4) For the purposes of deduction from the aggregate of the net assessable incomes of a person and the person’s spouse for the year preceding a year of assessment, the reference in section 12B(2)(a) to “such deductions as are under Part 4A allowable to them” is taken to be a reference to—(a) the deduction under section 26D (elderly residential care expenses) allowable to them not exceeding the amount specified in Schedule 3C for the relevant year of assessment;(b) the deduction under section 26E (home loan interest) allowable to them not exceeding— (Amended 31 of 2018 s. 9; 10 of 2024 s. 10)(i) if the deduction allowable under that section for the year preceding the relevant year of assessment is not an HLI increased deduction—the amount specified in Part 1 of Schedule 3D for the relevant year of assessment; or(ii) if the deduction allowable under that section for the year preceding the relevant year of assessment is an HLI increased deduction—the aggregate of the amounts specified in Parts 1 and 2 of Schedule 3D for the relevant year of assessment; (Amended 10 of 2024 s. 10)(c) the deduction under section 26G (contributions to recognized retirement schemes) allowable to them not exceeding the amount specified in Schedule 3B for the relevant year of assessment; (Amended 31 of 2018 s. 9; 7 of 2019 s. 4)(d) the deduction under section 26K (qualifying premiums paid under VHIS policy) allowable to them not exceeding the amount specified in Schedule 3E for the relevant year of assessment; (Added 31 of 2018 s. 9. Amended 7 of 2019 s. 4; 7 of 2022 s. 4)(e) either or both of the following deductions allowable to them, to the extent that the total amount does not exceed the amount specified in Schedule 3F for the relevant year of assessment—(i) the deductions under section 26O (deduction for qualifying annuity premiums);(ii) the deductions under section 26S (deduction for tax deductible MPF voluntary contributions); (Added 7 of 2019 s. 4. Amended 7 of 2022 s. 4; 2 of 2025 s. 4)(f) the deduction under section 26X (deduction for domestic rents) allowable to them not exceeding— (Added 7 of 2022 s. 4. Amended 10 of 2024 s. 10)(i) if the deduction allowable under that section for the year preceding the relevant year of assessment is not a DR increased deduction—the amount specified in Part 1 of Schedule 3G for the relevant year of assessment; or(ii) if the deduction allowable under that section for the year preceding the relevant year of assessment is a DR increased deduction—the aggregate of the amounts specified in Parts 1 and 2 of Schedule 3G for the relevant year of assessment; and (Amended 10 of 2024 s. 10; 2 of 2025 s. 4)(g) the deduction under section 26ZG (deduction for qualifying AR service expenses) allowable to them not exceeding the amount specified in Schedule 3H for the relevant year of assessment. (Added 2 of 2025 s. 4)(5) For the purposes of deduction from a person’s net assessable income for the year preceding a year of assessment, the reference in section 12B(1)(b) to “such allowances as are under Part 5 permitted for that person” is taken to be a reference to the allowances that may be granted to that person under Part 5 for the relevant year of assessment.(6) For the purposes of deduction from the aggregate of the net assessable incomes of a person and the person’s spouse for the year preceding a year of assessment, the reference in section 12B(2)(b) to “such allowances as are under Part 5 permitted in their case” is taken to be a reference to the allowances that may be granted to them under Part 5 for the relevant year of assessment.(7) In this section—DR increased deduction (住宅租金經提高的扣除) has the meaning given by section 26ZA(2);HLI increased deduction (居貸利息經提高的扣除) has the meaning given by section 26E(9). (Added 10 of 2024 s. 10)(Added 20 of 2018 s. 5) 63D. Demands for provisional salaries tax (1) In any year of assessment, a notice for payment of provisional salaries tax may be—(a) given separately to any person liable to pay provisional salaries tax; or(b) included in a notice of assessment to salaries tax. (Amended 7 of 1975 s. 37)(2) (Repealed 7 of 1975 s. 37)(Added 8 of 1973 s. 13) 63E. Holding over of payment of provisional salaries tax (1) Where in relation to any year of assessment a person is liable to pay provisional salaries tax, he may, by notice in writing lodged with the Commissioner not later than—(a) 28 days before the day by which the provisional salaries tax is to be paid; or (b) 14 days after the date of the notice for payment of provisional salaries tax under section 63C(6),whichever is the later, apply to the Commissioner on any of the grounds specified in subsection (2) to have the payment of the whole or part of such tax held over until he is required to pay salaries tax for that year of assessment or, in the case of an application on the ground set out in subsection (2)(d), until—(i) the determination of the objection or settlement thereof under section 64(3); or(ii) he is required to pay salaries tax for that year of assessment,whichever is the sooner. (Replaced 52 of 1993 s. 7)#(2) The grounds referred to in subsection (1) are—*(a) that the person assessed to provisional salaries tax has become entitled during the year of assessment to an allowance under Part 5, which allowance was not taken into account in the ascertainment of his net chargeable income for the year preceding the year of assessment or in estimating the sum in respect of which such person is liable to pay provisional salaries tax; (Amended 33 of 1973 s. 4; 79 of 1978 s. 3; 43 of 1989 s. 22)*(b) that the net chargeable income during the year of assessment of the person assessed to provisional salaries tax is, or is likely to be, less than 90% of the net chargeable income for the year preceding the year of assessment or of the estimated sum in respect of which such person is liable to pay provisional salaries tax; (Amended 7 of 1975 s. 38)(ba) that the person assessed to provisional salaries tax has paid or is likely to pay, during the year of assessment, expenses of self-education (as defined by section 12(6)(b)) that—(i) are allowable for deduction under section 12; and(ii) exceed or are likely to exceed the amount specified in Schedule 3A for the year preceding the year of assessment; (Added 20 of 2018 s. 6)(bb) that the person assessed to provisional salaries tax has paid or is likely to pay, during the year of assessment, contributions to a recognized retirement scheme that—(i) are allowable for deduction under section 26G; and(ii) exceed or are likely to exceed the amount specified in Schedule 3B for the year preceding the year of assessment; (Added 20 of 2018 s. 6)(bc) that the person assessed to provisional salaries tax, or the person’s spouse (not being a spouse living apart from the person), has paid or is likely to pay, during the year of assessment, residential care expenses (as defined by section 26D(5)) that—(i) are allowable for deduction under section 26D; and(ii) exceed or are likely to exceed the amount specified in Schedule 3C for the year preceding the year of assessment; (Added 20 of 2018 s. 6)(bd) that the person assessed to provisional salaries tax, or the person’s spouse (not being a spouse living apart from the person), has paid or is likely to pay, during the year of assessment, home loan interest (as defined by section 26E(9)) that—(i) is allowable for deduction under section 26E; and(ii) exceeds or is likely to exceed—(A) if the dwelling to which the home loan interest relates is held by the person or the spouse as a sole owner—(if the deduction concerned is not an HLI increased deduction) the amount specified in Part 1 of Schedule 3D for the year preceding the year of assessment, or (if the deduction concerned is an HLI increased deduction) the aggregate of the amounts specified in Parts 1 and 2 of that Schedule for the year preceding the year of assessment;(B) if the dwelling to which the home loan interest relates is held by the person or the spouse as a joint tenant—(if the deduction concerned is not an HLI increased deduction) the amount specified in Part 1 of Schedule 3D for the year preceding the year of assessment, or (if the deduction concerned is an HLI increased deduction) the aggregate of the amounts specified in Parts 1 and 2 of that Schedule for the year preceding the year of assessment, as divided by the number of joint tenants; or(C) if the dwelling to which the home loan interest relates is held by the person or the spouse as a tenant in common—(if the deduction concerned is not an HLI increased deduction) the amount specified in Part 1 of Schedule 3D for the year preceding the year of assessment, or (if the deduction concerned is an HLI increased deduction) the aggregate of the amounts specified in Parts 1 and 2 of that Schedule for the year preceding the year of assessment, as multiplied by the share of the person or the spouse in the ownership in the dwelling; (Added 20 of 2018 s. 6. Amended 10 of 2024 s. 11)(be) that the person assessed to provisional salaries tax, or the person’s spouse (not being a spouse living apart from the person), or both of them, has or have paid, or is or are likely to pay, during the year of assessment, qualifying premiums (as defined by section 26I(1)) that—(i) are allowable for deduction under section 26K; and(ii) in total, exceed or are likely to exceed the amount specified in Schedule 3E for the year preceding the year of assessment; (Added 31 of 2018 s. 10)(bf) that—(i) either or both of the following apply—(A) the person assessed to provisional salaries tax, or the person’s spouse (not being a spouse living apart from the person), or both of them, has or have paid, or is or are likely to pay, during the year of assessment, qualifying annuity premiums (as defined by section 26N(1)) that are allowable for deduction under section 26O;(B) the person assessed to provisional salaries tax has paid or is likely to pay, during the year of assessment, tax deductible MPF voluntary contributions (as defined by section 26S(2)) that are allowable for deduction under section 26S; and(ii) the amount of the qualifying annuity premiums mentioned in subparagraph (i)(A), the amount of the tax deductible MPF voluntary contributions mentioned in subparagraph (i)(B), or the total of both of these amounts exceeds or is likely to exceed the amount specified in Schedule 3F for the year preceding the year of assessment; (Added 7 of 2019 s. 5)(bg) that the person assessed to provisional salaries tax, or the person’s spouse (not being a spouse living apart from the person), or both of them, has or have paid, or is or are likely to pay, any rents in relation to the year of assessment (as construed in accordance with section 26W(3)) that—(i) are allowable for deduction under section 26X; and(ii) in total, exceed or are likely to exceed the amount of the deduction allowable for the rents as determined in accordance with section 26Y that applies on the basis that— (Added 7 of 2022 s. 5. Amended 10 of 2024 s. 11)(A) (if the deduction concerned is not a DR increased deduction) the amount specified in Part 1 of Schedule 3G for the year of assessment were the same as the amount specified in Part 1 of that Schedule for the year preceding the year of assessment; or(B) (if the deduction concerned is a DR increased deduction) the aggregate of the amounts specified in Parts 1 and 2 of Schedule 3G for the year of assessment were the same as the aggregate of the amounts specified in Parts 1 and 2 of that Schedule for the year preceding the year of assessment; (Amended 10 of 2024 s. 11)(bh) that the person assessed to provisional salaries tax, or the person’s spouse (not being a spouse living apart from the person), or both of them, has or have paid, or is or are likely to pay, during the year of assessment, qualifying AR service expenses (as defined by section 26ZE(1)) that—(i) are allowable for deduction under section 26ZG; and(ii) in total, exceed or are likely to exceed the amount specified in Schedule 3H for the year preceding the year of assessment; (Added 2 of 2025 s. 5)(c) that the person assessed to provisional salaries tax has ceased, or will before the end of the year of assessment cease, to derive income chargeable to salaries tax; or (Amended 7 of 1975 s. 38)(d) that the person assessed to provisional salaries tax has objected under section 64 to his assessment to salaries tax for the year preceding the year of assessment. (Added 7 of 1975 s. 38)(2A) For the purposes of subsection (2)(a) and (b), a person’s net chargeable income for the year preceding the year of assessment must be calculated with reference to section 63CA. (Added 20 of 2018 s. 6)(2B) The Commissioner may, if satisfied that it is appropriate, extend (either generally or in a particular case) the time within which an application may be made under subsection (1) on a ground specified in subsection (2)(ba), (bb), (bc), (bd), (be), (bf), (bg) or (bh). (Added 20 of 2018 s. 6. Amended 31 of 2018 s. 10; 7 of 2019 s. 5; 7 of 2022 s. 5; 2 of 2025 s. 5)(3) On receipt of an application under subsection (1), the Commissioner shall consider the same and may hold over the payment of the whole or part of the provisional salaries tax. (4) The Commissioner shall, by notice in writing, inform the person applying under subsection (1) of his decision.(5) (Repealed 43 of 1989 s. 22)(6) In this section—DR increased deduction (住宅租金經提高的扣除) has the meaning given by section 26ZA(2);HLI increased deduction (居貸利息經提高的扣除) has the meaning given by section 26E(9). (Added 10 of 2024 s. 11)(Added 8 of 1973 s. 13. Amended E.R. 1 of 2012) Editorial Note: # On additional grounds for making a hold over application in respect of the year of assessment commencing on 1 April 2003 or 1 April 2008, please see the transitional provisions in section 15(1), (2) and (5) to (7) of 24 of 2003 or section 17 of 21 of 2008 respectively. * For the calculation of the “net chargeable income for the year preceding the year of assessment” commencing on 1 April 2003 or 1 April 2004, 1 April 2007 or 1 April 2008, please see the transitional provisions in section 14 of 24 of 2003, section 9 of 10 of 2007 or section 16 of 21 of 2008 respectively. 63F. Provisional salaries tax to be applied against salaries tax (1) When any person had paid provisional salaries tax in respect of any year of assessment, the Commissioner shall, not later than when he gives notice of assessment of salaries tax, apply the amount of provisional salaries tax so paid in payment first of—(a) the salaries tax payable by that person for that year of assessment; then(b) the provisional salaries tax payable in respect of the year of assessment succeeding that year of assessment,and shall refund to the person paying the provisional salaries tax the amount of the provisional salaries tax not so applied. (Replaced 7 of 1975 s. 39)(2) (Repealed 43 of 1989 s. 23) Part 10B Provisional Profits Tax (Part 10B added 7 of 1975 s. 40) 63G. Liability for provisional profits tax Every person who is chargeable to profits tax under Part 4 in respect of the year of assessment commencing on 1 April 1975 or any succeeding year of assessment shall be liable to pay provisional profits tax in respect of that year of assessment in accordance with this Part.(Added 7 of 1975 s. 40. Amended E.R. 1 of 2012) 63H. Amount of provisional profits tax (1) Subject to subsections (1E), (2), (3) and (4), provisional profits tax in respect of any year of assessment shall be payable by reference to the amount of assessable profits for the year preceding the year of assessment, but after the set off of any loss available for set off in the year of assessment under section 19 or 19C. (Amended 56 of 1993 s. 25; 13 of 2018 s. 6; 17 of 2022 s. 9)(1A) For a person other than a corporation, the tax is to be charged on the assessable profits of the person—(a) for any year of assessment commencing before 1 April 2018—at the standard rate; or(b) for any year of assessment commencing on or after 1 April 2018—in accordance with section 2 of Schedule 8A. (Replaced 13 of 2018 s. 6)(1B) For a corporation, the tax is to be charged, subject to subsections (1C) and (1D), on the assessable profits of the corporation—(a) for any year of assessment commencing before 1 April 2018—at the rate specified in Schedule 8; or(b) for any year of assessment commencing on or after 1 April 2018—in accordance with section 2(a) of Schedule 8B. (Added 13 of 2018 s. 6)(1C) If a corporation is a partner in a partnership, in relation to any share of assessable profits of the partnership apportioned to the corporation under section 22A, the tax is to be charged—(a) for any year of assessment commencing before 1 April 2018—at the rate specified in Schedule 8; or(b) for any year of assessment commencing on or after 1 April 2018—in accordance with section 2(b) of Schedule 8B. (Added 13 of 2018 s. 6)(1D) If a corporation has made an election under section 14B(2)(b), 14D(5)(b), 14H(4)(b), 14J(5)(b), 14P(4)(b), 14T(5)(b), 14ZD(7)(b), 14ZM(7)(b) or 14ZV(7)(b) or section 4 of Schedule 17FD in respect of a portion of its assessable profits, then, in relation to the rest of its assessable profits, the tax is to be charged at the rate specified in Schedule 8. (Added 13 of 2018 s. 6. Amended 5 of 2020 s. 14; 15 of 2020 s. 14; 10 of 2022 s. 7; 17 of 2024 s. 9)(1E) In computing the amount of provisional profits tax for a year of assessment, any credit or deduction allowed under section 50 for the preceding year of assessment is to be taken into account. (Added 17 of 2022 s. 9)(2) In calculating any assessable profits for a year preceding a year of assessment for the purposes of computing provisional profits tax under subsection (1), there shall be disregarded any loss available for set off in that year.(2A) Also, in calculating any assessable profits for the year preceding a year of assessment—(a) for the purposes of computing provisional profits tax under subsection (1), the reference in section 16AA(1) to “the basis period for any year of assessment” is taken to be a reference to the basis period for the year preceding the year of assessment; and(b) for the purposes of computing provisional profits tax under subsection (1) in respect of the year of assessment (relevant year of assessment), the reference in section 16AA(2)(b) to “that year of assessment” is taken to be a reference to the relevant year of assessment. (Added 20 of 2018 s. 7)(3) Where the amount of assessable profits of a person for the year preceding the year of assessment was calculated on a basis period of more or less than 1 year, an assessor may estimate the sum in respect of which such person is liable to pay provisional profits tax in that year of assessment.(4) If a person commences to carry on a trade, profession or business in Hong Kong on a day within a year of assessment commencing on or after 1 April 1974, an assessor may estimate the sum in respect of which such person is liable to pay provisional profits tax in that year and the succeeding year of assessment. (Amended 7 of 1986 s. 12)(5) If a person is liable to pay provisional profits tax, an assessor shall, as soon as may be after the expiration of the time limited by the notice requiring that person to furnish a return under section 51(1), assess or estimate the amount of provisional profits tax which he is liable to pay.(6) Notwithstanding subsection (5), an assessor may assess or estimate the amount of provisional profits tax which any person is liable to pay if he is of the opinion that the person is about to leave Hong Kong or that for any other reason it is expedient to do so. (Amended 7 of 1986 s. 12)(7) When an assessor has assessed or estimated the amount of provisional profits tax which a person is liable to pay, the Commissioner shall give a notice to that person stating the amount of provisional profits tax to be paid, and such due date for payment thereof as may be fixed by the Commissioner.(7A) Where in any year of assessment a notice for payment of provisional profits tax has been given under subsection (7) and thereafter the rate of provisional tax for that year of assessment is amended, the amount of provisional profits tax stated in the notice shall nevertheless be payable. (Added 32 of 1981 s. 10)(8) For the purposes of Part 12, provisional profits tax shall be deemed to be a tax charged under this Ordinance and a notice under subsection (7) shall be deemed to be a notice of assessment.(Added 7 of 1975 s. 40. Amended E.R. 1 of 2012) 63HA. Amount of provisional profits tax for connected entities (1) This section applies to an entity in relation to any year of assessment commencing on or after 1 April 2018 (specified year of assessment) if, at the end of the basis period of the entity for the year preceding that year of assessment, the entity has any connected entity.(2) Section 63H applies to the entity subject to any applicable modifications specified in subsection (3).(3) The modifications are—(a) for an entity other than a corporation—the reference in section 63H(1A)(b) to “in accordance with section 2 of Schedule 8A” is taken to be a reference to “at the standard rate”;(b) for a corporation—the reference in section 63H(1B)(b) to “in accordance with section 2(a) of Schedule 8B” is taken to be a reference to “at the rate specified in Schedule 8”; and(c) for a corporation that is a partner in a partnership—the reference in section 63H(1C)(b) to “in accordance with section 2(b) of Schedule 8B” is taken to be a reference to “at the rate specified in Schedule 8”.(4) However, the Commissioner may exempt an entity from subsection (2) for a specified year of assessment if the entity has elected in writing to be exempted from section 14AAC(2) for the year preceding that year of assessment.(5) Also, the Commissioner may exempt an entity from subsection (2) for the year of assessment commencing on 1 April 2018 if the entity has elected in writing to be so exempted.(6) Subsection (5) does not apply to an entity (entity A) if—(a) entity A is a connected entity of another entity (entity B) at the end of the basis period of entity A for the year of assessment commencing on 1 April 2017; and(b) entity B has been exempted under that subsection for the year of assessment commencing on 1 April 2018.(7) Sections 14AA and 14AAB apply for the interpretation of this section as they apply for the interpretation of section 14AAC.(Added 13 of 2018 s. 7) 63I. Demands for provisional profits tax In any year of assessment, a notice for payment of provisional profits tax may be—(a) given separately to the person liable to pay that provisional profits tax; or(b) included in a notice of assessment to profits tax.(Added 7 of 1975 s. 40) 63J. Holding over of payment of provisional profits tax (1) Where in relation to any year of assessment a person is liable to pay provisional profits tax, he may, by notice in writing lodged with the Commissioner not later than—(a) 28 days before the day by which the provisional profits tax is to be paid; or(b) 14 days after the date of the notice for payment of provisional profits tax under section 63H(7),whichever is the later, apply to the Commissioner on any of the grounds specified in subsection (2) to have the payment of the whole or part of such tax held over until he is required to pay profits tax for that year of assessment or, in the case of an application on the ground set out in subsection (2)(e), until—(i) the determination of the objection or settlement thereof under section 64(3); or(ii) he is required to pay profits tax for that year of assessment,whichever is the sooner. (Replaced 52 of 1993 s. 8)*(2) The grounds referred to in subsection (1) are—(a) that the assessable profits for the year of assessment of the person assessed to provisional profits tax are, or are likely to be, less than 90 per cent of the assessable profits for the year preceding the year of assessment or of the estimated sum in respect of which the person is liable to pay provisional profits tax;(ab) that the person assessed to provisional profits tax has paid or is likely to pay, during the year of assessment, mandatory contributions that the person is required to pay as a self-employed person under the Mandatory Provident Fund Schemes Ordinance (Cap. 485) and the mandatory contributions—(i) are allowable for deduction under section 16AA; and(ii) exceed or are likely to exceed the amount specified in Schedule 3B for the year preceding the year of assessment; (Added 20 of 2018 s. 8)(b) that the amount of any loss brought forward for set off to that year of assessment under section 19 or 19C has been omitted or is incorrect;(c) that the person assessed to provisional profits tax has ceased, or will before the end of the year of assessment cease, to carry on his trade, profession or business and that the assessable profits to be assessed under section 18D for that year of assessment are, or are likely to be, less than the assessable profits for the year preceding the year of assessment or of the estimated sum in respect of which the person is liable to pay provisional profits tax;(d) that the person assessed to provisional profits tax has elected to be personally assessed under Part 7 for that year of assessment and that such personal assessment is likely to reduce his liability to tax; or (Amended 19 of 1996 s. 12)(e) that the person assessed to provisional profits tax has objected under section 64 to his assessment to profits tax for the year preceding the year of assessment.(2A) For the purposes of subsection (2)(a), a person’s assessable profits for the year preceding the year of assessment must be calculated with reference to section 63H(2A). (Added 20 of 2018 s. 8)(2B) The Commissioner may, if satisfied that it is appropriate, extend (either generally or in a particular case) the time within which an application may be made under subsection (1) on the ground specified in subsection (2)(ab). (Added 20 of 2018 s. 8)(3) On receipt of an application under subsection (1), the Commissioner shall consider the same and may hold over the payment of the whole or part of the provisional profits tax.(4) The Commissioner shall, by notice in writing, inform the person applying under subsection (1) of his decision.(Added 7 of 1975 s. 40. Amended E.R. 1 of 2012) Editorial Note: * On the additional ground for making a hold over application in respect of the year of assessment commencing on 1 April 2003, please see the transitional provision in section 15(3) to (7) of 24 of 2003 or section 18 of 21 of 2008 respectively. 63K. Provisional profits tax to be applied against profits tax When any person has paid provisional profits tax in respect of any year of assessment, the Commissioner shall, not later than when he gives notice of assessment of profits tax, apply the amount of provisional profits tax so paid in payment first of—(a) the profits tax payable by that person for that year of assessment; then(b) the provisional profits tax payable in respect of the year of assessment succeeding that year of assessment,and shall refund to the person paying the provisional profits tax the amount thereof not so applied. Part 10C Provisional Property Tax (Part 10C added 8 of 1983 s. 18) 63L. Liability for provisional property tax Every person who is chargeable to property tax under Part 2 in respect of any year of assessment commencing on or after 1 April 1983 shall be liable to pay provisional property tax in respect of that year of assessment in accordance with this Part.(Added 8 of 1983 s. 18. Amended E.R. 1 of 2012) 63M. Amount of provisional property tax (1) Subject to subsection (1A), provisional property tax in respect of any year of assessment shall be payable at the standard rate on the net assessable value of land or buildings or land and buildings for the year preceding the year of assessment. (Amended 17 of 2022 s. 10)(1A) In computing the amount of provisional property tax for a year of assessment, any credit or deduction allowed under section 50 for the preceding year of assessment is to be taken into account. (Added 17 of 2022 s. 10)(2) Where the amount of assessable value of land or buildings or land and buildings for the year preceding the year of assessment was calculated in respect of a period of less than one year, an assessor may estimate the assessable value in respect of which provisional property tax is payable.(3) Where a person becomes chargeable to property tax during a year of assessment, an assessor may estimate the assessable value in respect of which provisional property tax is payable in that year and the succeeding year of assessment.(4) Where a person is liable to pay provisional property tax, an assessor shall, as soon as may be after expiration of the time limited by the notice requiring that person to furnish a return under section 51(1), assess or estimate the amount of provisional property tax which he is liable to pay.(5) Notwithstanding subsection (4), an assessor may assess or estimate the amount of provisional property tax which any person is liable to pay if he is of the opinion that the person is about to leave Hong Kong or that for any other reason it is expedient to do so.(6) When an assessor has assessed or estimated the amount of provisional property tax which a person is liable to pay, the Commissioner shall give a notice to that person stating the amount of provisional property tax to be paid, and such due date for payment thereof as may be fixed by the Commissioner.(7) Where in any year of assessment a notice for payment of provisional property tax has been given under subsection (6) and thereafter the allowance mentioned in section 5(1A) or the rate of provisional property tax for that year of assessment is amended, the amount of provisional property tax stated in the notice shall nevertheless be payable.(8) For the purposes of Part 12, provisional property tax shall be deemed to be a tax charged under this Ordinance and a notice under subsection (6) shall be deemed to be a notice of assessment. (Amended 24 of 2003 s. 7)(Added 8 of 1983 s. 18. Amended E.R. 1 of 2012) 63N. Demands for provisional property tax In any year of assessment, a notice for payment of provisional property tax may be—(a) given separately to the person liable to pay that provisional property tax; or(b) included in a notice of assessment to property tax.(Added 8 of 1983 s. 18) 63O. Holding over of payment of provisional property tax (1) Where in relation to any year of assessment a person is liable to pay provisional property tax, he may, by notice in writing lodged with the Commissioner not later than—(a) 28 days before the day by which the provisional property tax is to be paid; or(b) 14 days after the date of the notice for payment of provisional property tax under section 63M(6),whichever is the later, apply to the Commissioner on any of the grounds specified in subsection (2) to have the payment of the whole or part of such tax held over until he is required to pay property tax for that year of assessment or, in the case of an application on the ground set out in subsection (2)(d), until—(i) the determination of the objection or settlement thereof under section 64(3); or(ii) he is required to pay property tax for that year of assessment,whichever is the sooner. (Replaced 52 of 1993 s. 9)(2) The grounds referred to in subsection (1) are—(a) that the assessable value for the year of assessment is, or is likely to be, less than 90% of the assessable value for the year preceding the year of assessment or of the estimated assessable value in respect of which the person is liable to pay provisional property tax;(b) that the person assessed to provisional property tax has ceased, or will before the end of the year of assessment cease, to be an owner of land or buildings or land and buildings and that the assessable value for the year of assessment is, or is likely to be, less than the assessable value for the year preceding the year of assessment or the estimated sum in respect of which the person is liable to pay provisional property tax;(c) that the person assessed to provisional property tax has elected to be personally assessed under Part 7 for that year of assessment and that such personal assessment is likely to reduce his liability to tax; or (Amended 19 of 1996 s. 13)(d) that the person assessed to provisional property tax has objected under section 64 to his assessment to property tax for the year preceding the year of assessment.(3) On receipt of an application under subsection (1), the Commissioner shall consider the same and may hold over the payment of the whole or part of the provisional property tax.(4) The Commissioner shall, by notice in writing, inform the person applying under subsection (1) of his decision.(Added 8 of 1983 s. 18. Amended E.R. 1 of 2012) 63P. Provisional property tax to be applied against property tax When any person has paid provisional property tax in respect of any year of assessment, the Commissioner shall, not later than when he gives notice of assessment of property tax, apply the amount of provisional property tax so paid in payment first of—(a) the property tax payable by that person for that year of assessment; then(b) the provisional property tax payable in respect of the year of assessment succeeding that year of assessment,and shall refund to the person paying the provisional property tax the amount thereof not so applied. Part 11 Objections and Appeals (Amended 26 of 1969 s. 33) 64. Objections (1) Any person aggrieved by an assessment made under this Ordinance may, by notice in writing to the Commissioner, object to the assessment; but no such notice shall be valid unless it states precisely the grounds of objection to the assessment and is received by the Commissioner within 1 month after the date of the notice of assessment: (Amended 2 of 1971 s. 41; 52 of 1993 s. 10; 24 of 2003 s. 8)Provided that—(a) if the Commissioner is satisfied that owing to absence from Hong Kong, sickness or other reasonable cause, the person objecting to the assessment was prevented from giving such notice within such period, the Commissioner shall extend the period as may be reasonable in the circumstances; (Amended 7 of 1986 s. 12)(b) where any assessment objected to has been made under section 59(3) in the absence of any return required under section 51, no notice of objection against such assessment shall be valid unless, in addition to such notice being valid in accordance with the foregoing provisions of this subsection, the return required as aforesaid has been made within the period provided by this subsection for objecting to the assessment or within such further period as the Commissioner may approve for the making of such return;(c) where the assessment is a reassessment of the tax due from a person having the effect of either increasing or reducing that person’s liability to tax, the person so reassessed shall have no further right of objection than he would have had if the reassessment had not been made except to the extent to which, by reason of the reassessment, a fresh liability in respect of any particular is imposed on him or an existing liability in respect of any particular is increased or reduced. (Replaced 2 of 1971 s. 41)(1A) For the purposes of subsection (1), where a person chargeable to tax is assessed under section 59(2)(b) or 60(1) in circumstances that, if the person had no other income, property or profits chargeable to tax under this Ordinance, the assessment would have been made under section 59(3)—(a) the provisions of proviso (b) to subsection (1) shall apply to any objection made against that assessment to the extent to which that person has failed to comply with section 51; and(b) no notice of objection against such assessment shall be valid unless and until that person has complied with section 51. (Added 52 of 1993 s. 10)(2) On receipt of a valid notice of objection under subsection (1) the Commissioner shall consider the same and within a reasonable time may confirm, reduce, increase or annul the assessment objected to, and for the purpose of discharging his functions under this subsection may, by notice in writing, require the person giving the notice of objection to furnish such particulars as the Commissioner may deem necessary with respect to the matters which are the subject of the assessment and to produce all books or other documents in his custody or under his control relating to such matters, and may summon any person who in his opinion is able to give evidence respecting the assessment to attend before him and may examine such person on oath or otherwise. Where the Commissioner proposes to examine any person on oath under this subsection, he shall, by prior notice in writing, afford a reasonable opportunity to the person giving the notice of objection or his authorized representative to be present at such examination. (3) In the event of the Commissioner agreeing with any person assessed, who has validly objected to an assessment made upon him, as to the amount at which such person is liable to be assessed, any necessary adjustment of the assessment shall be made.(4) In the event of the Commissioner failing to agree with any person assessed, who has validly objected to an assessment made upon him, as to the amount at which such person is liable to be assessed, the Commissioner shall, within 1 month after his determination of the objection, transmit in writing to the person objecting to the assessment his determination together with the reasons therefor and a statement of the facts upon which the determination was arrived at, and such person may appeal therefrom to the Board of Review as provided in section 66.(5) The Commissioner shall for the purpose of this section have the powers granted under section 4(1)(d), (e), (f) and (g) of the Commissions of Inquiry Ordinance (Cap. 86), subject to the provisions of section 80 of this Ordinance. (Amended 26 of 1969 s. 34)(6) Any person, other than the person giving the notice of objection or his authorized representative, may be allowed by the Commissioner any reasonable expenses necessarily incurred by him in attending before the Commissioner under subsection (2).(7) No objection by a person to a personal assessment on his total income under Part 7 shall—(a) extend the time for making any objection under any other provision of this Ordinance;(b) make valid any objection which is otherwise invalid; or(c) authorize the revision of any amount which has been included in the total income of an individual pursuant to the provisions of section 42(1), where such amount has been the subject of, or formed a part of, any assessment made under Part 2, 3 or 4 which has become final and conclusive under section 70: (Amended 17 of 1989 s. 17) Provided that nothing in this paragraph shall operate to prevent an objection by an individual on the grounds that an amount included in the calculation under section 42 of his total income as a share of the assessable profits or losses of a partnership has not been ascertained in accordance with section 22A. (Replaced 7 of 1975 s. 41)(Added 40 of 1972 s. 7)(8) Where an individual makes an objection in the circumstances described in the proviso to subsection (7)(c), such objection shall be deemed to be an objection by all the partners as to the share of assessable profits or losses ascertained under section 22A and any determination or agreement made under this section as to such ascertainment shall be binding on all the partners. (Added 7 of 1975 s. 41)(9) For the purposes of subsection (1) where a person is chargeable to salaries tax under section 10(3)(a), the spouse of that person, shall have, subject to this subsection, the same right to object as has the person assessed, but any such objection shall be limited to the manner in which the assessable income or net assessable income of such spouse is to be determined, the entitlement of such spouse to any allowance under Part 5 or other matters to which that spouse could have objected had that spouse been the person so chargeable. (Added 43 of 1989 s.

24)(10) Where an objection to which subsection (9) applies is made—(a) the powers of the Commissioner under subsection (2) shall include the power to annul such assessment and make an assessment against the person objecting;(b) subsection (3) shall not apply but—(i) where the Commissioner agrees with both the spouse who has objected and his or her spouse as to the amount at which either of them is liable to be assessed, any necessary adjustment of the assessment shall be made; and(ii) where the Commissioner fails to come to any such agreement as is referred to in subparagraph (i), such agreement shall be deemed to be a failure to agree for the purposes of subsection (4), and the reference in that subsection to the person objecting shall be construed as a reference to the person objecting under paragraph (a) and his or her spouse, with the consequence that either or both of them may appeal to the Board of Review. (Added 43 of 1989 s. 24)(11) Section 27 of Schedule 17A (specified alternative bond scheme and its treatment under this Ordinance (other than Part 4AA)) provides for modifications to this section. (Added 10 of 2013 s. 13. Amended 21 of 2025 s. 33)(Replaced 35 of 1965 s. 29. Amended E.R. 1 of 2012) 65. Constitution of the Board of Review (1) For the purpose of hearing and determining appeals in the manner hereinafter provided, there shall be a panel for a Board of Review consisting of a chairman and 10 deputy chairmen, who shall be persons with legal training and experience, and not more than 150 other members, all of whom shall be appointed from time to time by the Chief Executive. The members of the panel shall hold office for a term of 3 years but shall be eligible for reappointment. (Amended 49 of 1956 s. 48; 35 of 1965 s. 31; 51 of 1969 s. 2; 65 of 1970 s. 9; 32 of 1977 s. 3; 11 of 1985 s. 4; 4 of 1989 s. 3; 12 of 1999 s. 3; 4 of 2010 s. 9)(2) There shall be a clerk to the Board who shall be appointed by the Chief Executive. (Amended 12 of 1999 s. 3; 17 of 2015 s. 3)(3) (Repealed 49 of 1956 s. 48)(4) For the purpose of hearing and determining an appeal—(a) the Board comprises 3 or more members of the panel as follows—(i) the chairman or a deputy chairman nominated by the chairman; and(ii) at least 2 more members of the panel nominated by the chairman;(b) the member mentioned in paragraph (a)(i) is to preside at the hearing;(c) the clerk must summon the members mentioned in paragraph (a)(i) and (ii) to attend meetings of the Board at which the appeal is to be heard;(d) the quorum for a meeting of the Board hearing the appeal is 3 members; and(e) a matter arising at a meeting of the Board is determined by a majority of votes of the members present and voting on the matter and, if there is an equality of votes, the member presiding has a casting vote in addition to his or her original vote. (Replaced 4 of 2010 s. 9)(5) At the request of the Chief Secretary for Administration, the clerk to the Board shall summon a meeting of the Board consisting of all the members of the panel available in Hong Kong. At such a meeting a quorum shall consist of 5 members. (Amended 7 of 1986 s. 12; L.N. 362 of 1997)(6) The remuneration, if any, of the chairman, deputy chairmen and other members of the Board and the clerk to the Board shall be determined by the Chief Executive. (Replaced 49 of 1956 s. 48. Amended 65 of 1970 s. 9; 12 of 1999 s. 3)(7) If a person ceases to be the chairman, a deputy chairman or a member of the panel and, at the time of that event, the person is or has been involved in the hearing or determination of an appeal by the Board, that person may continue to—(a) hear and determine the appeal; or(b) perform any other function as a member of the Board in relation to the appeal in accordance with section 68(2C), 69AA(1)(a)(ii) or 69A(3)(a)(ii) until the appeal is finally disposed of by the Board. (Replaced 4 of 2010 s. 9. Amended 17 of 2015 s. 3) 66. Right of appeal to the Board of Review (1) Any person (hereinafter referred to as the appellant) who has validly objected to an assessment but with whom the Commissioner in considering the objection has failed to agree may within—(a) 1 month after the transmission to him under section 64(4) of the Commissioner’s written determination together with the reasons therefor and the statement of facts; or(b) such further period as the Board of Review may allow under subsection (1A), (Amended 17 of 2015 s. 4) either himself or by his authorized representative give notice of appeal to the Board; but no such notice shall be entertained unless it is given in writing to the clerk to the Board and is accompanied by a copy of the Commissioner’s written determination together with a copy of the reasons therefor and of the statement of facts and a statement of the grounds of appeal. (Replaced 2 of 1971 s. 42)(1A) If the Board is satisfied that an appellant was prevented by illness or absence from Hong Kong or other reasonable cause from giving notice of appeal in accordance with subsection (1)(a), the Board may extend for such period as it thinks fit the time within which notice of appeal may be given under subsection (1). (Added 2 of 1971 s. 42. Amended 7 of 1986 s. 12; 4 of 2010 s. 10)(2) The appellant shall at the same time as he gives notice of appeal to the Board serve on the Commissioner a copy of such notice and of the statement of the grounds of appeal. (3) Save with the consent of the Board and on such terms as the Board may determine, an appellant may not at the hearing of his appeal rely on any grounds of appeal other than the grounds contained in his statement of grounds of appeal given in accordance with subsection (1).(Replaced 35 of 1965 s. 32) 67. Transfer of appeals under section 66 for hearing and determination by Court of First Instance instead of Board of Review (1) Where notice of appeal is given to the Board of Review under section 66, the appellant or the Commissioner may give notice in writing in accordance with this section that he desires the appeal to be transferred to the Court of First Instance: (Amended 17 of 2015 s. 5) Provided that if both the appellant and the Commissioner give such notice, the notice given by the Commissioner shall have no effect and shall be deemed not to have been given. (2) A notice under subsection (1) shall, if given by the appellant, be given to the Commissioner, or, if given by the Commissioner, be given to the appellant within—(a) 21 days after the date on which the notice of appeal is received by the clerk to the Board; or(b) such further time as the Board may in any particular case permit upon application in writing by the appellant or the Commissioner,and the person giving such notice shall at the same time send a copy thereof to the Board. (Amended 63 of 1997 s. 5)(3) If the person to whom notice is given under subsection (1) consents thereto, he shall, within—(a) 21 days after the date on which the notice is given; or(b) such further time as the Board may in any particular case permit upon application in writing by the person, notify his consent in writing to the Board and serve a copy of such notification on the person giving the notice, and on receipt of such notification by the Board the clerk to the Board shall transmit the notice of appeal to the Court of First Instance together with the documents delivered to the Board under this section and section 66(1) in connection with the appeal. (Amended L.N. 262 of 1985; 63 of 1997 s. 5)(4) An appeal in respect of which notice of appeal is transmitted to the Court of First Instance under subsection (3) shall be heard and determined by the Court of First Instance as in all respects an appeal to the Court of First Instance against the determination to which the notice of appeal relates.(5) The following provisions shall apply in relation to the hearing of an appeal under this section—(a) the Court of First Instance shall give 14 days’ notice to the appellant and the Commissioner of the date fixed for the hearing of the appeal, and may adjourn the hearing to any other date as the Court of First Instance may deem fit; (Amended 17 of 2015 s. 5)(b) the Commissioner shall be entitled to appear and be heard at the hearing of the appeal;(c) save with the leave of the Court of First Instance and on such terms as to costs or otherwise as the Court of First Instance may order, the appellant shall not at the hearing of the appeal rely on any grounds of appeal other than the grounds contained in his statement of grounds of appeal given with the notice of appeal under section 66(1);(d) the onus of proving that the assessment appealed against is excessive or incorrect shall be on the appellant;(e) the Court of First Instance may summon any person appearing to the Court of First Instance to be able to give evidence respecting the appeal to attend at the hearing of the appeal and may examine any such person as a witness on oath or otherwise.(6) An appeal in respect of which notice of appeal is transmitted to the Court of First Instance under subsection (3) shall not be withdrawn without the leave of the Court of First Instance and except on such terms as to costs or otherwise as the Court of First Instance may order.(7) In determining an appeal under this section, the Court of First Instance may—(a) confirm, reduce, increase or annul the assessment determined by the Commissioner;(b) make any assessment which the Commissioner was empowered to make at the time he determined the assessment, or direct the Commissioner to make such an assessment, in which case an assessment shall be made by the Commissioner so as to conform to that direction;(c) make such order as to costs as the Court of First Instance may deem fit.(Added 12 of 1979 s. 3. Amended 25 of 1998 s. 2) 68. Hearing and disposal of appeals to the Board of Review (1) Except where—(a) a notification of consent in respect of the transfer of any appeal under section 67 is received by the Board of Review within the time allowed in that behalf by that section; or (b) the Board endorses under subsection (1B)(b) a settlement reached in respect of the relevant appeal, every appeal under section 66 shall be heard by the Board in accordance with this section and the clerk to the Board shall, as soon as may be after the receipt of the notice of appeal, fix a time and place for the hearing of the appeal, and shall give 14 days’ notice thereof to the appellant and the Commissioner: (Amended 63 of 1997 s. 6; 17 of 2015 s. 6) Provided that the time so fixed for the hearing of the appeal shall not be earlier than— (a) in the case of an appeal in respect of which neither party to the appeal gives notice under section 67(1), the expiration of the time allowed by that section for giving such notice; or (b) in the case of an appeal in respect of which notice under section 67(1) is given—(i) by the appellant; or(ii) by the Commissioner but not by the appellant, the expiration of a period of 21 days after the date on which such notice is given. (Replaced 12 of 1979 s. 4)(1A) At any time before the hearing of an appeal—(a) the appellant may withdraw the appeal by notice in writing addressed to the clerk to the Board;(b) the appellant and the Commissioner may reach a settlement on the amount at which the appellant is liable to be assessed. (Added 63 of 1997 s. 6)(1B) Where a settlement of an appeal is reached under subsection (1A)(b)—(a) the terms of the settlement shall be reduced to writing in a form specified by the Board and signed by the appellant and the Commissioner; and(b) the settlement shall be submitted to the Board for endorsement by it. (Added 63 of 1997 s. 6)(1C) Subject to subsection (1D), where a settlement is submitted to and endorsed by the Board, any necessary adjustment of the assessment shall be made and such assessment shall be final and conclusive for all purposes of this Ordinance as regards the amount of relevant assessable income or profits or net assessable value. (Added 63 of 1997 s. 6)(1D) Nothing in subsection (1A), (1B) or (1C) shall prevent an assessor from making an assessment or additional assessment for any year of assessment which does not involve re-opening any matter which has been endorsed by the Board under subsection (1B)(b) for the year. (Added 63 of 1997 s. 6)(1E) In the event that a settlement reached under subsection (1A)(b) is not endorsed by the Board, the relevant appeal shall be heard by it. (Added 63 of 1997 s. 6)(2) Subject to subsection (2B), an appellant shall attend at the meeting of the Board at which the appeal is heard in person or by an authorized representative. (Amended 40 of 1972 s. 8)(2A) (Repealed 63 of 1997 s. 6)(2B) If, on the date fixed for the hearing of an appeal, the appellant fails to attend at the meeting of the Board either in person or by his authorized representative the Board may—(a) if satisfied that the appellant’s failure to attend was due to sickness or other reasonable cause, postpone or adjourn the hearing for such period as it thinks fit;(b) proceed to hear the appeal under subsection (2D); or(c) dismiss the appeal. (Added 40 of 1972 s. 8)(2C) If an appeal has been dismissed by the Board under subsection (2B)(c) the appellant may, within 30 days after the making of the order for dismissal by notice in writing addressed to the clerk to the Board, apply to the Board to review its order and the Board may, if satisfied that the appellant’s failure to attend at the meeting of the Board for the hearing of the appeal was due to sickness or any other reasonable cause, set aside the order for dismissal and proceed to hear the appeal. (Added 40 of 1972 s. 8)(2D) The Board may, if satisfied that an appellant will be or is outside Hong Kong on the date fixed for the hearing of the appeal and is unlikely to be in Hong Kong within such period thereafter as the Board considers reasonable on the application of the appellant made by notice in writing addressed to the clerk to the Board and received by him at least 7 days prior to the date fixed for the hearing of the appeal, proceed to hear the appeal in the absence of the appellant or his authorized representative. (Added 40 of 1972 s. 8. Amended 7 of 1986 s. 12)(2E) The Board may, if it hears an appeal in the absence of an appellant or his authorized representative under subsection (2D), consider such written submissions as the appellant may submit to the Board. (Added 40 of 1972 s. 8. Amended 7 of 1975 s. 42)(3) The assessor who made the assessment appealed against or some other person authorized by the Commissioner shall attend such meeting of the Board in support of the assessment.(4) The onus of proving that the assessment appealed against is excessive or incorrect shall be on the appellant. (Replaced 35 of 1965 s. 34)(5) All appeals shall be heard in camera, but any appeal may be reported in such publications as may be approved by the Secretary for Justice in such a manner that the identity of the appellant is not disclosed. (Replaced 2 of 1971 s. 43. Amended L.N. 362 of 1997)(6) The Board shall have power to summon to attend at the hearing any person whom it may consider able to give evidence respecting the appeal and may examine him as a witness either on oath or otherwise. Any person so attending may be allowed by the Board any reasonable expenses necessarily incurred by him in so attending.(7) At the hearing of the appeal the Board may, subject to the provisions of section 66(3), admit or reject any evidence adduced, whether oral or documentary, and the provisions of the Evidence Ordinance (Cap. 8), relating to the admissibility of evidence shall not apply.(8) (a) After hearing the appeal, the Board shall confirm, reduce, increase or annul the assessment appealed against or may remit the case to the Commissioner with the opinion of the Board thereon.(b) Where a case is so remitted by the Board, the Commissioner shall revise the assessment as the opinion of the Board may require and in accordance with such directions (if any) as the Board, at the request at any time of the Commissioner, may give concerning the revision required in order to give effect to such opinion. (Replaced 35 of 1965 s. 34)(9) Where under subsection (8), the Board does not reduce or annul such assessment, the Board may order the appellant to pay as costs of the Board a sum not exceeding the amount specified in Part 1 of Schedule 5, which shall be added to the tax charged and recovered therewith. (Amended 11 of 1985 s. 5; 56 of 1993 s. 27; 12 of 2004 s. 14)(9A) The Secretary for Financial Services and the Treasury may by order amend the amount specified in Part 1 of Schedule 5. (Added 12 of 2004 s. 14)(10) The Board shall for the purpose of this section have the powers granted under section 4(1)(d), (e), (f) and (g) of the Commissions of Inquiry Ordinance (Cap. 86), subject to the provisions of section 80 of this Ordinance. (Added 35 of 1965 s. 34. Amended 26 of 1969 s. 35)(11) Subject to section 69, the Board’s decision on the appeal is final. (Added 17 of 2015 s. 6)(Amended E.R. 1 of 2012) 68AA. Directions on provision of documents and information (1) Without limiting section 68, the person who is to preside, or is presiding, at the hearing of an appeal under section 66 (presiding person) may—(a) give directions on the provision of documents and information for the hearing; and(b) refuse to admit in evidence any document or information that is not provided in compliance with directions given under paragraph (a).(2) If the presiding person decides to exercise the power under subsection (1)(b) to refuse to admit in evidence any document or information provided by a party (defaulting party), the presiding person must, as soon as practicable after making the decision, by notice in writing given to the party—(a) notify the party of the decision; and(b) give reasons for the decision.(3) The defaulting party may, within 14 days after the date on which the notice is given to the party or within a longer period that the presiding person allows, apply to the presiding person for relief against the decision.(4) The application for relief—(a) does not suspend the decision;(b) must be supported by evidence proving the statements made in the application; and(c) may be determined without a hearing.(5) The presiding person must, as soon as practicable after determining the application for relief, by notice in writing given to the defaulting party—(a) notify the party of the determination; and(b) give reasons for the determination.(6) In determining the application for relief, the presiding person must consider all the circumstances, including—(a) the interests of the administration of justice;(b) whether the application has been made promptly;(c) whether the failure to comply with the directions given under subsection (1)(a) was intentional;(d) whether there is a good explanation for the failure;(e) the extent to which the defaulting party has complied with other directions of the presiding person;(f) whether the failure was caused by the defaulting party (or the party’s authorized representative);(g) where the defaulting party is not legally represented—(i) whether the party was unaware of the directions given under subsection (1)(a); or(ii) if the party was aware of the directions given under subsection (1)(a), whether the party was able to comply with them without legal assistance;(h) whether the hearing date or the likely hearing date can still be met if relief is granted;(i) the effect that the failure had on each party; and(j) the effect that the granting of relief would have on each party.(Added 17 of 2015 s. 7) 68AAB. Privileges and immunities (1) Subsection (2) applies to the chairman, a deputy chairman or any other member of the panel mentioned in section 65(1).(2) A person to whom this subsection applies has, in performing the person’s duties under this Part, the same privileges and immunities as a judge of the Court of First Instance in civil proceedings in that Court.(3) Subsection (4) applies to—(a) a party to a hearing before the Board of Review; or(b) a witness, counsel, solicitor or person representing a party appearing before the Board.(4) A person to whom this subsection applies has the same privileges and immunities as the person would have in civil proceedings in the Court of First Instance.(Added 17 of 2015 s. 7) 68A. Power of Board of Review to correct clerical mistakes and other errors The Board of Review may correct—(a) any clerical mistake in any decision of the Board made in relation to an appeal; or(b) any error in any decision of the Board arising from any accidental slip or omission.(Added 4 of 2010 s. 11) 69. Appeal against Board of Review’s decision: leave to appeal (1) Where the Board of Review has made a decision on an appeal under section 68, the appellant or the Commissioner may appeal to the Court of First Instance against the Board’s decision on a ground involving only a question of law.(2) No appeal may be made under subsection (1) unless leave to appeal has been granted, on the application of the appellant or the Commissioner—(a) by the Court of First Instance; or(b) if a further application is made under subsection (4), by the Court of Appeal.(3) For the purposes of an application to the Court of First Instance under subsection (2)(a) for leave to appeal—(a) the application—(i) must be lodged with the Registrar of the High Court, and served on the other party, within 1 month after the following date—(A) subject to sub-subparagraph (B), the date on which the Board’s decision is made;(B) if the Board’s decision is notified to the appellant or the Commissioner by notice in writing, the date of the communication by which the decision is notified; and(ii) must be made by a summons supported by a statement setting out—(A) the grounds of the appeal; and(B) the reasons why leave should be granted;(b) if the other party intends to resist the application, that party must, within 14 days after the date on which the application is served on that party, file in the Court of First Instance and serve on the applicant a statement as to why leave should not be granted;(c) the Court of First Instance may—(i) determine the application without a hearing on the basis of written submissions only; or(ii) direct that the application be considered at a hearing,and, in both cases, the Court of First Instance may give any directions it thinks fit in relation to the application;(d) if the Court of First Instance directs that the application be considered at a hearing, it must give 14 days’ notice to the parties of the date and place fixed for the hearing;(e) leave to appeal must not be granted unless the Court of First Instance is satisfied—(i) that a question of law is involved in the proposed appeal; and(ii) that—(A) the proposed appeal has a reasonable prospect of success; or(B) there is some other reason in the interests of justice why the proposed appeal should be heard;(f) if the Court of First Instance grants leave to appeal—(i) it must give 14 days’ notice to the parties of the date and place fixed for the hearing of the appeal; and(ii) it may impose any terms it thinks fit;(g) if the application is determined by the Court of First Instance on the basis of written submissions only, a party aggrieved by the determination may, within 7 days after the date on which the party is notified of the determination, request the Court of First Instance to reconsider the determination at a hearing inter partes; and(h) a hearing held in response to a request under paragraph (g) may be before the judge who has determined the application on the basis of written submissions only.(4) If the Court of First Instance refuses to grant leave to appeal, the applicant may make a further application to the Court of Appeal for leave to appeal against the Board’s decision.(5) For the purposes of an application to the Court of Appeal under subsection (4) for leave to appeal—(a) the application—(i) must be lodged with the Registrar of the High Court, and served on the other party, within 14 days after the date on which the Court of First Instance refuses to grant leave; and(ii) must be made by a summons supported by a statement setting out—(A) the grounds of the appeal; and(B) the reasons why leave should be granted;(b) if the other party intends to resist the application, that party must, within 14 days after the date on which the application is served on that party, file in the Court of Appeal and serve on the applicant a statement as to why leave should not be granted;(c) the Court of Appeal consisting of one or more Justices of Appeal may—(i) determine the application without a hearing on the basis of written submissions only; or(ii) direct that the application be considered at a hearing,and, in both cases, the Court of Appeal may give any directions it thinks fit in relation to the application;(d) paragraphs (d), (e) and (f) of subsection (3) apply to the application as if references in those paragraphs to the Court of First Instance were references to the Court of Appeal;(e) subject to paragraph (f), if the application is determined by the Court of Appeal on the basis of written submissions only, a party aggrieved by the determination may, within 7 days after the date on which the party is notified of the determination, request the Court of Appeal to reconsider the determination at a hearing inter partes;(f) if—(i) the application is determined by the Court of Appeal consisting of more than one Justice of Appeal on the basis of written submissions only; and(ii) the Court of Appeal considers that the application is totally without merit,the Court of Appeal may make an order that no party may make a request under paragraph (e);(g) a hearing held in response to a request under paragraph (e) may be before the Court of Appeal consisting of—(i) (if the application was determined by a single Justice of Appeal on the basis of written submissions only) that Justice of Appeal; or(ii) (if the application was determined by more than one Justice of Appeal on the basis of written submissions only) one or more of those Justices of Appeal; and(h) subject to paragraph (e), after the Court of Appeal (whether or not consisting of a single Justice of Appeal only) has determined the application (whether or not on the basis of written submissions only), no further application may be made to the Court of Appeal for leave to appeal against the Board’s decision.(Replaced 17 of 2015 s. 8) 69AA. Appeal against Board of Review’s decision: hearing of appeal (1) Where leave to appeal has been granted under section 69 in respect of a decision of the Board of Review, the Court of First Instance, on hearing the appeal—(a) may—(i) draw any inference of fact;(ii) confirm, reduce, increase or annul the assessment determined by the Board, or remit the matter back to the Board with any directions (including a direction for a new hearing) that the Court of First Instance thinks fit; and(iii) make any order as to costs that the Court of First Instance thinks fit; and(b) must not—(i) receive any further evidence; or(ii) reverse or vary any conclusion made by the Board on questions of fact unless the Court of First Instance finds that the conclusion is erroneous in point of law.(2) Where—(a) the Court of First Instance has made a determination on an appeal for which leave has been granted under section 69; and(b) there is an appeal to the Court of Appeal against the Court of First Instance’s determination,paragraphs (a) and (b) of subsection (1) apply to the Court of Appeal on hearing the appeal as if references in those paragraphs to the Court of First Instance were references to the Court of Appeal.(3) Subject to subsection (2), the High Court Ordinance (Cap. 4) applies to proceedings before the Court of Appeal under this section.(Added 17 of 2015 s. 9) 69A. Right to appeal directly to Court of Appeal against decision of Board of Review (1) Where leave to appeal has been granted under section 69 in respect of a decision of the Board of Review, the appellant or the Commissioner may appeal directly to the Court of Appeal against the Board’s decision. (Replaced 17 of 2015 s. 10)(1A) No appeal may be made under subsection (1) unless leave to appeal directly to the Court of Appeal has been granted, on the application of the appellant or the Commissioner, by the Court of Appeal. (Added 17 of 2015 s. 10)(2) Leave to appeal may be granted under subsection (1A) on the ground that in the opinion of the Court of Appeal it is desirable that, by reason of the amount of tax in dispute or of the general or public importance of the matter or its extraordinary difficulty or for any other reason, the appeal be heard and determined by the Court of Appeal instead of the Court of First Instance. (Amended 17 of 2015 s. 10)(3) On hearing an appeal for which leave has been granted under subsection (1A), the Court of Appeal—(a) may—(i) draw any inference of fact;(ii) confirm, reduce, increase or annul the assessment determined by the Board, or remit the matter back to the Board with any directions (including a direction for a new hearing) that the Court of Appeal thinks fit; and(iii) make any order as to costs that the Court of Appeal thinks fit; and(b) must not—(i) receive any further evidence; or(ii) reverse or vary any conclusion made by the Board on questions of fact unless the Court of Appeal finds that the conclusion is erroneous in point of law. (Replaced 17 of 2015 s. 10)(4) Subject to subsection (3), the High Court Ordinance (Cap. 4) applies to proceedings before the Court of Appeal under this section. (Added 17 of 2015 s. 10)(Added 12 of 1979 s. 5. Amended 25 of 1998 s. 2) 70. Assessments or amended assessments to be final Where no valid objection or appeal has been lodged within the time limited by this Part against an assessment as regards the amount of the assessable income or profits or net assessable value assessed thereby, or where an appeal against an assessment has been withdrawn under section 68(1A)(a) or dismissed under subsection (2B) of that section, or where the amount of the assessable income or profits or net assessable value has been agreed to under section 64(3), or where the amount of such assessable income or profits or net assessable value has been determined on objection or appeal, the assessment as made or agreed to or determined on objection or appeal, as the case may be, shall be final and conclusive for all purposes of this Ordinance as regards the amount of such assessable income or profits or net assessable value: (Amended 49 of 1956 s. 51; 35 of 1965 s. 35; 40 of 1972 s. 9; 7 of 1979 s. 4; 12 of 2004 s. 16)Provided that nothing in this Part shall prevent an assessor from making an assessment or additional assessment for any year of assessment which does not involve re-opening any matter which has been determined on objection or appeal for the year. (Amended 35 of 1965 s. 35) 70A. Powers of assessor to correct errors (1) Notwithstanding the provisions of section 70, if, upon application made within 6 years after the end of a year of assessment or within 6 months after the date on which the relative notice of assessment was served, whichever is the later, it is established to the satisfaction of an assessor that the tax charged for that year of assessment is excessive by reason of an error or omission in any return or statement submitted in respect thereof, or by reason of any arithmetical error or omission in the calculation of the amount of the net assessable value (within the meaning of section 5(1A)), assessable income or profits assessed or in the amount of the tax charged, the assessor shall correct such assessment: (Amended 56 of 1993 s. 29) Provided that under this section no correction shall be made to any assessment in respect of an error or omission in any return or statement submitted in respect thereof as to the basis on which the liability to tax ought to have been computed where the return or statement was in fact made on the basis of or in accordance with the practice generally prevailing at the time when the return or statement was made.(2) Where an assessor refuses to correct an assessment in accordance with an application under this section he shall give notice thereof in writing to the person who made such application and such person shall thereupon have the same rights of objection and appeal under this Part as if such notice of refusal were a notice of assessment. (Added 35 of 1965 s. 36)(Replaced 28 of 1964 s. 11) 70AA. Revision of assessment due to commencement of section 4 or 8 of Inland Revenue (Amendment) Ordinance 2004 (1) Notwithstanding any other provisions of this Ordinance, if, upon application in respect of a year of assessment (the relevant year) that expires before the date of commencement* of section 4 or 8 of the Inland Revenue (Amendment) Ordinance 2004 (12 of 2004) made within 12 months after that date, or within 6 years after the end of the relevant year, whichever is the later, it is established to the satisfaction of an assessor that the tax charged for the relevant year is excessive solely by reason of the commencement of that section, the assessor shall revise the assessment for the relevant year.(2) Where an assessor refuses to revise an assessment in accordance with an application under this section, he shall give notice thereof in writing to the person who made such application and such person shall thereupon have the same rights of objection and appeal under this Part as if such notice of refusal were a notice of assessment.(Added 12 of 2004 s. 17) Editorial Note: * Commencement date: 25 June 2004. 70AB. Revision of assessment due to commencement of section 2 of Revenue (Profits Tax Exemption for Offshore Funds) Ordinance 2006 (1) Notwithstanding any other provisions of this Ordinance, if, upon application by a person in respect of a year of assessment (the relevant year) that expires before the date of commencement* of section 2 of the Revenue (Profits Tax Exemption for Offshore Funds) Ordinance 2006 (4 of 2006) made within 12 months after that date, or within 6 years after the end of the relevant year, whichever is the later, it is established to the satisfaction of an assessor that the tax charged for the relevant year exceeds the amount that the person would have had to pay had that section been in force, the assessor shall revise the assessment for the relevant year.(2) Where an assessor refuses to revise an assessment in accordance with an application made under this section, he shall give notice of the refusal in writing to the person who made the application and the person thereupon has the same rights of objection and appeal under this Part as if the notice of refusal were a notice of assessment.(Added 4 of 2006 s. 3) Editorial Note: * Commencement date: 10 March 2006. 70B. Husband and wife Where, following an election under section 41(1A) for personal assessment by a husband and wife, either spouse makes an objection, appeal or application under this Part in respect of any assessment made in consequence of the election—(a) the other spouse shall be deemed to be joined in the objection, appeal or application;(b) nothing in section 70 shall prevent a re-assessment being made in respect of either spouse; and(c) amended assessments may be issued to both spouses.(Added 71 of 1983 s. 34. Amended 43 of 1989 s. 25) Part 12 Payment and Recovery of Tax 71. Provisions regarding payment of tax (1) Tax charged under the provisions of this Ordinance shall be paid in the manner directed in the notice of assessment on or before a date specified in such notice. Any tax not so paid shall be deemed to be in default, and the person by whom such tax is payable, or where any tax is payable by more than one person or by a partnership then each of such persons or each partner in the partnership, shall be deemed to be a defaulter for the purposes of this Ordinance. (Replaced 49 of 1956 s. 53)(2) Tax shall be paid notwithstanding any notice of objection or appeal, unless the Commissioner orders that payment of tax or any part thereof be held over pending the result of such objection or appeal: (Amended 7 of 1985 s. 2) Provided that where the Commissioner so orders he may do so conditionally upon the person who or on whose behalf the objection or appeal is made providing security for the payment of the amount of tax or any part thereof the payment of which is held over either—(a) by purchasing a certificate issued under the Tax Reserve Certificates Ordinance (Cap. 289); or(b) by furnishing a banker’s undertaking,as the Commissioner may require. (Added 7 of 1985 s. 2)(3) Where the Commissioner is of opinion either that the tax or any part thereof held over under subsection (2) is likely to become irrecoverable, or that the person objecting or appealing is unreasonably delaying the prosecution of his objection or appeal, he may cancel any order made under that subsection and make such fresh order as the case may appear to him to require. (Amended 49 of 1956 s. 53; 35 of 1965 s. 37)(4) Where, upon the final determination of an objection or appeal under Part 11, or upon any order made by the Commissioner, any tax which has been held over under subsection (2) becomes payable or the tax charged is increased, the Commissioner shall give to the person objecting or appealing a notice in writing fixing a date on or before which any tax or balance of tax shall be paid. Any tax not so paid shall be deemed to be in default. (Amended 30 of 1950 Schedule; 49 of 1956 s. 53; 35 of 1965 s. 37)(5) Where any tax is in default, the Commissioner may in his discretion order that a sum or sums not exceeding 5% in all of the amount in default shall be added to the tax and recovered therewith.(5A) Where on the expiry of a period of 6 months from the date when any tax is deemed to be in default, whether such date was before or after 1 August 1984, there remains unpaid any amount of the aggregate of—(a) the tax deemed to be in default; and(b) any sum added thereto under subsection (5), the Commissioner may order that a sum or sums not exceeding 10% in all of the unpaid amount shall be added to the unpaid amount and recovered therewith. (Replaced 52 of 1984 s. 2)(5B) (Repealed 19 of 1996 s. 14)(6) Notwithstanding anything contained in the previous subsections of this section the Commissioner may agree to accept payment of tax by instalments. (Amended 49 of 1956 s. 53)(7) Where the Commissioner exercises his powers under the proviso to subsection (2) and a person is required to purchase a certificate under paragraph (a) of that proviso—(a) a certificate in an amount equal to the tax or any part thereof the payment of which is held over shall be purchased within a period of 14 days from the date of the order of the Commissioner, or on or before the date for the payment of tax specified in the notice of the assessment, whichever is the later, failing which the provisions of subsection (2) shall apply as they would if there had been no order;(b) the Commissioner shall, when he issues a certificate so purchased, note on it particulars sufficient to identify the objection or appeal to which it relates;(c) upon the withdrawal or final determination of the objection or appeal a certificate or part of a certificate so purchased shall be accepted by the Commissioner in payment of so much of the tax held over as becomes or is found to become payable, and no interest shall be payable upon any certificate or part of a certificate so accepted;(d) where, upon the final determination of the objection or appeal, and after all tax held over which becomes, or is found to be, payable has been paid in the manner specified in paragraph (c), any certificate or part of a certificate so purchased has not been accepted as payment by the Commissioner under paragraph (c), the Commissioner must repay to the holder of the certificate— (Amended 4 of 2010 s. 12)(i) the principal value represented by the certificate or part of the certificate; and(ii) the interest on that value, calculated in accordance with the rules from the date of issue of the certificate to the date of the final determination of the objection or appeal; and (Amended 4 of 2010 s. 12)(e) no certificate so purchased shall be valid for any purpose except as specified in the preceding paragraphs. (Added 7 of 1985 s. 2)(8) The provisions of subsection (7) shall apply notwithstanding anything to the contrary in the rules relating to such certificates made under the Tax Reserve Certificates Ordinance (Cap. 289) and any reference to the rules relating to such certificates in that subsection shall refer to the rules so made. (Added 7 of 1985 s. 2)(9) Where the Commissioner exercises his powers under the proviso to subsection (2) and a person is required to furnish a banker’s undertaking under paragraph (b) of that proviso, the undertaking shall—(a) be in a form acceptable to the Commissioner;(b) be furnished to the Commissioner within a period of 14 days from the date of the order of the Commissioner, or on or before the date for the payment of the tax specified in the notice of assessment, whichever is the later;(c) be given by a bank (as defined in the Banking Ordinance (Cap. 155));(d) not be revocable without the consent of the Commissioner;(e) be expressed to be an undertaking to pay—(i) an amount equal to the tax or any part thereof the payment of which is held over; and(ii) interest on that amount, from the date for the payment of the tax specified in the notice of assessment to the date of withdrawal or final determination of the objection or appeal, at the rate specified in subsection (11); and(f) provide for payment to the Commissioner upon written notification to the bank by the Commissioner that the objection or appeal has been withdrawn or finally determined and that the amount, and interest, stated by him is now due, and if such person fails to supply such an undertaking in such manner the provisions of subsection (2) shall apply as they would if there had been no order. (Added 7 of 1985 s. 2)(10) Where the Commissioner makes an order under subsection (2) but does not exercise his powers under the proviso thereto, interest shall be payable on so much of the amount of the tax or any part thereof the payment of which is held over as becomes payable or is found to become payable upon the withdrawal or final determination of the objection or appeal, from the date for the payment of the tax specified in the notice of assessment or the date of the order, whichever is the later, to the date of withdrawal or final determination of the objection or appeal, at the rate specified in subsection (11). (Added 7 of 1985 s. 2)(11) The rate of interest specified for the purposes of subsections (9)(e)(ii) and (10) shall be the rate determined by the Chief Justice by order under section 50(1)(b) of the District Court Ordinance (Cap. 336). (Added 7 of 1985 s. 2. Amended 4 of 2010 s. 12)(Amended E.R. 1 of 2012) 72. Tax to include fines, etc. In the succeeding sections of this Part, tax (稅款) includes any sum or sums added under section 71 (5) or (5A) by reason of default, together with any fines, penalties, fees, or costs incurred, and any interest payable under section 71 (9)(e)(ii) or (10).(Amended 23 of 1974 s. 5; 7 of 1985 s. 3) 73. (Repealed 49 of 1956 s. 54) 74. (Repealed 49 of 1956 s. 54) 75. Tax recoverable as a civil debt through the District Court (1) Tax due and payable under this Ordinance shall be recoverable as a civil debt due to the Government. (Amended 19 of 1996 s. 15)(2) Whenever any person makes default in payment of tax the Commissioner may recover the same by action in the District Court notwithstanding that the amount is in excess of the sum mentioned in section 33 of the District Court Ordinance (Cap. 336). (Amended 35 of 1966 Schedule; 68 of 1973 s. 5; 79 of 1981 s. 3)(3) In proceedings under this section for the recovery of tax the production of a certificate signed by the Commissioner stating the name and last known postal address of the defaulter and particulars of the tax due by him shall be sufficient evidence of the amount so due and sufficient authority for a District Court to give judgment for the said amount.(4) In proceedings under this section for the recovery of tax the court shall not entertain any plea that the tax is excessive, incorrect, subject to objection or under appeal, but nothing in this subsection shall be construed so as to derogate from the powers conferred by the proviso to section 51 (4B)(a) to give judgment for a less sum in the case of proceedings for the penalty specified therein. (Amended 35 of 1965 s. 38)(5) In any proceedings in the District Court under this section, the Commissioner may appear in person or may be represented either by a legal officer within the meaning of the Legal Officers Ordinance (Cap. 87) or by any other person authorized by him in writing.(Replaced 49 of 1956 s. 55) 75A. (Repealed 43 of 1989 s. 26) 76. Recovery of tax from a debtor of the taxpayer (1) Where tax payable by a person is in default, or a person charged to tax has quitted Hong Kong or in the opinion of the Commissioner is likely to quit Hong Kong without paying all the tax charged to him, and it appears to the Commissioner to be probable that any other person (hereinafter in this subsection referred to as the third party)— (Amended 7 of 1986 s. 12)(a) owes or is about to pay money to such person (hereinafter in this subsection referred to as the taxpayer); or(b) holds money for or on account of the taxpayer; or(c) holds money on account of some other person for payment to the taxpayer; or(d) has authority from some other person to pay money to the taxpayer, the Commissioner may give the third party notice in writing (a copy of which shall be sent by post to the taxpayer) requiring him to pay such moneys not exceeding the amount of tax in default or charged, as the case may be, to the officer named in the notice. The notice shall apply to all such moneys which are in the third party’s hands or due from him or about to be paid by him at the date of receipt of such notice or which come into his hands or become due from him or about to be paid by him at any time within a period of 30 days thereafter. (Replaced 26 of 1969 s. 36)(2) Any person who has made any payment in pursuance of this section shall be deemed to have acted under the authority of the person by whom the tax was payable or on whom it was charged and of all other persons concerned, and is hereby indemnified in respect of such payment against all proceedings civil or criminal notwithstanding the provisions of any written law, contract or agreement.(3) Any person to whom notice has been given under subsection (1) who is unable to comply therewith shall within 14 days of the expiration of the period of 30 days from the date of receipt of such notice give notice in writing to the Commissioner acquainting him with the facts.(4) Any person to whom a notice has been given under subsection (1) who could have complied therewith but failed to do so within 14 days after the expiration of the period referred to in subsection (1), shall be personally liable for the whole of the tax which he was required to pay, and such tax may be recovered from him by all means provided in this Ordinance for the recovery of tax from a person who has made default in payment.(Replaced 49 of 1956 s. 56) 77. Recovery of tax from persons leaving Hong Kong (1) If the Commissioner, or an officer of the Inland Revenue Department not below the rank of chief assessor authorized in writing by the Commissioner for the purposes (authorized officer), satisfies a District Judge, by statement made on oath—(a) that a person has not paid all tax assessed upon him;

and(b) that there are reasonable grounds for believing that the person intends to depart, or has departed, from Hong Kong to reside elsewhere, and if the District Judge is satisfied that it is in the public interest to ensure that the person does not depart from Hong Kong or, if he returns, does not depart again, without first paying the tax or furnishing security to the satisfaction of the Commissioner for payment of that tax, he shall issue a direction (departure prevention direction) to the Director of Immigration and the Commissioner of Police directing them to prevent the person from departing from Hong Kong without paying such tax or furnishing such security.(2) The District Judge shall, as soon as practicable after he makes a departure prevention direction under subsection (1), cause a copy of it to be served upon the person who is the subject of the direction, if he can be found, but, whether or not a copy is so served, the direction comes into force immediately upon being issued and continues in force until—(a) the tax is paid;(b) security is furnished to the satisfaction of the Commissioner for payment of the tax; or(c) the departure prevention direction is set aside by the Court of First Instance under subsection (9).(3) Where—(a) an immigration officer or immigration assistant (within the meaning of section 2(1) of the Immigration Ordinance (Cap. 115)); or(b) a police officer,believes on reasonable grounds that—(i) a person the subject of a departure prevention direction made under subsection (1) is about to depart from Hong Kong; and(ii) the Commissioner has not authorized the person to depart from Hong Kong nor has the Court of First Instance suspended or otherwise varied the departure prevention direction so as to permit the person to depart from Hong Kong, he may take such measures including the use of such force as may be necessary to prevent the departure of that person from Hong Kong.(4) Where—(a) a copy of a departure prevention direction has been served on the person the subject of it or the person has been verbally advised of its existence by a person referred to in subsection (3)(a) or (b); and(b) the Commissioner has not authorized the person to depart from Hong Kong nor has the Court of First Instance suspended or otherwise varied the departure prevention direction so as to permit the person to depart from Hong Kong, the person commits an offence if he departs or attempts to depart from Hong Kong, and an immigration officer, immigration assistant or police officer may arrest him without a warrant.(5) Any person who commits an offence under subsection (4) is liable to a fine at level 4 and to imprisonment for 6 months. (Amended L.N. 338 of 1995)(6) Where a departure prevention direction made under this section is in force, the Commissioner may, if he thinks fit, on the written application of the person the subject of the direction or, in the absence of any such application, of his own initiative, authorize, in writing, the person to depart from Hong Kong on one or more occasions as specified in the authorization.(7) Where—(a) the tax owing has been paid or security has been furnished to the satisfaction of the Commissioner for payment thereof;(b) a departure prevention direction is set aside or temporarily suspended under this section; or(c) the Commissioner authorizes a person to depart from Hong Kong on one or more occasions,the Commissioner shall, as soon as practicable, notify—(i) the Director of Immigration; and(ii) the Commissioner of Police,that the person is permitted to depart from Hong Kong.(8) Where a person the subject of a departure prevention direction applies under subsection (6) and the Commissioner does not see fit to authorize his departure, the commissioner shall, as soon as practicable, serve a notice (notice of decision) upon the person.(9) A person aggrieved by a departure prevention direction under subsection (1) or a notice of decision under subsection (8), as the case may be, may appeal to the Court of First Instance which may—(a) make an order setting aside the departure prevention direction subject to such conditions as the Court may consider necessary, including the supplying of security to the Commissioner as specified by the Court;(b) make an order temporarily suspending or otherwise varying the departure prevention direction, and the Court may attach such conditions to the suspension or variation as it considers necessary; or(c) dismiss the appeal.(10) Service of—(a) a copy of a departure prevention direction under subsection (2) shall be effected personally on the person who is the subject of it;(b) a notice of decision under subsection (8) may be effected personally on the person who is the subject of it or by post addressed to that person at his last known place of abode, business or employment.(11) Where a direction was issued by a District Judge under section 77 as repealed by the Inland Revenue (Amendment) (No. 3) Ordinance 1993 (56 of 1993), that direction shall be deemed to be a departure prevention direction issued under this section and the provisions of this section shall apply to it accordingly.(12) In this section, Court of First Instance (原訟法庭) has the same meaning as in section 2 of the High Court Ordinance (Cap. 4) and includes the Registrar and a Master as defined in that Ordinance.(13) In proceedings under this section, the production of a certificate signed by the Commissioner or an authorized officer stating the name and last known postal address of the person referred to in subsection (1) and particulars of the unpaid tax assessed upon him shall be sufficient evidence of the amount and a court shall not entertain any plea that the tax is excessive, incorrect, subject to objection or under appeal.(14) The Commissioner or an authorized officer may apply ex parte to the District Court for a departure prevention direction.(15) In any proceedings in the District Court under this section, the Commissioner or an authorized officer, as the case may be, may appear in person or may be represented either by a legal officer within the meaning of the Legal Officers Ordinance (Cap. 87) or by any other person authorized in writing by the Commissioner.(Replaced 56 of 1993 s. 30. Amended 25 of 1998 s. 2) 77A. Refusal of clearance to ships and aircraft where tax is in default (1) In addition to any other powers of collection and recovery provided by this Ordinance, where a person has been charged to tax in respect of his profits from the business of shipowner or charterer or aircraft owner or charterer and such tax is in default and whether such person has been assessed directly or in the name of some other person, the Commissioner, with the prior approval of the Chief Secretary for Administration, may issue to the Director of Marine, the Director-General of Civil Aviation or other authority by whom clearance may be granted, a certificate containing the name or names of the said person and the particulars of the tax in default.(2) On receipt of such certificate the Director of Marine, the Director-General of Civil Aviation, or other authority, shall be empowered and is hereby required to refuse clearance from any port, aerodrome or airport or place within Hong Kong to any ship or aircraft owned wholly or partly or chartered by such person until the said tax has been paid or until security for payment has been given to the satisfaction of the Commissioner. (Amended 7 of 1986 s. 12)(3) No civil or criminal proceedings shall be instituted or maintained against the Government, the Chief Secretary for Administration, the Commissioner, the Director of Marine, the Director-General of Civil Aviation or other authority, in respect of a refusal of clearance under this section, nor shall the fact that a ship or aircraft is detained under this section affect the liability of the owner, charterer or agent to harbour, airport or other dues and charges for the period of detention. (Amended 19 of 1996 s. 15)(Added 49 of 1956 s. 58. Amended L.N. 362 of 1997; L.N. 326 of 2000) 78. (Repealed 49 of 1956 s. 59) Part 13 Repayment 79. Tax paid in excess to be refunded (1) If it is proved to the satisfaction of the Commissioner by claim duly made in writing within 6 years of the end of a year of assessment or within 6 months after the date on which the relevant notice of assessment was served, whichever is the later, that any person has paid tax in excess of the amount with which he was properly chargeable for the year, such person shall be entitled to have refunded the amount so paid in excess: (Amended 49 of 1956 s. 60) Provided that nothing in this section shall operate to extend or reduce any time limit for objection, appeal or repayment specified in any other section or to validate any objection or appeal which is otherwise invalid, or to authorize the revision of any assessment or other matter which has become final and conclusive. (Amended 35 of 1965 s. 39) (2) An executor, trustee or receiver shall have the same right to make a claim under the provisions of subsection (1) as the person whom he represents would have had if such person had not been prevented from making such claim by his death, incapacity, bankruptcy or liquidation and shall be entitled to have refunded to him for the benefit of such person or such person’s estate any tax paid in excess within the meaning of subsection (1). (Replaced 49 of 1956 s. 60)(3) Where a non-resident person has been assessed in the name of another person under section 20A or 20B and the tax so assessed has been paid by the other person, the other person or the non-resident person, but not both, may make a claim under subsection (1) for a refund of tax overpaid. In the event of a refund being made to the other person his receipt shall be a valid discharge in respect of the amount of overpaid tax so refunded. (Replaced 4 of 1989 s. 5)(3A) If an entity (entity A) has been assessed in the name of another entity (entity B) under section 15OB(2)(c) and the tax so assessed has been paid by entity B—(a) entity A or entity B, but not both, may make a claim under subsection (1) for a refund of the tax overpaid; and(b) if a refund is made to entity B, the entity’s receipt is a valid discharge in respect of the amount of the refund. (Added 32 of 2023 s. 9)(4) Section 27 of Schedule 17A (specified alternative bond scheme and its treatment under this Ordinance (other than Part 4AA)) provides for modifications to this section. (Added 10 of 2013 s. 14. Amended 21 of 2025 s. 33)(5) In this section—entity (實體) has the meaning given by section 15H(1). (Added 32 of 2023 s. 9) Part 14 Penalties and Offences 79A. Interpretation of Part 14: offences relating to Schedule 61, 62 or 63 (1) In this Part—Part 4AA entity (第4AA部實體) means—(a) in relation to a provision of this Part that relates to any requirement, liability or obligation imposed under Schedule 61, 62 or 63 (GloBE-related obligation) on a HK constituent entity (however described), the HK constituent entity;(b) in relation to a GloBE-related obligation that also applies, under Schedule 61, 62 or 63 (as the case requires), to a HK standalone JV or HK member of a JV group (however described), the HK standalone JV or HK member (as the case requires); or(c) in relation to a GloBE-related obligation that also applies, under Schedule 61, 62 or 63 (as the case requires), to a Part 4AA stateless constituent entity (however described), the stateless constituent entity.(2) Unless the contrary intention appears, an expression—(a) used in a provision of this Part that relates to any requirement, liability or obligation under Schedule 61, 62 or 63; and(b) defined or otherwise explained in any provision of Part 4AA or of Part 1 of Schedule 61 or of Schedule 62 or 63 (definition provision),has the same meaning as in the definition provision.(Added 21 of 2025 s. 23) 80. Penalties for failure to make returns, making incorrect returns, etc. (1) Any person who without reasonable excuse—(a) fails to comply with the requirements of a notice given to him under section 51(3), 51A(1), 52(1) or (2), or 64(2); or(b) fails to attend in answer to a summons issued under section 64(2) or 68(6), or having attended fails to answer any questions put to him, being questions which, under section 64(2) or 68(6), as the case may be, may be put to him; or (c) fails to comply with the requirements of section 5(2)(c), 51(6), (7) or (8), 51D(1), 52(4), (5), (6) or (7), or 76(3), (Amended 48 of 1995 s. 11) commits an offence and is liable on conviction to a fine at level 3, and the court may order the person convicted within a time specified in the order to do the act which he has failed to do. (Replaced 35 of 1965 s. 40. Amended 26 of 1969 s. 37; 2 of 1971 s. 46; 43 of 1975 s. 6; 8 of 1983 s. 19; L.N. 411 of 1984; 17 of 1989 s. 18; 56 of 1993 s. 31; L.N. 338 of 1995; 4 of 2010 s. 13)(1A) Any person who without reasonable excuse fails to comply with the requirements of section 51C commits an offence and is liable on conviction to a fine at level 6 and the court may order the person convicted within a time specified in the order to do the act which he has failed to do. (Added 48 of 1995 s. 11. Amended 4 of 2010 s. 13)(1AA) Without prejudice to the generality of the term “reasonable excuse” as it is used in subsection (1) in relation to section 52(4), (5), (6) or (7), where a person has failed to comply with the requirements of that section in the case of an individual in respect of whom that person is treated as the employer by virtue of the operation of section 9A, then it shall constitute a defence in any proceedings under this section against that person in respect of such failure if he shows that—(a) he did not comply with those requirements because he relied upon a statement in writing—(i) by that individual; and(ii) in the form specified under subsection (1AC); and(b) it was reasonable for him to rely upon that statement. (Added 54 of 1995 s. 3) (1AB) A person who knowingly or recklessly makes a statement of the kind referred to in subsection (1AA)(a) which in a material respect is false or misleading commits an offence and is liable on conviction to a fine at level 3. (Added 54 of 1995 s. 3. Amended 4 of 2010 s. 13)(1AC) The Commissioner may, by notice in the Gazette, specify a form for the purposes of subsection (1AA)(a). (Added 54 of 1995 s. 3)(1AD) For the avoidance of doubt, it is hereby declared that a form specified under subsection (1AC) is not subsidiary legislation. (Added 54 of 1995 s. 3)(2) Any person who without reasonable excuse—(a) makes, or causes or allows to be made on the person’s behalf, an incorrect return by omitting or understating anything in respect of which he is required by this Ordinance to make a return, either on his behalf or on behalf of another person; (Amended 1 of 2010 s. 7; 18 of 2021 s. 11)(b) makes an incorrect statement in connection with a claim for any deduction or allowance under this Ordinance;(c) gives any incorrect information in relation to any matter or thing affecting his own liability (or the liability of any other person) to tax; (Amended 1 of 2010 s. 7)(ca) fails to comply with section 26M(3)(a); (Added 31 of 2018 s. 11)(cb) fails to comply with section 26Q(3)(a); (Added 7 of 2019 s. 6)(cc) fails to comply with section 26ZB(3)(a); (Added 10 of 2024 s. 12)(cd) fails to comply with section 26ZI(3)(a); (Added 2 of 2025 s. 6)(d) fails to comply with the requirements of a notice given to him under section 51(1); or (Amended 18 of 2021 s. 18)(e) fails to comply with section 51(2), commits an offence and is liable on conviction to a fine at level 3 and a further fine of treble the undercharged amount. (Replaced 43 of 1975 s. 6. Amended L.N. 411 of 1984; 43 of 1989 s. 27; L.N. 338 of 1995; 4 of 2010 s. 13; 27 of 2018 s. 20)(2AA) For the purposes of subsection (2)(a), (b), (c) and (d), engaging a service provider (as defined by section 51AAD(8)) under section 51AAD(1) does not in itself constitute a reasonable excuse. (Added 18 of 2021 s. 11)(2A) In the case of an offence under subsection (2)(d), the court may order the person convicted to comply with the requirements of the notice given to him under section 51(1) within such time as may be specified in the order. (Added 43 of 1975 s. 6. Amended 43 of 1989 s. 27; 18 of 2021 s. 18)(2B) Any person who does not comply with an order of the court under subsection (1) or (2A) or under section 51(4B)(b) commits an offence and is liable on conviction to a fine at level 4. (Added 43 of 1975 s. 6. Amended L.N. 338 of 1995; 4 of 2010 s. 13)(2C) Any person who does not comply with an order of the court under subsection (1A) commits an offence and is liable on conviction to a fine at level 6. (Added 48 of 1995 s. 11. Amended 4 of 2010 s. 13)(2D) Any person who without reasonable excuse gives any incorrect information in relation to any matter or thing affecting the person’s own liability (or the liability of any other person) to any tax of a territory outside Hong Kong commits an offence if—(a) arrangements having effect under section 49(1A) are made with the government of that territory; and(b) that tax is the subject of a provision of the arrangements that requires disclosure of information concerning tax of that territory,and is liable to a fine at level 3. (Added 1 of 2010 s. 7)(2E) A person commits an offence if the person, in making a self-certification that is required to be collected under Schedule 17D by a reporting financial institution—(a) makes a statement that is misleading, false or incorrect in a material particular; and(b) knows, or is reckless as to whether, the statement is misleading, false or incorrect in a material particular. (Added 22 of 2016 s. 9)(2F) A person who commits an offence under subsection (2E) is liable on conviction to a fine at level 3. (Added 22 of 2016 s. 9)(2G) A person commits an offence—(a) if the person, without reasonable excuse, fails to comply with section 50AA(5);(b) if the person, without reasonable excuse, fails to comply with a requirement of a notice given to the person under section 50AAB(2); or(c) if—(i) the person, without reasonable excuse—(A) makes an incorrect statement, or provides incorrect information, in connection with any mutual agreement procedure or arbitration referred to in section 50AAB; or(B) omits anything from a statement or information made or provided in connection with the procedure or arbitration; and(ii) the statement or information referred to in subparagraph (i)(A), or the thing referred to in subparagraph (i)(B), is material to the case or issue to which the procedure or arbitration relates. (Added 27 of 2018 s. 20)(2H) A person who commits an offence under subsection (2G)(a) is liable on conviction to—(a) a fine at level 3; and(b) a further fine of the undercharged amount. (Added 27 of 2018 s. 20)(2I) A person who commits an offence under subsection (2G)(b) is liable on conviction to a fine at level 3, and the court may order the person to comply, within a time specified in the order, with the requirements of the notice given to the person under section 50AAB(2). (Added 27 of 2018 s. 20)(2J) If a person fails to comply with an order of the court under subsection (2I), the person commits an offence and is liable on conviction to a fine at level 4. (Added 27 of 2018 s. 20)(2K) A person who commits an offence under subsection (2G)(c) is liable on conviction to—(a) a fine at level 3; and(b) a further fine of treble the undercharged amount. (Added 27 of 2018 s. 20)(2L) A person commits an offence—(a) if the person, without reasonable excuse, fails to comply with a requirement under section 50AAM(11), 50AAN(3) or 50AAO(3);(b) if—(i) the person, without reasonable excuse, makes an incorrect statement or provides incorrect information in connection with the following claim or application, or omits anything from a statement made or information provided in connection with the following claim or application—(A) the person’s claim for relief under section 50AAM, 50AAN or 50AAO; or(B) the person’s application for an advance pricing arrangement under section 50AAP(1); and(ii) the statement or information that is incorrect, or thing that is omitted, is material to the claim or application;(c) if the person, without reasonable excuse, fails to comply with a requirement under section 50AAS;(d) if—(i) the person either—(A) without reasonable excuse and in purported compliance with a requirement under section 50AAS, provides incorrect information in relation to an advance pricing arrangement; or(B) without reasonable excuse, omits anything from information provided, in relation to an advance pricing arrangement, in purported compliance with the requirement; and(ii) the information referred to in subparagraph (i)(A), or the thing referred to in subparagraph (i)(B), is material to the arrangement;(e) if the person, without reasonable excuse, fails to comply with a requirement of section 50AAT; or(f) if the person, without reasonable excuse, fails to comply with the requirement of a notice given to the person under section 3 of Schedule 17H. (Added 27 of 2018 s. 20)(2M) A person who commits an offence under subsection (2L)(a), (b), (c) or (d) is liable on conviction to—(a) a fine at level 3; and(b) a further fine of the undercharged amount. (Added 27 of 2018 s. 20)(2N) A person who commits an offence under subsection (2L)(e) is liable on conviction to a fine at level 5, and the court may order the person to do, within a time specified in the order, the act that the person has failed to do. (Added 27 of 2018 s. 20)(2O) If a person fails to comply with an order of the court under subsection (2N), the person commits an offence and is liable on conviction to a fine at level 6. (Added 27 of 2018 s. 20)(2P) A person who commits an offence under subsection (2L)(f) is liable on conviction to a fine at level 3. (Added 27 of 2018 s. 20)(2Q) A person commits an offence if the person, without reasonable excuse, fails to comply with a requirement of section 58C. (Added 27 of 2018 s. 20)(2R) A person who commits an offence under subsection (2Q) is liable on conviction to a fine at level 5, and the court may order the person to do, within a time specified in the order, the act that the person has failed to do. (Added 27 of 2018 s. 20)(2S) If a person fails to comply with an order of the court under subsection (2R), the person commits an offence and is liable on conviction to a fine at level 6. (Added 27 of 2018 s. 20)(2T) A person commits an offence if the person, without reasonable excuse, fails to comply with a requirement under section 10(2) of Schedule 16D. (Added 9 of 2021 s. 10)(2U) A person who commits an offence under subsection (2T) is liable on conviction to a fine at level 3, and the court may order the person to do, within a time specified in the order, the act that the person has failed to do. (Added 9 of 2021 s. 10)(2V) If a person fails to comply with an order of the court under subsection (2U), the person commits an offence and is liable on conviction to a fine at level 4. (Added 9 of 2021 s. 10)(2W) A person who, without reasonable excuse, fails to comply with section 15J commits an offence and is liable on conviction to—(a) a fine at level 3; and(b) a further fine of treble the undercharged amount. (Added 17 of 2022 s. 11)(2X) A person who, without reasonable excuse, fails to comply with section 8(2) of Schedule 17FC commits an offence and is liable on conviction to—(a) a fine at level 3; and(b) a further fine of treble the undercharged amount. (Added 17 of 2022 s. 11)(2Y) A person who, without reasonable excuse, fails to comply with a Schedule 16E provision commits an offence and is liable on conviction to a fine at level 3. (Added 8 of 2023 s. 5)(2Z) For the purposes of subsection (2Y)—Schedule 16E provision (附表16E條文) means any of the following provisions of Schedule 16E—(a) section 28(2);(b) section 28(3);(c) section 28(4);(d) section 28(5);(e) section 28(6);(f) section 29(2);(g) section 29(3);(h) section 29(4);(i) section 29(5);(j) section 29(6);(k) section 29(7);(l) section 29(8);(m) section 29(9). (Added 8 of 2023 s. 5)(2ZA) If a person is convicted of an offence under subsection (2Y) for failing to do an act, the court may order the person to do the act within a time specified in the order. (Added 8 of 2023 s. 5)(2ZB) A person who fails to comply with an order of the court under subsection (2ZA) commits an offence and is liable on conviction to a fine at level 4. (Added 8 of 2023 s. 5)(2ZC) A person who, without reasonable excuse, fails to comply with section 21 of Schedule 17FD commits an offence and is liable on conviction to—(a) a fine at level 3; and(b) a further fine of treble the undercharged amount. (Added 17 of 2024 s. 10)(3) No person shall be liable to any penalty under this section unless the complaint concerning such offence was made in the year of assessment in respect of or during which the offence was committed or within 6 years after the expiration thereof. (Amended 49 of 1956 s. 61)(4) Any person who aids, abets or incites another person to commit an offence under this section shall be deemed to have committed the same offence and to be liable to the same penalty. (Added 49 of 1956 s. 61)(5) The Commissioner may compound any offence under this section and may before judgment stay or compound any proceedings thereunder. (Amended 49 of 1956 s. 61)(6) The following provisions provide for modifications to this section—(aa) section 15S (records to be kept); (Added 17 of 2022 s. 11)(a) section 10 of Schedule 16D (eligible carried interest and its tax treatment);(b) sections 25 and 26 of Schedule 17A (specified alternative bond scheme and its treatment under this Ordinance (other than Part 4AA)); (Replaced 9 of 2021 s. 10. Amended 17 of 2022 s. 11; 21 of 2025 s. 33)(c) section 9 of Schedule 17FC (qualifying IP income: nexus requirement for ascertaining excepted portion etc.); (Added 17 of 2022 s. 11. Amended 17 of 2024 s. 10)(d) section 22 of Schedule 17FD (eligible IP income: concessionary tax treatment and nexus requirement for ascertaining concessionary portion). (Added 17 of 2024 s. 10)(7) In this section— undercharged amount (少徵稅款)— (a) for an offence that relates to any incorrect return, statement or information or an omission from any statement or information—means the amount of tax that—(i) has been undercharged as a result of the incorrect return, statement or information or omission; or(ii) would have been so undercharged if the return, statement or information had been accepted as correct or the omission had not been detected; (b) for an offence that relates to a failure to comply with a provision of this Ordinance or with a notice under the provision—means the amount of tax that has been undercharged as a result of the failure, or would have been so undercharged if the failure had not been detected; or (c) for any other offence—means the amount of tax that has been undercharged as a result of the offence, or would have been so undercharged had the offence not been detected. (Added 27 of 2018 s. 20) 80A. (Repealed 17 of 1989 s. 19) 80B. Penalties for offences relating to reporting financial institutions (1) A reporting financial institution commits an offence if the institution, without reasonable excuse—(a) fails to comply with a requirement under—(i) section 50B(1) or (2);(ii) section 50C(1); or(iii) section 50D(1), (2), (3) or (4);(b) fails to comply with a requirement of a notice given to it under section 51B(1AAAD) or 51BA(6); or(c) obstructs or hinders an assessor in the exercise of the powers under section 51BA(2).(2) For subsection (1)(a)(i) and (ii), engaging a service provider under section 50H does not in itself constitute a reasonable excuse.(3) A reporting financial institution that commits an offence under subsection (1) is liable on conviction to a fine at level 3, and the court may order the institution, within the time specified in the order—(a) (for subsection (1)(a) or (b)) to do the act that the institution has failed to do; or(b) (for subsection (1)(c)) to allow and facilitate an assessor to exercise the powers under section 51BA(2).(4) In the case of an offence under—(a) subsection (1)(a)(ii) for contravening section 50C(1); or(b) subsection (1)(b) for contravening section 51B(1AAAD) or 51BA(6),the reporting financial institution is liable to a further fine of $500 for every day or part of a day during which the offence continues after conviction.(5) A reporting financial institution commits an offence if the institution does not comply with an order of the court under subsection (3), and is liable on conviction to a fine at level 4.(6) A reporting financial institution commits an offence if the institution—(a) in purported compliance with the requirement to furnish a return under section 50C(1), provides any information in the return that is misleading, false or inaccurate in a material particular, and—(i) knows the information is misleading, false or inaccurate in a material particular;(ii) is reckless as to whether the information is misleading, false or inaccurate in a material particular; or(iii) has no reasonable ground to believe that the information is true or accurate; or(b) after a return has been furnished to the Commissioner in purported compliance with section 50C(1)—(i) discovers misleading, false or inaccurate information in the return; and(ii) without reasonable excuse, fails to notify the Commissioner of the discovery within a reasonable time.(7) A reporting financial institution that commits an offence under subsection (6) is liable on conviction to a fine at level 3.(8) A reporting financial institution commits an offence if the institution, with intent to defraud, provides any information that is misleading, false or inaccurate in a material particular in a return furnished under section 50C(1).(9) A reporting financial institution that commits an offence under subsection (8) is liable—(a) on summary conviction to—(i) a fine at level 3; and(ii) imprisonment for 6 months; or(b) on conviction on indictment to—(i) a fine at level 5; and(ii) imprisonment for 3 years.(10) In relation to a reporting financial institution that is not a corporation, this section applies to a person who acts for the institution to maintain financial accounts as if the references to a reporting financial institution were references to that person.(Added 22 of 2016 s. 10) 80C. Offences of persons employed by reporting financial institutions, etc. (1) If a person—(a) is an employee of a reporting financial institution or, as the case requires, an individual employed as an employee in respect of a reporting financial institution that is not a corporation;(b) other than a service provider, is engaged to work for a reporting financial institution; or(c) is concerned in the management of a reporting financial institution,the person commits an offence if the person, with intent to defraud, causes or allows the institution to provide any information that is misleading, false or inaccurate in a material particular in a return furnished under section 50C(1).(2) A person who commits an offence under subsection (1) is liable—(a) on summary conviction to—(i) a fine at level 3; and(ii) imprisonment for 6 months; or(b) on conviction on indictment to—(i) a fine at level 5; and(ii) imprisonment for 3 years.(Added 22 of 2016 s. 10) 80D. Offences of service provider (1) A person who is a service provider engaged to carry out a reporting financial institution’s obligations under section 50B(1) commits an offence if the person, without reasonable excuse, fails to—(a) establish the procedures described in section 50B(1)(a); or(b) incorporate into those procedures the due diligence requirements in Schedule 17D.(2) A person who is a service provider engaged to carry out a reporting financial institution’s obligations under section 50B(2) commits an offence if the person, without reasonable excuse, fails to maintain or apply the procedures established in compliance with section 50B(1)(a) and (b)—(a) to identify reportable accounts, and to identify and collect the required information within the meaning of section 50C(3); or(b) to ensure that the purpose mentioned in section 50B(1)(a)(iii) can be achieved.(3) A person who is a service provider engaged to carry out a reporting financial institution’s obligations under section 50C(1) commits an offence if the person, without reasonable excuse, fails to cause a return to be furnished as required by that section.(4) A person who is a service provider engaged to carry out a reporting financial institution’s obligations under section 50B(1) or (2) or 50C(1) commits an offence if the person—(a) causes or allows the institution to provide, or in purported compliance with the requirement on the institution to furnish a return under section 50C(1), provides any information in the return that is misleading, false or inaccurate in a material particular, and—(i) knows the information is misleading, false or inaccurate in a material particular;(ii) is reckless as to whether the information is misleading, false or inaccurate in a material particular; or(iii) has no reasonable ground to believe that the information is true or accurate; or(b) after a return has been furnished to the Commissioner in purported compliance with section 50C(1)—(i) discovers misleading, false or inaccurate information in the return; and(ii) without reasonable excuse, fails to notify the Commissioner of the discovery within a reasonable time.(5) A person who is a service provider commits an offence if the person, without reasonable excuse—(a) fails to comply with a requirement of a notice given to it under section 51B(1AAAD) or 51BA(6); or(b) obstructs or hinders an assessor in the exercise of the powers under section 51BA(2).(6) A person who commits an offence under subsection (1), (2), (3), (4) or (5) is liable on conviction to a fine at level 3.(7) A person who is a service provider engaged to carry out a reporting financial institution’s obligations under section 50B(1) or (2) or 50C(1) commits an offence if the person, with intent to defraud, causes or allows the institution to provide any information that is misleading, false or inaccurate in a material particular in a return furnished under section 50C(1).(8) A person who commits an offence under subsection (7) is liable—(a) on summary conviction to—(i) a fine at level 3; and(ii) imprisonment for 6 months; or(b) on conviction on indictment to—(i) a fine at level 5; and(ii) imprisonment for 3 years.(9) The court may order a service provider that commits an offence under subsection (1), (2), (3) or (5), within the time specified in the order—(a) (for subsection (1), (2), (3) or (5)(a)) to do the act that the service provider has failed to do; or(b) (for subsection (5)(b)) to allow and facilitate an assessor to exercise the powers under section 51BA(2).(10) A service provider commits an offence if the service provider does not comply with an order of the court under subsection (9), and is liable on conviction to a fine at level 4.(Added 22 of 2016 s. 10) 80E. Offences of directors, etc. of corporations If—(a) any of the following persons is a corporation—(i) a reporting financial institution that commits an offence under section 80B(1), (5), (6) or (8);(ii) a person who commits an offence under section 80B(1), (5), (6) or (8) pursuant to section 80B(10);(iii) a service provider that commits an offence under section 80D(1), (2), (3), (4), (5), (7) or (10); and(b) the offence was committed with the consent or connivance of a director, or other officer concerned in the management, of the corporation, or any person purporting to act as such director or officer (that person),the director or officer or that person, as the case requires, also commits the offence and is liable on conviction to the penalty provided for that offence.(Added 22 of 2016 s. 10) 80F. Miscellaneous provisions for certain offences relating to reporting financial institutions, etc. (1) Despite section 26 of the Magistrates Ordinance (Cap. 227), proceedings in respect of an offence under section 80B, 80C, 80D or 80E, other than an indictable offence, may be brought within 6 years after the date on which the offence was committed.(2) The Commissioner may compound an offence under section 80B, 80C, 80D or 80E, and may before judgment stay or compound any proceedings instituted for the offence.(Added 22 of 2016 s. 10) 80G. Offences of reporting entities in relation to country-by-country reporting (1) A reporting entity commits an offence if the entity, without reasonable excuse—(a) fails to comply with a requirement under—(i) section 58E(1) or 58F;(ii) section 58H;(iii) section 58L(1); or(iv) section 58L(2); or(b) fails to comply with a requirement of a notice given to it under section 58L(3).(2) For subsection (1)(a)(i), (ii) and (iii), engaging a service provider does not in itself constitute a reasonable excuse.(3) A reporting entity that commits an offence under subsection (1) is liable on conviction to a fine at level 5, and the court may order the entity to do, within the time specified in the order, the act that the entity has failed to do.(4) In case of an offence under subsection (1)(a)(i) and (ii), the reporting entity is liable to a further fine of $500 for every day or part of a day during which the offence continues after conviction.(5) If a reporting entity fails to comply with an order of the court under subsection (3), the entity commits an offence and is liable on conviction to a fine at level 6.(6) A reporting entity commits an offence if—(a) the entity—(i) files, or causes or allows to be filed on its behalf, a specified document for a specified purpose and the document is misleading, false or inaccurate in a material particular, whether or not because any information is omitted from the document; or(ii) in purported compliance with a requirement of a notice given to the entity under section 58L(3), provides any information that is misleading, false or inaccurate in a material particular, whether or not because anything is omitted from the information; and(b) the entity—(i) knows the document referred to in paragraph (a)(i), or the information referred to in paragraph (a)(ii), is misleading, false or inaccurate in a material particular;(ii) is reckless as to whether the document or information is misleading, false or inaccurate in a material particular; or(iii) has no reasonable ground to believe that the document or information is true or accurate.(7) A reporting entity commits an offence if the entity—(a) discovers that—(i) a specified document that the entity has filed, or has caused or allowed to be filed on its behalf, for a specified purpose is misleading, false or inaccurate in a material particular, whether or not because any information is omitted from the document; or(ii) any information provided, in purported compliance with a requirement of a notice given to the entity under section 58L(3), is misleading, false or inaccurate in a material particular, whether or not because anything is omitted from the information; and(b) without reasonable excuse, fails to notify the Commissioner of the discovery within a reasonable time.(8) A reporting entity that commits an offence under subsection (6) or (7) is liable on conviction to a fine at level 5.(9) A reporting entity commits an offence if the entity—(a) with intent to defraud, files or causes or allows to be filed on its behalf, a specified document for a specified purpose and the document is misleading, false or inaccurate in a material particular, whether or not because any information is omitted from the document; or(b) with intent to defraud and in purported compliance with a requirement of a notice given to the entity under section 58L(3), provides any information that is misleading, false or inaccurate in a material particular, whether or not because anything is omitted from the information.(10) A reporting entity that commits an offence under subsection (9) is liable—(a) on summary conviction to—(i) a fine at level 3; and(ii) imprisonment for 6 months; or(b) on conviction on indictment to—(i) a fine at level 5; and(ii) imprisonment for 3 years.(11) In relation to a reporting entity that is not a corporation, this section applies to a person who acts for the entity or is responsible for the management of the entity as if references to a reporting entity were references to that person.(12) In relation to a reporting entity that is a permanent establishment of an enterprise, this section also applies to the enterprise as if references to a reporting entity were references to that enterprise.(13) In this section—(a) specified document (指明文件) means a return or notice; and(b) a reference to filing a specified document for a specified purpose means—(i) filing a return in purported compliance with section 58E(1) or 58F;(ii) filing a return under section 58E(2); or(iii) filing a notice in purported compliance with section 58H.(Added 27 of 2018 s. 21) 80H. Offences of service provider in relation to country-by-country reporting (1) A person who is a service provider engaged by a reporting entity to carry out the entity’s obligations commits an offence if—(a) where the engagement relates to obligations under section 58E(1) or 58F—the person, without reasonable excuse, fails to cause a country-by-country return to be filed as required under section 58E(1) or 58F; or(b) where the engagement relates to obligations under section 58H—the person, without reasonable excuse, fails to cause a notice to be filed as required under section 58H.(2) A person who is a service provider engaged by a reporting entity commits an offence if—(a) the person files on behalf of the entity, or causes or allows the entity to file, a specified document for a specified purpose and the document is misleading, false or inaccurate in a material particular, whether or not because any information is omitted from the document; and(b) the person—(i) knows the document is misleading, false or inaccurate in a material particular;(ii) is reckless as to whether the document is misleading, false or inaccurate in a material particular; or(iii) has no reasonable ground to believe that the document is true or accurate.(3) A person who is a service provider engaged by a reporting entity commits an offence if the person—(a) discovers that a specified document that the person has filed on behalf of the entity, or has caused or allowed the entity to file, for a specified purpose is misleading, false or inaccurate in a material particular, whether or not because any information is omitted from the document; and(b) without reasonable excuse, fails to notify the Commissioner of the discovery within a reasonable time.(4) A person who commits an offence under subsection (1), (2) or (3) is liable on conviction to a fine at level 5.(5) A person who is a service provider engaged by a reporting entity commits an offence if the person, with intent to defraud, files on behalf of the entity, or causes or allows the entity to file, a specified document for a specified purpose and the document is misleading, false or inaccurate in a material particular, whether or not because any information is omitted from the document.(6) A person who commits an offence under subsection (5) is liable—(a) on summary conviction to—(i) a fine at level 3; and(ii) imprisonment for 6 months; or(b) on conviction on indictment to—(i) a fine at level 5; and(ii) imprisonment for 3 years.(7) The court may order a service provider who commits an offence under subsection (1) to do, within the time specified in the order, the act that the person has failed to do.(8) If a service provider fails to comply with an order of the court under subsection (7), the service provider commits an offence and is liable on conviction to a fine at level 6.(9) In this section—(a) specified document (指明文件) means a return or notice; and(b) a reference to filing a specified document for a specified purpose, in relation to a service provider engaged by a reporting entity, means—(i) if the engagement relates to obligations under section 58E(1) or 58F—filing a return in purported compliance with that section;(ii) if the engagement relates to filing a return under section 58E(2)—filing a return under that section; or(iii) if the engagement relates to obligations under section 58H—filing a notice in purported compliance with that section.(Added 27 of 2018 s. 21) 80I. Offences of directors, etc. of reporting entities and service provider in relation to country-by-country reporting If—(a) any of the following persons is a corporation—(i) a reporting entity that commits an offence under section 80G;(ii) a person who commits an offence under section 80G by virtue of section 80G(11) or (12);(iii) a service provider that commits an offence under section 80H; and(b) the offence was committed with the consent or connivance of a director, or other officer concerned in the management, of the corporation, or any person purporting to act as such director or officer (specified person),the director or officer or specified person, as the case requires, also commits the offence and is liable on conviction to the penalty provided for that offence.(Added 27 of 2018 s. 21) 80J. Miscellaneous provisions for certain offences relating to country-by-country reporting (1) Despite section 26 of the Magistrates Ordinance (Cap. 227), proceedings in respect of an offence under section 80G, 80H or 80I, other than an indictable offence, may be brought within 6 years after the date on which the offence was committed.(2) The Commissioner may compound an offence under section 80G, 80H or 80I, and may, before judgment, stay or compound any proceedings instituted for the offence.(Added 27 of 2018 s. 21) 80K. Offences of service provider in relation to furnishing of returns under section 51(1) (1) This section applies if a service provider is engaged by a taxpayer under section 51AAD(1) to furnish for or on behalf of the taxpayer a return required to be furnished under section 51(1).(2) The service provider commits an offence if the service provider, without reasonable excuse, fails to furnish the return for or on behalf of the taxpayer.(3) The service provider commits an offence if the service provider, without reasonable excuse, fails to comply with a requirement under section 51AAD(3) or (4).(4) The service provider commits an offence if, without reasonable excuse—(a) the service provider furnishes the return for or on behalf of the taxpayer but not in accordance with the information provided, or instructions given, by the taxpayer to the service provider; and(b) the return so furnished is incorrect in a material particular (whether or not because any information is omitted from the return).(5) A service provider who commits an offence under subsection (2), (3) or (4) is liable on conviction to a fine at level 3.(6) In this section—service provider (服務提供者) has the meaning given by section 51AAD(8);taxpayer (納稅人) has the meaning given by section 51AAD(8).(Added 18 of 2021 s. 12) 80L. Court may order service providers to do certain acts (1) The court may order a service provider (as defined by section 51AAD(8)) who commits an offence under section 80K(2) or (3) to do, within the time specified in the order, the act that the service provider has failed to do.(2) A service provider who fails to comply with an order of the court under subsection (1) commits an offence and is liable on conviction to a fine at level 6.(Added 18 of 2021 s. 12) 80M. Proceedings for offences relating to service providers Despite section 26 of the Magistrates Ordinance (Cap.

227), proceedings for an offence under section 80K(2), (3) or (4) may be brought within 6 years after the expiry of the year of assessment during which the offence was committed.(Added 18 of 2021 s. 12) 80N. Commissioner may compound offences The Commissioner may—(a) compound an offence under section 80K(2), (3) or (4); and(b) before judgment, stay or compound any proceedings for the offence.(Added 18 of 2021 s. 12) 80O. Minimum tax for MNE groups: offences by Part 4AA entities (1) A Part 4AA entity commits an offence if the entity, without reasonable excuse—(a) fails to comply with—(i) a requirement under section 3(1) of Schedule 63;(ii) a requirement under section 5(1) of Schedule 63; or(iii) a requirement of a notice given to it under section 12(1) of Schedule 63;(b) in purported compliance with section 3(1) of Schedule 63, files, or causes or allows to be filed on its behalf, a top-up tax return that is misleading, false or inaccurate in a material particular, whether or not because any information is omitted from the top-up tax return;(c) in purported compliance with section 5(1) of Schedule 63, files, or causes or allows to be filed on its behalf, a notice that is misleading, false or inaccurate in a material particular, whether or not because any information is omitted from the notice; or(d) makes any statement or provides any information relating to any matter or thing, affecting its MNE group’s top-up tax liability, that is misleading, false or inaccurate in a material particular, whether or not because anything is omitted from the statement or information.(2) For subsection (1)(a)(i) and (ii), (b), (c) and (d), engaging a service provider under section 13 of Schedule 63 does not in itself constitute a reasonable excuse.(3) A Part 4AA entity that commits an offence under subsection (1)(a)(i) or (ii) is liable on conviction to a fine at level 3 and a further fine of treble the top-up tax undercharged amount.(4) A Part 4AA entity that commits an offence under subsection (1)(a)(iii) is liable on conviction to a fine at level 3.(5) A Part 4AA entity that commits an offence under subsection (1)(b), (c) or (d) is liable on conviction to a fine at level 3 and a further fine of treble the top-up tax undercharged amount.(6) In case of an offence under subsection (1)(a), the court may order the Part 4AA entity, within a time specified in the order, to do the act that the entity has failed to do.(7) Any Part 4AA entity that does not comply with an order of the court under subsection (6) commits an offence and is liable on conviction to a fine at level 4.(8) In relation to a Part 4AA entity that is not a corporation, this section applies to a person who acts for the entity or is responsible for the management of the entity as if a reference to a Part 4AA entity in this section were a reference to that person.(9) In relation to a Part 4AA entity that is a permanent establishment of a main entity, this section also applies to the main entity as if a reference to a Part 4AA entity in this section were a reference to the main entity.(10) In subsection (1)(d), in relation to a Part 4AA entity of an MNE group, a reference to a matter or thing affecting the MNE group’s top-up tax liability is a reference to a matter or thing relevant to the determination of any top-up tax payable by a Part 4AA entity of the MNE group.(11) In subsections (3) and (5)—top-up tax undercharged amount (補足稅少徵稅款)—(a) for an offence that relates to a failure to comply with a provision of Schedule 63—means the amount of top-up tax that has been undercharged as a result of the failure, or would have been so undercharged if the failure had not been detected; or(b) for an offence that relates to any top-up tax return, notice, statement or information that is misleading, false or inaccurate in a material particular—means the amount of top-up tax that—(i) has been undercharged as a result of the top-up tax return, notice, statement or information; or(ii) would have been so undercharged if the top-up tax return, notice, statement or information had been accepted as correct.(Added 21 of 2025 s. 24) 80P. Minimum tax for MNE groups: offences by service provider (1) This section applies if a service provider is engaged by a Part 4AA entity under section 13 of Schedule 63 to file, for or on behalf of a Part 4AA entity—(a) a top-up tax return; or(b) a notice required to be filed under a provision of that Schedule.(2) A person who is a service provider engaged to carry out a Part 4AA entity’s obligations under section 3(1) of Schedule 63 commits an offence if the person, without reasonable excuse, fails to cause a top-up tax return to be filed as required by that section.(3) A person who is a service provider engaged to carry out a Part 4AA entity’s obligations under section 5(1) of Schedule 63 commits an offence if the person, without reasonable excuse, fails to cause a notice to be filed as required by that section.(4) A person who is a service provider commits an offence if—(a) the person, without reasonable excuse and in purported compliance with section 3(1) of Schedule 63, files on behalf of a Part 4AA entity, or causes or allows the entity to file, a top-up tax return not in accordance with the information provided, or instructions given, by the entity to the service provider; and(b) the top-up tax return is misleading, false or inaccurate in a material particular, whether or not because any information is omitted from the top-up tax return.(5) A person who is a service provider commits an offence if—(a) the person, without reasonable excuse and in purported compliance with section 5(1) of Schedule 63, files on behalf of a Part 4AA entity, or causes or allows the entity to file, a notice not in accordance with the information provided, or instructions given, by the entity to the service provider; and(b) the notice is misleading, false or inaccurate in a material particular, whether or not because any information is omitted from the notice.(6) A person who commits an offence under subsection (2), (3), (4) or (5) is liable on conviction to a fine at level 3.(7) The court may order a person who commits an offence under subsection (2) or (3) to do, within the time specified in the order, the act that the person has failed to do.(8) A person who fails to comply with an order of the court under subsection (7) commits an offence and is liable on conviction to a fine at level 6.(Added 21 of 2025 s. 24) 80Q. Minimum tax for MNE groups: miscellaneous provisions for certain offences (1) Despite section 26 of the Magistrates Ordinance (Cap. 227), proceedings in respect of an offence under section 80O or 80P (other than an indictable offence) may be brought within 8 years after the day on which the offence was committed.(2) The Commissioner may compound an offence under section 80O or 80P, and may, before judgment, stay or compound any proceedings instituted for the offence.(Added 21 of 2025 s. 24) 81. Breach of secrecy and other matters to be offences (1) Any person who— (Amended 4 of 2010 s. 14)(a) acts under this Ordinance without taking an oath of secrecy as required by section 4(2); or(b) acts contrary to the provisions of section 4(1) or to an oath taken under section 4(2); or(c) aids, abets, or incites any other person to act contrary to the provisions of section 4, (Amended 49 of 1956 s. 62) commits an offence and is liable on conviction to a fine at level 5. (Amended 43 of 1975 s. 7; L.N. 338 of 1995; 4 of 2010 s. 14)(2) Proceedings in respect of an offence under this section must not be commenced after 2 years from the commission of the offence. (Added 4 of 2010 s. 14)(3) Subsection (2) applies only to an offence committed on or after the commencement* of the Inland Revenue (Amendment) (No. 2) Ordinance 2010 (4 of 2010). (Added 4 of 2010 s. 14) Editorial Note: * Commencement date: 12 February 2010. 82. Penal provisions relating to fraud, etc. (1) Any person who wilfully with intent to evade or to assist any other person to evade tax—(a) omits from a return made under this Ordinance any sum which should be included; or (Amended 30 of 1950 Schedule)(b) makes any false statement or entry in any return made under this Ordinance; or (c) makes any false statement in connection with a claim for any deduction or allowance under this Ordinance; or(d) signs any statement or return furnished under this Ordinance without reasonable grounds for believing the same to be true; or(e) gives any false answer whether verbally or in writing to any question or request for information asked or made in accordance with the provisions of this Ordinance; or(f) prepares or maintains or authorizes the preparation or maintenance of any false books of account or other records or falsifies or authorizes the falsification of any books of account or records; or(g) makes use of any fraud, art, or contrivance, whatsoever or authorizes the use of any such fraud, art, or contrivance, commits an offence. (Amended 49 of 1956 s. 63; 40 of 1972 s. 12; L.N. 411 of 1984; 50 of 1991 s. 4; L.N. 338 of 1995; 4 of 2010 s. 15)(1AA) A person commits an offence if—(a) the person wilfully, with intent to evade tax or to assist any other person to evade tax—(i) makes an incorrect statement, or provides incorrect information, in connection with any mutual agreement procedure or arbitration referred to in section 50AAB; or(ii) omits anything from a statement or information made or provided in connection with the procedure or arbitration; and(b) the statement or information referred to in paragraph (a)(i), or the thing referred to in paragraph (a)(ii), is material to the case or issue to which the procedure or arbitration relates. (Added 27 of 2018 s. 22)(1AAB) A person commits an offence if—(a) the person wilfully, with intent to evade tax or to assist any other person to evade tax, makes an incorrect statement or provides incorrect information in connection with the following claim or application, or omits anything from a statement made or information provided in connection with the following claim or application—(i) the person’s claim for relief under section 50AAM, 50AAN or 50AAO; or(ii) the person’s application for an advance pricing arrangement under section 50AAP(1); and(b) the statement or information that is incorrect, or thing that is omitted, is material to the claim or application. (Added 27 of 2018 s. 22)(1AAC) A person commits an offence if—(a) the person either—(i) wilfully, with intent to evade tax or to assist any other person to evade tax and in purported compliance with a requirement under section 50AAS, provides incorrect information in relation to an advance pricing arrangement; or(ii) wilfully, with intent to evade tax or to assist any other person to evade tax, omits anything from the information provided, in relation to an advance pricing arrangement, in purported compliance with the requirement; and(b) the information referred to in paragraph (a)(i), or the thing referred to in paragraph (a)(ii), is material to the arrangement. (Added 27 of 2018 s. 22)(1AAD) A person commits an offence if the person either—(a) wilfully, with intent to evade top-up tax or to assist any other person to evade top-up tax, and in purported compliance with a requirement under section 3(1) or 5(1) of Schedule 63, provides information that is misleading, false or inaccurate in a material particular; or(b) wilfully, with intent to evade top-up tax or to assist any other person to evade top-up tax, omits anything from the statement made or information provided, in relation to any matter or thing affecting an MNE group’s top-up tax liability, in purported compliance with the requirement. (Added 21 of 2025 s. 25)(1A) A person who commits an offence under subsection (1), (1AA), (1AAB) or (1AAC) is liable— (Amended 27 of 2018 s. 22)(a) on summary conviction to—(i) a fine at level 3;(ii) a further fine of treble the undercharged amount; and(iii) imprisonment for 6 months; and(b) on indictment to—(i) a fine at level 5;(ii) a further fine of treble the undercharged amount; and(iii) imprisonment for 3 years. (Added 4 of 2010 s. 15. Amended 27 of 2018 s. 22)(1B) A person who commits an offence under subsection (1AAD) is liable—(a) on summary conviction to—(i) a fine at level 3;(ii) a further fine of treble the top-up tax undercharged amount; and(iii) imprisonment for 6 months; or(b) on indictment to—(i) a fine at level 5;(ii) a further fine of treble the top-up tax undercharged amount; and(iii) imprisonment for 3 years. (Added 21 of 2025 s. 25)(2) The Commissioner may compound any offence under this section and may before judgment stay or compound any proceedings thereunder.(3) In this section—top-up tax undercharged amount (補足稅少徵稅款), in relation to an offence, means the amount of top-up tax that—(a) has been undercharged as a result of the offence; or(b) would have been so undercharged, had the offence not been detected; (Added 21 of 2025 s. 25)undercharged amount (少徵稅款), in relation to an offence, means the amount of tax that has been undercharged as a result of the offence, or would have been so undercharged had the offence not been detected. (Added 27 of 2018 s. 22)(4) Section 80O(10) applies to subsection (1AAD)(b) as it applies to section 80O(1)(d). (Added 21 of 2025 s. 25) 82A. Additional tax in certain cases (1) Any person who without reasonable excuse—(a) makes, or causes or allows to be made on the person’s behalf, an incorrect return by omitting or understating anything in respect of which he is required by this Ordinance to make a return, either on his behalf or on behalf of another person; or (Amended 1 of 2010 s. 8; 18 of 2021 s. 13)(b) makes an incorrect statement in connection with a claim for any deduction or allowance under this Ordinance; or(c) gives any incorrect information in relation to any matter or thing affecting his own liability (or the liability of any other person) to tax; or (Amended 1 of 2010 s. 8)(ca) fails to comply with section 26M(3)(a); or (Added 31 of 2018 s. 12)(cb) fails to comply with section 26Q(3)(a); or (Added 7 of 2019 s. 7)(cc) fails to comply with section 26ZB(3)(a); or (Added 10 of 2024 s. 13)(cd) fails to comply with section 26ZI(3)(a); or (Added 2 of 2025 s. 7)(d) fails to comply with the requirements of a notice given to him under section 51(1); or (Amended 18 of 2021 s. 19)(e) fails to comply with section 51(2), shall, if no prosecution under section 80(2) or 82(1) has been instituted in respect of the same facts, be liable to be assessed under this section to additional tax of an amount not exceeding treble the undercharged amount. (Amended 43 of 1975 s. 8; 43 of 1989 s. 28; 27 of 2018 s. 23)(1AA) For the purposes of subsection (1)(a), (b), (c) and (d), engaging a service provider (as defined by section 51AAD(8)) under section 51AAD(1) does not in itself constitute a reasonable excuse. (Added 18 of 2021 s. 13)(1A) If—(a) a person, without reasonable excuse, fails to comply with section 50AA(5); and(b) no prosecution for an offence under section 80 has been instituted in respect of the same facts,the person is liable to be assessed under this section to additional tax of an amount not exceeding the undercharged amount. (Added 27 of 2018 s. 23)(1B) If—(a) a person, without reasonable excuse—(i) makes an incorrect statement, or provides incorrect information, in connection with any mutual agreement procedure or arbitration referred to in section 50AAB; or(ii) omits anything from a statement or information made or provided in connection with the procedure or arbitration;(b) the statement or information referred to in paragraph (a)(i), or the thing referred to in paragraph (a)(ii), is material to the case or issue to which the procedure or arbitration relates; and(c) no prosecution for an offence under section 80 or 82 has been instituted in respect of the same facts,the person is liable to be assessed under this section to additional tax of an amount not exceeding treble the undercharged amount. (Added 27 of 2018 s. 23)(1C) Subsection (1D) applies if—(a) an assessment or additional assessment made on a person under section 50AAF(5) or 50AAK(9) has become final and conclusive under section 70 (the assessment or additional assessment is referred to as the relevant assessment); and(b) the amount of the person’s income as assessed under section 50AAF(5) or 50AAK(9) to which the relevant assessment relates (the person’s assessed income) is larger than the amount of the person’s income as stated in the person’s tax return. (Added 27 of 2018 s. 23)(1D) The person is liable to be assessed to additional tax under this section of an amount not exceeding the difference between—(a) the amount of tax assessed on the basis of the amount of the person’s assessed income; and(b) the amount of tax that would have been assessed if the amount of the person’s income as stated in the person’s tax return had been accepted for the purpose of assessment. (Added 27 of 2018 s. 23)(1E) Subsection (1F) applies if—(a) an assessment made on a person for a year of assessment (subject year) has become final and conclusive under section 70 and the assessment has taken into account the person’s loss for an earlier year of assessment (year of loss) as computed under section 50AAF(5) or 50AAK(9) (the person’s computed loss); and(b) the amount of the person’s computed loss is smaller than the amount of the person’s loss as stated in the person’s tax return for the year of loss. (Added 27 of 2018 s. 23)(1F) The person is liable to be assessed to additional tax under this section for the subject year of an amount not exceeding the difference between—(a) the amount of tax assessed taking into account the amount of the person’s computed loss; and(b) the amount of tax that would have been assessed if the amount of the person’s loss as stated in the person’s tax return for the year of loss had been accepted for the purpose of assessment. (Added 27 of 2018 s. 23)(1G) A person is not liable to be assessed to additional tax under subsection (1D) or (1F) if the person proves that the person has made reasonable efforts to determine the arm’s length amount under section 50AAF(1) or 50AAK(2). (Added 27 of 2018 s. 23)(1H) If—(a) any of the following applies—(i) a person, without reasonable excuse, fails to comply with a requirement under section 50AAM(11), 50AAN(3) or 50AAO(3);(ii) both—(A) a person, without reasonable excuse, makes an incorrect statement or provides incorrect information in connection with the following claim or application, or omits anything from a statement made or information provided in connection with the following claim or application—(I) the person’s claim for relief under section 50AAM, 50AAN or 50AAO; or(II) the person’s application for an advance pricing arrangement under section 50AAP(1); and(B) the statement or information that is incorrect, or thing that is omitted, is material to the claim or application;(iii) a person, without reasonable excuse, fails to comply with a requirement under section 50AAS;(iv) both—(A) a person either—(I) without reasonable excuse and in purported compliance with a requirement under section 50AAS, provides incorrect information in relation to an advance pricing arrangement; or(II) without reasonable excuse, omits anything from information provided, in relation to an advance pricing arrangement, in purported compliance with the requirement; and(B) the information referred to in sub-subparagraph (A)(I), or the thing referred to in sub-subparagraph (A)(II), is material to the arrangement; and(b) no prosecution for an offence under section 80 or 82 has been instituted in respect of the same facts,the person is liable to be assessed under this section to additional tax of an amount not exceeding the undercharged amount. (Added 27 of 2018 s. 23)(1I) If—(a) a person, without reasonable excuse, fails to comply with section 15J; and(b) no prosecution for an offence under section 80 has been instituted in respect of the same facts,the person is liable to be assessed under this section to additional tax of an amount not exceeding treble the undercharged amount. (Added 17 of 2022 s. 12)(1J) If—(a) a person, without reasonable excuse, fails to comply with section 8(2) of Schedule 17FC; and(b) no prosecution for an offence under section 80 has been instituted in respect of the same facts,the person is liable to be assessed under this section to additional tax of an amount not exceeding treble the undercharged amount. (Added 17 of 2022 s. 12)(1K) If—(a) a person, without reasonable excuse, fails to comply with section 21 of Schedule 17FD; and(b) no prosecution for an offence under section 80 has been instituted in respect of the same facts,the person is liable to be assessed under this section to additional tax of an amount not exceeding treble the undercharged amount. (Added 17 of 2024 s. 11)(1L) If—(a) a person that is a Part 4AA entity of an MNE group—(i) without reasonable excuse, fails to comply with section 3(1) of Schedule 63;(ii) without reasonable excuse, fails to comply with section 5(1) of Schedule 63;(iii) without reasonable excuse and in purported compliance with section 3(1) of Schedule 63, files, or causes or allows to be filed on its behalf, a top-up tax return that is misleading, false or inaccurate in a material particular, whether or not because any information is omitted from the top-up tax return;(iv) without reasonable excuse and in purported compliance with section 5(1) of Schedule 63, files, or causes or allows to be filed on its behalf, a notice that is misleading, false or inaccurate in a material particular, whether or not because any information is omitted from the notice; or(v) without reasonable excuse, makes any statement or provides any information relating to any matter or thing, affecting the MNE group’s top-up tax liability, that is misleading, false or inaccurate in a material particular, whether or not because anything is omitted from the statement or information; and(b) no prosecution for an offence under section 80O or 82 has been instituted in respect of the same facts,the person is liable to be assessed under this section to additional tax of an amount not exceeding treble the top-up tax undercharged amount. (Added 21 of 2025 s. 26)(1M) In relation to a Part 4AA entity that is not a corporation, subsection (1L) applies to a person who acts for the entity or is responsible for the management of the entity as if a reference to a Part 4AA entity in that subsection were a reference to that person. (Added 21 of 2025 s. 26)(1N) In relation to a Part 4AA entity that is a permanent establishment of a main entity, subsection (1L) also applies to the main entity as if a reference to a Part 4AA entity in that subsection were a reference to the main entity. (Added 21 of 2025 s. 26)(1O) Section 80O(10) applies to subsection (1L)(a)(v) as it applies to section 80O(1)(d). (Added 21 of 2025 s. 26)(2) Additional tax shall be payable in addition to any amount of tax payable under an assessment, or an additional assessment under section 60.(3) An assessment of additional tax may be made only by the Commissioner personally or a deputy commissioner personally (each is referred to as the specified authority). (Amended 48 of 1995 s. 12; 27 of 2018 s. 23)(4) Before making an assessment of additional tax, the specified authority must—(a) give notice to the person that the specified authority proposes to assess additional tax and the notice must—(i) inform the person of the following—(A) for additional tax to be assessed under subsection (1)—the alleged incorrect return, incorrect statement or incorrect information, the alleged failure to comply with section 26M(3)(a), 26Q(3)(a), 26ZB(3)(a) or 26ZI(3)(a), the alleged failure to comply with a requirement of the notice given to the person under section 51(1) or the alleged failure to comply with section 51(2); (Amended 31 of 2018 s. 12; 7 of 2019 s. 7; 18 of 2021 s. 19; 10 of 2024 s. 13; 2 of 2025 s. 7)(B) for additional tax to be assessed under subsection (1A)—the alleged failure to comply with section 50AA(5);(C) for additional tax to be assessed under subsection (1B)—the alleged incorrect statement, incorrect information or omission from any statement or information;(D) for additional tax to be assessed under subsection (1D) or (1F)—the assessment or additional assessment made or computation of loss issued or revised under section 50AAF(5) or 50AAK(9);(E) for additional tax to be assessed under subsection (1H)—the alleged failure to comply with a requirement under section 50AAM(11), 50AAN(3), 50AAO(3) or 50AAS or the alleged incorrect statement, incorrect information or omission from any statement or information;(F) for additional tax to be assessed under subsection (1I)—the alleged failure to comply with section 15J; (Added 17 of 2022 s. 12)(G) for additional tax to be assessed under subsection (1J)—the alleged failure to comply with section 8(2) of Schedule 17FC; (Added 17 of 2022 s. 12)(H) for additional tax to be assessed under subsection (1K)—the alleged failure to comply with section 21 of Schedule 17FD; (Added 17 of 2024 s. 11)(I) for additional tax to be assessed under subsection (1L)—the alleged failure to comply with section 3(1) or 5(1) of Schedule 63 or the allegation that the top-up tax return, notice, statement or information is misleading, false or inaccurate in a material particular; (Added 21 of 2025 s. 26)(ii) include a statement that, with regard to the proposed assessment on the person of additional tax, the person has the right—(A) to submit written representations to the specified authority; and(B) for additional tax to be assessed under subsection (1D) or (1F)—to submit to the specified authority written representations and evidence for the purposes of subsection (1G); and(iii) specify the date, which must not be earlier than 21 days from the date of service of the notice, by which representations and evidence that the person may wish to submit under subparagraph (ii) must be received by the specified authority; and(b) consider and take into account any representations and evidence that the specified authority may receive under paragraph (a). (Replaced 27 of 2018 s. 23)(4A) Despite subsection (4), if the specified authority is of the opinion that the person the authority proposes to assess to additional tax under this section is about to leave Hong Kong, the authority may assess the person to additional tax under this section without giving the notice otherwise required to be given under subsection (4)(a). (Replaced 27 of 2018 s. 23)(5) Notice of intention to assess additional tax and notice of an assessment to additional tax shall be given in the same manner as is provided in section 58(2) in respect of a notice of assessment under section 62.(6) Where a person who is liable to be assessed to additional tax has died, an assessment to additional tax may be made on his executor, and the additional tax shall be recovered as a debt due from and payable out of the deceased person’s estate.(7) A person who has been assessed to additional tax under this section is not liable to be charged on the same facts with an offence under section 80 or 82. (Amended 27 of 2018 s. 23)(8) Section 26 of Schedule 17A (specified alternative bond scheme and its treatment under this Ordinance (other than Part 4AA)) provides for modifications to this section. (Added 10 of 2013 s. 16. Amended 21 of 2025 s. 33)(9) In this section—top-up tax undercharged amount (補足稅少徵稅款)—(a) for additional tax assessed because of a failure to comply with a provision of Schedule 63—means the amount of top-up tax that has been undercharged as a result of the failure, or would have been so undercharged if the failure had not been detected; or(b) for additional tax assessed because of any top-up tax return, notice, statement or information that is misleading, false or inaccurate in a material particular—means the amount of top-up tax that—(i) has been undercharged as a result of the top-up tax return, notice, statement or information; or(ii) would have been so undercharged if the top-up tax return, notice, statement or information had been accepted as correct; (Added 21 of 2025 s. 26)undercharged amount (少徵稅款)—(a) for additional tax assessed because of any incorrect return, statement or information or an omission from any statement or information—means the amount of tax that—(i) has been undercharged as a result of the incorrect return, statement or information or omission; or(ii) would have been so undercharged if the return, statement or information had been accepted as correct or the omission had not been detected; or(b) for additional tax assessed because of a failure to comply with a provision of this Ordinance or with a notice under the provision—means the amount of tax that has been undercharged as a result of the failure, or would have been so undercharged if the failure had not been detected. (Added 27 of 2018 s. 23)(Added 26 of 1969 s. 38) 82B. Appeals against assessment to additional tax to Board of Review (1) Any person who has been assessed to additional tax under section 82A may within—(a) 1 month after the notice of assessment is given to him; or(b) such further period as the Board of Review may allow under subsection (1A), (Amended 17 of 2015 s. 11) either himself or by his authorized representative give notice of appeal to the Board; but no such notice shall be entertained unless it is given in writing to the clerk to the Board and is accompanied by—(i) a copy of the notice of assessment;(ii) a statement of the grounds of appeal from the assessment;(iii) a copy of the notice of intention to assess additional tax given under section 82A(4), if any such notice was given; and(iv) a copy of any written representations made under section 82A(4). (Replaced 12 of 2004 s. 18)(1A) If the Board is satisfied that an appellant was prevented by illness or absence from Hong Kong or other reasonable cause from giving notice of appeal in accordance with subsection (1)(a), the Board may extend for such period as it thinks fit the time within which notice of appeal may be given under subsection (1). This subsection shall apply to an appeal relating to any assessment in respect of which notice of assessment is given on or after the commencement* of the Inland Revenue (Amendment) Ordinance 2004 (12 of 2004). (Added 12 of 2004 s. 18)(2) On an appeal against assessment to additional tax, it shall be open to the appellant to argue that—(a) he is not liable to additional tax;(b) the amount of additional tax assessed on him exceeds the amount for which he is liable under section 82A;(c) the amount of additional tax, although not in excess of that for which he is liable under section 82A, is excessive having regard to the circumstances.(3) Sections 66(2) and (3), 68, 68AA, 68AAB, 68A, 69 and 70 shall, so far as they are applicable, have effect with respect to appeals against additional tax as if such appeals were against assessments to tax other than additional tax. (Amended 4 of 2010 s. 16; 17 of 2015 s. 11)(Added 26 of 1969 s. 38) Editorial Note: * Commencement date: 25 June 2004. 83. Tax payable notwithstanding proceedings The institution of proceedings for, or the imposition of, a penalty, fine, or term of imprisonment under this Part shall not relieve any person from liability to assessment or payment of any tax for which he is or may be liable.(Amended 49 of 1956 s. 64) 84. Prosecutions, sanction of Commissioner (1) No prosecution in respect of an offence under section 80, 80O or 82 may be commenced except at the instance of or with the sanction of the Commissioner. (Amended 26 of 1969 s. 39; 21 of 2025 s. 27)(2) Nothing in this section shall derogate from the powers of the Secretary for Justice in respect of the prosecution of criminal offences. (Added 26 of 1969 s. 39. Amended L.N. 362 of 1997) Part 15 General 85. Power to make rules (1) The Board of Inland Revenue may from time to time make rules generally for carrying out the provisions of this Ordinance and for the ascertainment and determination of any class of income or profits. (Amended 30 of 1950 Schedule)(2) Without prejudice to the generality of the foregoing power such rules may—(a) prescribe the procedure to be followed on application for refunds and relief;(b) provide for any matter which by this Ordinance is to be or may be prescribed; (Amended 35 of 1965 s. 41)(c) for the purpose of any of the provisions of this Ordinance, prescribe what is or is deemed to be included in, or excluded from, the expression machinery or plant (機械或工業裝置) and the expression implement, utensil or article (工具、器具或物品); (Added 35 of 1965 s. 41. Amended 63 of 1997 s. 8)(d) prescribe any procedure to be followed in relation to an appeal to the Board of Review. (Added 63 of 1997 s. 8)(3) Such rules may prescribe fines recoverable on summary conviction for any contravention thereof or failure to comply therewith not exceeding in each case a fine at level 1. (Amended L.N. 338 of 1995)(4) All such rules made by the Board of Inland Revenue shall be submitted to the Chief Executive, and shall be subject to the approval of the Legislative Council. (Amended 12 of 1999 s. 3) 86. Board of Inland Revenue to specify forms (1) The Board of Inland Revenue may specify any forms or the form of any forms which may be necessary for carrying this Ordinance into effect. (Amended 39 of 1969 s. 10; 8 of 1983 s. 20; 5 of 2003 s. 14)(2) Where a specimen of any form bears an endorsement, purporting to be signed by the secretary to the Board of Inland Revenue, to the effect that the form is specified by the Board of Inland Revenue, it shall be presumed, until the contrary is proved, that the form is a form specified by the Board of Inland Revenue under subsection (1). (Added 8 of 1983 s. 20) 87. General power of Chief Executive in Council to exempt The Chief Executive in Council may by order exempt any person, office or institution from payment of the whole or any portion of any tax chargeable under this Ordinance, other than a top-up tax.(Amended 12 of 1999 s. 3; 21 of 2025 s. 28) 87A. (Repealed 76 of 1993 s. 9) 88. Exemption of charitable bodies (1) Notwithstanding anything to the contrary in this Ordinance contained there shall be exempt and there shall be deemed always to have been exempt from tax any charitable institution or trust of a public character: Provided that where a trade or business is carried on by any such institution or trust the profits derived from such trade or business shall be exempt and shall be deemed to have been exempt from tax only if such profits are applied solely for charitable purposes and are not expended substantially outside Hong Kong and either— (Amended 7 of 1986 s. 12) (a) the trade or business is exercised in the course of the actual carrying out of the expressed objects of such institution or trust; or (b) the work in connection with the trade or business is mainly carried on by persons for whose benefit such institution or trust is established. (Amended 21 of 2025 s. 29) (2) Subsection (1) does not apply to a top-up tax. (Added 21 of 2025 s. 29)(Added 3 of 1949 s. 18. Amended 30 of 1950 Schedule; 49 of 1956 s. 66; 26 of 1969 s. 40; 65 of 1970 s. 10) 88A. Advance rulings (1) The Commissioner may, on an application made by a person in accordance with Part 1 of Schedule 10, make a ruling on any of the matters specified in that Part in accordance with that Part.(2) Part 1 of Schedule 10 shall apply to and in connection with an application under subsection (1) and any ruling made by the Commissioner under that subsection.(3) The fees specified in Part 2 of Schedule 10 shall be payable in respect of any application under subsection (1).(4) If by reason of section 2 or 3 of Part 1 of Schedule 10, the Commissioner does not make a ruling under subsection (1), any fees paid under subsection (3) shall be refunded to the applicant.(5) The Commissioner may in exceptional circumstances at his discretion waive in whole or in part any fees payable by an applicant under subsection (3).(6) Any fees due and payable under subsection (3) shall be recoverable as a civil debt due to the Government.(7) The Secretary for Financial Services and the Treasury may by order amend Schedule 10. (Amended L.N. 106 of 2002)(8) No liability shall rest upon the Government, the Commissioner or any other public officer in respect of the bona fide exercise of any power or performance of any duty under and in accordance with Schedule 10.(9) In this section and in Schedule 10, applicant (申請人) means the person making an application under subsection (1).(Added 32 of 1998 s. 30. Amended E.R. 1 of 2012) 88B. Notice of no objection in respect of an application to deregister a company under section 750 of Companies Ordinance or limited partnership fund under section 68 of Limited Partnership Fund Ordinance* (Amended 14 of 2020 s. 111)(1) On a request made by a person who is entitled to apply for—(a) the deregistration of a company under section 750 of the Companies Ordinance (Cap. 622); or(b) the deregistration of a limited partnership fund under section 68 of the Limited Partnership Fund Ordinance (Cap. 637), (Amended E.R. 5 of 2020)the Commissioner may issue a written notice stating that the Commissioner has no objection to the deregistration. (Replaced 14 of 2020 s. 111)(2) The fee specified in Schedule 11 shall be payable in respect of a request under subsection (1).(3) The Secretary for Financial Services and the Treasury may by order amend Schedule 11. (Amended L.N. 106 of 2002)(Added 30 of 1999 s. 44) Editorial Note: * (Amended 28 of 2012 ss. 912 & 920) 89. Transitional provisions or other provisions having effect for purposes of amendments to this Ordinance (Amended 5 of 2024 s. 21)(1) (Repealed 12 of 2004 s. 20)(2) In relation to amendments made by the Inland Revenue (Amendment) (No. 2) Ordinance 1993 (52 of 1993)—(a) it is declared that the amendments shall be without prejudice to the provisions of Part 14. (Amended 4 of 2010 s. 17)(b) (Repealed 4 of 2010 s. 17)(3) The transitional provisions of Schedule 9 shall have effect in relation to recognized occupational retirement schemes approved under section 87A prior to the repeal of that section by the Inland Revenue (Amendment) (No. 5) Ordinance 1993 (76 of 1993). (Added 76 of 1993 s. 10)(4) The transitional provisions of Schedule 12 shall have effect in relation to a person liable to pay provisional salaries tax in respect of the year of assessment 2001/02. (Added 29 of 2001 s. 2)(5) Schedule 14 has effect in relation to a person liable to pay provisional salaries tax in respect of the year of assessment 2005/06. (Added 8 of 2005 s. 6)(6) Schedule 21 has effect in relation to the amendments made by the Inland Revenue (Amendment) Ordinance 2011 (4 of 2011). (Added 4 of 2011 s. 5)(7) Schedule 22 has effect in relation to a person liable to pay provisional salaries tax in respect of the year of assessment commencing on 1 April 2011. (Added 9 of 2011 s. 3)(8) Schedule 24 sets out transitional provisions that have effect for the purposes of the Inland Revenue (Amendment) (No. 3) Ordinance 2011 (21 of 2011). (Added 21 of 2011 s. 8)(9) Schedule 25 has effect in relation to the following persons—(a) a person liable to pay provisional salaries tax in respect of the year of assessment commencing on 1 April 2012 or the year of assessment commencing on 1 April 2013;(b) a person liable to pay provisional profits tax in respect of the year of assessment commencing on 1 April 2012 or the year of assessment commencing on 1 April 2013. (Added 21 of 2012 s. 5)(10) Schedule 27 has effect in relation to a person liable to pay provisional salaries tax in respect of the year of assessment commencing on 1 April 2013. (Added 5 of 2013 s. 3)(11) Schedule 29 sets out transitional provisions that have effect for the purposes of amendments to this Ordinance made by the Inland Revenue and Stamp Duty Legislation (Alternative Bond Schemes) (Amendment) Ordinance 2013 (10 of 2013). (Added 10 of 2013 s. 17)(12) Schedule 30 has effect in relation to the following persons—(a) a person liable to pay provisional salaries tax in respect of the year of assessment commencing on 1 April 2014 or the year of assessment commencing on 1 April 2015;(b) a person liable to pay provisional profits tax in respect of the year of assessment commencing on 1 April 2014 or the year of assessment commencing on 1 April 2015. (Added 3 of 2014 s. 8)(13) Schedule 31 has effect in relation to a person liable to pay provisional salaries tax in respect of the year of assessment commencing on 1 April 2014. (Added 10 of 2014 s. 3)(14) Schedule 33 has effect in relation to a person liable to pay provisional salaries tax in respect of the year of assessment commencing on 1 April 2015. (Added 10 of 2015 s. 3)(15) Schedule 35 sets out transitional provisions relating to appeals against decisions of the Board of Review made before the commencement date of the Inland Revenue (Amendment) (No. 3) Ordinance 2015 (17 of 2015). (Added 17 of 2015 s. 12)(16) Schedule 36 sets out transitional provisions that have effect for the purposes of amendments to this Ordinance made by the Inland Revenue (Amendment) (No. 2) Ordinance 2016 (12 of 2016). (Added 12 of 2016 s. 17)(17) Schedule 37 has effect in relation to a person liable to pay provisional salaries tax in respect of the year of assessment commencing on 1 April 2016. (Added 8 of 2016 s. 3)(18) Schedule 39 has effect in relation to a person liable to pay provisional salaries tax in respect of the year of assessment commencing on 1 April 2017. (Added 3 of 2017 s. 4)(19) Schedule 41 sets out transitional provisions that have effect for the purposes of amendments to this Ordinance made by the Inland Revenue (Amendment) (No. 3) Ordinance 2017 (9 of 2017). (Added 9 of 2017 s. 14)(20) Schedule 42 has effect in relation to a person liable to pay provisional profits tax in respect of the year of assessment commencing on 1 April 2018. (Added 13 of 2018 s. 8)(21) Schedule 44 sets out transitional provisions that have effect for the purposes of amendments to this Ordinance made by the Inland Revenue (Amendment) (No. 6) Ordinance 2018 (27 of 2018). (Added 27 of 2018 s. 34)(22) Schedule 46 has effect in relation to a person liable to pay provisional salaries tax in respect of the year of assessment commencing on 1 April 2019. (Added 31 of 2018 s. 13)(23) Schedule 47 sets out transitional provisions that have effect for the purposes of amendments to this Ordinance made by the Inland Revenue (Amendment) Ordinance 2019 (4 of 2019). (Added 4 of 2019 s. 12)(24) Schedule 48 sets out transitional provisions that have effect for the purposes of amendments to this Ordinance made by the Inland Revenue (Amendment) (No. 2) Ordinance 2019 (6 of 2019). (Added 6 of 2019 s. 12)(25) Schedule 50 sets out transitional provisions that have effect for the purposes of the amendments to this Ordinance made by the Inland Revenue (Amendment) (Profits Tax Concessions for Insurance-related Businesses) Ordinance 2020 (15 of 2020). (Added 15 of 2020 s. 15)(26) Schedule 51 sets out transitional provisions that have effect for the purposes of amendments to this Ordinance made by the Inland Revenue (Amendment) (Ship Leasing Tax Concessions) Ordinance 2020 (5 of 2020). (Added 5 of 2020 s. 15)(27) Schedule 52 has effect in relation to a person liable to pay provisional salaries tax in respect of the year of assessment commencing on 1 April 2022. (Added 7 of 2022 s. 6)(28) Schedule 53 sets out a transitional provision that has effect for the purposes of amendments to this Ordinance made by the Inland Revenue (Amendment) (Tax Concessions for Certain Shipping-related Activities) Ordinance 2022 (10 of 2022). (Added 10 of 2022 s. 8)(29) Schedule 55 sets out transitional provisions that have effect for the purposes of the amendments to this Ordinance made by the Inland Revenue (Amendment) (Taxation on Specified Foreign-sourced Income) Ordinance 2022 (17 of 2022). (Added 17 of 2022 s. 13)(30) Schedule 56 sets out transitional provisions that have effect for the purposes of the amendments to this Ordinance made by the Inland Revenue (Amendment) (Taxation on Foreign-sourced Disposal Gains) Ordinance 2023 (32 of 2023). (Added 32 of 2023 s. 10)(31) Schedule 58 sets out the provisions that have effect for the purposes of the amendments to this Ordinance made by the Inland Revenue (Amendment) (Aircraft Leasing Tax Concessions) Ordinance 2024 (5 of 2024). (Added 5 of 2024 s. 21)(32) Schedule 59 sets out the provisions that have effect for the purposes of the amendments to this Ordinance made by the Inland Revenue (Amendment) (Tax Concessions and Two-tiered Standard Rates) Ordinance 2024 (10 of 2024). (Added 10 of 2024 s. 14)(33) Schedule 60 has effect in relation to a person liable to pay provisional salaries tax in respect of the year of assessment commencing on 1 April 2024. (Added 2 of 2025 s. 8)(Amended E.R. 1 of 2012) 90. Reduction of taxes for year of assessment 2007/08 Schedule 18 contains provisions relating to the reduction of property tax, salaries tax, profits tax and tax under personal assessment for the year of assessment commencing on 1 April 2007.(Added 21 of 2008 s. 6) 91. Reduction of taxes for year of assessment 2008/09 Schedule 19 contains provisions relating to the reduction of salaries tax and tax under personal assessment for the year of assessment commencing on 1 April 2008.(Added 8 of 2009 s. 2) 92. Reduction of taxes for year of assessment 2009/10 Schedule 20 contains provisions relating to the reduction of salaries tax and tax under personal assessment for the year of assessment commencing on 1 April 2009.(Added 10 of 2010 s. 7) 93. Reduction of taxes for year of assessment 2010/11 Schedule 23 contains provisions relating to the reduction of salaries tax and tax under personal assessment for the year of assessment commencing on 1 April 2010.(Added 9 of 2011 s. 4) 94. Reduction of taxes for year of assessment 2011/12 Schedule 26 contains provisions relating to the reduction of salaries tax, profits tax and tax under personal assessment for the year of assessment commencing on 1 April 2011.(Added 21 of 2012 s. 6) 95. Reduction of taxes for year of assessment 2012/13 Schedule 28 contains provisions relating to the reduction of salaries tax, profits tax and tax under personal assessment for the year of assessment commencing on 1 April 2012. (Added 5 of 2013 s. 4) 96. Reduction of taxes for year of assessment 2013/14 Schedule 32 contains provisions relating to the reduction of salaries tax, profits tax and tax under personal assessment for the year of assessment commencing on 1 April 2013.(Added 10 of 2014 s. 4) 97. Reduction of taxes for year of assessment 2014/15 Schedule 34 contains provisions relating to the reduction of salaries tax, profits tax and tax under personal assessment for the year of assessment commencing on 1 April 2014.(Added 10 of 2015 s. 4) 98. Reduction of taxes for year of assessment 2015/16 Schedule 38 contains provisions relating to the reduction of salaries tax, profits tax and tax under personal assessment for the year of assessment commencing on 1 April 2015.(Added 8 of 2016 s. 4) 99. Reduction of taxes for year of assessment 2016/17 Schedule 40 contains provisions relating to the reduction of salaries tax, profits tax and tax under personal assessment for the year of assessment commencing on 1 April 2016. (Added 3 of 2017 s. 5) 100. Reduction of taxes (1) The amount of a person’s salaries tax charged under Part 3 for a specified year of assessment is reduced by an amount equal to the lesser of—(a) the prescribed percentage of the amount of the tax as computed under section 13(1) read together with section 13(2), as in force for the year of assessment;

and(b) the prescribed amount.(2) The amount of a person’s profits tax charged under Part 4 for a specified year of assessment is reduced by an amount equal to the lesser of—(a) the prescribed percentage of the amount of the tax as computed under section 14(2), (3), (4) and (5) read together with sections 14AAC, 14A, 14B, 14D, 14H, 14J, 14P, 14T, 14ZD, 14ZM and 14ZV and section 3 of Schedule 17FD, as in force for the year of assessment; and (Amended 9 of 2019 s. 4; 5 of 2020 s. 16; 10 of 2022 s. 9; 10 of 2025 s. 3)(b) the prescribed amount.(3) For a trade, profession or business carried on by a partnership, the reduction under subsection (2) applies to the tax chargeable on the whole of the net assessable profits of the trade, profession or business, whether or not any of the partners has elected to be assessed in accordance with Part 7 for the specified year of assessment.(4) The amount of tax charged under Part 7 for a specified year of assessment is reduced by an amount equal to the lesser of—(a) the prescribed percentage of the amount of the tax as computed under section 43(1) read together with section 43(1A), as in force for the year of assessment; and(b) the prescribed amount.(5) For the purposes of section 43(2B), in ascertaining the portion of tax to be charged on each spouse in a specified year of assessment, the amount of tax to be apportioned between the husband and wife is the amount as reduced under subsection (4) for the year of assessment.(6) In this section—prescribed amount (訂明款額) and prescribed percentage (訂明百分率), in relation to a specified year of assessment, mean the amount and percentage specified in column 2 of Schedule 43 opposite to, and for the purposes of, the provisions of this section specified in column 1 of that Schedule, for the specified year of assessment;specified year of assessment (指明課稅年度) means a year of assessment specified in Schedule 43. (Added 20 of 2018 s. 9) Schedule 1 [ss. 2(1), 14A(1) & 19CA](Amended 4 of 2011 s. 6; 13 of 2018 s. 9; 15 of 2020 s. 16)Standard Rate For the years of assessment 1947/48 to 1949/50 inclusive — 10%. (Amended 49 of 1956 s. 67) For the years of assessment 1950/51 to 1965/66 inclusive — 12 1/2%. (Amended 15 of 1966 s. 4) For the years of assessment 1966/67 to 1983/84 inclusive — 15%. (Added 15 of 1966 s. 4. Amended 36 of 1984 s. 7) For the years of assessment 1984/85 to 1986/87 inclusive — 17%. (Added 36 of 1984 s. 7. Amended 28 of 1987 s. 8) For the year of assessment 1987/88 — 16 1/2%. (Added 28 of 1987 s. 8. Amended 28 of 1988 s. 7) For the year of assessment 1988/89 — 15 1/2%. (Added 28 of 1988 s. 7. Amended 17 of 1989 s. 20) For the years of assessment 1989/90 to 2002/03 inclusive — 15%. (Added 17 of 1989 s. 20. Amended 24 of 2003 s. 9) For the year of assessment 2003/04 — 15 1/2%. (Added 24 of 2003 s. 9) For the years of assessment 2004/05 to 2007/08 inclusive — 16%. (Added 24 of 2003 s. 9. Amended 21 of 2008 s. 7) For the years of assessment 2008/09 to 2023/24 inclusive — 15%. (Added 21 of 2008 s. 7. Amended 10 of 2024 s. 19) For the year of assessment 2024/25 and for each year after that year— (a) for salaries tax, provisional salaries tax and tax under personal assessment— (i) on the first $5,000,000 — 15%; (ii) on the remainder — 16%; (b) for other taxes — 15%. (Added 10 of 2024 s. 19) Schedule 2 [ss. 13 & 43(1)](Format changes——E.R. 3 of 2017)Rates For the years of assessment 1947/48 to 1949/50 inclusive(Amended 49 of 1956 s. 68) Second Column Third Column (a) Upon the first $5,000 1/4 standard rate (b) Upon the next $5,000 1/4 ” ” (c) — do — 3/4 ” ” (d) — do — The full standard rate (e) — do — 1 1/4 standard rate (f) — do — 1 1/2 ” ” (g) — do — 1 3/4 ” ” (h) Upon the remainder Twice the standard rate Note:— Where a person is liable to the appropriate tax for a part only of any year of assessment the amounts in the Second Column against items (a) to (g) will be reduced in the proportion which the number of days he is so liable bears to the number of days in that year of assessment. For the years of assessment 1950/51 to 1965/66 inclusive Second Column Third Column (a) Upon the first $5,000 1/5 standard rate (b) Upon the next $5,000 2/5 ” ” (c) — do — 3/5 ” ” (d) — do — 4/5 ” ” (e) — do — The full standard rate (f) — do — 1 1/5 standard rate (g) — do — 1 2/5 ” ” (h) — do — 1 3/5 ” ” (i) — do — 1 4/5 ” ” (j) Upon the remainder Twice the standard rate (Added 30 of 1950 Schedule. Amended 37 of 1950 Schedule; 15 of 1966 s. 5) For the years of assessment 1966/67 to 1971/72 inclusive Second Column Third Column (a) Upon the first $5,000 2 3/4% (b) Upon the next $5,000 5 1/2% (c) — do — 8 1/4% (d) — do — 11% (e) — do — 14% (f) — do — 17% (g) — do — 20% (h) — do — 23% (i) — do — 26% (j) Upon the remainder 30% (Added 15 of 1966 s. 5. Amended 40 of 1972 s. 2) For the years of assessment 1972/73 Second Column Third Column (a) Upon the first $5,000 2 1/2% (b) Upon the next $5,000 5% (c) — do — 7 1/2% (d) — do — 10% (e) — do — 12 1/2% (f) — do — 15% (g) — do — 17 1/2% (h) — do — 20% (i) — do — 22 1/2% (j) — do — 25% (k) — do — 27 1/2% (l) Upon the remainder 30% (Added 26 of 1972 s. 2. Amended 33 of 1973 s. 5) For the years of assessment 1973/74 to 1977/78 inclusive Second Column Third Column (a) Upon the first $10,000 5% (b) Upon the next $10,000 10% (c) — do — 15% (d) — do — 20% (e) — do — 25% (f) Upon the remainder 30% (Added 33 of 1973 s. 5. Amended 29 of 1979 s. 3; L.N. 137 of 1981) For the years of assessment 1978/79 to 1984/85 inclusive Second Column Third Column (a) Upon the first $10,000 5% (b) Upon the next $10,000 10% (c) — do — 15% (d) — do — 20% (e) Upon the remainder 25% (Added 29 of 1979 s. 3. Amended 21 of 1985 s. 3) For the years of assessment 1985/86 to 1986/87 inclusive Second Column Third Column (a) Upon the first $10,000 5% (b) Upon the next $10,000 10% (c) — do — 15% (d) Upon the next $20,000 20% (e) Upon the remainder 25% (Added 21 of 1985 s. 3. Amended 28 of 1987 s. 9) For the year of assessment 1987/88 Second Column Third Column (a) Upon the first $10,000 5% (b) Upon the next $10,000 10% (c) Upon the next $20,000 15% (d) Upon the next $20,000 20% (e) Upon the remainder 25% (Added 28 of 1987 s. 9. Amended 28 of 1988 s. 8) For the years of assessment 1988/89 and 1989/90 Second Column Third Column (a) Upon the first $10,000 3% (b) Upon the next $10,000 6% (c) — do — 9% (d) — do — 12% (e) — do — 15% (f) — do — 18% (g) — do — 21% (h) Upon the remainder 25% (Added 28 of 1988 s. 8. Amended 30 of 1990 s. 5) For the year of assessment 1990/91 Second Column Third Column (a) Upon the first $10,000 2% (b) Upon the next $10,000 4% (c) — do — 9% (d) — do — 12% (e) — do — 15% (f) — do — 18% (g) — do — 21% (h) Upon the remainder 25% (Added 30 of 1990 s. 5. Amended 42 of 1991 s. 2; E.R. 3 of 2017) For the years of assessment 1991/92 and 1992/93 Second Column Third Column (a) Upon the first $20,000 2% (b) Upon the next $20,000 9% (c) Upon the next $20,000 17% (d) Upon the remainder 25% (Added 42 of 1991 s. 2. Amended 28 of 1993 s. 2) For the year of assessment 1993/94 Second Column Third Column (a) Upon the first $20,000 2% (b) Upon the next $30,000 9% (c) Upon the next $30,000 17% (d) Upon the remainder 25% (Added 28 of 1993 s. 2. Amended 37 of 1994 s. 6) For the years of assessment 1994/95 to 1996/97 inclusive Second Column Third Column (a) Upon the first $20,000 2% (b) Upon the next $30,000 9% (c) Upon the next $30,000 17% (d) Upon the remainder 20% (Added 37 of 1994 s. 6. Amended 42 of 1997 s. 4) For the year of assessment 1997/98 Second Column Third Column (a) Upon the first $30,000 2% (b) Upon the next $30,000 8% (c) Upon the next $30,000 14% (d) Upon the remainder 20% (Added 42 of 1997 s. 4. Amended 31 of 1998 s. 20) For the years of assessment 1998/99 to 2002/03 inclusive Second Column Third Column (a) Upon the first $35,000 2% (b) Upon the next $35,000 7% (c) Upon the next $35,000 12% (d) Upon the remainder 17% (Added 31 of 1998 s. 20. Amended 24 of 2003 s. 10) For the year of assessment 2003/04 Second Column Third Column (a) Upon the first $32,500 2% (b) Upon the next $32,500 7 1/2% (c) Upon the next $32,500 13% (d) Upon the remainder 18 1/2% (Added 24 of 2003 s. 10) For the years of assessment of 2004/05 and 2005/06 Second Column Third Column (a) Upon the first $30,000 2% (b) Upon the next $30,000 8% (c) Upon the next $30,000 14% (d) Upon the remainder 20% (Added 24 of 2003 s. 10. Amended 13 of 2006 s. 3) For the year of assessment 2006/07 Second Column Third Column (a) Upon the first $30,000 2% (b) Upon the next $30,000 7% (c) Upon the next $30,000 13% (d) Upon the remainder 19% (Added 13 of 2006 s. 3. Amended 10 of 2007 s. 6) For the year of assessment 2007/08 Second Column Third Column (a) Upon the first $35,000 2% (b) Upon the next $35,000 7% (c) Upon the next $35,000 12% (d) Upon the remainder 17% (Added 10 of 2007 s. 6. Amended 21 of 2008 s. 8) For the years of assessment 2008/09 to 2016/17 inclusive Second Column Third Column (a) Upon the first $40,000 2% (b) Upon the next $40,000 7% (c) Upon the next $40,000 12% (d) Upon the remainder 17% (Added 21 of 2008 s. 8. Amended 3 of 2017 s. 6) For the year of assessment 2017/18 Second Column Third Column (a) On the first $45,000 2% (b) On the next $45,000 7% (c) On the next $45,000 12% (d) On the remainder 17% (Added 3 of 2017 s. 6. Amended 20 of 2018 s. 10) For the year of assessment 2018/19 andfor each year after that year Second Column Third Column (a) On the first $50,000 2% (b) On the next $50,000 6% (c) On the next $50,000 10% (d) On the next $50,000 14% (e) On the remainder 17% (Added 20 of 2018 s. 10) Schedule 3 [s. 16(2)(b) & (6)]Public Utility Companies The Hong Kong Electric Company, Limited. China Light and Power Company, Limited. The Hong Kong and China Gas Company, Limited.(Added 2 of 1971 s. 48. Amended 17 of 1989 s. 21) Schedule 3A [ss. 12(6)(a), 63CA & 63E](Replaced 20 of 2018 s. 11)Deduction for Expenses of Self-Education Item Year of assessment Amount 1. For the year of assessment 1996/97 $12,000 2. For the year of assessment 1997/98 (Amended 31 of 1998 s. 21) $20,000 3. For the years of assessment 1998/99 to 2000/01 inclusive (Replaced 15 of 2001 s. 2) $30,000 4. For the years of assessment 2001/02 to 2006/07 inclusive (Replaced 10 of 2007 s. 7) $40,000 5. For the years of assessment 2007/08 to 2012/13 inclusive (Replaced 5 of 2013 s. 5) $60,000 6. For the years of assessment 2013/14 to 2016/17 inclusive (Replaced 3 of 2017 s. 7) $80,000 7. For the year of assessment 2017/18 and for each year after that year (Added 3 of 2017 s. 7) $100,000 (Added 42 of 1997 s. 5) Schedule 3B [ss. 16AA, 26G, 63CA, 63E & 63J](Replaced 20 of 2018 s. 12)Deduction for the Purposes of Section 16AA or 26G 1. For the years of assessment 2000/01 to 2011/12 inclusive (Replaced 21 of 2012 s. 7) $12,000 2. For the year of assessment 2012/13 (Added 21 of 2012 s. 7) $14,500 3. For the year of assessment 2013/14 (Added 21 of 2012 s. 7. Amended 3 of 2014 s. 7) $15,000 4. For the year of assessment 2014/15 (Added 3 of 2014 s. 7) $17,500 5. For the year of assessment 2015/16 and for each year after that year (Added 3 of 2014 s. 7) $18,000 (Added 31 of 1998 s. 22) Schedule 3C [ss. 26D, 63CA & 63E](Replaced 20 of 2018 s. 13)Elderly Residential Care Expenses Deduction 1. For the years of assessment 1998/99 to 2010/11 inclusive (Replaced 9 of 2011 s. 5) $ 60,000 2. For the year of assessment 2011/12 (Replaced 21 of 2012 s. 8) $ 72,000 3. For the years of assessment 2012/13 and 2013/14 (Replaced 10 of 2014 s. 5) $ 76,000 4. For the years of assessment 2014/15 and 2015/16 (Replaced 8 of 2016 s. 5) $ 80,000 5. For the years of assessment 2016/17 and 2017/18 (Replaced 20 of 2018 s. 13) $ 92,000 6. For the years of assessment 2018/19 to 2025/26 inclusive (Replaced 2 of 2026 s. 4) $100,000 7. For the year of assessment 2026/27 and for each year after that year (Added 2 of 2026 s. 4) $110,000 (Added 31 of 1998 s. 22) Schedule 3D [ss. 26E, 63CA & 63E & Sch. 59] (Replaced 20 of 2018 s. 14. Amended 10 of 2024 s. 15)Home Loan Interest Deduction Part 1 HLI Basic Deduction Ceiling Amount (Added 10 of 2024 s. 15) 1. For the years of assessment 1998/99 to 2000/01 inclusive (Replaced 29 of 2001 s. 3) $100,000 2. For the years of assessment 2001/02 and 2002/03 (Added 29 of 2001 s. 3) $150,000 3. For the year of assessment 2003/04 and for each year after that year (Added 29 of 2001 s. 3) $100,000 (Added 31 of 1998 s. 22) Part 2 HLI Additional Deduction Ceiling Amount Column 1 Column 2 Column 3 Item Year of assessment Amount 1. For the year of assessment 2024/25 and for each year after that year $20,000 (Part 2 added 10 of 2024 s. 15) Schedule 3E [ss. 26K, 26L, 63CA & 63E]Maximum Deduction for Qualifying Premiums Paid for Each Insured Person (Schedule 3E added 31 of 2018 s. 14) Column 1 Column 2 Column 3 Item Year of assessment Amount 1. For the year of assessment 2019/20 and for each year after that year $8,000 Schedule 3F [ss. 26P, 26U, 63CA & 63E]Maximum Total Deductions for Qualifying Annuity Premiums and Tax Deductible MPF Voluntary Contributions (Schedule 3F added 7 of 2019 s. 8) Column 1 Column 2 Column 3 Item Year of assessment Amount 1. For the year of assessment 2019/20 and for each year after that year $60,000 Schedule 3G [ss. 26Y, 63CA & 63E & Sch. 59](Amended 10 of 2024 s. 16)Amount Specified for Deductions for Domestic Rents (Schedule 3G added 7 of 2022 s. 7) Part 1 Calculating DR Basic Deduction Ceiling Amount (Added 10 of 2024 s. 16) Column 1 Column 2 Column 3 Item Year of assessment Amount 1. For the year of assessment 2022/23 and for each year after that year $100,000 Part 2 Calculating DR Additional Deduction Ceiling Amount Column 1 Column 2 Column 3 Item Year of assessment Amount 1. For the year of assessment 2024/25 and for each year after that year $20,000 (Part 2 added 10 of 2024 s. 16) Schedule 3H [ss. 26ZG, 26ZH, 63CA & 63E]Maximum Deduction for Qualifying AR Service Expenses (Schedule 3H added 2 of 2025 s. 9) Column 1 Column 2 Column 3 Item Year of assessment Amount 1. For the year of assessment 2024/25 and for each year after that year $100,000 Schedule 4 [ss. 27 & 59]*(Replaced 32 of 2018 s. 13)Allowances (Format changes—E.R. 4 of 2017)For the year of assessment 1989/90 First Column(section) Second Column(the prescribed amount or percentage) 1. Section 28 (basic allowance)— (a) subsection (1)(a) $ 32,000 (b) subsection (1)(b), being the first reference to the prescribed amount $ 7,000 (c) subsection (1)(b), being the references to the prescribed amount in subparagraphs (i) and (ii) $ 39,000 (d) subsection (1)(b), being the prescribed percentage 10% 2. Section 29 (married person’s allowance)— (a) subsection (3)(a) $ 66,000 (b) subsection (3)(b), being the first reference to the prescribed amount $ 14,000 (c) subsection (3)(b), being the references to the prescribed amount in subparagraphs (i), (ii) and (iii) $ 80,000 (d) subsection (3)(b), being the prescribed percentage 10% 3. Section 30 (dependent parent allowance)— (a) subsection (3)(a) $ 11,000 (b) subsection (3)(b) $ 3,000 (c) subsection (4)(a) $ 1,200 4. Section 31 (child allowance)— (a) subsection (1) (i) $13,000 for the first child (ii) $9,000 for the second child (iii) $3,000 for the third child (iv) $2,000 each for the fourth, fifth and sixth child (v) $1,000 for each subsequent child (b) subsection (5) $ 34,000 5. Section 32(1) (single parent allowance) $ 20,000 (Replaced 43 of 1989 s. 30. Amended 30 of 1990 s. 6) For the year of assessment 1990/91 First Column(section) Second Column (the prescribed amount or percentage) 1. Section 28 (basic allowance)— (a) subsection (1)(a) $ 32,000 (b) subsection (1)(b), being the first reference to the prescribed amount $ 7,000 (c) subsection (1)(b), being the references to the prescribed amount in subparagraphs (i) and (ii) $ 39,000 (d) subsection (1)(b), being the prescribed percentage 0% 2. Section 29 (married person’s allowance)— (a) subsection (3)(a) $ 66,000 (b) subsection (3)(b), being the first reference to the prescribed amount $ 14,000 (c) subsection (3)(b), being the references to the prescribed amount in subparagraphs (i), (ii) and (iii) $ 80,000 (d) subsection (3)(b), being the prescribed percentage 0% 3. Section 30 (dependent parent allowance)— (a) subsection (3)(a) $ 12,000 (b) subsection (3)(b) $ 3,000 (c) subsection (4)(a) $ 1,200 4. Section 31 (child allowance)— (a) subsection (1) (i) $14,000 for the first child (ii) $10,000 for the second child (iii) $3,000 for the third child (iv) $2,000 each for the fourth, fifth and sixth child (v) $1,000 for each subsequent child (b) subsection (5) $ 36,000 5. Section 32(1) (single parent allowance) $ 20,000 (Added 30 of 1990 s. 6. Amended 42 of 1991 s. 3) For the year of assessment 1991/92 First Column(section) Second Column(the prescribed amount or percentage) 1. Section 28 (basic allowance)— (a) subsection (1)(a) $ 34,000 (b) subsection (1)(b), being the first reference to the prescribed amount $ 7,000 (c) subsection (1)(b), being the references to the prescribed amount in subparagraphs (i) and (ii) $ 41,000 (d) subsection (1)(b), being the prescribed percentage 0% 2. Section 29 (married person’s allowance)— (a) subsection (3)(a) $ 68,000 (b) subsection(3)(b), being the first reference to the prescribed amount $ 14,000 (c) subsection (3)(b), being the references to the prescribed amount in subparagraphs (i), (ii) and (iii) $ 82,000 (d) subsection (3)(b), being the prescribed percentage 0% 3. Section 30 (dependant parent allowance)— (a) subsection (3)(a) $ 12,000 (b) subsection (3)(b) $ 3,000 (c) subsection (4)(a) $ 1,200 4. Section 31 (child allowance)— (a) subsection (1) (i) $14,000 for the first child (ii) $10,000 for the second child (iii) $3,000 for the third child (iv) $2,000 for the fourth, fifth and sixth child (v) $1,000 for each subsequent child (b) subsection (5) $ 36,000 5. Section 32(1) (single parent allowance) $ 20,000 (Added 42 of 1991 s. 3. Amended 34 of 1992 s. 4) For the year of assessment 1992/93 First Column(section) Second Column(the prescribed amount or percentage) 1. Section 28 (basic allowance)— (a) subsection (1)(a) $ 39,000 (b) subsection (1)(b), being the first reference to the prescribed amount $ 7,000 (c) subsection (1)(b), being the references to the prescribed amount in subparagraphs (i) and (ii) $ 46,000 (d) subsection (1)(b), being the prescribed percentage 0% 2. Section 29 (married person’s allowance)— (a) subsection (3)(a) $ 78,000 (b) subsection (3)(b), being the first reference to the prescribed amount $ 14,000 (c) subsection (3)(b), being the references to the prescribed amount in subparagraphs (i), (ii) and (iii) $ 92,000 (d) subsection (3)(b), being the prescribed percentage 0% 3. Section 30 (dependent parent allowance)— (a) subsection (3)(a) $ 13,500 (b) subsection (3)(b) $ 3,000 (c) subsection (4)(a) $ 1,200 4. Section 31 (child allowance)— (a) subsection (1) (i) $15,500 for the first child (ii) $11,500 for the second child (iii) $3,000 for the third child (iv) $2,000 each for the fourth, fifth and sixth child (v) $1,000 for each subsequent child (b) subsection (5) $ 39,000 5. Section 32(1) (single parent allowance) $ 23,000 (Added 34 of 1992 s. 4. Amended 28 of 1993 s. 3) For the year of assessment 1993/94 First Column(section) Second Column(the prescribed amount or percentage) 1. Section 28 (basic allowance)— (a) subsection (1)(a) $ 49,000 (b) subsection (1)(b), being the first reference to the prescribed amount $ 7,000 (c) subsection (1)(b), being the references to the prescribed amount in subparagraphs (i) and (ii) $ 56,000 (d) subsection (1)(b), being the prescribed percentage 0% 2. Section 29 (married person’s allowance)— (a) subsection (3)(a) $ 98,000 (b) subsection (3)(b), being the first reference to the prescribed amount $ 14,000 (c) subsection (3)(b), being the references to the prescribed amount in subparagraphs (i), (ii) and (iii) $112,000 (d) subsection (3)(b), being the prescribed percentage 0% 3. Section 30 (dependent parent allowance)— (a) subsection (3)(a) $ 17,000 (b) subsection (3)(b) $ 3,000 (c) subsection (4)(a) $ 1,200 4. Section 31 (child allowance)— (a) subsection (1) (i) $17,000 for the first child (ii) $17,000 for the second child (iii) $3,000 for the third child (iv) $2,000 each for the fourth, fifth and sixth child (v) $1,000 for each subsequent child (b) subsection (5) $ 46,000 5. Section 32(1) (single parent allowance) $ 27,000 (Added 28 of 1993 s. 3. Amended 37 of 1994 s. 7) For the year of assessment 1994/95 First Column(section) Second Column(the prescribed amount or percentage) 1. Section 28 (basic allowance)— (a) subsection (1)(a) $ 65,000 (b) subsection (1)(b), being the first reference to the prescribed amount $ 7,000 (c) subsection (1)(b), being the references to the prescribed amount in subparagraphs (i) and (ii) $ 72,000 (d) subsection (1)(b), being the prescribed percentage 0% 2. Section 29 (married person’s allowance)— (a) subsection (3)(a) $130,000 (b) subsection (3)(b), being the first reference to the prescribed amount $ 14,000 (c) subsection (3)(b), being the references to the prescribed amount in subparagraphs (i), (ii) and (iii) $144,000 (d) subsection (3)(b), being the prescribed percentage 0% 3. Section 30 (dependent parent allowance)— (a) subsection (3)(a) $ 20,000 (b) subsection (3)(b) $ 3,000 (c) subsection (4)(a) $ 1,200 4. Section 30A (dependent grandparent allowance)— (a) subsection (3)(a) $ 20,000 (b) subsection (3)(b) $ 3,000 (c) subsection (4)(a) $ 1,200 5. Section 31 (child allowance)— (a) subsection (1) (i) $20,000 for the first child (ii) $20,000 for the second child (iii) $3,000 for the third child (iv) $2,000 each for the fourth, fifth and sixth child (v) $1,000 for each subsequent child (b) subsection (5) $ 52,000 6. Section 32(1) (single parent allowance) $ 32,000 (Added 37 of 1994 s. 7. Amended 48 of 1995 s. 13) For the year of assessment 1995/96 First Column(section) Second Column(the prescribed amount or percentage) 1. Section 28 (basic allowance)— (a) subsection (1)(a) $ 72,000 (b) subsection (1)(b), being the first reference to the prescribed amount $ 7,000 (c) subsection (1)(b), being the references to the prescribed amount in subparagraphs (i) and (ii) $ 79,000 (d) subsection (1)(b), being the prescribed percentage 0% 2. Section 29 (married person’s allowance)— (a) subsection (3)(a) $144,000 (b) subsection (3)(b), being the first reference to the prescribed amount $ 14,000 (c) subsection (3)(b), being the references to the prescribed amount in subparagraphs (i), (ii) and (iii) $158,000 (d) subsection (3)(b), being the prescribed percentage 0% 3. Section 30 (dependent parent allowance)— (a) subsection (3)(a) $ 22,000 (b) subsection (3)(b) $ 6,000 (c) subsection (4)(a) $ 1,200 4. Section 30A (dependent grandparent allowance)— (a) subsection (3)(a) $ 22,000 (b) subsection (3)(b) $ 6,000 (c) subsection (4)(a) $ 1,200 5. Section 31 (child allowance)— (a) subsection (1) (i) $22,000 for each of the first and the second child (ii) $11,000 for each subsequent child (b) subsection (5) $121,000 6. Section 31A(1) (disabled dependent allowance) $ 11,000 7. Section 32(1) (single parent allowance) $ 40,000 (Added 48 of 1995 s. 13; Amended 24 of 1996 s. 11) For the year of assessment 1996/97 First Column(section) Second Column(the prescribed amount or percentage) 1. Section 28 (basic allowance)— (a) subsection (1)(a) $ 83,000 (b) subsection (1)(b), being the first reference to the prescribed amount $ 7,000 (c) subsection (1)(b), being the references to the prescribed amount in subparagraphs (i) and (ii) $ 90,000 (d) subsection (1)(b), being the prescribed percentage 0% 2. Section 29 (married person’s allowance)— (a) subsection (3)(a) $166,000 (b) subsection (3)(b), being the first reference to the prescribed amount $ 14,000 (c) subsection (3)(b), being the references to the prescribed amount in subparagraphs (i), (ii) and (iii) $180,000 (d) subsection (3)(b), being the prescribed percentage 0% 3. Section 30 (dependent parent allowance)— (a) subsection (3)(a) $ 24,500 (b) subsection (3)(b) $ 7,000 (c) subsection (4)(a) $ 1,200 4. Section 30A (dependent grandparent allowance)— (a) subsection (3)(a) $ 24,500 (b) subsection (3)(b) $ 7,000 (c) subsection (4)(a) $ 1,200 5. Section 30B(1) (dependent brother or dependent sister allowance) $ 24,500 6. Section 31 (child allowance)— (a) subsection (1) (i) $24,500 for the first and second child (ii) $12,500 for each subsequent child (b) subsection (5) $136,500 7. Section 31A(1) (disabled dependent allowance) $ 15,000 8. Section 32(1) (single parent allowance) $ 45,000 (Added 24 of 1996 s. 11. Amended 42 of 1997 s. 6) For the year of assessment 1997/98 First Column(section) Second Column(the prescribed amount or percentage) 1. Section 28 (basic allowance)— (a) subsection (1)(a) $100,000 (b) subsection (1)(b), being the first reference to the prescribed amount $ 0 (c) subsection (1)(b), being the references to the prescribed amount in subparagraphs (i) and (ii) $100,000 (d) subsection (1)(b), being the prescribed percentage 0% 2. Section 29 (married person’s allowance)— (a) subsection (3)(a) $200,000 (b) subsection (3)(b), being the first reference to the prescribed amount $ 0 (c) subsection (3)(b), being the references to the prescribed amount in subparagraphs (i), (ii) and (iii) $200,000 (d) subsection (3)(b), being the prescribed percentage 0% 3. Section 30 (dependent parent allowance)— (a) subsection (3)(a) $ 27,000 (b) subsection (3)(b) $ 8,000 (c) subsection (4)(a) $ 1,200 4. Section 30A (dependent grandparent allowance)— (a) subsection (3)(a) $ 27,000 (b) subsection (3)(b) $ 8,000 (c) subsection (4)(a) $ 1,200 5. Section 30B(1) (dependent brother or dependent sister allowance) $ 27,000 6. Section 31 (child allowance)— (a) subsection (1) (i) $27,000 for the first and second child (ii) $14,000 for each subsequent child (b) subsection (5) $152,000 7. Section 31A(1) (disabled dependant allowance) $ 25,000 8. Section 32(1) (single parent allowance) $ 75,000 (Added 42 of 1997 s. 6. Amended 31 of 1998 s. 23) For the years of assessment 1998/99 to 2002/03 inclusive First Column(section) Second Column(the prescribed amount) 1. Section 28 (basic allowance) $108,000 2. Section 29 (married person’s allowance) $216,000 3. Section 30 (dependent parent allowance)— (a) subsection (3)(a) $ 30,000 (b) subsection (3)(b) $ 30,000 (c) subsection (4)(a) $ 12,000 4. Section 30A (dependent grandparent allowance)— (a) subsection (3)(a) $ 30,000 (b) subsection (3)(b) $ 30,000 (c) subsection (4)(a) $ 12,000 5. Section 30B(1) (dependent brother or dependent sister allowance) $ 30,000 6. Section 31 (child allowance)— (a) subsection (1) (i) $30,000 for each of the first and second children (ii) $15,000 for each subsequent child (b) subsection (5) $165,000 7. Section 31A(1) (disabled dependant allowance) $ 60,000 8. Section 32(1) (single parent allowance) $108,000 (Added 31 of 1998 s. 23. Amended 24 of 2003 s. 11; 4 of 2010 s. 18) For the year of assessment 2003/04 First Column(section) Second Column(the prescribed amount) 1. Section 28 (basic allowance) $104,000 2. Section 29 (married person’s allowance) $208,000 3. Section 30 (dependent parent allowance)— (a) subsection (3)(a) $ 30,000 (b) subsection (3)(b) $ 30,000 (c) subsection (4)(a) $ 12,000 4. Section 30A (dependent grandparent allowance)— (a) subsection (3)(a) $ 30,000 (b) subsection (3)(b) $ 30,000 (c) subsection (4)(a) $ 12,000 5. Section 30B(1) (dependent brother or dependent sister allowance) $ 30,000 6. Section 31 (child allowance)— (a) subsection (1) $30,000 each for the first to the ninth child (b) subsection (5) $270,000 7. Section 31A(1) (disabled dependant allowance) $ 60,000 8. Section 32(1) (single parent allowance) $104,000 (Added 24 of 2003 s. 11) For the year of assessment 2004/05 First Column(section) Second Column(the prescribed amount) 1. Section 28 (basic allowance) $100,000 2. Section 29 (married person’s allowance) $200,000 3. Section 30 (dependent parent allowance)— (a) subsection (3)(a) $ 30,000 (b) subsection (3)(b) $ 30,000 (c) subsection (4)(a) $ 12,000 4. Section 30A (dependent grandparent allowance)— (a) subsection (3)(a) $ 30,000 (b) subsection (3)(b) $ 30,000 (c) subsection (4)(a) $ 12,000 5. Section 30B(1) (dependent brother or dependent sister allowance) $ 30,000 6. Section 31 (child allowance)— (a) subsection (1) $30,000 each for the first to the ninth child (b) subsection (5) $270,000 7. Section 31A(1) (disabled dependant allowance) $ 60,000 8. Section 32(1) (single parent allowance) $100,000 (Added 24 of 2003 s. 11. Amended 8 of 2005 s. 5) For the years of assessment 2005/06 and 2006/07 First Column(section) Second Column(the prescribed amount) 1. Section 28 (basic allowance) $100,000 2. Section 29 (married person’s allowance) $200,000 3. Section 30 (dependent parent allowance)— (a) subsection (3)(a) $ 30,000 (b) subsection (3)(b) $ 30,000 (c) subsection (3A)(a) $ 15,000 (d) subsection (3A)(b) $ 15,000 (e) subsection (4)(a) $ 12,000 4. Section 30A (dependent grandparent allowance)— (a) subsection (3)(a) $ 30,000 (b) subsection (3)(b) $ 30,000 (c) subsection (3A)(a) $ 15,000 (d) subsection (3A)(b) $ 15,000 (e) subsection (4)(a) $ 12,000 5. Section 30B(1) (dependent brother or dependent sister allowance) $ 30,000 6. Section 31 (child allowance)— (a) subsection (1) $40,000 each for the first to the ninth child (b) subsection (5) $360,000 7. Section 31A(1) (disabled dependant allowance) $ 60,000 8. Section 32(1) (single parent allowance) $100,000 (Added 8 of 2005 s. 5. Amended 10 of 2007 s. 8) For the year of assessment 2007/08 First Column(section) Second Column(the prescribed amount) 1. Section 28 (basic allowance) $100,000 2. Section 29 (married person’s allowance) $200,000 3. Section 30 (dependent parent allowance)— (a) subsection (3)(a) $ 30,000 (b) subsection (3)(b) $ 30,000 (c) subsection (3A)(a) $ 15,000 (d) subsection (3A)(b) $ 15,000 (e) subsection (4)(a) $ 12,000 4. Section 30A (dependent grandparent allowance)— (a) subsection (3)(a) $ 30,000 (b) subsection (3)(b) $ 30,000 (c) subsection (3A)(a) $ 15,000 (d) subsection (3A)(b) $ 15,000 (e) subsection (4)(a) $ 12,000 5. Section 30B(1) (dependent brother or dependent sister allowance) $ 30,000 6. Section 31 (child allowance)— (a) subsection (1) $50,000 for each child (b) subsection (1A) $50,000 for each child (c) subsection (5) (in relation to subsection (1)) $450,000 (d) subsection (5) (in relation to subsection (1A)) $450,000 7. Section 31A(1) (disabled dependant allowance) $ 60,000 8. Section 32(1) (single parent allowance) $100,000 (Added 10 of 2007 s. 8. Amended 21 of 2008 s. 9) For the years of assessment 2008/09 to 2010/11 inclusive First Column(section) Second Column(the prescribed amount) 1. Section 28 (basic allowance) $108,000 2. Section 29 (married person’s allowance) $216,000 3. Section 30 (dependent parent allowance)— (a) subsection (3)(a) $ 30,000 (b) subsection (3)(b) $ 30,000 (c) subsection (3A)(a) $ 15,000 (d) subsection (3A)(b) $ 15,000 (e) subsection (4)(a) $ 12,000 4. Section 30A (dependent grandparent allowance)— (a) subsection (3)(a) $ 30,000 (b) subsection (3)(b) $ 30,000 (c) subsection (3A)(a) $ 15,000 (d) subsection (3A)(b) $ 15,000 (e) subsection (4)(a) $ 12,000 5. Section 30B(1) (dependent brother or dependent sister allowance) $ 30,000 6. Section 31 (child allowance)— (a) subsection (1) $50,000 for each child (b) subsection (1A) $50,000 for each child (c) subsection (5) (in relation to subsection (1)) $450,000 (d) subsection (5) (in relation to subsection (1A)) $450,000 7. Section 31A(1) (disabled dependant allowance) $ 60,000 8. Section 32(1) (single parent allowance) $108,000 (Added 21 of 2008 s. 9. Amended 9 of 2011 s. 6) For the year of assessment 2011/12 First Column(section) Second Column(the prescribed amount) 1. Section 28 (basic allowance) $108,000 2. Section 29 (married person’s allowance) $216,000 3. Section 30 (dependent parent allowance)— (a) subsection (3)(a) $ 36,000 (b) subsection (3)(b) $ 36,000 (c) subsection (3A)(a) $ 18,000 (d) subsection (3A)(b) $ 18,000 (e) subsection (4)(a) $ 12,000 4. Section 30A (dependent grandparent allowance)— (a) subsection (3)(a) $ 36,000 (b) subsection (3)(b) $ 36,000 (c) subsection (3A)(a) $ 18,000 (d) subsection (3A)(b) $ 18,000 (e) subsection (4)(a) $ 12,000 5. Section 30B(1) (dependent brother or dependent sister allowance) $ 30,000 6. Section 31 (child allowance)— (a) subsection (1) $60,000 for each child (b) subsection (1A) $60,000 for each child (c) subsection (5) (in relation to subsection (1)) $540,000 (d) subsection (5) (in relation to subsection (1A)) $540,000 7. Section 31A(1) (disabled dependant allowance) $ 60,000 8. Section 32(1) (single parent allowance) $108,000 (Added 9 of 2011 s. 6. Amended 21 of 2012 s. 9) For the year of assessment 2012/13 First Column(section) Second Column(the prescribed amount) 1. Section 28 (basic allowance) $120,000 2. Section 29 (married person’s allowance) $240,000 3. Section 30 (dependent parent allowance)— (a) subsection (3)(a) $ 38,000 (b) subsection (3)(b) $ 38,000 (c) subsection (3A)(a) $ 19,000 (d) subsection (3A)(b) $ 19,000 (e) subsection (4)(a) $ 12,000 4. Section 30A (dependent grandparent allowance)— (a) subsection (3)(a) $ 38,000 (b) subsection (3)(b) $ 38,000 (c) subsection (3A)(a) $ 19,000 (d) subsection (3A)(b) $ 19,000 (e) subsection (4)(a) $ 12,000 5. Section 30B(1) (dependent brother or dependent sister allowance) $ 33,000 6. Section 31 (child allowance)— (a) subsection (1) $63,000 for each child (b) subsection (1A) $63,000 for each child (c) subsection (5) (in relation to subsection (1)) $567,000 (d) subsection (5) (in relation to subsection (1A)) $567,000 7. Section 31A(1) (disabled dependant allowance) $ 66,000 8. Section 32(1) (single parent allowance) $120,000 (Added 21 of 2012 s. 9. Amended 5 of 2013 s. 6) For the year of assessment 2013/14 First Column(section) Second Column(the prescribed amount) 1. Section 28 (basic allowance) $120,000 2. Section 29 (married person’s allowance) $240,000 3. Section 30 (dependent parent allowance)— (a) subsection (3)(a) $ 38,000 (b) subsection (3)(b) $ 38,000 (c) subsection (3A)(a) $ 19,000 (d) subsection (3A)(b) $ 19,000 (e) subsection (4)(a) $ 12,000 4. Section 30A (dependent grandparent allowance)— (a) subsection (3)(a) $ 38,000 (b) subsection (3)(b) $ 38,000 (c) subsection (3A)(a) $ 19,000 (d) subsection (3A)(b) $ 19,000 (e) subsection (4)(a) $ 12,000 5. Section 30B(1) (dependent brother or dependent sister allowance) $ 33,000 6. Section 31 (child allowance)— (a) subsection (1) $70,000 for each child (b) subsection (1A) $70,000 for each child (c) subsection (5) (in relation to subsection (1)) $630,000 (d) subsection (5) (in relation to subsection (1A)) $630,000 7. Section 31A(1) (disabled dependant allowance) $ 66,000 8. Section 32(1) (single parent allowance) $120,000 (Added 5 of 2013 s. 6. Amended 10 of 2014 s. 6) For the year of assessment 2014/15 First Column(section) Second Column(the prescribed amount) 1. Section 28 (basic allowance) $120,000 2. Section 29 (married person’s allowance) $240,000 3. Section 30 (dependent parent allowance)— (a) subsection (3)(a) $ 40,000 (b) subsection (3)(b) $ 40,000 (c) subsection (3A)(a) $ 20,000 (d) subsection (3A)(b) $ 20,000 (e) subsection (4)(a) $ 12,000 4. Section 30A (dependent grandparent allowance)— (a) subsection (3)(a) $ 40,000 (b) subsection (3)(b) $ 40,000 (c) subsection (3A)(a) $ 20,000 (d) subsection (3A)(b) $ 20,000 (e) subsection (4)(a) $ 12,000 5. Section 30B(1) (dependent brother or dependent sister allowance) $ 33,000 6. Section 31 (child allowance)— (a) subsection (1) $70,000 for each child (b) subsection (1A) $70,000 for each child (c) subsection (5) (in relation to subsection (1)) $630,000 (d) subsection (5) (in relation to subsection (1A)) $630,000 7. Section 31A(1) (disabled dependant allowance) $ 66,000 8. Section 32(1) (single parent allowance) $120,000 (Added 10 of 2014 s. 6. Amended 10 of 2015 s. 5) For the year of assessment 2015/16 First Column(section) Second Column(the prescribed amount) 1. Section 28 (basic allowance) $120,000 2. Section 29 (married person’s allowance) $240,000 3. Section 30 (dependent parent allowance)— (a) subsection (3)(a) $ 40,000 (b) subsection (3)(b) $ 40,000 (c) subsection (3A)(a) $ 20,000 (d) subsection (3A)(b) $ 20,000 (e) subsection (4)(a) $ 12,000 4. Section 30A (dependent grandparent allowance)— (a) subsection (3)(a) $ 40,000 (b) subsection (3)(b) $ 40,000 (c) subsection (3A)(a) $ 20,000 (d) subsection (3A)(b) $ 20,000 (e) subsection (4)(a) $ 12,000 5. Section 30B(1) (dependent brother or dependent sister allowance) $ 33,000 6. Section 31 (child allowance)— (a) subsection (1) $100,000 for each child (b) subsection (1A) $100,000 for each child (c) subsection (5) (in relation to subsection (1)) $900,000 (d) subsection (5) (in relation to subsection (1A)) $900,000 7. Section 31A(1) (disabled dependant allowance) $ 66,000 8. Section 32(1) (single parent allowance) $120,000 (Added 10 of 2015 s. 5. Replaced 8 of 2016 s. 6) For the year of assessment 2016/17 First Column(section) Second Column(the prescribed amount) 1. Section 28 (basic allowance) $132,000 2. Section 29 (married person’s allowance) $264,000 3. Section 30 (dependent parent allowance)— (a) subsection (3)(a) $ 46,000 (b) subsection (3)(b) $ 46,000 (c) subsection (3A)(a) $ 23,000 (d) subsection (3A)(b) $ 23,000 (e) subsection (4)(a) $ 12,000 4. Section 30A (dependent grandparent allowance)— (a) subsection (3)(a) $ 46,000 (b) subsection (3)(b) $ 46,000 (c) subsection (3A)(a) $ 23,000 (d) subsection (3A)(b) $ 23,000 (e) subsection (4)(a) $ 12,000 5. Section 30B(1) (dependent brother or dependent sister allowance) $ 33,000 6. Section 31 (child allowance)— (a) subsection (1) $100,000 for each child (b) subsection (1A) $100,000 for each child (c) subsection (5) (in relation to subsection (1)) $900,000 (d) subsection (5) (in relation to subsection (1A)) $900,000 7. Section 31A(1) (disabled dependant allowance) $ 66,000 8. Section 32(1) (single parent allowance) $132,000 (Added 8 of 2016 s. 6. Amended 3 of 2017 s. 8) For the year of assessment 2017/18 First Column(section) Second Column(the prescribed amount) 1. Section 28 (basic allowance) $132,000 2. Section 29 (married person’s allowance) $264,000 3. Section 30 (dependent parent allowance)— (a) subsection (3)(a) $ 46,000 (b) subsection (3)(b) $ 46,000 (c) subsection (3A)(a) $ 23,000 (d) subsection (3A)(b) $ 23,000 (e) subsection (4)(a) $ 12,000 4. Section 30A (dependent grandparent allowance)— (a) subsection (3)(a) $ 46,000 (b) subsection (3)(b) $ 46,000 (c) subsection (3A)(a) $ 23,000 (d) subsection (3A)(b) $ 23,000 (e) subsection (4)(a) $ 12,000 5. Section 30B(1) (dependent brother or dependent sister allowance) $ 37,500 6. Section 31 (child allowance)— (a) subsection (1) $100,000 for each child (b) subsection (1A) $100,000 for each child (c) subsection (5) (in relation to subsection (1)) $900,000 (d) subsection (5) (in relation to subsection (1A)) $900,000 7. Section 31A(1) (disabled dependant allowance) $ 75,000 8. Section 32(1) (single parent allowance) $132,000 (Added 3 of 2017 s. 8. Amended 20 of 2018 s. 15)For the years of assessment 2018/19 to 2022/23 inclusive First Column(section) Second Column(the prescribed amount) 1. Section 28 (basic allowance) $ 132,000 2. Section 28A (personal disability allowance) $ 75,000 3. Section 29 (married person’s allowance) $ 264,000 4. Section 30 (dependent parent allowance)— (a) subsection (3)(a) $ 50,000 (b) subsection (3)(b) $ 50,000 (c) subsection (3A)(a) $ 25,000 (d) subsection (3A)(b) $ 25,000 (e) subsection (4)(a) $ 12,000 5. Section 30A (dependent grandparent allowance)— (a) subsection (3)(a) $ 50,000 (b) subsection (3)(b) $ 50,000 (c) subsection (3A)(a) $ 25,000 (d) subsection (3A)(b) $ 25,000 (e) subsection (4)(a) $ 12,000 6. Section 30B(1) (dependent brother or dependent sister allowance) $ 37,500 7. Section 31 (child allowance)— (a) subsection (1) $120,000 for each child (b) subsection (1A) $120,000 for each child (c) subsection (5) (in relation to subsection (1)) $1,080,000 (d) subsection (5) (in relation to subsection (1A)) $1,080,000 8. Section 31A(1) (disabled dependant allowance) $ 75,000 9. Section 32(1) (single parent allowance) $ 132,000 (Added 20 of 2018 s. 15. Amended 4 of 2023 s. 3)For the years of assessment 2023/24 to 2025/26 inclusive First Column(section) Second Column(the prescribed amount) 1. Section 28 (basic allowance) $ 132,000 2. Section 28A (personal disability allowance) $ 75,000 3. Section 29 (married person’s allowance) $ 264,000 4. Section 30 (dependent parent allowance)— (a) subsection (3)(a) $ 50,000 (b) subsection (3)(b) $ 50,000 (c) subsection (3A)(a) $ 25,000 (d) subsection (3A)(b) $ 25,000 (e) subsection (4)(a) $ 12,000 5. Section 30A (dependent grandparent allowance)— (a) subsection (3)(a) $ 50,000 (b) subsection (3)(b) $ 50,000 (c) subsection (3A)(a) $ 25,000 (d) subsection (3A)(b) $ 25,000 (e) subsection (4)(a) $ 12,000 6. Section 30B(1) (dependent brother or dependent sister allowance) $ 37,500 7. Section 31 (child allowance)— (a) subsection (1) $130,000 for each child (b) subsection (1A) $130,000 for each child (c) subsection (5) (in relation to subsection (1)) $1,170,000 (d) subsection (5) (in relation to subsection (1A)) $1,170,000 8. Section 31A(1) (disabled dependant allowance) $ 75,000 9. Section 32(1) (single parent allowance) $ 132,000 (Added 4 of 2023 s. 3. Amended 2 of 2026 s. 5)For the year of assessment 2026/27 andfor each year after that year First Column(section) Second Column(the prescribed amount) 1. Section 28 (basic allowance) $ 145,000 2. Section 28A (personal disability allowance) $ 75,000 3. Section 29 (married person’s allowance) $ 290,000 4. Section 30 (dependent parent allowance)— (a) subsection (3)(a) $ 55,000 (b) subsection (3)(b) $ 55,000 (c) subsection (3A)(a) $ 27,500 (d) subsection (3A)(b) $ 27,500 (e) subsection (4)(a) $ 12,000 5. Section 30A (dependent grandparent allowance)— (a) subsection (3)(a) $ 55,000 (b) subsection (3)(b) $ 55,000 (c) subsection (3A)(a) $ 27,500 (d) subsection (3A)(b) $ 27,500 (e) subsection (4)(a) $ 12,000 6. Section 30B(1) (dependent brother or dependent sister allowance) $ 37,500 7. Section 31 (child allowance)— (a) subsection (1) $140,000 for each child (b) subsection (1A) $140,000 for each child (c) subsection (1B) $140,000 for each child (d) subsection (5) (in relation to subsection (1)) $1,260,000 (e) subsection (5) (in relation to subsection (1A)) $1,260,000 (f) subsection (5) (in relation to subsection (1B)) $1,260,000 8. Section 31A(1) (disabled dependant allowance) $ 75,000 9. Section 32(1) (single parent allowance) $ 145,000 (Added 2 of 2026 s. 5) Editorial Note: * The amendment made by Part 2 of Ord. No. 32 of 2018 to this Schedule applies in relation to all years of assessment commencing on or after 1 April 2018. (Please see 32 of 2018 s. 3) Schedule 5 [s. 68](Amended 17 of 2015 s. 13)(Schedule 5 replaced 12 of 2004 s. 21) Part 1 Order for Appellant to Pay Costs 1. Maximum amount which the Board of Review may order the appellant to pay as costs of the Board (Amended 17 of 2015 s. 13) $25,000 Part 2 (Repealed 17 of 2015 s. 13) Schedule 6 [ss. 14A(4), 17A(1) & 26A(2) & (3) & Schs. 17A, 29 & 36](Replaced 12 of 2016 s. 15)(Schedule 6 added 17 of 1992 s. 3) Part 1 Instruments 1. A bill of exchange within the meaning of section 3 of the Bills of Exchange Ordinance (Cap. 19). 2. A promissory note within the meaning of section 89 of the Bills of Exchange Ordinance (Cap. 19). 3. Subject to section 21(3)(a) of Schedule 17A (specified alternative bond scheme and its treatment under this Ordinance (other than Part 4AA)), any other instrument (other than a regulatory capital security) which evidences an obligation to pay a stated or determinable amount to bearer or to order, on or before a fixed time, with or without interest, being an instrument by the delivery of which, with or without endorsement, the right to receive that stated or determinable amount, with or without interest, is transferable. (Amended 10 of 2013 s. 18; 12 of 2016 s. 15; 21 of 2025 s. 33) Part 2 Bodies 1. The Asian Development Bank. 2. The International Bank for Reconstruction and Development. 3. The International Finance Corporation. 4. The European Investment Bank. 5. The European Bank for Reconstruction and Development. (Added L.N. 478 of 1993) 6. The Inter-American Development Bank. (Added L.N. 478 of 1993) 7. The Nordic Investment Bank. (Added L.N. 478 of 1993) 8. The European Company for the Financing of Railroad Rolling Stock. (Added L.N. 654 of 1994) 9. The Council of Europe Development Bank (formerly known as The Council of Europe Social Development Fund). (Replaced 4 of 2010 s. 19) 10. The African Development Bank. (Added L.N. 309 of 1997) Schedule 7 (Schedule 7 repealed 4 of 2010 s. 20) Schedule 8 [ss. 14, 14AAC, 14A, 14B, 14D, 14H, 14J, 14T, 14ZD, 14ZM, 14ZV, 16, 19CA, 63H & 63HA](Replaced 13 of 2018 s. 10. Amended 5 of 2020 s. 17; 10 of 2022 s. 10)Rate of Profits Tax in respect of a Corporation (Schedule 8 added 56 of 1993 s. 32) For the years of assessment 1992/93 and 1993/94 17 1/2% (Amended 37 of 1994 s. 8) For the years of assessment 1994/95 to 1997/98 inclusive 16 1/2% (Added 37 of 1994 s. 8. Amended 32 of 1998 s. 31) For the years of assessment 1998/99 to 2002/03 inclusive 16% (Added 32 of 1998 s. 31. Amended 24 of 2003 s. 12) For the years of assessment 2003/04 to 2007/08 inclusive 17 1/2% (Added 24 of 2003 s. 12. Amended 21 of 2008 s. 10) For the year of assessment 2008/09 and for each year after that year 16 1/2% (Added 21 of 2008 s. 10) Schedule 8A [ss. 14, 14AAC, 63H & 63HA & Sch. 42]Two-tiered Rates of Profits Tax—Persons other than Corporations 1. In this Schedule—section 14 assessable profits (第14條應評稅利潤) means assessable profits to which section 14 applies. 2. For a year of assessment commencing on or after 1 April 2018, profits tax is chargeable in respect of each trade, profession or business—(a) at the rate of 7.5% on the section 14 assessable profits from the trade, profession or business up to $2,000,000; and(b) at the rate of 15% on any part of the section 14 assessable profits over $2,000,000 from the trade, profession or business.(Schedule 8A added 13 of 2018 s. 11) Schedule 8B [ss. 14, 14AAC, 63H & 63HA & Sch. 42]Two-tiered Rates of Profits Tax—Corporations 1. In this Schedule—section 14 assessable profits (第14條應評稅利潤) means assessable profits to which section 14 applies;threshold (限額), for a corporation that is a partner in a partnership, means $2,000,000 multiplied by the ratio at which the corporation shares the profits or losses of the partnership during the basis period for the year of assessment concerned. 2. For a year of assessment commencing on or after 1 April 2018, profits tax is chargeable—(a) for a corporation—(i) at the rate of 8.25% on section 14 assessable profits up to $2,000,000; and(ii) at the rate of 16.5% on any part of section 14 assessable profits over $2,000,000; and(b) for a corporation that is a partner in a partnership—(i) at the rate of 8.25% on the net share of section 14 assessable profits concerned up to the threshold; and(ii) at the rate of 16.5% on any part of the net share of section 14 assessable profits over the threshold.(Schedule 8B added 13 of 2018 s. 11) Schedule 8C [ss. 14P, 14T, 14X, 14ZD, 14ZH, 14ZM, 14ZQ, 14ZV & 14ZZ](Amended 10 of 2022 s. 11)Rate of Profits Tax for Qualifying Ship Lessor, Qualifying Ship Leasing Manager, etc. (Schedule 8C added 5 of 2020 s. 18. Amended 10 of 2022 s. 11) For a year of assessment commencing on or after 1 April 2020 0% Schedule 9 [s. 89]Transitional Provisions Relating to the Inland Revenue (Amendment) (no. 5) Ordinance 1993 (Schedule 9 added 76 of 1993 s. 11) 1.

In this Schedule—amending Ordinance (修訂條例) means the Inland Revenue (Amendment) (No. 5) Ordinance 1993 (76 of 1993);retirement scheme (退休計劃) means a retirement scheme as defined in section 2(1) prior to the commencement of section 2 of the amending Ordinance. 2. Notwithstanding the repeal of section 87A by the amending Ordinance, where an application for approval of a retirement scheme under that section was received by the Commissioner before such repeal, the Commissioner may approve the scheme as if that section has not been repealed, and where such approval has been given the scheme shall be deemed to have been approved by the Commissioner under that section immediately prior to its repeal by the amending Ordinance. 3. The approval given by the Commissioner to any retirement scheme under section 87A prior to its repeal by the amending Ordinance shall—(a) continue to be effective unless and until it is—(i) deemed to have been withdrawn under subparagraph (b); or(ii) withdrawn under paragraph 4;(b) be deemed to have been withdrawn—(i) upon the scheme becoming a recognized occupational retirement scheme other than by virtue of paragraph (a) of the definition of recognized occupational retirement scheme (認可職業退休計劃) in section 2(1);(ii) where an application is made under section 7 or 15 of the Occupational Retirement Schemes Ordinance (Cap. 426) in respect of the scheme before the commencement of section 3 of that Ordinance but the application has not been disposed of prior to the commencement of that section, on the date on which the application is finally disposed of;(iii) where an application made under section 7 or 15 of the Occupational Retirement Schemes Ordinance (Cap. 426) in respect of the scheme is rejected and an appeal (if any) against such rejection is dismissed before the commencement of section 3 of that Ordinance, on that date of commencement; or(iv) where no application for registration or exemption under the Occupational Retirement Schemes Ordinance (Cap. 426) has been made prior to the date of commencement of section 3 of that Ordinance, on that date of commencement. 4. The Commissioner may withdraw the approval given to any retirement scheme under section 87A prior to its repeal by the amending Ordinance if any term or condition of the scheme is altered unless—(a) the alteration is made solely to secure the issue of an exemption certificate in respect of the scheme or registration of the scheme under section 7 or 18 of the Occupational Retirement Schemes Ordinance (Cap. 426); or(b) in the case of any other alteration, the Commissioner is notified in writing of such alteration within 1 month after it is made and the scheme, as altered, complies substantially with the requirements set out in paragraph 7. 5. Where an application is made under section 7(1) or 15 of the Occupational Retirement Schemes Ordinance (Cap. 426) in respect of a retirement scheme which was approved for the time being by the Commissioner under section 87A before its repeal by the amending Ordinance, the employer who operates the scheme shall as soon as reasonably practicable after the determination of the application or appeal (if any) give a notice in writing to the Commissioner of the result of the application and, where an appeal has been made against the refusal of such application under section 19 of the Occupational Retirement Schemes Ordinance (Cap. 426), the result of such appeal. 6. Section 17(1)(j) applies to a retirement scheme as defined in section 2(1) prior to the commencement of section 2 of the amending Ordinance. 7. The requirements referred to in paragraph 4(b) are—(a) the retirement scheme shall be exclusively for the benefit of the employee or employees and of the spouse, children, surviving dependants, or legal personal representatives of an employee;(b) each employee concerned shall be entitled to defined benefits and the terms and conditions of the retirement scheme shall have been made known to all the employees concerned;(c) the benefits afforded by the retirement scheme shall accrue only—(i) on retirement from the service of the employer at some specified age of not less than 45 years; or(ii) on retirement after some specified period of service with the employer of not less than 10 years; or(iii) on attaining the age of 60 years or some specified age for retirement whichever is the later; or(iv) on earlier incapacity or death:Provided where, however, the retirement scheme provides for proportionate or reduced benefits in the event of an employee leaving the employer’s service prior to attaining the specified age or completing the specified period of service, the provision for such benefits shall not in itself disqualify the scheme from retaining the approved status;(d) the nature of the benefits afforded by the retirement scheme shall be the same in relation to all the persons to whom the scheme relates but a scheme relating to more than one class of employee may be regarded as so many separate schemes for this purpose;(e) where the retirement scheme is conducted by a third party to whom the employer makes periodical contributions, the diversion of such contributions to any purposes (other than those of the scheme) and the refund of such contributions to the employer shall, except with the consent of the Commissioner and subject to subparagraph (f), be prohibited;(f) the employer shall have no lien on any sum or other benefit to which the employee would be entitled under the retirement scheme except—(i) to the extent that the employer has suffered a loss due to a dishonest act committed by the employee; or(ii) to the extent of a debt acknowledged in writing by the employee as owing to the employer. Schedule 10 [s. 88A](Schedule 10 added 32 of 1998 s. 32. Amended E.R. 1 of 2012) Part 1 Advance Rulings 1. Subject to section 1A and on an application made by a person in accordance with this Part, the Commissioner may make a ruling on how a provision of this Ordinance applies to the applicant or to the arrangement described in the application, whether or not reference is made to that provision in the application.(Replaced 27 of 2018 s. 24) 1A. A ruling is not to be made under section 1 on how a provision of this Ordinance applies if the provision relates to—(a) the imposition or remission of a penalty;(b) the correctness of a return or other information supplied by a person;(c) the prosecution of a person;(d) the recovery of a debt owing by a person; or(e) the computation of income or loss under section 50AAF or 50AAK.(Added 27 of 2018 s. 24) 2. The Commissioner may decline to make a ruling if—(a) the application seeking the ruling would require the Commissioner to determine or establish any question of fact;(b) the Commissioner considers that the correctness of the ruling would depend on the making of assumptions, whether in respect of a future event or any other matter;(c) the matter on which the ruling is sought is subject to an objection or appeal, whether in relation to the applicant or any other person; or(d) the matter on which the ruling is sought is the subject of a return which has been or is due to be lodged under this Ordinance. 3. The Commissioner shall not make a ruling if—(a) the Commissioner considers that the arrangement in relation to which the ruling is sought is not seriously contemplated by the applicant;(b) the application is frivolous or vexatious;(c) the Commissioner is undertaking an audit on how any provision of this Ordinance applies to the applicant, or to an arrangement similar to the arrangement which is the subject of the application, during any period for which the proposed ruling would apply were the ruling to be made;(d) the Commissioner considers that the applicant has not provided sufficient information in relation to the application; or(e) the Commissioner considers that it would be unreasonable to make a ruling in view of the resources available to the Commissioner. 4. The Commissioner shall, where he has declined to make a ruling under section 2 or has not made a ruling by virtue of section 3, notify the applicant in writing of his decision and the reasons therefor. 5. Where the Commissioner has made a ruling to a person on the application of any provision of this Ordinance in relation to an arrangement, and—(a) the ruling applies in relation to the arrangement during the whole or any part of the period specified in the ruling; and(b) the person has under section 15 disclosed in the return provided under this Ordinance that he has relied on the ruling in preparing and providing the return,the Commissioner shall apply the provision in relation to the person and the arrangement in respect of the whole of the period or the part of the period, as the case may be, in accordance with the ruling. 6. A ruling shall apply in relation to an arrangement as a ruling on a provision of this Ordinance only if the provision is expressly referred to in the ruling and only for the period specified in the ruling. 7. A ruling shall not apply in relation to an arrangement if—(a) the arrangement is materially different from the arrangement identified in the ruling;(b) there was a material omission or misrepresentation in, or in connection with, the application seeking the ruling; or(c) any assumption of the Commissioner in respect of a future event or any other matter that is stated in the ruling is incorrect. 8. An application for a ruling must—(a) identify the applicant;(b) disclose all relevant facts and documents relating to the arrangement in respect of which the ruling is sought;(c) state the provision of this Ordinance in respect of which the ruling is sought;(d) state the proposition of law (if any) which is relevant to the issues raised in the application;(e) provide such other information as the Commissioner may specify in writing from time to time for the purposes of this section; and(f) be accompanied by a draft ruling. 9. The Commissioner may at any time request further relevant information in respect of an application for a ruling. 10. Without prejudice to section 2, if the Commissioner considers that the correctness of a ruling would depend on the making of assumptions, whether in respect of a future event or any other matter, the Commissioner may, subject to section 11, make any assumption which he considers to be the most appropriate. 11. The Commissioner may not make any assumption in respect of information which the applicant can provide. 12. A ruling made by the Commissioner must state—(a) the name of the person, the provision of this Ordinance, and the arrangement to which the ruling applies;(b) the period for which the ruling applies; and(c) any material assumptions in respect of a future event or any other matter made by the Commissioner. 13. The Commissioner may at any time withdraw a ruling by notifying the person to whom the ruling applies in writing of the withdrawal and the reasons therefor. 14. If the Commissioner withdraws a ruling made in respect of an arrangement—(a) the ruling shall cease to apply in relation to the arrangement if the arrangement is entered into or effected after the date of the withdrawal;(b) if the arrangement has been entered into or effected on or before the date of the withdrawal—(i) where the person to whom the ruling applies has under section 15 disclosed in the return provided under this Ordinance that he has relied on the ruling in preparing and providing the return, the ruling shall after the date of the withdrawal continue to apply in relation to the arrangement for the remainder of the period specified in the ruling;(ii) in any other case, the ruling shall cease to apply in relation to the arrangement. 15. Where—(a) a person has obtained a ruling;(b) the person is required to provide a return under this Ordinance; and(c) in preparing the return the person is required to take into account the way in which a provision of this Ordinance applies to the arrangement identified in the ruling, the person must disclose in the return—(i) the existence of the ruling;(ii) whether or not the person has relied on the ruling in preparing and providing the return; and(iii) any material changes to the arrangement identified in the ruling. 16. (a) If any provision of this Ordinance that is the subject of or affects a ruling is repealed, the ruling shall cease to apply to the extent of, and from the effective date of, that repeal.(b) If any provision of this Ordinance that is the subject of a ruling is amended, or repealed in part only, so that the way in which the provision applies is altered, the ruling shall cease to apply to the extent of, and from the effective date of, the amendment or partial repeal. Part 2 Fees 1. The fees specified in respect of an application for a ruling made in accordance with Part 1 are as follows—(a) application fee— (i) for a ruling on whether profits are to be treated as chargeable to profits tax under section 14 of this Ordinance as arising in or derived from Hong Kong $45,000 (ii) for a ruling on whether remuneration is to be treated as chargeable to salaries tax by virtue of section 9A of this Ordinance $15,000 (iii) for any other ruling $15,000 (b) where the time spent in consideration of the application, including any time spent in consulting with the applicant, exceeds the time specified in section 3 for the type of rulings to which the ruling belongs, an additional fee calculated on the basis of each hour or any part thereof spent by— (i) a Deputy Commissioner $2,650 (ii) an Assistant Commissioner $2,240 (iii) any other person appointed under this Ordinance $1,730 (Amended 27 of 2018 s. 24) 2. (a) In an application for a ruling made in accordance with Part 1, reimbursement shall be made in respect of—(i) any fees paid by the Commissioner to any person, as a result of the Commissioner requiring any external advice in relation to the ruling; and(ii) any costs and reasonable disbursements incurred by the Commissioner in relation to the ruling.(b) For the purposes of this Ordinance, the reimbursement required to be made under paragraph (a) shall, in addition to the fees specified in section 1, be regarded as the fees specified in respect of an application for a ruling made in accordance with Part 1. 3. The time specified for the purposes of section 1(b) is as follows— (a) for a ruling on whether profits are to be treated as chargeable to profits tax under section 14 of this Ordinance as arising in or derived from Hong Kong 23 hours (b) for a ruling on whether remuneration is to be treated as chargeable to salaries tax by virtue of section 9A of this Ordinance 11 hours (c) for any other ruling 7 hours 4. Where an application for a ruling is withdrawn, the applicant is still liable to pay all the fees specified in this Part and incurred in respect of the application before the Commissioner receives notice of the withdrawal. Schedule 11 [s. 88B]Fee Payable on Request for Notice under Section 88B (Schedule 11 added 30 of 1999 s. 44. Amended L.N. 3 of 2006)The fee payable in respect of a request under section 88B is $270. Schedule 12 [s. 89]Transitional Provisions Relating to Provisional Salaries Tax in respect of the Year of Assessment 2001/02 (Schedule 12 added 29 of 2001 s. 4) 1. In this Schedule—dwelling (住宅), place of residence (居住地方) and recognized organization or association (認可組織或協會) have the respective meanings assigned to them in section 26E(9); home loan (居所貸款), in relation to a person applying under paragraph 2, means a loan of money which is— (a) applied wholly or partly for the acquisition of a dwelling which—(i) during any period of time in the year of assessment 2001/02 is held by the person as a sole owner, or as a joint tenant or tenant in common; and(ii) during that period of time is used by the person exclusively or partly as his place of residence; and (b) secured during that period of time by a mortgage or charge over that dwelling or any other property in Hong Kong; home loan interest (居所貸款利息), in relation to a person applying under paragraph 2, means interest on a home loan which is payable by the person as a sole owner or as a joint tenant or tenant in common of the dwelling to which the home loan relates, to— (a) the Government; (b) a financial institution; (c) a credit union registered under the Credit Unions Ordinance (Cap. 119); (d) a money lender licensed under the Money Lenders Ordinance (Cap. 163); (e) the Hong Kong Housing Society; (f) an employer of the person; or (g) any recognized organization or association. 2. Without prejudice to section 63E, where in relation to the year of assessment 2001/02 a person is liable to pay provisional salaries tax, that person may, by notice in writing lodged with the Commissioner not later than—(a) 28 days before the day by which the provisional salaries tax is to be paid; or(b) 14 days after the date of the notice for payment of the provisional salaries tax given under section 63C(6), whichever is the later, apply to have the payment of the whole or part of such tax held over until he is required to pay salaries tax for that year of assessment, on the ground that he has paid or is likely to pay during that year of assessment home loan interest of an amount which exceeds—(i) in a case where the dwelling to which the home loan interest relates is held by the person as a sole owner, $100,000; or(ii) in a case where the dwelling to which the home loan interest relates is held by the person otherwise than as a sole owner, the amount calculated in accordance with paragraph 3. 3. The amount referred to in paragraph 2(ii) shall be—(a) in a case where the dwelling is held by the person as a joint tenant, $100,000 as divided by the number of joint tenants; or(b) in a case where the dwelling is held by the person as a tenant in common, $100,000 as multiplied by his share in the ownership in the dwelling. 4. Where the Commissioner is satisfied that it is appropriate to do so, he may, either generally or in a particular case, extend the time within which a person may apply under paragraph 2. 5. On receipt of an application under paragraph 2, the Commissioner shall consider the application and may hold over the payment of the whole or part of the provisional salaries tax. 6. The Commissioner shall, by notice in writing, inform the person applying under paragraph 2 of his decision. Schedule 13 [s. 12]*Institutions that may Accredit or Recognize Training or Development Courses for the Purpose of Section 12(6)(c)(iii) (Schedule 13 added 12 of 2004 s. 22) Item Institution 1. The Architects Registration Board established by section 4 of the Architects Registration Ordinance (Cap. 408) 2. The Chinese Medicine Council of Hong Kong established by section 3 of the Chinese Medicine Ordinance (Cap. 549) 3. The Chiropractors Council established by section 3 of the Chiropractors Registration Ordinance (Cap. 428) **3A. The Construction Industry Council established by section 4 of the Construction Industry Council Ordinance (Cap. 587) (Added 12 of 2006 s. 84) 4. The Construction Industry Training Authority established by section 4 of the Industrial Training (Construction Industry) Ordinance (Cap. 317) and in existence before the commencement# of section 71 of the Construction Industry Council Ordinance (Cap. 587) (Amended 12 of 2006 s. 84) 5. The Dental Council of Hong Kong established by section 4 of the Dentists Registration Ordinance (Cap. 156) 6. The Engineers Registration Board established by section 3 of the Engineers Registration Ordinance (Cap. 409) 7. The Estate Agents Authority established by section 4 of the Estate Agents Ordinance (Cap. 511) 8. The Hong Kong Academy of Medicine established by section 3 of the Hong Kong Academy of Medicine Ordinance (Cap. 419) 9. The Hong Kong Bar Association referred to in section 2(1) of the Legal Practitioners Ordinance (Cap. 159) 10. The Hong Kong Institute of Architects incorporated by section 3 of The Hong Kong Institute of Architects Incorporation Ordinance (Cap. 1147) 11. The Hong Kong Institution of Engineers incorporated by section 3 of The Hong Kong Institution of Engineers Ordinance (Cap. 1105) 12. The Hong Kong Institute of Housing incorporated by section 3 of The Hong Kong Institute of Housing Ordinance (Cap. 507) 13. The Hong Kong Institute of Landscape Architects incorporated by section 3 of The Hong Kong Institute of Landscape Architects Incorporation Ordinance (Cap. 1162) 14. The Hong Kong Institute of Planners incorporated by section 3 of The Hong Kong Institute of Planners Incorporation Ordinance (Cap. 1153) 15. The Hong Kong Institute of Surveyors incorporated by section 3 of The Hong Kong Institute of Surveyors Ordinance (Cap. 1148) 16. The Hong Kong Institute of Certified Public Accountants incorporated by section 3 of the Professional Accountants Ordinance (Cap. 50) (Amended 23 of 2004 s. 56) @17. The Hong Kong Society of Notaries referred to in section 2(1) of the Legal Practitioners Ordinance (Cap. 159) as amended by section 5(1)(e) of the Legal Practitioners (Amendment) Ordinance 1998 (27 of 1998) 18. The Housing Managers Registration Board established by section 3 of the Housing Managers Registration Ordinance (Cap. 550) 19. The Land Surveyors Registration Committee appointed under section 6 of the Land Survey Ordinance (Cap. 473) 20. The Landscape Architects Registration Board established by section 3 of the Landscape Architects Registration Ordinance (Cap. 516) 21. The Law Society of Hong Kong referred to in section 2(1) of the Legal Practitioners Ordinance (Cap. 159) 22. The Medical Council of Hong Kong established by section 3 of the Medical Registration Ordinance (Cap. 161) 23. The Medical Laboratory Technologists Board established by section 5 of the Allied Health Professions Ordinance (Cap. 359) (Amended 33 of 2025 s. 187) 24. The Midwives Council of Hong Kong established by section 3 of the Midwives Registration Ordinance (Cap. 162) 25. The Nursing Council of Hong Kong established by section 3 of the Nurses Registration Ordinance (Cap. 164) 26. The Occupational Therapists Board established by section 5 of the Allied Health Professions Ordinance (Cap. 359) (Amended 33 of 2025 s. 187) 27. The Optometrists Board established by section 5 of the Allied Health Professions Ordinance (Cap. 359) (Amended 33 of 2025 s. 187) 28. The Pharmacy and Poisons Board established by section 3 of the Pharmacy and Poisons Ordinance (Cap. 138) 29. The Physiotherapists Board established by section 5 of the Allied Health Professions Ordinance (Cap. 359) (Amended 33 of 2025 s. 187) 30. The Planners Registration Board established by section 3 of the Planners Registration Ordinance (Cap. 418) 31. The Radiographers Board established by section 5 of the Allied Healthl Professions Ordinance (Cap. 359) (Amended 33 of 2025 s. 187) 32. The Security and Guarding Services Industry Authority established by section 4 of the Security and Guarding Services Ordinance (Cap. 460) 33. The Social Workers Registration Board established by section 4 of the Social Workers Registration Ordinance (Cap. 505) 34. The Surveyors Registration Board established by section 3 of the Surveyors Registration Ordinance (Cap. 417) 35. (Repealed 37 of 2018 s. 171) 36. The Veterinary Surgeons Board established by section 3 of the Veterinary Surgeons Registration Ordinance (Cap. 529) 37. The Vocational Training Council established by section 4 of the Vocational Training Council Ordinance (Cap. 1130) 38. The Hong Kong Council for Accreditation of Academic and Vocational Qualifications established by section 3(1) of the Hong Kong Council for Accreditation of Academic and Vocational Qualifications Ordinance (Cap. 1150) (Added 6 of 2007 s. 49) 39. The Travel Industry Authority established by section 150 of the Travel Industry Ordinance (Cap. 634) (Added 37 of 2018 s. 171 and E.R. 1 of 2019) Editorial Note: * Schedule 13 (except items 3A and 17) applies in relation to the year of assessment 2004/05 and to all subsequent years of assessment. (Please see 12 of 2004 s. 2(5)(a) and 12 of 2006 s. 84) ** Item 3A applies in relation to the year of assessment in which section 3 of Schedule 6 to the Construction Industry Council Ordinance (Cap. 587) comes into operation# and to all subsequent years of assessment. (Please see 12 of 2006 s. 84) # Commencement date : 1 January 2008. @ Item 17 applies in relation to the year of assessment in which section 5(1)(e) of the Legal Practitioners (Amendment) Ordinance 1998 (27 of 1998) comes into operation+ and to all subsequent years of assessment. (Please see 12 of 2004 s. 2(5)(b)) + Commencement date: 30 June 2005. Schedule 14 [s. 89(5)]Transitional Provisions Relating to Provisional Salaries Tax in respect of the Year of Assessment 2005/06 (Schedule 14 added 8 of 2005 s. 7. Amended E.R. 1 of 2012) 1. For the purposes of section 63C(1) of the Ordinance, in calculating the net chargeable income of a person for the preceding year of assessment to ascertain the provisional salaries tax in respect of the year of assessment 2005/06—(a) the reference to “such allowances as are under Part 5 permitted for that person” in section 12B(1)(b) of the Ordinance; and(b) the reference to “such allowances as are under Part 5 permitted in their case” in section 12B(2)(b) of the Ordinance, shall be construed to mean such allowances that may be granted to that person for the year of assessment 2005/06 under Part 5 of the Ordinance as amended by the Revenue (Allowances for Tax) Ordinance 2005 (8 of 2005). 2. For the purposes of an application under section 63E(1) of the Ordinance to hold over the payment of provisional salaries tax in respect of the year of assessment 2005/06, the reference to “net chargeable income for the year preceding the year of assessment” in section 63E(2)(a) or (b) of the Ordinance shall be construed to mean the net chargeable income for the preceding year of assessment as calculated in accordance with paragraph 1. Schedule 15 [ss. 20AB & 20AE & Sch. 15A](Amended 13 of 2015 s. 9)Provisions for Ascertaining Amount of Assessable Profits of Resident Person under Section 20AE (Amended 13 of 2015 s. 9)(Schedule 15 added 4 of 2006 s. 4. Amended E.R. 1 of 2012) Part 1 1. The amount regarded as the assessable profits of a resident person for a year of assessment is the total sum arrived at by adding up the assessable profits of the non-resident person that would have been chargeable to tax under Part 4 but for section 20AC (exempt profits) for each day in the period in that year of assessment during which the resident person has a direct or indirect beneficial interest in the non-resident person.(Amended 13 of 2015 s. 9) 2. For the purposes of section 1 of this Part, the exempt profits of a non-resident person for a particular day in a year of assessment are to be ascertained in accordance with the following formula— (Amended 13 of 2015 s. 9) A = B × C D where: A means the exempt profits of the non-resident person for a particular day in a year of assessment; B means the extent of the resident person’s beneficial interest in the non-resident person on the particular day, expressed as a percentage determined in accordance with Part 2 of this Schedule; C means the exempt profits of the non-resident person for the accounting period of the non-resident person in which the particular day falls; D means the total number of days in the accounting period of the non-resident person in which the particular day falls. (Amended 13 of 2015 s. 9) Part 2 1. Where a resident person has a direct beneficial interest in a non-resident person, the extent of the beneficial interest of the resident person in the non-resident person is—(a) where the non-resident person is a corporation that is not a trustee of a trust estate, the percentage of the issued share capital (however described) of the corporation held by the resident person;(b) where the non-resident person is a partnership that is not a trustee of a trust estate, the percentage of the profits of the partnership to which the resident person is entitled; or(c) where the non-resident person is a trustee of a trust estate, the percentage in value of the trust estate in which the resident person is interested. 2. Where a resident person has an indirect beneficial interest in a non-resident person, the extent of the beneficial interest of the resident person in the non-resident person is—(a) where there is one interposed person, the percentage arrived at by multiplying the percentage representing the extent of the beneficial interest of the resident person in the interposed person by the percentage representing the extent of the beneficial interest of the interposed person in the non-resident person; or(b) where there is a series of 2 or more interposed persons, the percentage arrived at by multiplying the percentage representing the extent of the beneficial interest of the resident person in the first interposed person in the series by—(i) the percentage representing the extent of the beneficial interest of each interposed person (other than the last interposed person) in the series in the next interposed person in the series; and(ii) the percentage representing the extent of the beneficial interest of the last interposed person in the series in the non-resident person. 3. For the purposes of section 2 of this Part— (Amended 13 of 2015 s. 9)(a) section 1 of this Part applies in determining the extent of the beneficial interest of a resident person in an interposed person as if references to a non-resident person in that section were references to an interposed person;(b) section 1 of this Part applies in determining the extent of the beneficial interest of an interposed person in a non-resident person as if references to a resident person in that section were references to an interposed person;(c) section 1 of this Part applies in determining the extent of the beneficial interest of an interposed person (first-mentioned interposed person) in another interposed person (second-mentioned interposed person) as if— (Amended 13 of 2015 s. 9)(i) references to a resident person in that section were references to the first-mentioned interposed person; and(ii) references to a non-resident person in that section were references to the second-mentioned interposed person. (Amended 13 of 2015 s. 9) Schedule 15A [ss. 20AB & 20AF]Provisions for Ascertaining Amount of Assessable Profits of Resident Person under Section 20AF (Schedule 15A added 13 of 2015 s. 10) Part 1 1. The amount regarded as the assessable profits of a resident person for a year of assessment is the total sum arrived at by adding up the assessable profits of the special purpose vehicle that are chargeable to tax under Part 4 and in respect of which tax would have been payable but for section 20ACA (exempt profits) for each day in the period in that year of assessment during which the resident person has an indirect beneficial interest in the special purpose vehicle. 2. For the purposes of section 1 of this Part, the exempt profits of a special purpose vehicle for a particular day in a year of assessment are to be ascertained in accordance with the following formula— A = B1 × B2 × C D where: A means the exempt profits of the special purpose vehicle for a particular day in a year of assessment; B1 means the extent of the resident person’s beneficial interest in the non-resident person on the particular day, expressed as a percentage determined in accordance with Part 2 of Schedule 15; B2 means the extent of the non-resident person’s beneficial interest in the special purpose vehicle on the particular day, expressed as a percentage determined in accordance with Part 2 of this Schedule; C means the exempt profits of the special purpose vehicle for the accounting period of the special purpose vehicle in which the particular day falls; D means the total number of days in the accounting period of the special purpose vehicle in which the particular day falls. 3. In this Part—special purpose vehicle (特定目的工具) has the meaning given by section 20ACA(2). Part 2 1. Where a non-resident person has a direct beneficial interest in a special purpose vehicle, the extent of the beneficial interest of the non-resident person in the special purpose vehicle is—(a) if the special purpose vehicle is a corporation that is not a trustee of a trust estate, the percentage of the issued share capital (however described) of the corporation held by the non-resident person;(b) if the special purpose vehicle is a partnership that is not a trustee of a trust estate, the percentage of the profits of the partnership to which the non-resident person is entitled;(c) if the special purpose vehicle is a trustee of a trust estate, the percentage in value of the trust estate in which the non-resident person is interested; or(d) if the special purpose vehicle is an entity that does not fall within any of paragraphs (a), (b) and (c), the percentage of ownership interests that the non-resident person has in the entity. 2. Where a non-resident person has an indirect beneficial interest in a special purpose vehicle, the extent of the beneficial interest of the non-resident person in the special purpose vehicle is—(a) if there is one interposed person, the percentage arrived at by multiplying the percentage representing the extent of the beneficial interest of the non-resident person in the interposed person by the percentage representing the extent of the beneficial interest of the interposed person in the special purpose vehicle; or(b) if there is a series of 2 or more interposed persons, the percentage arrived at by multiplying the percentage representing the extent of the beneficial interest of the non-resident person in the first interposed person in the series by—(i) the percentage representing the extent of the beneficial interest of each interposed person (other than the last interposed person) in the series in the next interposed person in the series; and(ii) the percentage representing the extent of the beneficial interest of the last interposed person in the series in the special purpose vehicle. 3. For the purposes of section 2 of this Part—(a) section 1 of this Part applies in determining the extent of the beneficial interest of a non-resident person in an interposed person as if references to a special purpose vehicle in that section were references to an interposed person;(b) section 1 of this Part applies in determining the extent of the beneficial interest of an interposed person in a special purpose vehicle as if references to a non-resident person in that section were references to an interposed person; and(c) section 1 of this Part applies in determining the extent of the beneficial interest of an interposed person (Interposed Person A) in another interposed person (Interposed Person B) as if— (i) references to a non-resident person in that section were references to Interposed Person A; and (ii) references to a special purpose vehicle in that section were references to Interposed Person B. 4. In this Part—special purpose vehicle (特定目的工具) has the meaning given by section 20ACA(2). Schedule 15B (Repealed 5 of 2019 s. 7) Schedule 15C [ss. 20AM, 20AW & 20AX & Sch. 15D]Provisions for Ascertaining Amount of Assessable Profits of Resident Person under Section 20AX (Schedule 15C added 5 of 2019 s. 8) Part 1 1. The amount regarded as the assessable profits of a resident person for a year of assessment is the total sum arrived at by adding up the assessable profits of the fund that are chargeable to tax under Part 4 and in respect of which tax would have been payable but for section 20AN (exempt profits) for each day in the period in the year of assessment during which the resident person has a direct or indirect beneficial interest in the fund. 2. For the purposes of section 1 of this Part, the exempt profits of a fund for a particular day in a year of assessment are to be ascertained in accordance with the following formula— A = B × C D where: A means the exempt profits of the fund for a particular day in a year of assessment; B means the extent of the resident person’s beneficial interest in the fund on the particular day, expressed as a percentage determined in accordance with Part 2 of this Schedule; C means the exempt profits of the fund for the accounting period of the fund in which the particular day falls; D means the total number of days in the accounting period of the fund in which the particular day falls. Part 2 1. For a resident person having a direct beneficial interest in a fund, the extent of the beneficial interest of the resident person in the fund is—(a) if the fund is a corporation that is not a trustee of a trust estate—the percentage of the issued share capital (however described) of the corporation held by the resident person;(b) if the fund is a partnership that is not a trustee of a trust estate—the percentage of the profits of the partnership to which the resident person is entitled;(c) if the fund is a trustee of a trust estate—the percentage in value of the trust estate in which the resident person is interested; or(d) if the fund is an entity that does not fall within any of paragraphs (a), (b) and (c)—the percentage of ownership interests that the resident person has in the entity. 2. For a resident person having an indirect beneficial interest in a fund, the extent of the beneficial interest of the resident person in the fund is—(a) if there is only one interposed person—the percentage arrived at by multiplying the percentage representing the extent of the beneficial interest of the resident person in the interposed person by the percentage representing the extent of the beneficial interest of the interposed person in the fund; or(b) if there is a series of 2 or more interposed persons—the percentage arrived at by multiplying the percentage representing the extent of the beneficial interest of the resident person in the first interposed person in the series by—(i) the percentage representing the extent of the beneficial interest of each interposed person (other than the last interposed person) in the series in the next interposed person in the series; and(ii) the percentage representing the extent of the beneficial interest of the last interposed person in the series in the fund. 3. For the purposes of section 2 of this Part—(a) section 1 of this Part applies in determining the extent of the beneficial interest of a resident person in an interposed person as if the references to a fund in that section were references to an interposed person;(b) section 1 of this Part applies in determining the extent of the beneficial interest of an interposed person in a fund as if the references to a resident person in that section were references to an interposed person; and(c) section 1 of this Part applies in determining the extent of the beneficial interest of an interposed person (Interposed Person A) in another interposed person (Interposed Person B) as if—(i) the references to a resident person in that section were references to Interposed Person A; and(ii) the references to a fund in that section were references to Interposed Person B. Schedule 15D [ss. 20AM, 20AW & 20AY]Provisions for Ascertaining Amount of Assessable Profits of Resident Person under Section 20AY (Schedule 15D added 5 of 2019 s. 8) Part 1 1. The amount regarded as the assessable profits of a resident person for a year of assessment is the total sum arrived at by adding up the assessable profits of the special purpose entity that are chargeable to tax under Part 4 and in respect of which tax would have been payable but for section 20AO (exempt profits) for each day in the period in the year of assessment during which the resident person has an indirect beneficial interest in the special purpose entity. 2. For the purposes of section 1 of this Part, the exempt profits of a special purpose entity for a particular day in a year of assessment are to be ascertained in accordance with the following formula— A = B1 × B2 × C D where: A means the exempt profits of the special purpose entity for a particular day in a year of assessment; B1 means the extent of the resident person’s beneficial interest in the fund on the particular day, expressed as a percentage determined in accordance with Part 2 of Schedule 15C; B2 means the extent of the fund’s beneficial interest in the special purpose entity on the particular day, expressed as a percentage determined in accordance with Part 2 of this Schedule; C means the exempt profits of the special purpose entity for the accounting period of the special purpose entity in which the particular day falls; D means the total number of days in the accounting period of the special purpose entity in which the particular day falls. 3. In this Part—special purpose entity (特定目的實體) has the meaning given by section 20AO(4). Part 2 1. For a fund having a direct beneficial interest in a special purpose entity, the extent of the beneficial interest of the fund in the special purpose entity is—(a) if the special purpose entity is a corporation that is not a trustee of a trust estate—the percentage of the issued share capital (however described) of the corporation held by the fund;(b) if the special purpose entity is a partnership that is not a trustee of a trust estate—the percentage of the profits of the partnership to which the fund is entitled;(c) if the special purpose entity is a trustee of a trust estate—the percentage in value of the trust estate in which the fund is interested; or(d) if the special purpose entity is an entity that does not fall within any of paragraphs (a), (b) and (c)—the percentage of ownership interests that the fund has in the entity. 2. For a fund having an indirect beneficial interest in a special purpose entity, the extent of the beneficial interest of the fund in the special purpose entity is—(a) if there is only one interposed person—the percentage arrived at by multiplying the percentage representing the extent of the beneficial interest of the fund in the interposed person by the percentage representing the extent of the beneficial interest of the interposed person in the special purpose entity; or(b) if there is a series of 2 or more interposed persons—the percentage arrived at by multiplying the percentage representing the extent of the beneficial interest of the fund in the first interposed person in the series by—(i) the percentage representing the extent of the beneficial interest of each interposed person (other than the last interposed person) in the series in the next interposed person in the series; and(ii) the percentage representing the extent of the beneficial interest of the last interposed person in the series in the special purpose entity. 3. For the purposes of section 2 of this Part—(a) section 1 of this Part applies in determining the extent of the beneficial interest of a fund in an interposed person as if the references to a special purpose entity in that section were references to an interposed person;(b) section 1 of this Part applies in determining the extent of the beneficial interest of an interposed person in a special purpose entity as if the references to a fund in that section were references to an interposed person; and(c) section 1 of this Part applies in determining the extent of the beneficial interest of an interposed person (Interposed Person A) in another interposed person (Interposed Person B) as if—(i) the references to a fund in that section were references to Interposed Person A; and(ii) the references to a special purpose entity in that section were references to Interposed Person B. 4. In this Part—special purpose entity (特定目的實體) has the meaning given by section 20AO(4). Schedule 16 [ss. 20AB & 20AC & Schs. 17A, 29 & 36](Amended 10 of 2013 s. 19; 12 of 2016 s. 16; 5 of 2019 s. 9)Specified Transactions (Schedule 16 added 4 of 2006 s. 5) Part 1 (Added 13 of 2015 s. 11; Amended L.N. 69 of 2018) 1. A transaction in securities. 2. A transaction in futures contracts. 3. A transaction in foreign exchange contracts. 4. A transaction consisting in the making of a deposit other than by way of a money-lending business. 5. A transaction in foreign currencies. 6. A transaction in exchange-traded commodities. 7. A transaction in an investee company’s shares carried out through or arranged by a specified person for, or carried out by, a non-resident partner fund. (Added L.N. 69 of 2018) Part 2 (Added 13 of 2015 s. 11) 1. In this Schedule— (Amended 13 of 2015 s. 11) collective investment scheme (集體投資計劃) means arrangements in respect of any property— (a) under which the participating persons do not have day-to-day control over the management of the property, whether or not they have the right to be consulted or to give directions in respect of the management; (b) under which—(i) the property is managed as a whole by or on behalf of the person operating the arrangements;(ii) the contributions of the participating persons and the profits or income from which payments are made to them are pooled; or(iii) the property is managed as a whole by or on behalf of the person operating the arrangements, and the contributions of the participating persons and the profits or income from which payments are made to them are pooled; and (c) the purpose or effect, or pretended purpose or effect, of which is to enable the participating persons, whether by acquiring any right, interest, title or benefit in the property or any part of the property or otherwise, to participate in or receive—(i) profits, income or other returns represented to arise or to be likely to arise from the acquisition, holding, management or disposal of the property or any part of the property, or sums represented to be paid or to be likely to be paid out of any such profits, income or other returns; or(ii) a payment or other returns arising from the acquisition, holding or disposal of, the exercise of any right in, the redemption of, or the expiry of, any right, interest, title or benefit in the property or any part of the property; contract for differences (差價合約) means an agreement the purpose or effect of which is to obtain a profit or avoid a loss by reference to fluctuations in the value or price of property of any description or in an index or other factor designated for that purpose in the agreement;debenture (債權證) includes debenture stocks, bonds, and other debt securities of a corporation, whether constituting a charge on the assets of the corporation or not; (Amended 8 of 2011 s. 27) deposit (存款) means a loan of money— (a) at interest; or (b) repayable at a premium or repayable with any consideration in money or money’s worth; exchange-traded commodity (在交易所買賣的商品) means gold or silver traded on a commodity exchange in Hong Kong to which the Commodity Exchanges (Prohibition) Ordinance (Cap. 82) does not apply by virtue of section 3(d) of that Ordinance;foreign exchange contract (外匯交易合約) means a contract other than a futures contract and an options contract, whereby the parties to the contract agree to exchange different currencies at a future time; futures contract (期貨合約) means— (a) a contract or an option on a contract that is listed or traded on the Hong Kong Futures Exchange Limited; or (b) any other contract for differences—(i) that is listed on a specified stock exchange, or traded on a specified futures exchange, within the meaning of section 1 of Part 1 of Schedule 1 to the Securities and Futures Ordinance (Cap. 571);(ii) that an authorized institution within the meaning of the Banking Ordinance (Cap. 155) may enter into under that Ordinance; or(iii) the transaction in respect of which is regulated by or under, or is carried out in compliance with, the Securities and Futures Ordinance (Cap. 571);

investee company (獲投資公司) means— (a) a corporation that has ITVFC and a partner fund as shareholders under the ITVF Scheme; or (b) a corporation that—(i) had, at any time, ITVFC and a partner fund (Fund A) as shareholders under the ITVF Scheme; and(ii) has, since that time, continued to have a partner fund (whether Fund A or another partner fund) as a shareholder; (Added L.N. 69 of 2018) ITVF Scheme (創基計劃) means the Innovation and Technology Venture Fund Scheme established by the Innovation and Technology Commission; (Added L.N. 69 of 2018)ITVFC (創基公司) means The Innovation and Technology Venture Fund Corporation incorporated under the Companies Ordinance (Cap. 622); (Added L.N. 69 of 2018)non-resident partner fund (非居港夥伴基金) means a partner fund that is a non-resident person within the meaning of section 20AB(3); (Added L.N. 69 of 2018) options contract (期權合約) means a contract that gives the holder of the contract the option or right, exercisable at or before a time specified in the contract to— (a) buy or sell—(i) at an agreed consideration an agreed quantity of a specified futures contract, share or other property; or(ii) an agreed value of a specified futures contract, share or other property; or (b) be paid an amount of money calculated by reference to the value of such futures contract, share or other property or by reference to the level of an index, as may be specified in the contract; partner fund (夥伴基金) means a fund that is a party (whether or not through an agent) to an agreement— (a) to which ITVFC is also a party; (b) that stipulates the overall rights and obligations of ITVFC and the fund in respect of their participation in the ITVF Scheme; and (c) that is valid and in force; (Added L.N. 69 of 2018) property (財產) includes— (a) money, goods, choses in action and land, whether in Hong Kong or elsewhere; and (b) obligations, easements and every description of estate, interest and profit, present or future, vested or contingent, arising out of or incident to property as defined in paragraph (a); securities (證券) means— (a) subject to section 21(6) of Schedule 17A (specified alternative bond scheme and its treatment under this Ordinance (other than Part 4AA)), shares, stocks, debentures, loan stocks, funds, bonds or notes of, or issued by, a body, whether incorporated or unincorporated, or a government or municipal government authority (excluding shares, stocks, debentures, loan stocks, funds, bonds or notes of, or issued by, a private company which is not a special purpose vehicle or an excepted private company); (Amended 10 of 2013 s. 19; 13 of 2015 s. 11; 21 of 2025 s. 33) (b) rights, options or interests (whether described as units or otherwise) in, or in respect of, such shares, stocks, debentures, loan stocks, funds, bonds or notes; (c) certificates of interest or participation in, temporary or interim certificates for, receipts for, or warrants to subscribe for or purchase, such shares, stocks, debentures, loan stocks, funds, bonds or notes; (d) interests in any collective investment scheme; (e) interests, rights or property, whether in the form of an instrument or otherwise, commonly known as securities; (Amended 28 of 2012 ss. 912 & 920; 13 of 2015 s. 11) share (股份) means any share in the share capital of a corporation, and, except where a distinction between stock and shares is express or implied, includes stock; (Amended L.N. 69 of 2018)specified person (指明人士) has the meaning given by section 20AC(6). (Added L.N. 69 of 2018) 2. For the purposes of the definition of securities in section 1 of this Part—excepted private company (例外私人公司) has the meaning given by section 20ACA(2);private company (私人公司) has the meaning given by section 20ACA(2);special purpose vehicle (特定目的工具) has the meaning given by section 20ACA(2).(Added 13 of 2015 s. 11) 3. For the purposes of paragraphs (a), (b) and (c) of the definition of securities in section 1 of this Part, a regulatory capital security is treated as a bond. (Added 12 of 2016 s. 16) Schedule 16A (Repealed 5 of 2019 s. 10) Schedule 16B (Repealed 5 of 2019 s. 10) Schedule 16C [ss. 20AM, 20AN, 20AO, 20AP & 20AS & Schs. 16D, 16E & 17A] (Amended 9 of 2021 s. 11; 8 of 2023 s. 6)Classes of Assets Specified for Transactions for Purposes of Sections 20AN and 20AO and Schedule 16E (Amended 9 of 2021 s. 11; 8 of 2023 s. 6)(Schedule 16C added 5 of 2019 s. 11) Part 1 1. Securities 2. Shares, stocks, debentures, loan stocks, funds, bonds or notes of, or issued by, a private company 3. Futures contracts 4. Foreign exchange contracts under which the parties to the contracts agree to exchange different currencies on a particular date 5. Deposits other than those made by way of a money-lending business 6. Deposits (as defined by section 2(1) of the Banking Ordinance (Cap. 155)) made with a bank (as defined by Part 1 of Schedule 1 to the Securities and Futures Ordinance (Cap. 571)) 7. Certificates of deposit (as defined by Part 1 of Schedule 1 to the Securities and Futures Ordinance (Cap. 571)) 8. Exchange-traded commodities 9. Foreign currencies 10. OTC derivative products (as defined by Part 1 of Schedule 1 to the Securities and Futures Ordinance (Cap. 571)) 11. An investee company’s shares co-invested by a partner fund and ITVFC under the ITVF Scheme Part 2 1. In this Schedule—collective investment scheme (集體投資計劃) means an arrangement in respect of any property—(a) under which either or both of the following apply—(i) the property is managed as a whole by, or on behalf of, the person operating the arrangement;(ii) the contributions of the persons participating in the arrangement (participating persons) and the profits or income from which payments are made to them are pooled;(b) under which the participating persons do not have day-to-day control over the management of the property (whether or not they have the right to be consulted on, or to give directions in respect of, the management); and(c) the purpose or effect (or pretended purpose or effect) of which is to enable the participating persons (whether by acquiring any right, interest, title or benefit in the property or any part of the property or otherwise) to participate in or receive—(i) profits, income or other returns represented to arise (or to be likely to arise) from the acquisition, holding, management or disposal of the property (or any part of the property), or sums represented to be paid (or to be likely to be paid) out of any such profits, income or other returns; or(ii) a payment or other returns arising from the acquisition, holding or disposal of, the exercise of any right in, the redemption of, or the expiry of, any right, interest, title or benefit in the property (or any part of the property);contract for differences (差價合約) means an agreement the purpose or effect of which is to obtain a profit or avoid a loss by reference to fluctuations in the value or price of property of any description or in an index or other factor designated for that purpose in the agreement;debenture (債權證) includes debenture stocks, bonds, and other debt securities of a corporation (whether constituting a charge on the assets of the corporation or not);deposit (存款) means a loan of money—(a) at interest; or(b) repayable at a premium or repayable with any consideration in money or money’s worth;exchange-traded commodity (交易所買賣商品) means gold or silver traded on a commodity exchange in Hong Kong to which the Commodity Exchanges (Prohibition) Ordinance (Cap. 82) does not apply by virtue of section 3(d) of that Ordinance;futures contract (期貨合約) means—(a) a contract or an option on a contract made under the rules or convention of a futures market; or(b) any other contract for differences—(i) that is listed on a specified stock exchange, or traded on a specified futures exchange, within the meaning of section 1 of Part 1 of Schedule 1 to the Securities and Futures Ordinance (Cap. 571);(ii) that an authorized institution within the meaning of the Banking Ordinance (Cap. 155) may enter into under that Ordinance; or(iii) the transaction in respect of which is regulated by or under, or is carried out in compliance with, the Securities and Futures Ordinance (Cap. 571);futures market (期貨市場) has the meaning given by section 1 of Part 1 of Schedule 1 to the Securities and Futures Ordinance (Cap. 571);investee company (獲投資公司) has the meaning given by section 20AR(2);ITVF Scheme (創基計劃) has the meaning given by section 20AR(2);ITVFC (創基公司) has the meaning given by section 20AR(2);partner fund (夥伴基金) has the meaning given by section 20AR(2);private company (私人公司) has the meaning given by section 20AO(4);property (財產) has the meaning given by section 20AM(3);securities (證券) means—(a) subject to section 21(6) of Schedule 17A (specified alternative bond scheme and its treatment under this Ordinance (other than Part 4AA)), shares, stocks, debentures, loan stocks, funds, bonds or notes of, or issued by, a body (including a special purpose entity), whether incorporated or unincorporated, or a government or municipal government authority; (Amended 21 of 2025 s. 33)(b) rights, options or interests (whether described as units or otherwise) in, or in respect of, such shares, stocks, debentures, loan stocks, funds, bonds or notes;(c) certificates of interest or participation in, temporary or interim certificates for, receipts for, or warrants to subscribe for or purchase, such shares, stocks, debentures, loan stocks, funds, bonds or notes;(d) interests in any collective investment scheme;(e) interests, rights or property (whether in the form of an instrument or otherwise) commonly known as securities; or(f) a structured product in respect of which the issue of any advertisement, invitation or document that is or contains an invitation to the public to do any act referred to in section 103(1)(a) of the Securities and Futures Ordinance (Cap. 571) is authorized, or required to be authorized, under section 105(1) of that Ordinance;share (股份) means any share in the share capital of a corporation, and, except where a distinction between stock and shares is express or implied, includes stock;special purpose entity (特定目的實體) has the meaning given by section 20AO(4). Schedule 16D [ss. 2, 4, 19CA, 40AC, 40AD, 51C & 80](Amended 21 of 2025 s. 32)Eligible Carried Interest and its Tax Treatment (Schedule 16D added 9 of 2021 s. 12) Part 1 Preliminary 1. Interpretation In this Schedule—associated corporation (相聯法團), in relation to a corporation, means—(a) another corporation over which the corporation has control;(b) another corporation that has control over the corporation; or(c) another corporation that is under the control of the same person as is the corporation;associated partnership (相聯合夥), in relation to a partnership, means—(a) another partnership over which the partnership has control;(b) another partnership that has control over the partnership; or(c) another partnership that is under the control of the same person as is the partnership;certified investment fund (經核證投資基金)—see section 2 of this Schedule;control (控制)—(a) in relation to a corporation, means the power of a person to secure—(i) by means of the holding of shares or the possession of voting power in or in relation to that corporation or any other corporation; or(ii) by virtue of any powers conferred by the articles of association or other document regulating that corporation or any other corporation,that the affairs of that corporation are conducted in accordance with the wishes of the person;(b) in relation to a partnership, means the power of a person to secure—(i) by means of the holding of interests or the possession of voting power in or in relation to that partnership or any other partnership; or(ii) by virtue of any powers conferred by the partnership agreement or other document regulating that partnership or any other partnership,that the affairs of that partnership are conducted in accordance with the wishes of the person;disposal of investment (投資處置) includes part disposal of an investment and the disposal of particular investments;eligible carried interest (具資格附帶權益)—see section 3 of this Schedule;entity (實體) means a body of persons (corporate or unincorporate) or a legal arrangement, and includes—(a) a corporation;(b) a partnership; and(c) a trust;external investor (外部投資者) means a person who participates in a certified investment fund or a specified entity as an investor without day-to-day control over the fund or entity;investment management services (投資管理服務), in relation to a certified investment fund or a specified entity, include—(a) seeking funds for the fund or entity from external investors or potential external investors;(b) researching and advising on potential investments to be made for the fund or entity;(c) acquiring, managing or disposing of property or investments for the fund or entity; and(d) acting for the fund or entity with a view to assisting an entity in which the fund or entity has made an investment to raise funds;profit-related return (利潤關聯回報)—see section 3 of this Schedule;qualifying employee (合資格僱員)—see section 8(4) of this Schedule;qualifying payer (合資格支付人)—see section 2 of this Schedule;qualifying person (合資格人士)—see section 4(3) of this Schedule;specified entity (指明實體)—see section 2 of this Schedule;sum (款項) includes any money or money’s worth. 2. Meaning of certified investment fund, qualifying payer and specified entity In this Schedule—certified investment fund (經核證投資基金) means a fund within the meaning of section 20AM that is certified by the Monetary Authority to be in compliance with the criteria for certification published by the Monetary Authority;qualifying payer (合資格支付人) means—(a) a certified investment fund;(b) an associated corporation, or an associated partnership, of a certified investment fund that is a corporation or a partnership; or(c) a specified entity;specified entity (指明實體) means The Innovation and Technology Venture Fund Corporation incorporated under the Companies Ordinance (Cap. 622). 3. Meaning of eligible carried interest and profit-related return (1) Eligible carried interest is a sum received by, or accrued to, a person by way of profit-related return from the provision of investment management services by the person for a certified investment fund or a specified entity.(2) A sum received by, or accrued to, a person is so received or accrued by way of profit-related return if, under the agreement governing the operation of the certified investment fund or the specified entity, all of the following conditions are satisfied—(a) the sum is received or accrued after the payment of a return on investments in the fund or entity subject to the fulfilment of the hurdle rate in the fund or entity;(b) the sum is to be, or may be, received or accrued only if—(i) there are profits for a period on the investments, or on particular investments, made for the fund or entity; or(ii) there are profits arising from a disposal of investment made for the fund or entity;(c) the sum that is to be, or may be, received or accrued is variable by reference to those profits;(d) the returns to external investors of the fund or entity are also determined by reference to those profits.(3) If a part of the sum does not satisfy any one of the conditions in subsection (2), that part is not to be regarded as received by, or accrued to, a person by way of profit-related return.(4) If—(a) one or more sums are received by, or accrued to, a person from a certified investment fund or a specified entity by way of profit-related return in a year of assessment (actual sums); and(b) there was no significant risk that at least a certain amount of the actual sum (minimum amount) would not be received by, or accrued to, the person,then the amount of the actual sum, or of the aggregate of the actual sums, that is equal to the minimum amount is not to be regarded as eligible carried interest.(5) For the purposes of subsection (4)(b), the risk is to be assessed—(a) in relation to each actual sum (and the investments to which it relates) individually—by taking into account any other sums that might have been received by, or accrued to, the person from the certified investment fund or the specified entity instead of that actual sum; and(b) in relation to the actual sum or sums, and any other sums that might have been received by, or accrued to, the person from the fund or entity by way of profit-related return in the year of assessment (and the investments to which all those sums relate)—by taking into account all those sums as a whole.(6) For the purposes of subsection (4)(b), the risk is also to be assessed as at the latest of—(a) the time when the person enters into an agreement for the provision of investment management services for the certified investment fund or the specified entity;(b) the time when the person begins to carry out investment management services directly or indirectly for the fund or entity; and(c) the time when a change is made to the agreement referred to in paragraph (a) so far as relating to the amount of the sums that are to be, or may be, received by or accrued to the person.(7) For the purposes of subsection (4)(b), any risk that a sum is prevented from being received by, or accrued to, a person (by reason of insolvency or otherwise) is to be ignored.(8) If more than one actual sum is received by, or accrued to, a person in a year of assessment, the minimum amount is to be apportioned between the actual sums so that, for the purposes of subsection (4)—(a) the part of the minimum amount that is attributable to a particular actual sum is to be apportioned to that actual sum; and(b) the part of the minimum amount that is not attributable to any particular actual sum is to be apportioned between the actual sums on a just and reasonable basis.(9) For the purposes of subsection (8), any part of the minimum amount is attributable to a particular actual sum (so that the risk under subsection (4)(b) for that part is to be assessed in accordance with subsection (5)(a)) to the extent that there was no significant risk that that part would not be received by, or accrued to, the person in relation to that actual sum.(10) Despite subsections (2), (3), (4), (5), (6), (7), (8) and (9), any sum received by, or accrued to, a person in respect of investment management services, that—(a) is distributed by a specified entity; and(b) arises from profits derived from a disposal of shares of an investee company (as defined by section 20AR(2)),is to be regarded as received or accrued by way of profit-related return.(11) In this section—hurdle rate (門檻回報率) means a preferred rate of return on investments in a certified investment fund or a specified entity, that is stipulated in the agreement governing the operation of the fund or entity. Part 2 Profits Tax Treatment of Eligible Carried Interest 4. Profits tax concessions for qualifying person (1) Where a person is chargeable to profits tax in respect of eligible carried interest for a year of assessment and all of the conditions in subsection (2) are satisfied in relation to the eligible carried interest, then—(a) the person’s assessable profits in respect of the eligible carried interest are to be calculated in accordance with section 6 of this Schedule; and(b) profits tax is to be charged on those assessable profits of the person at the rate specified in section 7 of this Schedule.(2) The conditions are that—(a) for the year of assessment, the person by whom the eligible carried interest is received, or to whom the eligible carried interest is accrued, is a qualifying person;(b) the eligible carried interest is received by, or accrued to, the person from one, or more than one, qualifying payer;(c) the eligible carried interest arises from profits on investments, profits on particular investments, or profits on a disposal of investment, that are earned from a transaction—(i) in shares, stocks, debentures, loan stocks, funds, bonds or notes of, or issued by, a private company (as specified in Schedule 16C);(ii) in shares of, or comparable interests in, a special purpose entity or an interposed special purpose entity (as defined by section 20AO(4)) that holds (whether directly or indirectly) and administers—(A) one or more investee private companies (as defined by section 20AO(4)); and(B) no other assets of a class specified in Schedule 16C;(iii) in shares, stocks, debentures, loan stocks, funds, bonds or notes of, or issued by, an investee private company (as defined by section 20AO(4)); or(iv) incidental to the carrying out of a transaction mentioned in subparagraph (i), (ii) or (iii);(d) if the profits that are earned from a transaction mentioned in paragraph (c) are from a transaction by a certified investment fund or a special purpose entity—those profits are exempt from profits tax in accordance with section 20AN or 20AO.(3) A person is a qualifying person for a year of assessment if, during the basis period for the year of assessment, the person—(a) is a corporation licensed under Part V of the Securities and Futures Ordinance (Cap. 571) to carry on, or an authorized financial institution registered under that Part for carrying on, a business in any regulated activity as defined by Part 1 of Schedule 5 to that Ordinance;(b) carries out investment management services in Hong Kong, or arranges such services to be carried out in Hong Kong, for a certified investment fund that is a qualified investment fund as defined by section 20AN(6); or(c) carries out investment management services in Hong Kong, or arranges such services to be carried out in Hong Kong, for a specified entity. 5. Investment management services carried out in Hong Kong (1) Section 4(1) of this Schedule does not apply to a person in relation to eligible carried interest received by, or accrued to, the person from the provision of investment management services by the person for a certified investment fund or a specified entity for a year of assessment unless the person satisfies the conditions in both subsections (2) and (3).(2) The condition in this subsection is satisfied if, during the whole of the applicable period, the investment management services concerned are—(a) either—(i) carried out in Hong Kong by the person; or(ii) arranged by the person to be carried out in Hong Kong; and(b) not carried out outside Hong Kong by a permanent establishment (that is, a branch, management or other place of business, but not including an agency, unless the agent has, and habitually exercises, a general authority to negotiate and conclude contracts on behalf of a principal).(3) The condition in this subsection is satisfied if, during the whole of the applicable period—(a) the average number of full-time employees in Hong Kong who carry out the investment management services concerned and have the qualifications necessary for doing so during the basis period for each year of assessment falling within the applicable period is—(i) adequate in the opinion of the Commissioner; and(ii) in any event, 2 or more; and(b) the total amount of operating expenditure incurred in Hong Kong for the provision of the investment management services concerned during the basis period for each year of assessment falling within the applicable period is—(i) adequate in the opinion of the Commissioner; and(ii) in any event, $2,000,000 or more.(4) In this section—applicable period (適用期間) means the period beginning on the day on which a person begins to carry out investment management services directly or indirectly for a certified investment fund or a specified entity and ending on the day on which eligible carried interest is received by, or accrued to, the person. 6. Profits tax calculation for qualifying person (1) If section 4(1) of this Schedule applies to a qualifying person in relation to eligible carried interest—(a) the person is chargeable to profits tax for the basis period for a year of assessment on the net eligible carried interest calculated in accordance with subsection (2); and(b) the person’s assessable profits in respect of the eligible carried interest are to be calculated on the basis of the net eligible carried interest calculated in accordance with subsection (2).(2) The calculation of net eligible carried interest is in accordance with the following formula— A = B – C – D + E where: A means the net eligible carried interest; B means the eligible carried interest received by, or accrued to, the qualifying person from one, or more than one, qualifying payer during the basis period for the year of assessment; C means the outgoings and expenses to the extent that they are incurred during the basis period for the year of assessment to produce B; D means the allowances allowed under Part 6, to the extent that the relevant assets counted for the allowances are used during the basis period for the year of assessment to produce B; E means the balancing charge to be made under Part 6, to the extent that the relevant assets counted for the balancing charge are used during the basis period for the year of assessment to produce B. 7. Rate of profits tax for qualifying person For a year of assessment commencing on or after 1 April 2020, the rate of profits tax in respect of the net eligible carried interest mentioned in section 6 of this Schedule is 0%. Part 3 Salaries Tax Treatment of Eligible Carried Interest 8. Salaries tax concessions for qualifying employee (1) This section applies to an individual who, for a year of assessment, is a qualifying employee.(2) If assessable income is accrued to a qualifying employee from an employment under which investment management services are provided by the employee for, or on behalf of, a qualifying person for a certified investment fund or a specified entity, the employee’s assessable income from the employment for the year of assessment is to be calculated in accordance with subsection (3).(3) The calculation is in accordance with the following formula— A = B – (C × D) where: A means the assessable income accrued from the employment for the year of assessment; B means the income accrued from the employment for the year of assessment; C means that part of B paid out of the eligible carried interest received by, or accrued to, a qualifying person and to which section 4(1) of this Schedule applies for the assessment of that eligible carried interest for profits tax; D means the percentage specified in section 9 of this Schedule. (4) In this section—qualifying employee (合資格僱員) means an individual who satisfies both of the following conditions—(a) the individual is employed by—(i) a qualifying person; or(ii) the associated corporation, or the associated partnership, of a qualifying person who is a corporation or a partnership, if the associated corporation or the associated partnership carries on a business in Hong Kong;(b) the individual is carrying out the duties of the employment by providing investment management services in Hong Kong for, or on behalf of, the qualifying person. 9. Percentage of eligible carried interest to be excluded for salaries tax calculation For a year of assessment commencing on or after 1 April 2020, the percentage mentioned in section 8(3) of this Schedule is 100%. Part 4 Provision of Information and Retention of Records 10. Obligations of qualifying person: information and records (1) Part 9 and section 80 apply, with the modifications specified in this section, to a person who makes a claim to the Commissioner that—(a) the person is a qualifying person; and(b) eligible carried interest received by, or accrued to, the person is to be assessed for profits tax in accordance with section 4(1) of this Schedule for a year of assessment.(2) The person must provide to the Commissioner in the person’s return or in other manner or form that may be required by the Commissioner—(a) the information in relation to the eligible carried interest; and(b) the additional information in relation to an employee of the person, if—(i) the person makes a payment or an accrual of eligible carried interest to the employee; and(ii) the employee makes a claim to the Commissioner that—(A) the employee is a qualifying employee; and(B) eligible carried interest received by, or accrued to, the employee is to be assessed for salaries tax in accordance with section 8 of this Schedule for a year of assessment.(3) The additional information in relation to an employee includes—(a) the employee’s name;(b) the employee’s address;(c) the employee’s Hong Kong Identity Card number (or the number and issuing country of the employee’s passport);(d) the amount of eligible carried interest received by, or accrued to, the employee for the year of assessment; and(e) details of the qualifying payer from which the eligible carried interest was received by, or accrued to, the employee for the year of assessment.(4) For the purposes of section 51C, a person mentioned in subsection (1) must—(a) keep sufficient records to enable the accuracy and completeness of a payment or an accrual of eligible carried interest made by the person to be readily ascertained; and(b) retain the records for a period of not less than 7 years beginning on the date of the payment or the accrual of eligible carried interest, whichever is the later.(5) Section 80 applies to a failure to comply with section 51C, as modified by subsection (4), in the same way that section 80 applies to a failure to comply with that section 51C. 11. Obligations of qualifying payer: information and records (1) This section applies to a qualifying payer if—(a) a person makes a claim to the Commissioner that—(i) the person is a qualifying person; and(ii) eligible carried interest received by, or accrued to, the person is to be assessed for profits tax in accordance with section 4(1) of this Schedule for a year of assessment; and(b) the eligible carried interest was paid or accrued to the person by the qualifying payer for the year of assessment.(2) The qualifying payer must provide to the Commissioner the information that may be required by the Commissioner in relation to the payments or the accruals of eligible carried interest made to the person mentioned in subsection (1).(3) For the purposes of providing information to the Commissioner, the qualifying payer must—(a) keep sufficient records to enable the accuracy and completeness of a payment or an accrual of eligible carried interest made by the qualifying payer to be readily ascertained; and(b) retain the records for a period of not less than 7 years beginning on the date of the payment or the accrual of eligible carried interest, whichever is the later.(4) If a qualifying payer fails to comply with the requirements in subsection (2) or (3), the Commissioner may determine that—(a) the person making the claim is not a person by whom the eligible carried interest is received, or to whom the eligible carried interest is accrued; and(b) the eligible carried interest is not to be assessed for profits tax in accordance with section 4(1) of this Schedule. Part 5 Miscellaneous Matters 12. Commissioner may seek advice from Monetary Authority on certain matters (1) This section applies if a claim is made by a person to the Commissioner in relation to—(a) profits tax treatment of eligible carried interest under section 4 of this Schedule; or(b) salaries tax treatment of eligible carried interest under section 8 of this Schedule.(2) After receiving the claim, the Commissioner may seek advice from the Monetary Authority, or an officer authorized by the Monetary Authority, in order to ascertain—(a) whether a service constitutes an investment management service;(b) whether a sum has been received by, or accrued to, a person by way of profit-related return so that it may be eligible carried interest;(c) whether an entity is, and has remained, a certified investment fund; and(d) any other matter that the Commissioner considers appropriate in relation to the claim. 13. Anti-avoidance provisions relating to arrangement to obtain tax benefit (1) If—(a) a person enters into an arrangement; and(b) the Commissioner is satisfied that the main purpose, or one of the main purposes, of the person entering into the arrangement is to obtain a tax benefit, whether for the person or any other person, in relation to a liability to pay profits tax or salaries tax in respect of eligible carried interest under this Schedule,this Schedule does not apply in relation to any sums received by, or accrued to, the person or any other person during a basis period for a year of assessment relevant to the arrangement.(2) For the purposes of subsection (1), a basis period for a year of assessment is relevant to an arrangement if, in the opinion of the Commissioner, the arrangement has effect during the basis period.(3) Without limiting subsection (1), an arrangement to disguise as eligible carried interest a management fee that a person receives, or that accrues, from a qualifying payer is an arrangement to obtain a tax benefit.(4) In this section—management fee (管理費用), in relation to a certified investment fund or a specified entity, means a sum received by, or accrued to, a person from the provision of investment management services by the person for the fund or entity, except in so far as the sum constitutes eligible carried interest;tax benefit (稅務利益) means an avoidance, postponement or reduction of a liability to pay tax. 14. Loss sustained by qualifying person (1) This section applies to a qualifying person if, because of sections 4, 6 and 7 of this Schedule, the person does not need to pay any profits tax in respect of eligible carried interest for a year of assessment.(2) Any associated loss is not available for set off against any of the assessable profits of the person for the year of assessment or any subsequent year of assessment.(3) In this section—associated loss (相聯虧損) means any loss sustained by a qualifying person in a year of assessment in respect of eligible carried interest received by, or accrued to, the person arising from a transaction mentioned in section 4(2)(c) of this Schedule. Part 6 Application 15. Application of this Schedule (1) The tax treatment of eligible carried interest under this Schedule applies in relation to eligible carried interest received by, or accrued to, a qualifying person or a qualifying employee on or after 1 April 2020, for any year of assessment commencing on or after that date.(2) To avoid doubt, this Schedule does not apply in relation to eligible carried interest received by, or accrued to, a qualifying person before 1 April 2020 but falling within the basis period for a year of assessment commencing on or after 1 April 2020.(3) For any year of assessment mentioned in subsection (1), this Schedule applies in relation to eligible carried interest received by, or accrued to, a qualifying person or a qualifying employee in the period beginning on 1 April 2020 and ending on the day immediately before the date of commencement* of the Inland Revenue (Amendment) (Tax Concessions for Carried Interest) Ordinance 2021 (9 of 2021) as it applies in relation to eligible carried interest received or accrued after that period. Editorial Note: * Commencement date: 7 May 2021. Schedule 16E [ss. 2, 19CA, 40AV, 40AW & 80 & Schs. 16C, 16F, 16G, 16H, 16I, 16J & 16K](Amended 21 of 2025 s. 32)Tax Treatment of Family-owned Investment Holding Vehicle and Family-owned Special Purpose Entity (Schedule 16E added 8 of 2023 s. 7) Part 1 Preliminary 1. Interpretation (1) In this Schedule—direct beneficial interest (直接實益權益)—see section 7 of this Schedule;entity (實體) means a body of persons (corporate or unincorporate) or a legal arrangement, and includes—(a) a corporation;(b) a partnership; and(c) a trust;ESF Office (具資格辦公室), in relation to a family—see section 2 of this Schedule;family (家族)—see section 4 of this Schedule;family office (家族辦公室) means a family office within the meaning of section 2 of this Schedule;FIHV (家控工具) means a family-owned investment holding vehicle within the meaning of section 5 of this Schedule;FSPE (家族特體) means a family-owned special purpose entity within the meaning of section 6 of this Schedule;IFSPE (中間家族特體) means an interposed family-owned special purpose entity within the meaning of section 6 of this Schedule;immovable property (不動產)—(a) means—(i) land (whether covered by water or not);(ii) any estate, right, interest or easement in or over any land; and(iii) things attached to land or permanently fastened to anything attached to land; and(b) does not include infrastructure;indirect beneficial interest (間接實益權益)—see section 7 of this Schedule;infrastructure (基礎設施)—(a) means any publicly or privately owned facility providing or distributing services for the benefit of the public; and(b) includes any water, sewage, energy, fuel, transportation or communication facility;investee private company (獲投資私人公司)—see subsections (2) and (3);investment activity (投資活動), in relation to an FIHV, includes—(a) conducting research and advising on any potential investments to be made by the FIHV;(b) acquiring, holding, managing or disposing of property for the FIHV; and(c) establishing or administering an FSPE for holding and administering one or more underlying investments of the FIHV;member (成員), in relation to a family—see section 4 of this Schedule;private company (私人公司) means a company (whether incorporated in or outside Hong Kong) that is not allowed to issue any invitations to the public to subscribe for any shares or debentures of the company;property (財產) includes—(a) money, goods, choses in action and land (whether in Hong Kong or elsewhere); and(b) obligations, easements and every description of estate, interest and profit, present or future, vested or contingent, arising out of or incidental to property mentioned in paragraph (a);Schedule 16C asset (附表16C資產) means an asset that falls within a class specified in Schedule 16C.(2) An investee private company, in relation to an FIHV, is a private company any shares of which is held by an FSPE or IFSPE for the FIHV.(3) A reference to an FSPE or IFSPE in subsection (2) includes—(a) if the FSPE or IFSPE is a partnership—a partner in the partnership; and(b) if the FSPE or IFSPE is a trust—a trustee of the trust.(4) For the purposes of this Schedule, an FIHV is related to a family if one or more than one member of the family has or is taken to have at least 95%, in aggregate, of the beneficial interest (whether direct or indirect) in the FIHV.(5) For the purposes of this Schedule, an FIHV is managed by an ESF Office of the family to which the FIHV is related if the ESF Office carries out any investment activities. 2. Meaning of ESF office of family (1) A private company is a family office if—(a) the company is normally managed or controlled in Hong Kong; and(b) the company provides services to specified persons of a family.(2) A family office is an eligible single family office (ESF Office) of a family (particular family) for a year of assessment if—(a) at all times during the basis period for the year of assessment, one or more than one member of the family has at least 95%, in aggregate, of the beneficial interest (whether direct or indirect) in the family office;(b) the family office satisfies the safe harbour rule in relation to the family for the year of assessment; and(c) the following conditions are met in respect of the family office—(i) the family office provides services to specified persons of the family during the basis period for the year of assessment; and(ii) the fees for the provision of those services are chargeable to profits tax under section 14 for that year.(3) Without limiting subsection (2)(a), if both Condition 1 and Condition 2 are met with respect to the family office, the members of the particular family are taken to have at least 95%, in aggregate, of the beneficial interest (whether direct or indirect) in the family office.(4) Condition 1 is that one or more than one member of the particular family has at least 75%, but less than 95%, in aggregate, of the beneficial interest (whether direct or indirect) in the family office.(5) Condition 2 is—(a) that one or more than one charitable entity has a beneficial interest (whether direct or indirect) in the family office; and(b) that—(i) no unrelated person has a beneficial interest (whether direct or indirect) in the family office; or(ii) the total percentage of the beneficial interest (whether direct or indirect) that an unrelated person has in the family office or, if there is more than one unrelated person, the total percentage of the beneficial interest (whether direct or indirect) that those unrelated persons have in that office does not exceed 5%.(6) For the purposes of subsection (5)(b)(i), an unrelated person is not regarded as having a beneficial interest in the family office if the unrelated person has the beneficial interest only because a charitable entity has a beneficial interest (whether direct or indirect) in the office.(7) For the purposes of subsection (5)(b)(ii), in determining the extent of the beneficial interest (whether direct or indirect) that an unrelated person has in the family office, any beneficial interest (whether direct or indirect) that the unrelated person has—(a) in a charitable entity that has a beneficial interest (whether direct or indirect) in the family office; or(b) in any other unrelated person that is an entity and that has a beneficial interest (whether direct or indirect) in the office,is not to be taken into account.(8) In this section—charitable entity (慈善實體) means a charitable institution or trust of a public character that is exempt from tax under section 88;safe harbour rule (安全港規則)—see section 3 of this Schedule;specified person (指明人士), in relation to a family, means—(a) an FIHV that is related to the family;(b) an FSPE in which an FIHV mentioned in paragraph (a) has a beneficial interest (whether direct or indirect);(c) an IFSPE of an FIHV mentioned in paragraph (a); and(d) a member of the family;unrelated person (無關連人士), in relation to a particular family—(a) means—(i) an entity in which no member of the particular family has a beneficial interest (whether direct or indirect); or(ii) a natural person who is not a member of the family; and(b) does not include a charitable entity. 3. Provision supplementary to section 2 of this Schedule—safe harbour rule (1) For the purposes of section 2 of this Schedule, a family office satisfies the safe harbour rule in relation to a family for a year of assessment (subject year) if the family office—(a) falls within the 1-year safe harbour under subsection (2) in relation to the family for the subject year; or(b) falls within the multiple-year safe harbour under subsection (3) in relation to the family for the specified years.(2) A family office falls within the 1-year safe harbour in relation to a family for a subject year if, for that year, the FOMP percentage of the family office is more than or equal to 75%.(3) A family office falls within the multiple-year safe harbour in relation to a family for the specified years if, for those years, the average FOMP percentage of the family office is more than or equal to 75%.(4) In this section, a reference to the specified years for a family office is—(a) if the family office has provided services in Hong Kong, to any person or entity, for less than 2 consecutive years of assessment immediately before the subject year—a reference to the subject year and the preceding year of assessment (the 2 years); and(b) if the family office has provided services in Hong Kong, to any person or entity, for 2 or more consecutive years of assessment immediately before the subject year—a reference to the subject year and the preceding 2 years of assessment (the 3 years).(5) The FOMP percentage of a family office for a year of assessment is calculated in accordance with the following formula— FOMP P where: FOMP means the aggregate amount of the management profits of the family office in the basis period for the year of assessment that are derived from services provided to any one or more specified persons of the family; P means the aggregate amount of profits accruing to the family office from all sources in Hong Kong in the basis period for the year of assessment. (6) The average FOMP percentage of a family office for the specified years is—(a) for the specified years within the meaning of subsection (4)(a)—the percentage arrived at by dividing the sum of the FOMP percentage of the family office for the 2 years by 2; and(b) for the specified years within the meaning of subsection (4)(b)—the percentage arrived at by dividing the sum of the FOMP percentage of the family office for the 3 years by 3.(7) In this section—specified person (指明人士) has the meaning given by section 2(8) of this Schedule. 4. Meaning of family and member of family (1) For the purposes of this Schedule—(a) a natural person (whether alive or deceased) (Person A) and all of the persons related to Person A together constitute a family; and(b) each of the persons mentioned in paragraph (a) is a member of the family.(2) For the purposes of subsection (1)(a)—(a) a spouse (including a deceased spouse) of Person A (Person B) is a person related to Person A;(b) any other natural person (whether alive or deceased) is a person related to Person A if the other natural person is—(i) a lineal ancestor of Person A (Person C);(ii) a lineal ancestor of Person B (Person D);(iii) a lineal descendant of Person A (Person E);(iv) a sibling of Person A, Person B, Person C or Person D (Person F); or(v) a lineal descendant of Person F (Person G); and(c) a spouse (including a deceased spouse) of Person E, Person F or Person G is also a person related to Person A.(3) For the purposes of this section—(a) a child of a natural person (Child A) is a lineal descendant of the natural person;(b) a child of Child A (Child B), a child of Child B, and so on, is also a lineal descendant of the natural person mentioned in paragraph (a);(c) a parent of a natural person (Parent A) is a lineal ancestor of the natural person; and(d) a parent of Parent A (Parent B), a parent of Parent B, and so on, is also a lineal ancestor of the natural person mentioned in paragraph (c).(4) In this section—child (子女), in relation to a natural person—(a) means a child of the person, or of a spouse (including a deceased spouse) or former spouse of the person, whether or not the child was born in wedlock; and(b) includes an adopted child or step child of either or both of the following—(i) the person;(ii) a spouse (including a deceased spouse) or former spouse of the person;parent (父母), in relation to a natural person, means—(a) a parent of whose marriage the person is a child;(b) the natural father or mother of the person;(c) a parent by whom the person was adopted; or(d) a step parent of the person;sibling (兄弟姊妹), in relation to Person A, Person B, Person C or Person D (relevant person), means—(a) a full or half blood sibling of the relevant person;(b) an adopted sibling of the relevant person;(c) a step sibling of the relevant person;

or(d) if the relevant person is an adopted person—a natural child of an adoptive parent of the relevant person.(5) If a person (other than a deceased spouse of Person A) (Person H) ceases to be a spouse of Person A during a year of assessment that begins on or after 1 April 2022 (subject year), for the subject year and the year of assessment immediately after the subject year (and not for any subsequent year), Person H is still regarded as a spouse of Person A.(6) If subsection (5) applies to Person H, for the subject year and the year of assessment immediately after the subject year (and not for any subsequent year)—(a) a sibling of Person H (Sibling A) and a spouse of Sibling A are respectively a sibling and a spouse of a sibling of Person B;(b) a lineal descendant and a spouse of a lineal descendant of Sibling A are respectively a lineal descendant and a spouse of a lineal descendant of a sibling of Person B;(c) a lineal ancestor of Person H (Ancestor A) is a lineal ancestor of Person B;(d) a sibling and a spouse of a sibling of Ancestor A are respectively a sibling and a spouse of a sibling of a lineal ancestor of Person B; and(e) a lineal descendant and a spouse of a lineal descendant of a sibling of Ancestor A are respectively a lineal descendant and a spouse of a lineal descendant of a sibling of a lineal ancestor of Person B.(7) If a person (other than a deceased spouse of Person E, Person F or Person G) (Person I) ceases to be a spouse of Person E, Person F or Person G during a year of assessment that begins on or after 1 April 2022 (subject year), for the subject year and the year of assessment immediately after the subject year (and not for any subsequent year), Person I is still regarded as a spouse of Person E, Person F or Person G (as the case requires). 5. Meaning of family-owned investment holding vehicle (FIHV) (1) An entity (Entity A), whether established or created (however described) in or outside Hong Kong, is a family-owned investment holding vehicle for a year of assessment if—(a) at all times during the basis period for that year, one or more than one member of a family (particular family) has at least 95%, in aggregate, of the beneficial interest (whether direct or indirect) in Entity A; and(b) Entity A is not a business undertaking for general commercial or industrial purposes mentioned in section 20AM(6).(2) Without limiting subsection (1)(a), if both Condition 1 and Condition 2 are met with respect to Entity A, the members of the particular family are taken to have at least 95%, in aggregate, of the beneficial interest (whether direct or indirect) in Entity A.(3) Condition 1 is that one or more than one member of the particular family has at least 75%, but less than 95%, in aggregate, of the beneficial interest (whether direct or indirect) in Entity A.(4) Condition 2 is—(a) that one or more than one charitable entity has a beneficial interest (whether direct or indirect) in Entity A; and(b) that—(i) no unrelated person has a beneficial interest (whether direct or indirect) in Entity A; or(ii) the total percentage of the beneficial interest (whether direct or indirect) that an unrelated person has in Entity A or, if there is more than one unrelated person, the total percentage of the beneficial interest (whether direct or indirect) that those unrelated persons have in Entity A does not exceed 5%.(5) For the purposes of subsection (4)(b)(i), an unrelated person is not regarded as having a beneficial interest in Entity A if the unrelated person has the beneficial interest only because a charitable entity has a beneficial interest (whether direct or indirect) in Entity A.(6) For the purposes of subsection (4)(b)(ii), in determining the extent of the beneficial interest (whether direct or indirect) that an unrelated person has in Entity A, any beneficial interest (whether direct or indirect) that the unrelated person has—(a) in a charitable entity that has a beneficial interest (whether direct or indirect) in Entity A; or(b) in any other unrelated person that is an entity and that has a beneficial interest (whether direct or indirect) in Entity A,is not to be taken into account.(7) In this section—charitable entity (慈善實體) means a charitable institution or trust of a public character that is exempt from tax under section 88;unrelated person (無關連人士), in relation to a particular family—(a) means—(i) an entity in which no member of the particular family has a beneficial interest (whether direct or indirect); or(ii) a natural person who is not a member of the family; and(b) does not include a charitable entity. 6. Meaning of family-owned special purpose entity (FSPE) and interposed family-owned special purpose entity (IFSPE) (1) An entity (Entity B), whether established or created (however described) in or outside Hong Kong, is a family-owned special purpose entity (FSPE) if all of the conditions specified in subsection (2) are met in respect of Entity B.(2) The conditions are—(a) an FIHV (relevant FIHV) has a beneficial interest (whether direct or indirect) in Entity B;(b) Entity B is established or created (however described) solely—(i) for holding (whether directly or indirectly) and administering one or more investee private companies;(ii) for holding (whether directly or indirectly) and administering any Schedule 16C assets; or(iii) for the purposes mentioned in subparagraphs (i) and (ii);(c) Entity B does not carry on any trade or activity (including executing a legal document) except for either or both of the purposes mentioned in paragraph (b)(i) and (ii); and(d) Entity B is neither an FIHV nor an investee private company.(3) If an FSPE has an indirect beneficial interest in an investee private company through an entity (interposed entity) that is an FSPE in which the relevant FIHV has an indirect beneficial interest, the interposed entity is an interposed family-owned special purpose entity (IFSPE) of the relevant FIHV.(4) If an FSPE has an indirect beneficial interest in an investee private company through a series of 2 or more interposed entities each of which is an FSPE in which the relevant FIHV has an indirect beneficial interest, each of the interposed entities is an IFSPE of the relevant FIHV. 7. Meaning of direct beneficial interest and indirect beneficial interest in person or entity (1) A person or entity (the particular person) has a direct beneficial interest in another person or entity (the other person) if—(a) where the other person is a corporation—(i) the particular person holds any of the issued share capital (however described) of the corporation; or(ii) (if the corporation does not have any issued share capital) the particular person is entitled to exercise or control the exercise of any voting rights in the corporation;(b) where the other person is a partnership—(i) the particular person, as a partner in the partnership, is entitled to any of the profits of the partnership; or(ii) (if the partners in the partnership are neither entitled to the profits of the partnership nor entitled to a distribution of the assets of the partnership on its dissolution) the particular person, as a partner in the partnership, is entitled to exercise or control the exercise of any voting rights in the partnership;(c) where the other person is a trust—(i) the particular person benefits under the trust estate otherwise than through the trustee of the trust; or(ii) the particular person, not being a trustee of the trust or—(A) if the trustee of the trust is a corporation—a director of the corporation;(B) if the trustee of the trust is a partnership—a partner in the partnership; or(C) if the trustee of the trust is any other entity—a principal officer of the entity,is able (or might reasonably be expected to be able) to control the activities of the trust estate or the application of its corpus or income, otherwise than through the trustee of the trust; or(d) where the other person is a person or entity that does not fall within any of paragraphs (a), (b) and (c)—(i) the particular person is entitled to any capital of the other person;(ii) (if subparagraph (i) is not applicable in relation to the other person) the particular person has any of the ownership interests in the other person;(iii) (if neither subparagraph (i) nor (ii) is applicable in relation to the other person) the particular person is entitled to any profits of the other person; or(iv) (if none of subparagraphs (i), (ii) and (iii) is applicable in relation to the other person) the particular person is entitled to exercise or control the exercise of any voting rights in the other person.(2) A person or entity (the particular person) has an indirect beneficial interest in another person or entity (the other person) if—(a) where the other person is a corporation—(i) the particular person is interested in any of the issued share capital (however described) of the corporation; or(ii) (if the corporation does not have any issued share capital) the particular person is entitled to exercise or control the exercise of any voting rights in the corporation;(b) where the other person is a partnership—(i) the particular person is entitled to any of the profits of the partnership; or(ii) (if the partners in the partnership are neither entitled to the profits of the partnership nor entitled to a distribution of the assets of the partnership on its dissolution) the particular person is entitled to exercise or control the exercise of any voting rights in the partnership;(c) where the other person is a trust—(i) the particular person benefits under the trust estate; or(ii) the particular person, not being a trustee of the trust or—(A) if the trustee of the trust is a corporation—a director of the corporation;(B) if the trustee of the trust is a partnership—a partner in the partnership; or(C) if the trustee of the trust is any other entity—a principal officer of the entity,is able (or might reasonably be expected to be able) to control the activities of the trust estate or the application of its corpus or income; or(d) where the other person is a person or entity that does not fall within any of paragraphs (a), (b) and (c)—(i) the particular person is entitled to any capital of the other person;(ii) (if subparagraph (i) is not applicable in relation to the other person) the particular person has any of the ownership interests in the other person;(iii) (if neither subparagraph (i) nor (ii) is applicable in relation to the other person) the particular person is entitled to any profits of the other person; or(iv) (if none of subparagraphs (i), (ii) and (iii) is applicable in relation to the other person) the particular person is entitled to exercise or control the exercise of any voting rights in the other person,through a third person that is an entity (interposed entity), or a series of 2 or more interposed entities, that is or are related to the particular person and the other person in the way described in subsection (3) or (4).(3) If there is only one interposed entity—(a) the particular person has a direct beneficial interest in the interposed entity; and(b) the interposed entity has a direct beneficial interest in the other person.(4) If there is a series of 2 or more interposed entities—(a) the particular person has a direct beneficial interest in the first interposed entity in the series;(b) each interposed entity (other than the last interposed entity) in the series has a direct beneficial interest in the next interposed entity in the series; and(c) the last interposed entity in the series has a direct beneficial interest in the other person.(5) In this section, a reference to the issued share capital of a corporation does not include the shares comprised in the issued share capital that do not entitle their holders to receive dividends (whether in cash or in kind) and a distribution of the assets of the corporation on its dissolution other than a return of capital.(6) In this section, a reference to the exercise of any voting rights in the corporation is a reference to the exercise of any voting rights at a general meeting of the corporation.(7) For a partnership the partners in which are not entitled to its profits but are entitled to a distribution of the assets of the partnership on its dissolution—a reference in this section to an entitlement to any of the profits of the partnership is taken to be a reference to an entitlement to a distribution of any of the assets of the partnership on its dissolution.(8) A reference to the particular person in subsections (1) and (2) (other than the last reference in subsection (2)) includes—(a) if the particular person is a partnership—a partner in the partnership; and(b) if the particular person is a trust—a trustee of the trust.(9) In this section—principal officer (主要職員), in relation to an entity, means a person who exercises the managerial functions of the entity. 8. Determination of extent of family member’s beneficial interest in entity etc. (1) Schedule 16F applies in determining the extent of the beneficial interest that a member of a family has in the entity mentioned in section 2(2) or 5(1) of this Schedule.(2) Schedule 16G applies, for the purposes of sections 2(5)(b)(ii) and 5(4)(b)(ii) of this Schedule, in determining the extent of the beneficial interest that an unrelated natural person has in a subject entity.(3) Schedule 16H applies, for the purposes of sections 2(5)(b)(ii) and 5(4)(b)(ii) of this Schedule, in determining the extent of the beneficial interest that an unrelated entity has in a subject entity.(4) If it is not practicable to determine the extent, in aggregate, of the beneficial interest that one or more than one member of a family has in a subject entity, subsection (5) or (6) (as the case requires) applies.(5) For a subject entity that is a specified trust related to a family, if the aggregate percentage in value of the relevant estate of the trust is at least 95%, the members of the family who are qualified beneficiaries of the trust, and those other members of the family who are entitled to benefit from the trust estate, are taken to have at least 95%, in aggregate, of the beneficial interest (whether direct or indirect) in the trust.(6) Subsections (7), (8), (9), (10) and (11) apply if the subject entity is not a specified trust (particular entity).(7) If—(a) an entity that is a specified trust related to a family (Interposed Entity A) has a direct beneficial interest in a particular entity;(b) the extent of the beneficial interest mentioned in paragraph (a) is 100%; and(c) the aggregate percentage in value of the relevant estate of the trust is at least 95%,the members of the family who are qualified beneficiaries of Interposed Entity A, and those other members of the family who are entitled to benefit from the trust estate of Interposed Entity A, are taken to have at least 95%, in aggregate, of the beneficial interest (whether direct or indirect) in Interposed Entity A.(8) If, because of subsection (7), any members of a family are taken to have at least 95%, in aggregate, of the beneficial interest in Interposed Entity A, those members are also taken to have at least 95%, in aggregate, of the beneficial interest (whether direct or indirect) in the particular entity.(9) If—(a) an entity that is a specified trust related to a family (Interposed Entity B) has an indirect beneficial interest in a particular entity through one or more other entities each of which is an eligible entity;(b) the extent of the beneficial interest mentioned in paragraph (a) is 100%; and(c) the aggregate percentage in value of the relevant estate of the trust is at least 95%,the members of the family who are qualified beneficiaries of Interposed Entity B, and those other members of the family who are entitled to benefit from the trust estate of Interposed Entity B, are taken to have at least 95%, in aggregate, of the beneficial interest (whether direct or indirect) in Interposed Entity B.(10) If, because of subsection (9), any members of a family are taken to have at least 95%, in aggregate, of the beneficial interest in Interposed Entity B, those members are also taken to have at least 95%, in aggregate, of the beneficial interest (whether direct or indirect) in the particular entity.(11) Schedule 16H applies in determining the extent of the beneficial interest that Interposed Entity A or Interposed Entity B has in a particular entity.(12) Subsection (19) applies in relation to a subject entity and a family if—(a) Condition 1 or Condition 2 is met;(b) it is not practicable to apply Schedule 16F or 16H, or both; and(c) none of the deeming provisions can be relied on.(13) Condition 1 is that the subject entity is a specified trust (Trust A) and one or more than one member of a family—(a) is a specified beneficiary under Trust A; or(b) has a connection with the subject entity through—(i) another specified trust; or(ii) a series of 2 or more entities in which there is one or more than one specified trust.(14) Condition 2 is that the subject entity is not a specified trust but one or more than one member of a family has a connection with the subject entity through—(a) a specified trust (Trust B); or(b) a series of 2 or more entities in which there is one or more than one specified trust.(15) For the purposes of subsection (13)(b)(i), a member of a family has a connection with Trust A through a specified trust if—(a) the specified trust is related to the family; and(b) the specified trust—(i) is a specified beneficiary under Trust A; or(ii) has a beneficial interest (whether direct or indirect) in Trust A.(16) For the purposes of subsection (13)(b)(ii), a member of a family has a connection with Trust A through a series of 2 or more entities—(a) if—(i) the member of the family has a beneficial interest (whether direct or indirect) in the first entity in the series;(ii) each entity in the series—(A) has a beneficial interest (whether direct or indirect) in the next following entity in the series (next following interposed entity); or(B) if the next following interposed entity is a specified trust—is a specified beneficiary under the trust; and(iii) the last entity in the series—(A) has a beneficial interest (whether direct or indirect) in Trust A; or(B) is a specified beneficiary under Trust A; or(b) if—(i) the first entity in the series is a specified trust related to the family;(ii) each entity in the series—(A) has a beneficial interest (whether direct or indirect) in the next following interposed entity; or(B) if the next following interposed entity is a specified trust—is a specified beneficiary under the trust; and(iii) the last entity in the series—(A) has a beneficial interest (whether direct or indirect) in Trust A; or(B) is a specified beneficiary under Trust A.(17) For the purposes of subsection (14)(a), a member of a family has a connection with the subject entity through Trust B if—(a) Trust B is related to the family; and(b) Trust B has a beneficial interest (whether direct or indirect) in the subject entity.(18) For the purposes of subsection (14)(b), a member of a family has a connection with the subject entity through a series of 2 or more entities—(a) if—(i) the member of the family has a beneficial interest (whether direct or indirect) in the first entity in the series;(ii) each entity in the series—(A) has a beneficial interest (whether direct or indirect) in the next following entity in the series (next following entity); or(B) if the next following entity is a specified trust—is a specified beneficiary under the trust; and(iii) the last entity in the series has a beneficial interest (whether direct or indirect) in the subject entity; or(b) if—(i) the first entity in the series is a specified trust related to the family;(ii) each entity in the series—(A) has a beneficial interest (whether direct or indirect) in the next following entity; or(B) if the next following entity is a specified trust—is a specified beneficiary under the trust; and(iii) the last entity in the series has a beneficial interest (whether direct or indirect) in the subject entity.(19) If the Commissioner is satisfied that it is highly probable that one or more than one member of the family will have at least 95%, in aggregate, of the beneficial interest in the subject entity—(a) the Commissioner may regard the extent requirement as having been complied with in relation to the family and the subject entity; and(b) one or more than one member of the family is taken to have at least 95%, in aggregate, of the beneficial interest (whether direct or indirect) in the subject entity.(20) In considering whether it is highly probable that one or more than one member of a family would have at least 95%, in aggregate, of the beneficial interest in a subject entity, regard is to be had to all the circumstances of the case, including the following—(a) the extent of the beneficial interest (whether direct or indirect) that a member of the family has in one or more than one entity;(b) the extent of the beneficial interest (whether direct or indirect) that an entity has in one or more than one other entity;(c) the value, in aggregate, of the trust estate, or each part of the trust estate, of one or more than one specified trust related to the family that a member of the family would be able to benefit if—(i) the trustee of the trust exercises a discretionary power under the trust instrument in favour of the member or a specified beneficiary under the trust; or(ii) the conditions under the trust instrument that are applicable to the member or a specified beneficiary under the trust are met;(d) the value, in aggregate, of the trust estate, or each part of the trust estate, of one or more than one specified trust that an entity would be able to benefit if—(i) the trustee of the trust exercises a discretionary power under the trust instrument in favour of the entity or a specified beneficiary under the trust; or(ii) the conditions under the trust instrument that are applicable to the entity or a specified beneficiary under the trust are met.(21) In this section—deeming provisions (推定條文) means sections 2(3), 5(2) and 8(5), (7), (8), (9) and (10) of this Schedule;eligible entity (具資格實體) means an entity that is not a specified trust;extent requirement (程度規定), in relation to a subject entity and a family, means the requirement that one or more than one member of the family has at least 95%, in aggregate, of the beneficial interest (whether direct or indirect) in the entity;qualified beneficiary (合資格受益人), in relation to a specified trust related to a family, means—(a) a member of the family who is a specified beneficiary under the trust;(b) a member of the family who has a direct beneficial interest in a specified beneficiary under the trust that is an eligible entity; or(c) a member of the family who, through an eligible entity or a series of entities each of which is an eligible entity, has an indirect beneficial interest in a specified beneficiary under the trust that is an eligible entity;qualified entity (合資格實體)—see subsection (25);relevant estate (有關產業), in relation to a specified trust related to a family, means the trust estate of the trust, or each part of the trust estate of the trust, from which one or more than one member of the family is entitled to benefit or that is distributable for the benefit of one or more than one specified beneficiary under the trust who is a member of the family or a qualified entity of the family;specified beneficiary (指明受益人)—see subsection (24);specified trust (指明信託)—see subsection (22);subject entity (標的實體) means an entity mentioned in subsection (1);unrelated entity (無關連實體) means an entity that is an unrelated person under section 2 or 5 of this Schedule;unrelated natural person (無關連自然人) means a natural person who is an unrelated person under section 2 or 5 of this Schedule.(22) For the purposes of this section, a trust created or established (however described) under a trust instrument is a specified trust if, under the trust—(a) there is one or more than one specified beneficiary;(b) there is one or more than one class of persons or entities any of the members of which is a specified beneficiary; or(c) there is a combination of paragraphs (a) and (b).(23) For the purposes of this section, a specified trust is related to a family if one or more than one specified beneficiary under the trust is—(a) a member of the family; or(b) an entity in which one or more than one member of the family has a beneficial interest (whether direct or indirect).(24) For the purposes of this section, a person or entity is a specified beneficiary under a trust if—(a) the person or entity would be able to benefit from the trust estate if the trustee of the trust exercises a discretionary power under the trust instrument in the favour of the person or entity; or(b) the person or entity would be able to benefit from the trust estate if the conditions under the trust instrument that are applicable to the person or entity are met.(25) For the purposes of this section, an entity is a qualified entity of a family if—(a) the entity is an eligible entity; and(b) one or more than one member of the family has 100%, in aggregate, of the beneficial interest (whether direct or indirect) in the entity.(26) For the purposes of subsection (25)(b), the extent of the beneficial interest that a member of the family has in the eligible entity is to be determined in accordance with Schedule 16F. Part 2 Tax Concession for Certain Profits of Family-owned Investment Holding Vehicle 9. Profits tax concession for FIHV (1) This section applies to an FIHV for the basis period for a year of assessment.(2) Profits tax is to be charged, at the rate specified in section 24(2) of this Schedule, on the FIHV’s assessable profits for the basis period earned from the transactions specified in subsection (3) if the condition specified in subsection (4) is met.(3) The transactions are—(a) transactions in Schedule 16C assets (qualifying transactions); and(b) subject to subsection (5), transactions incidental to the carrying out of qualifying transactions (incidental transactions).(4) The condition referred to in subsection (2) is—(a) that the FIHV is normally managed or controlled in Hong Kong during the basis period; and(b) that, at all times during the basis period, the qualifying transactions of the FIHV—(i) are carried out in Hong Kong by or through an ESF Office of the family that manages the FIHV; or(ii) are arranged in Hong Kong by such an office.(5) Subsection (2) however does not apply to assessable profits earned from incidental transactions if the percentage calculated in accordance with the following formula exceeds 5%— A × 100% B where— A = the FIHV’s trading receipts from incidental transactions in the basis period; B = the total of the FIHV’s trading receipts from qualifying transactions and incidental transactions in the basis period. (6) This section is subject to sections 10, 12, 13 and 14 of this Schedule. 10. When does section 9 of this Schedule not apply—Exception 1 (FIHV) (1) Section 9 of this Schedule does not apply to an FIHV for the basis period for a year of assessment (subject year) unless—(a) the subject ESF Office complies with the Specified NAV Rule under section 11 of this Schedule;(b) the average number of qualified employees during the basis period—(i) is adequate in the opinion of the Commissioner; and(ii) is in any event not less than 2; and(c) the total amount of operating expenditure incurred in Hong Kong for carrying out investment activities during the basis period—(i) is adequate in the opinion of the Commissioner; and(ii) is in any event not less than $2,000,000.(2) For the purposes of subsection (1)(b), a person is a qualified employee in relation to an FIHV if—(a) the person is a full-time employee in Hong Kong; and(b) the person—(i) carries out any investment activities in Hong Kong during the basis period; and(ii) has the qualifications necessary for doing so.(3) In this section—subject ESF Office (標的具資格辦公室), in relation to an FIHV for the basis period for the subject year, means a family office—(a) that is an ESF Office of the family to which the FIHV is related; and(b) that, on the last day of the basis period, manages the FIHV. 11. Provision supplementary to section 10 of this Schedule—Specified NAV Rule (1) For the purposes of section 10(1)(a) of this Schedule, a subject ESF Office complies with the Specified NAV Rule in relation to an FIHV (subject FIHV) for the basis period for a year of assessment (subject year) if Requirement 1, Requirement 2 or Requirement 3 is met.(2) Requirement 1 is that—the aggregate of the amount of the NAV of the Schedule 16C assets of each relevant FIHV managed by the subject ESF Office (the Office), as at the end of the basis period of the relevant FIHV for the subject year, is not less than $240,000,000 (or its equivalent in a foreign currency).(3) Requirement 2 applies if—(a) the Office is established in or before the year preceding the subject year (1st preceding year); and(b) the Office does not meet Requirement 1.(4) Requirement 2 is that—the aggregate of the amount of the NAV of the Schedule 16C assets of each relevant FIHV managed by the Office, as at the end of the basis period of the relevant FIHV for the 1st preceding year, is not less than $240,000,000 (or its equivalent in a foreign currency).(5) Requirement 3 applies if—(a) the Office is established in or before the year preceding the 1st preceding year (2nd preceding year); and(b) the Office meets neither Requirement 1 nor Requirement 2.(6) Requirement 3 is that—the aggregate of the amount of the NAV of the Schedule 16C assets of each relevant FIHV managed by the Office, as at the end of the basis period of the relevant FIHV for the 2nd preceding year, is not less than $240,000,000 (or its equivalent in a foreign currency).(7) For the purposes of this section, the NAV of any Schedule 16C assets is to be determined in the manner specified by the Commissioner.(8) For the purposes of this section, a reference to the NAV of the Schedule 16C assets of an FIHV includes the NAV of the Schedule 16C assets held by each FSPE in which the FIHV has a beneficial interest (whether direct or indirect) to the extent specified in subsection (9).(9) The extent mentioned in subsection (8) is the percentage equal to the percentage of the FIHV’s beneficial interest (whether direct or indirect) in the FSPE.(10) Schedule 16I applies in determining the extent of the beneficial interest mentioned in subsection (9).(11) For the purposes of this section—(a) the subject FIHV is a relevant FIHV; and(b) any other FIHV that is related to the relevant family is also a relevant FIHV if an election has been made in relation to that other FIHV under section 14 of this Schedule.(12) For the purposes of this section—(a) if an FSPE is a partnership—any Schedule 16C asset held by a partner in the partnership is regarded as held by the FSPE; and(b) if an FSPE is a trust—any Schedule 16C asset held by a trustee of the trust is regarded as held by the FSPE.(13) In this section—NAV means net asset value;relevant family (有關家族) means the family to which the subject FIHV is related;relevant FIHV (有關家控工具)—see subsection (11);subject ESF Office (標的具資格辦公室), in relation to a subject FIHV for the basis period for the subject year, has the meaning given by section 10(3) of this Schedule. 12. When does section 9 of this Schedule not apply—Exception 2 (FIHV) (1) This section applies if, during the basis period for a year of assessment—(a) an FIHV carries out transactions in shares, stocks, debentures, loan stocks, funds, bonds or notes (specified securities) of, or issued by, a private company (relevant company); and(b) the relevant company holds (whether directly or indirectly)—(i) immovable property in Hong Kong; or(ii) share capital (however described) in another private company that holds (whether directly or indirectly) immovable property in Hong Kong.(2) If the aggregate value of the immovable property and share capital held by the relevant company exceeds 10% of the value of the company’s assets, section 9 of this Schedule does not apply to the assessable profits of the FIHV for the basis period earned from the transactions.(3) If the aggregate value of the immovable property and share capital held by the relevant company does not exceed 10% of the value of the company’s assets, section 9 of this Schedule does not apply to the assessable profits of the FIHV for the basis period earned from the transactions unless a condition specified in subsection (4) is met in good faith by the FIHV.(4) The condition is—(a) that the FIHV disposes of, through a transaction or a series of transactions, the subject securities not less than 2 years after they are acquired (whether or not the FIHV has control over the relevant company); or(b) that the FIHV disposes of, through a transaction or a series of transactions, the subject securities less than 2 years after they are acquired and—(i) the FIHV does not have control over the relevant company; or(ii) if the FIHV has control over the relevant company—the relevant company holds (whether directly or indirectly) short-term assets the aggregate value of which does not exceed 50% of the value of the relevant company’s assets.(5) For the purposes of this section, an FIHV has control over a company if the FIHV has power to secure—(a) by means of the holding of shares or the possession of voting power in or in relation to the company or any other company; or(b) by virtue of any powers conferred by the articles of association or any other document regulating the company or any other company,that the affairs of the company are conducted in accordance with the wishes of the FIHV.(6) For the purposes of this section, a reference to an FIHV (reference) in subsection (1), the second reference in subsection (3), the first reference in subsection (4)(a) and (b), and the second and last references in subsection (5) include—(a) if the FIHV is a partnership—a partner in the partnership; and(b) if the FIHV is a trust—a trustee of the trust.(7) In this section—short-term asset (短期資產), in relation to a private company, the shares, stocks, debentures, loan stocks, funds, bonds or notes of, or issued by, which are being disposed of by or for an FIHV, means an asset—(a) that is not a Schedule 16C asset;(b) that is not immovable property in Hong Kong; and(c) that has been held by the company for less than 3 consecutive years before the date of disposal;subject securities (標的證券), in relation to a relevant company, means the specified securities of, or issued by, the company. 13. When does section 9 of this Schedule not apply—Exception 3 (FIHV) (1) This section applies if, during the basis period for a year of assessment—(a) an FIHV carries out transactions in shares, stocks, debentures, loan stocks, funds, bonds or notes (specified securities) of, or issued by, a private company (relevant company); and(b) the relevant company holds (whether directly or indirectly) neither of the following—(i) immovable property in Hong Kong;(ii) share capital (however described) in another private company that holds (whether directly or indirectly) immovable property in Hong Kong.(2) Unless a condition specified in subsection (3) is met in good faith by the FIHV, section 9 of this Schedule does not apply to the assessable profits of the FIHV for the basis period earned from the transactions.(3) The condition is—(a) that the FIHV disposes of, through a transaction or a series of transactions, the subject securities not less than 2 years after they are acquired (whether or not the FIHV has control over the relevant company); or(b) that the FIHV disposes of, through a transaction or a series of transactions, the subject securities less than 2 years after they are acquired and—(i) the FIHV does not have control over the relevant company; or(ii) if the FIHV has control over the relevant company—the relevant company holds (whether directly or indirectly) short-term assets the aggregate value of which does not exceed 50% of the value of the relevant company’s assets.(4) For the purposes of this section, an FIHV has control over a company if the FIHV has power to secure—(a) by means of the holding of shares or the possession of voting power in or in relation to the company or any other company; or(b) by virtue of any powers conferred by the articles of association or any other document regulating the company or any other company,that the affairs of the company are conducted in accordance with the wishes of the FIHV.(5) For the purposes of this section, a reference to an FIHV (reference) in subsection (1), the first reference in subsections (2) and (3)(a) and (b), and the second and last references in subsection (4) include—(a) if the FIHV is a partnership—a partner in the partnership; and(b) if the FIHV is a trust—a trustee of the trust.(6) In this section—short-term asset (短期資產) has the meaning given by section 12(7) of this Schedule;subject securities (標的證券), in relation to a relevant company, means the specified securities of, or issued by, the company. 14. When does section 9 of this Schedule not apply—Exception 4 (FIHV) (1) Section 9 of this Schedule does not apply to an FIHV unless—(a) an election is made in relation to the FIHV under this section; and(b) the FIHV is managed by only one ESF Office of the family to which the FIHV is related.(2) Subject to subsection (3), an FIHV that is managed by an ESF Office of the family to which the FIHV is related (eligible FIHV) may in writing elect that section 9 of this Schedule applies to it.(3) For each ESF Office of the family, not more than 50 eligible FIHVs that are managed by the ESF Office may make an election under this section.(4) An election under this section, once made, is not revocable by the FIHV concerned. 15. Losses sustained by FIHV—where rate specified in section 24(2) of this Schedule is 0% If, because of sections 9 and 24 of this Schedule, an FIHV is exempt from the payment of profits tax in respect of its assessable profits earned from the transactions specified in section 9(3) of this Schedule for the basis period for a year of assessment, any loss sustained by the FIHV from any of those transactions is not available for set off against any of its assessable profits for that basis period or the basis period for any subsequent year of assessment. Part 3 Tax Concession for Certain Profits of Family-owned Special Purpose Entity 16. Profits tax concession for FSPE (1) This section applies to an FSPE for the basis period for a year of assessment if section 9 of this Schedule applies, for that year, to an FIHV that has a beneficial interest (whether direct or indirect) in the FSPE.(2) Profits tax is to be charged, at the rate specified in section 25(2) of this Schedule, on the FSPE’s assessable profits for the basis period earned from the transactions specified in subsection (3).(3) The transactions are—(a) transactions in shares, stocks, debentures, loan stocks, funds, bonds or notes (specified securities) of, or issued by, an investee private company or an IFSPE;(b) transactions in rights, options or interests (whether described in units or otherwise) in, or in respect of, the specified securities mentioned in paragraph (a);(c) transactions in certificates of interest or participation in, temporary or interim certificates for, receipts for, or warrants to subscribe for or purchase, the specified securities mentioned in paragraph (a);(d) transactions in Schedule 16C assets; and(e) qualified incidental transactions.(4) For the purposes of subsection (3)(e), the transactions that are incidental to the carrying out of the transactions mentioned in subsection (3)(a), (b), (c) or (d) (incidental transactions) are qualified incidental transactions if, in the basis period for the year of assessment, the FSPE’s trading receipts from the incidental transactions do not exceed 5% of the total trading receipts from—(a) the transactions mentioned in subsection (3)(a), (b), (c) and (d); and(b) the incidental transactions.(5) The extent of assessable profits to be charged under subsection (2) is the percentage equal to the percentage of the FIHV’s beneficial interest (whether direct or indirect) in the FSPE in the year of assessment.(6) Schedule 16I applies in determining the extent of the beneficial interest of the FIHV in the FSPE.(7) This section is subject to sections 17 and 18 of this Schedule. 17. When does section 16 of this Schedule not apply—Exception 1 (FSPE) (1) This section applies if, during the basis period for a year of assessment—(a) an FSPE carries out transactions in shares, stocks, debentures, loan stocks, funds, bonds or notes (specified securities) of, or issued by, a private company (relevant company); and(b) the relevant company holds (whether directly or indirectly)—(i) immovable property in Hong Kong; or(ii) share capital (however described) in another private company that holds (whether directly or indirectly) immovable property in Hong Kong.(2) If the aggregate value of the immovable property and share capital held by the relevant company exceeds 10% of the value of the company’s assets, section 16 of this Schedule does not apply to the assessable profits of the FSPE for the basis period earned from the transactions.(3) If the aggregate value of the immovable property and share capital held by the relevant company does not exceed 10% of the value of the company’s assets, section 16 of this Schedule does not apply to the assessable profits of the FSPE for the basis period earned from the transactions unless a condition specified in subsection (4) is met in good faith by the FSPE.(4) The condition is—(a) that the FSPE disposes of, through a transaction or a series of transactions, the subject securities not less than 2 years after they are acquired (whether or not the FSPE has control over the relevant company); or(b) that the FSPE disposes of, through a transaction or a series of transactions, the subject securities less than 2 years after they are acquired and—(i) the FSPE does not have control over the relevant company; or(ii) if the FSPE has control over the relevant company—the relevant company holds (whether directly or indirectly) short-term assets the aggregate value of which does not exceed 50% of the value of the relevant company’s assets.(5) For the purposes of this section, an FSPE has control over a company if the FSPE has power to secure—(a) by means of the holding of shares or the possession of voting power in or in relation to the company or any other company; or(b) by virtue of any powers conferred by the articles of association or any other document regulating the company or any other company,that the affairs of the company are conducted in accordance with the wishes of the FSPE.(6) For the purposes of this section, a reference to an FSPE (reference) in subsection (1), the second reference in subsection (3), the first reference in subsection (4)(a) and (b), and the second and last references in subsection (5) include—(a) if the FSPE is a partnership—a partner in the partnership; and(b) if the FSPE is a trust—a trustee of the trust.(7) In this section—short-term asset (短期資產), in relation to a private company, the shares, stocks, debentures, loan stocks, funds, bonds or notes of, or issued by, which are being disposed of by or for an FSPE, means an asset—(a) that is not a Schedule 16C asset;(b) that is not immovable property in Hong Kong; and(c) that has been held by the company for less than 3 consecutive years before the date of disposal;subject securities (標的證券), in relation to a relevant company, means the specified securities of, or issued by, the company. 18. When does section 16 of this Schedule not apply—Exception 2 (FSPE) (1) This section applies if, during the basis period for a year of assessment—(a) an FSPE carries out transactions in shares, stocks, debentures, loan stocks, funds, bonds or notes (specified securities) of, or issued by, a private company (relevant company); and(b) the relevant company holds (whether directly or indirectly) neither of the following—(i) immovable property in Hong Kong;(ii) share capital (however described) in another private company that holds (whether directly or indirectly) immovable property in Hong Kong.(2) Unless a condition specified in subsection (3) is met in good faith by the FSPE, section 16 of this Schedule does not apply to the assessable profits of the FSPE for the basis period earned from the transactions.(3) The condition is—(a) that the FSPE disposes of, through a transaction or a series of transactions, the subject securities not less than 2 years after they are acquired (whether or not the FSPE has control over the relevant company); or(b) that the FSPE disposes of, through a transaction or a series of transactions, the subject securities less than 2 years after they are acquired and—(i) the FSPE does not have control over the relevant company; or(ii) if the FSPE has control over the relevant company—the relevant company holds (whether directly or indirectly) short-term assets the aggregate value of which does not exceed 50% of the value of the relevant company’s assets.(4) For the purposes of this section, an FSPE has control over a company if the FSPE has power to secure—(a) by means of the holding of shares or the possession of voting power in or in relation to the company or any other company; or(b) by virtue of any powers conferred by the articles of association or any other document regulating the company or any other company,that the affairs of the company are conducted in accordance with the wishes of the FSPE.(5) For the purposes of this section, a reference to an FSPE (reference) in subsection (1), the first reference in subsections (2) and (3)(a) and (b), and the second and last references in subsection (4) include—(a) if the FSPE is a partnership—a partner in the partnership; and(b) if the FSPE is a trust—a trustee of the trust.(6) In this section—short-term asset (短期資產) has the meaning given by section 17(7) of this Schedule;subject securities (標的證券), in relation to a relevant company, means the specified securities of, or issued by, the company. 19. Losses sustained by FSPE—where rate specified in section 25(2) of this Schedule is 0% If, because of sections 16 and 25 of this Schedule, an FSPE is exempt from the payment of profits tax in respect of its assessable profits earned from the transactions specified in section 16(3) of this Schedule for the basis period for a year of assessment, any loss sustained by the FSPE from any of those transactions is not available for set off against any of its assessable profits for that basis period or the basis period for any subsequent year of assessment. Part 4 Assessable Profits of Resident Persons 20. Meaning of resident person, specified entity, etc. in this Part (1) In this Part—resident person (居港者)—see subsection (2);specified entity (指明實體)—see subsections (3), (4), (5), (6) and (7);specified members (指明成員), in relation to an entity, means members of a family who, because of section 8 of this Schedule, are taken to have at least 95%, in aggregate, of the beneficial interest (whether direct or indirect) in the entity.(2) In relation to a year of assessment—(a) a corporation that is not a trustee of a trust is a resident person if the central management and control of the corporation is exercised in Hong Kong in the year of assessment;(b) a partnership that is not a trustee of a trust is a resident person if the central management and control of the partnership is exercised in Hong Kong in the year of assessment;

and(c) a trustee of a trust is a resident person if the central management and control of the trust is exercised in Hong Kong in the year of assessment.(3) An entity (Entity C) is a specified entity in relation to the family to which an FIHV is related if Condition 1 or Condition 2 is met.(4) Condition 1 is—(a) that Entity C—(i) is not a business undertaking for general commercial or industrial purpose; and(ii) does not carry on any trade or business;(b) that at least one member of the family to which the FIHV is related has a direct or indirect beneficial interest in the entity (relevant family member); and(c) that Entity C is the entity, or one of the entities in a series of 2 or more entities, through which any one or more than one relevant family member has an indirect beneficial interest in the FIHV.(5) Condition 2 is—(a) that Entity C—(i) is not a business undertaking for general commercial or industrial purpose; and(ii) does not carry on any trade or business; and(b) that Entity C is a qualified entity.(6) For the purposes of subsection (5), Entity C is a qualified entity if—(a) Entity C has either—(i) 100% direct beneficial interest in the FIHV mentioned in subsection (3); or(ii) 100% indirect beneficial interest in that FIHV; and(b) there are any specified members in relation to Entity C.(7) For the purposes of subsection (5), an entity is also a qualified entity if it is an entity, or one of the entities in a series of 2 or more entities, through which an entity falling within the description in subsection (6) has the beneficial interest mentioned in subsection (6)(a)(ii).(8) Schedule 16H applies in determining the extent of the beneficial interest of Entity C in the FIHV. 21. Meaning of associate in sections 22 and 23 of this Schedule (1) In sections 22(2) and (4) and 23(2) of this Schedule—associate (相聯者)—(a) in relation to a resident person that is a corporation but is not a trustee of a trust, means—(i) a person or entity who has control over the corporation;(ii) if a person mentioned in subparagraph (i) is a partner in a partnership—another partner in the partnership;(iii) if a person mentioned in subparagraph (i) is a natural person—a relative of the person;(iv) if another partner mentioned in subparagraph (ii) is a natural person—a relative of that other partner;(v) a director or principal officer of—(A) the corporation; or(B) an associated corporation of the corporation;(vi) if a director mentioned in subparagraph (v) is a natural person—a relative of the director;(vii) a relative of a principal officer mentioned in subparagraph (v);(viii) if the corporation is a partner in a partnership—another partner in the partnership;(ix) if another partner mentioned in subparagraph (viii) is a natural person—a relative of that other partner;(x) a partnership in which the corporation is a partner; or(xi) an associated corporation of the corporation;(b) in relation to a resident person that is a partnership but is not a trustee of a trust, means—(i) a partner in the partnership;(ii) if a partner in the partnership is a natural person—a relative of the partner;(iii) if a partner in the partnership is another partnership—(A) a partner in the other partnership (Partner A); or(B) a partner with the other partnership in any other partnership (Partner B);(iv) if Partner A is a partnership—a partner in Partner A (Partner C);(v) if Partner B is a partnership—a partner in Partner B (Partner D);(vi) if Partner A, Partner B, Partner C or Partner D is a natural person—a relative of the partner;(vii) a corporation over which any of the following persons has control—(A) the partnership;(B) a partner in the partnership;(C) if a partner in the partnership is a natural person—a relative of the partner;(D) a partnership in which the partnership is a partner;(viii) a director or principal officer of the corporation mentioned in subparagraph (vii);(ix) if a director mentioned in subparagraph (viii) is a natural person—a relative of the director;(x) a relative of a principal officer mentioned in subparagraph (viii);(xi) a corporation of which a partner in the partnership is a director or principal officer; or(xii) an associated partnership of the partnership; and(c) in relation to a resident person that is a trustee of a trust, means—(i) a settlor, a protector, an enforcer or a beneficiary of the trust; or(ii) (if the resident person does not act in the capacity of a trustee in the course of a business or profession) a related person of the trustee.(2) In paragraph (c)(ii) of the definition of associate in subsection (1)—related person (有關連人士), in relation to a trustee of a trust—(a) if the trustee is a corporation, means—(i) a person or entity who has control over the corporation;(ii) if a person mentioned in subparagraph (i) is a partner in a partnership—another partner in the partnership;(iii) if a person mentioned in subparagraph (i) is a natural person—a relative of the person;(iv) if another partner mentioned in subparagraph (ii) is a natural person—a relative of that other partner;(v) a director or principal officer of—(A) the corporation; or(B) an associated corporation of the corporation;(vi) if a director mentioned in subparagraph (v) is a natural person—a relative of the director;(vii) a relative of a principal officer mentioned in subparagraph (v);(viii) if the corporation is a partner in a partnership—another partner in the partnership;(ix) if another partner mentioned in subparagraph (viii) is a natural person—a relative of that other partner;(x) a partnership in which the corporation is a partner; or(xi) an associated corporation of the corporation;(b) if the trustee is a partnership, means—(i) a partner in the partnership;(ii) if a partner in the partnership is a natural person—a relative of the partner;(iii) if a partner in the partnership is another partnership—(A) a partner in the other partnership (Partner E); or(B) a partner with the other partnership in any other partnership (Partner F);(iv) if Partner E is a partnership—a partner in Partner E (Partner G);(v) if Partner F is a partnership—a partner in Partner F (Partner H);(vi) if Partner E, Partner F, Partner G or Partner H is a natural person—a relative of the partner;(vii) a corporation over which any of the following persons has control—(A) the partnership;(B) a partner in the partnership;(C) if a partner in the partnership is a natural person—a relative of the partner;(D) a partnership in which the partnership is a partner;(viii) a director or principal officer of the corporation mentioned in subparagraph (vii);(ix) if a director mentioned in subparagraph (viii) is a natural person—a relative of the director;(x) a relative of a principal officer mentioned in subparagraph (viii);(xi) a corporation of which a partner in the partnership is a director or principal officer; or(xii) an associated partnership of the partnership; and(c) if the trustee is a natural person, means—(i) a relative of the person;(ii) if the person is a partner in a partnership—another partner in the partnership;(iii) if another partner mentioned in subparagraph (ii) is a natural person—a relative of that other partner;(iv) a partnership in which the person is a partner;(v) a corporation over which any of the following persons has control—(A) the person;(B) a relative of the person;(C) if the person is a partner in a partnership—another partner in the partnership;(D) if the person is a partner in a partnership and another partner in the partnership is a natural person—a relative of that other partner;(E) a partnership in which the person is a partner; or(vi) a director or principal officer of the corporation mentioned in subparagraph (v).(3) In the definitions of associate in subsection (1) and related person in subsection (2)—associated corporation (相聯法團), in relation to a corporation, means—(a) another corporation over which the corporation has control;(b) another corporation that has control over the corporation; or(c) another corporation that is under the control of the same person as is the corporation;associated partnership (相聯合夥), in relation to a partnership, means—(a) another partnership over which the partnership has control;(b) another partnership that has control over the partnership; or(c) another partnership that is under the control of the same person as is the partnership;principal officer (主要職員), in relation to a corporation, means—(a) a person employed by the corporation who, either alone or jointly with one or more other persons, is responsible under the immediate authority of the directors of the corporation for the conduct of the business of the corporation; or(b) a person employed by the corporation who, under the immediate authority of a director of the corporation or a person to whom paragraph (a) applies, exercises managerial functions in respect of the corporation;relative (親屬) has the meaning given by section 20AN(6).(4) For the purposes of the definitions of associate, associated corporation and associated partnership in this section—(a) a person or entity (particular person) has control over a corporation if the particular person has power to secure—(i) by means of the holding of shares or the possession of voting power in or in relation to the corporation or any other corporation; or(ii) by virtue of any powers conferred by the articles of association or any other document regulating the corporation or any other corporation,that the affairs of the corporation are conducted in accordance with the wishes of the particular person; and(b) a particular person has control over a partnership if the particular person has power to secure—(i) by means of the holding of interests or the possession of voting power in or in relation to the partnership or any other partnership; or(ii) by virtue of any powers conferred by the partnership agreement or any other document regulating the partnership or any other partnership,that the affairs of the partnership are conducted in accordance with the wishes of the particular person. 22. Assessable profits of FIHVs to be regarded as assessable profits of resident persons (1) If, in respect of a year of assessment—(a) a resident person has, during any period of time, a beneficial interest (whether direct or indirect) in an FIHV to the extent prescribed in subsection (2); and(b) section 9 of this Schedule applies to the FIHV,the assessable profits of the FIHV for the period of time (subsection (1) period) that would have been chargeable to tax under Part 4 of this Ordinance but for section 9 of this Schedule are to be regarded as the assessable profits arising in, or derived from, Hong Kong of the resident person for the year of assessment from a trade, profession or business carried on by the resident person in Hong Kong.(2) The extent of a resident person’s beneficial interest in an FIHV referred to in subsection (1) is that the person, either alone or jointly with any of the person’s associate (whether a resident person or not)—(a) if the FIHV is a corporation—has not less than 30% of the beneficial interest in the corporation;(b) if the FIHV is a partnership—has not less than 30% of the beneficial interest in the partnership;(c) if the FIHV is a trust—has not less than 30% of the beneficial interest in the trust; and(d) if the FIHV is an entity that does not fall within any of paragraphs (a), (b) and (c)—has not less than 30% of the beneficial interest in the entity.(3) For the purposes of subsection (2), the extent of a resident person’s beneficial interest in an FIHV is to be determined in accordance with Part 3 of Schedule 16J.(4) If, in respect of a year of assessment—(a) a resident person has, during any period of time, a beneficial interest (whether direct or indirect) in an FIHV;(b) section 9 of this Schedule applies to the FIHV; and(c) the FIHV is an associate of the resident person,the assessable profits of the FIHV for the period of time (subsection (4) period) that would have been chargeable to tax under Part 4 of this Ordinance but for section 9 of this Schedule are to be regarded as the assessable profits arising in, or derived from, Hong Kong of the resident person for the year of assessment from a trade, profession or business carried on by the resident person in Hong Kong.(5) Subsections (1) and (4) apply in relation to a resident person irrespective of whether the person has received or will receive (whether directly or indirectly) from the FIHV any money or other property representing the profits of the FIHV for the relevant year of assessment.(6) A resident person who has a direct or indirect beneficial interest in a trust because of the fact that the resident person is able (or might reasonably be expected to be able) to control the activities of the trust estate or the application of its corpus or income is, for the purposes of this section, to be regarded as being interested in 100% of the value of the trust estate.(7) The amount regarded as the assessable profits of a resident person for a year of assessment under subsection (1) or (4) is to be ascertained in accordance with Schedule 16J.(8) However, subsections (1) and (4) do not apply to a resident person in relation to a subsection (1) period or subsection (4) period if, at all times during the subsection (1) period or subsection (4) period, the person is—(a) a specified entity in relation to the family to which the FIHV is related;(b) a trustee of a trust that is a specified entity mentioned in paragraph (a); or(c) an ESF Office of the family that manages the FIHV.(9) If—(a) a resident person is liable to tax in respect of the profits of an FIHV by the operation of subsection (1) or (4) because the person has an indirect beneficial interest in the FIHV through a third person that is an entity (interposed entity) or through a series of 2 or more interposed entities; and(b) the interposed entity or any of the interposed entities is a resident person who is also liable to tax in respect of the profits by the operation of subsection (1) or (4),the resident person mentioned in paragraph (a) is discharged from the person’s liability to tax in respect of the profits. 23. Assessable profits of FSPEs to be regarded as assessable profits of resident persons (1) If, in respect of a year of assessment—(a) a resident person has, during any period of time, a beneficial interest (whether direct or indirect) in an FIHV to the extent prescribed in section 22(2) of this Schedule;(b) section 9 of this Schedule applies to the FIHV;(c) the FIHV has, during the period of time (subsection (1) period), a beneficial interest (whether direct or indirect) in an FSPE; and(d) section 16 of this Schedule applies to the FSPE,the assessable profits of the FSPE for the subsection (1) period that would have been chargeable to tax under Part 4 of this Ordinance but for section 16 of this Schedule are to be regarded as the assessable profits arising in, or derived from, Hong Kong of the resident person for the year of assessment from a trade, profession or business carried on by the resident person in Hong Kong.(2) If, in respect of a year of assessment—(a) a resident person has, during any period of time, a beneficial interest (whether direct or indirect) in an FIHV;(b) section 9 of this Schedule applies to the FIHV;(c) the FIHV is an associate of the resident person;(d) the FIHV has, during the period of time (subsection (2) period), a beneficial interest (whether direct or indirect) in an FSPE; and(e) section 16 of this Schedule applies to the FSPE,the assessable profits of the FSPE for the subsection (2) period that would have been chargeable to tax under Part 4 of this Ordinance but for section 16 of this Schedule are to be regarded as the assessable profits arising in, or derived from, Hong Kong of the resident person for the year of assessment from a trade, profession or business carried on by the resident person in Hong Kong.(3) Subsections (1) and (2) apply in relation to a resident person irrespective of whether the person has received or will receive (whether directly or indirectly) from the FSPE any money or other property representing the profits of the FSPE for the relevant year of assessment.(4) A resident person who has a direct or indirect beneficial interest in a trust because of the fact that the resident person is able (or might reasonably be expected to be able) to control the activities of the trust estate or the application of its corpus or income is, for the purposes of this section, to be regarded as being interested in 100% of the value of the trust estate.(5) The amount regarded as the assessable profits of a resident person for a year of assessment under subsection (1) or (2) is to be ascertained in accordance with Schedule 16K.(6) However, subsections (1) and (2) do not apply to a resident person in relation to a subsection (1) period or subsection (2) period if, at all times during the subsection (1) period or subsection (2) period, the person is—(a) a specified entity in relation to the family to which the FIHV is related;(b) a trustee of a trust that is a specified entity mentioned in paragraph (a); or(c) an ESF Office of the family that manages the FIHV.(7) If—(a) a resident person is liable to tax in respect of the profits of an FSPE by the operation of subsection (1) or (2) because the person has an indirect beneficial interest in the FSPE through a third person that is an entity (interposed entity) or through a series of 2 or more interposed entities; and(b) the interposed entity or any of the interposed entities is a resident person who is also liable to tax in respect of the profits by the operation of subsection (1) or (2),the resident person mentioned in paragraph (a) is discharged from the person’s liability to tax in respect of the profits. Part 5 Rate of Profits Tax for FIHV and FSPE 24. Rate of profits tax for FIHV (1) This section applies for the purposes of section 9(2) of this Schedule.(2) The rate specified for the basis period for a year of assessment commencing on or after 1 April 2022 is 0%. 25. Rate of profits tax for FSPE (1) This section applies for the purposes of section 16(2) of this Schedule.(2) The rate specified for the basis period for a year of assessment commencing on or after 1 April 2022 is 0%. Part 6 Miscellaneous Matters Division 1 Anti-avoidance Provisions 26. Anti-avoidance provisions relating to arrangement to obtain tax benefits—FIHV (1) Subsection (2) applies to an FIHV if—(a) the FIHV enters into an arrangement; and(b) the Commissioner is satisfied that the main purpose, or one of the main purposes, of the FIHV in entering into the arrangement is to obtain a tax benefit, whether for the FIHV or another person or entity, in relation to a liability to pay profits tax under this Ordinance.(2) Section 9 of this Schedule does not apply in relation to any relevant assessable profits accrued to the FIHV during a relevant basis period.(3) Subsection (4) applies to an FIHV if—(a) any assets or businesses are transferred directly or indirectly from a person (transferor) carrying on a business in Hong Kong to the FIHV;(b) the income of the transferor in relation to the transferred assets or businesses (as the case requires) would have been subject to tax under Part 4 of this Ordinance but for the transfer; and(c) the Commissioner is satisfied that the main purpose, or one of the main purposes, of the FIHV in making the transfer is to obtain a tax benefit, whether for the FIHV or another person or entity, in relation to a liability to pay profits tax under this Ordinance.(4) Section 9 of this Schedule does not apply in relation to any relevant assessable profits accrued to the FIHV during a relevant basis period unless the transfer—(a) is carried out on an arm’s length basis; and(b) is chargeable to tax under Part 4 of this Ordinance in respect of the assessable profits arising from the transfer.(5) For the purposes of this section, a reference to an FIHV (reference) in subsection (1)(a), the first reference in subsection (1)(b), the reference in subsection (3)(a), and the first reference in subsection (3)(c) include—(a) if the FIHV is a partnership—a partner in the partnership; and(b) if the FIHV is a trust—a trustee of the trust.(6) For the purposes of this section, a basis period for a year of assessment is a relevant basis period in relation to an arrangement if, in the opinion of the Commissioner, the arrangement has effect during the basis period.(7) For the purposes of this section, a basis period for a year of assessment is a relevant basis period in relation to a transfer if, in the opinion of the Commissioner, the transfer has effect during the basis period.(8) In this section—relevant assessable profits (有關應評稅利潤)—(a) in relation to an arrangement, means the assessable profits arising from the arrangement; and(b) in relation to a transfer, means the assessable profits arising from the transfer;tax benefit (稅務利益) means an avoidance, postponement or reduction of a liability to pay tax. 27. Anti-avoidance provisions relating to arrangement to obtain tax benefits—FSPE (1) Subsection (2) applies to an FSPE if—(a) the FSPE enters into an arrangement; and(b) the Commissioner is satisfied that the main purpose, or one of the main purposes, of the FSPE in entering into the arrangement is to obtain a tax benefit, whether for the FSPE or another person or entity, in relation to a liability to pay profits tax under this Ordinance.(2) Section 16 of this Schedule does not apply in relation to any relevant assessable profits accrued to the FSPE during a relevant basis period.(3) Subsection (4) applies to an FSPE if—(a) any assets or businesses are transferred directly or indirectly from a person (transferor) carrying on a business in Hong Kong to the FSPE;(b) the income of the transferor in relation to the transferred assets or businesses (as the case requires) would have been subject to tax under Part 4 of this Ordinance but for the transfer; and(c) the Commissioner is satisfied that the main purpose, or one of the main purposes, of the FSPE in making the transfer is to obtain a tax benefit, whether for the FSPE or another person or entity, in relation to a liability to pay profits tax under this Ordinance.(4) Section 16 of this Schedule does not apply in relation to any relevant assessable profits accrued to the FSPE during a relevant basis period unless the transfer—(a) is carried out on an arm’s length basis; and(b) is chargeable to tax under Part 4 of this Ordinance in respect of the assessable profits arising from the transfer.(5) For the purposes of this section, a reference to an FSPE (reference) in subsection (1)(a), the first reference in subsection (1)(b), the reference in subsection (3)(a), and the first reference in subsection (3)(c) include—(a) if the FSPE is a partnership—a partner in the partnership; and(b) if the FSPE is a trust—a trustee of the trust.(6) For the purposes of this section, a basis period for a year of assessment is a relevant basis period in relation to an arrangement if, in the opinion of the Commissioner, the arrangement has effect during the basis period.(7) For the purposes of this section, a basis period for a year of assessment is a relevant basis period in relation to a transfer if, in the opinion of the Commissioner, the transfer has effect during the basis period.(8) In this section—relevant assessable profits (有關應評稅利潤) has the meaning given by section 26(8) of this Schedule;tax benefit (稅務利益) has the meaning given by section 26(8) of this Schedule. Division 2 Records of FIHV and ESF Office 28. Obligations of responsible persons to keep records relating to beneficial owners (1) This section applies, for the purposes of this Schedule, to and in relation to an FIHV.(2) A responsible person for an entity that is an FIHV must keep sufficient records to enable the identity and particulars of each beneficial owner of the FIHV to be readily ascertained.(3) Any record that is required under subsection (2) to be kept by a responsible person for an entity, in relation to a person or entity (particular person) that is a beneficial owner of the FIHV, must be kept by the responsible person throughout the period within which the particular person is such an owner.(4) If a particular person ceases to be a beneficial owner of an FIHV, the responsible person for the entity must retain, for at least 7 years after the date of cessation, the records required under subsections (2) and (3) to be kept in relation to the particular person.(5) If an entity ceases to be an FIHV but continues to exist, a responsible person for the entity must retain, for at least 7 years after the date of cessation, the records that, but for the cessation, would have been required under subsection (2), (3) or (4) to be kept or retained.(6) If the entity ceases to exist, a person who immediately before the cessation was a responsible person for the entity must retain, for at least 7 years after the date of cessation, the records that, but for the cessation, would have been required under subsection (2), (3), (4) or (5) to be kept or retained.(7) In this section—beneficial owner (實益擁有人), in relation to an entity—(a) means a particular person who has a direct or indirect beneficial interest in the entity; and(b) includes any specified members;responsible person (負責人)—(a) in relation to an entity that is a corporation, means the corporation; and(b) in relation to any other entity, means a person who is responsible for the management of the entity;specified members (指明成員) has the meaning given by section 20(1) of this Schedule. 29. Obligations of ESF Office to keep records relating to beneficial owners (1) This section applies, for the purposes of this Schedule, to and in relation to an ESF Office of a family (relevant family office).(2) A relevant family office must keep sufficient records, for each FIHV managed by the family office, to enable the identity and particulars of each beneficial owner of the FIHV to be readily ascertained.(3) Any record that is required under subsection (2) to be kept by a relevant family office, in relation to a person or entity (particular person) that is a beneficial owner of the FIHV, must be kept by the family office throughout the period within which the particular person is such an owner.(4) In addition, a relevant family office must keep sufficient records to enable the identity and particulars of each beneficial owner of the family office to be readily ascertained.(5) Any record that is required under subsection (4) to be kept by a relevant family office, in relation to a person or entity (specified person) that is a beneficial owner of the family office, must be kept by the family office throughout the period within which the specified person is such an owner.(6) If a particular person ceases to be a beneficial owner of an FIHV managed by a relevant family office, the family office must retain, for at least 7 years after the date of cessation, the records required under subsections (2) and (3) to be kept in relation to the particular person.(7) If a specified person ceases to be a beneficial owner of a relevant family office, the family office must retain, for at least 7 years after the date of cessation, the records required under subsections (4) and (5) to be kept in relation to the specified person.(8) If an entity managed by a relevant family office ceases to be an FIHV (whether or not the entity continues to exist), or ceases to be managed by a relevant family office, the family office must retain, for at least 7 years after the date of cessation, the records that, but for the cessation, would have been required under subsection (2), (3) or (6) to be kept or retained.(9) If a relevant family office ceases to exist, a person who immediately before the cessation was a director of the family office must retain, for at least 7 years after the date of cessation, the records that, but for the cessation, would have been required under subsection (2), (3), (4), (5), (6), (7) or (8) to be kept or retained.(10) In this section—beneficial owner (實益擁有人) has the meaning given by section 28(7) of this Schedule. Schedule 16F [s. 40AV & Sch. 16E]Provisions for Determining Extent of Beneficial Interest Family Member has in Particular Entity (Section 8 of Schedule 16E) (Schedule 16F added 8 of 2023 s. 7) Part 1 1. In this Schedule—direct beneficial interest (直接實益權益) has the meaning given by section 7 of Schedule 16E;entity (實體) has the meaning given by section 1(1) of Schedule 16E;family (家族) has the meaning given by section 4 of Schedule 16E;indirect beneficial interest (間接實益權益) has the meaning given by section 7 of Schedule 16E;member (成員), in relation to a family, has the meaning given by section 4 of Schedule 16E. Part 2 2. For a member of a family having a direct beneficial interest in an entity (Entity A), the extent of the beneficial interest of the member in Entity A is—(a) if Entity A is a corporation—(i) the percentage of the issued share capital (however described) of the corporation held by the member; or(ii) (if the corporation does not have any issued share capital) the percentage of the voting rights in the corporation that the member is entitled to exercise or the exercise of which the member is entitled to control;(b) if Entity A is a partnership—(i) the percentage of the profits of the partnership to which the member is entitled; or(ii) (if the partners in the partnership are neither entitled to the profits of the partnership nor entitled to a distribution of the assets of the partnership on its dissolution) the percentage of the voting rights in the partnership that the member is entitled to exercise or the exercise of which the member is entitled to control;(c) if Entity A is a trust—the percentage in value of the trust estate in which the member is interested; and(d) if Entity A is an entity that does not fall within any of paragraphs (a), (b) and (c)—(i) the percentage of the capital of the entity to which the member is entitled;(ii) (if subparagraph (i) is not applicable in relation to the entity) the percentage of the ownership interests that the member has in the entity;(iii) (if neither subparagraph (i) nor (ii) is applicable in relation to the entity) the percentage of the profits of the entity to which the member is entitled; or(iv) (if none of subparagraphs (i), (ii) and (iii) is applicable in relation to the entity) the percentage of the voting rights in the entity that the member is entitled to exercise or the exercise of which the member is entitled to control. 3. Section 7(5), (6) and (7) of Schedule 16E applies for the purposes of section 2 of this Schedule. 4. For a member of a family having an indirect beneficial interest in an entity (Entity B), the extent of the beneficial interest of the member in Entity B is—(a) if there is only one interposed entity—the percentage arrived at by multiplying the percentage representing the extent of the beneficial interest of the member in the interposed entity by the percentage representing the extent of the beneficial interest of the interposed entity in Entity B; or(b) if there is a series of 2 or more interposed entities—the percentage arrived at by multiplying the percentage representing the extent of the beneficial interest of the member in the first interposed entity in the series by—(i) the percentage representing the extent of the beneficial interest of each interposed entity (other than the last interposed entity) in the series in the next interposed entity in the series; and(ii) the percentage representing the extent of the beneficial interest of the last interposed entity in the series in Entity B. 5. For the purposes of section 4 of this Schedule—(a) section 2 of this Schedule applies in determining the extent of the beneficial interest of a member of a family in an interposed entity as if the references to Entity A in that section were references to an interposed entity;(b) section 2 of this Schedule applies in determining the extent of the beneficial interest of an interposed entity in Entity B as if—(i) the references to a member of a family in that section were references to an interposed entity; and(ii) the references to Entity A in that section were references to Entity B; and(c) section 2 of this Schedule applies in determining the extent of the beneficial interest of an interposed entity (Interposed Entity A) in another interposed entity (Interposed Entity B) as if—(i) the references to a member of a family in that section were references to Interposed Entity A; and(ii) the references to Entity A in that section were references to Interposed Entity B. Schedule 16G [s. 40AV & Sch. 16E]Provisions for Determining Extent of Beneficial Interest Unrelated Natural Person has in Particular Entity (Section 8 of Schedule 16E) (Schedule 16G added 8 of 2023 s. 7) Part 1 1. In this Schedule—direct beneficial interest (直接實益權益) has the meaning given by section 7 of Schedule 16E;entity (實體) has the meaning given by section 1(1) of Schedule 16E;indirect beneficial interest (間接實益權益) has the meaning given by section 7 of Schedule 16E;unrelated natural person (無關連自然人) has the meaning given by section 8(21) of Schedule 16E. Part 2 2. For an unrelated natural person having a direct beneficial interest in an entity (Entity A), the extent of the beneficial interest of the person in Entity A is—(a) if Entity A is a corporation—(i) the percentage of the issued share capital (however described) of the corporation held by the person; or(ii) (if the corporation does not have any issued share capital) the percentage of the voting rights in the corporation that the person is entitled to exercise or the exercise of which the person is entitled to control;(b) if Entity A is a partnership—(i) the percentage of the profits of the partnership to which the person is entitled; or(ii) (if the partners in the partnership are neither entitled to the profits of the partnership nor entitled to a distribution of the assets of the partnership on its dissolution) the percentage of the voting rights in the partnership that the person is entitled to exercise or the exercise of which the person is entitled to control;(c) if Entity A is a trust—the percentage in value of the trust estate in which the person is interested; and(d) if Entity A is an entity that does not fall within any of paragraphs (a), (b) and (c)—(i) the percentage of the capital of the entity to which the person is entitled;(ii) (if subparagraph (i) is not applicable in relation to the entity) the percentage of the ownership interests that the person has in the entity;(iii) (if neither subparagraph (i) nor (ii) is applicable in relation to the entity) the percentage of the profits of the entity to which the person is entitled; or(iv) (if none of subparagraphs (i), (ii) and (iii) is applicable in relation to the entity) the percentage of the voting rights in the entity that the person is entitled to exercise or the exercise of which the person is entitled to control. 3. Section 7(5), (6) and (7) of Schedule 16E applies for the purposes of section 2 of this Schedule. 4. For an unrelated natural person having an indirect beneficial interest in an entity (Entity B), the extent of the beneficial interest of the person in Entity B is—(a) if there is only one interposed entity—the percentage arrived at by multiplying the percentage representing the extent of the beneficial interest of the person in the interposed entity by the percentage representing the extent of the beneficial interest of the interposed entity in Entity B; or(b) if there is a series of 2 or more interposed entities—the percentage arrived at by multiplying the percentage representing the extent of the beneficial interest of the person in the first interposed entity in the series by—(i) the percentage representing the extent of the beneficial interest of each interposed entity (other than the last interposed entity) in the series in the next interposed entity in the series; and(ii) the percentage representing the extent of the beneficial interest of the last interposed entity in the series in Entity B. 5. For the purposes of section 4 of this Schedule—(a) section 2 of this Schedule applies in determining the extent of the beneficial interest of an unrelated natural person in an interposed entity as if the references to Entity A in that section were references to an interposed entity;(b) section 2 of this Schedule applies in determining the extent of the beneficial interest of an interposed entity in Entity B as if—(i) the references to an unrelated natural person in that section were references to an interposed entity; and(ii) the references to Entity A in that section were references to Entity B; and(c) section 2 of this Schedule applies in determining the extent of the beneficial interest of an interposed entity (Interposed Entity A) in another interposed entity (Interposed Entity B) as if—(i) the references to an unrelated natural person in that section were references to Interposed Entity A; and(ii) the references to Entity A in that section were references to Interposed Entity B. Schedule 16H [s. 40AV & Sch. 16E]Provisions for Determining Extent of Beneficial Interest Entity has in Another Entity (Sections 8 and 20 of Schedule 16E) (Schedule 16H added 8 of 2023 s. 7) Part 1 1. In this Schedule—direct beneficial interest (直接實益權益) has the meaning given by section 7 of Schedule 16E;entity (實體) has the meaning given by section 1(1) of Schedule 16E;indirect beneficial interest (間接實益權益) has the meaning given by section 7 of Schedule 16E. Part 2 2. For an entity (Entity A) having a direct beneficial interest in another entity (Entity B), the extent of the beneficial interest of Entity A in Entity B is—(a) if Entity B is a corporation—(i) the percentage of the issued share capital (however described) of the corporation held by Entity A; or(ii) (if the corporation does not have any issued share capital) the percentage of the voting rights in the corporation that Entity A is entitled to exercise or the exercise of which Entity A is entitled to control;(b) if Entity B is a partnership—(i) the percentage of the profits of the partnership to which Entity A is entitled; or(ii) (if the partners in the partnership are neither entitled to the profits of the partnership nor entitled to a distribution of the assets of the partnership on its dissolution) the percentage of the voting rights in the partnership that Entity A is entitled to exercise or the exercise of which Entity A is entitled to control;(c) if Entity B is a trust—the percentage in value of the trust estate in which Entity A is interested; and(d) if Entity B is an entity that does not fall within any of paragraphs (a), (b) and (c)—(i) the percentage of the capital of the entity to which Entity A is entitled;(ii) (if subparagraph (i) is not applicable in relation to the entity) the percentage of the ownership interests that Entity A has in the entity;(iii) (if neither subparagraph (i) nor (ii) is applicable in relation to the entity) the percentage of the profits of the entity to which Entity A is entitled; or(iv) (if none of subparagraphs (i), (ii) and (iii) is applicable in relation to the entity) the percentage of the voting rights in the entity that Entity A is entitled to exercise or the exercise of which Entity A is entitled to control. 3. For the purposes of section 2 of this Schedule—(a) section 7(5), (6) and (7) of Schedule 16E applies; and(b) a reference to Entity A in section 2(a), (b), (c) and (d) of this Schedule includes—(i) if Entity A is a partnership—a partner in the partnership; and(ii) if Entity A is a trust—a trustee of the trust. 4. For an entity (Entity C) having an indirect beneficial interest in another entity (Entity D), the extent of the beneficial interest of Entity C in Entity D is—(a) if there is only one interposed entity—the percentage arrived at by multiplying the percentage representing the extent of the beneficial interest of Entity C in the interposed entity by the percentage representing the extent of the beneficial interest of the interposed entity in Entity D; or(b) if there is a series of 2 or more interposed entities—the percentage arrived at by multiplying the percentage representing the extent of the beneficial interest of Entity C in the first interposed entity in the series by—(i) the percentage representing the extent of the beneficial interest of each interposed entity (other than the last interposed entity) in the series in the next interposed entity in the series; and(ii) the percentage representing the extent of the beneficial interest of the last interposed entity in the series in Entity D. 5. For the purposes of section 4 of this Schedule—(a) section 2 of this Schedule applies in determining the extent of the beneficial interest of Entity C in an interposed entity as if—(i) the references to Entity A in that section were references to Entity C; and(ii) the references to Entity B in that section were references to an interposed entity;(b) section 2 of this Schedule applies in determining the extent of the beneficial interest of an interposed entity in Entity D as if—(i) the references to Entity A in that section were references to an interposed entity; and(ii) the references to Entity B in that section were references to Entity D; and(c) section 2 of this Schedule applies in determining the extent of the beneficial interest of an interposed entity (Interposed Entity A) in another interposed entity (Interposed Entity B) as if—(i) the references to Entity A in that section were references to Interposed Entity A; and(ii) the references to Entity B in that section were references to Interposed Entity B. Schedule 16I [s. 40AV & Sch. 16E]Provisions for Determining Extent of FIHV’s Beneficial Interest in FSPE (Sections 11 and 16 of Schedule 16E) (Schedule 16I added 8 of 2023 s. 7) Part 1 1. In this Schedule—direct beneficial interest (直接實益權益) has the meaning given by section 7 of Schedule 16E;entity (實體) has the meaning given by section 1(1) of Schedule 16E;FIHV (家控工具) has the meaning given by section 5 of Schedule 16E;FSPE (家族特體) has the meaning given by section 6 of Schedule 16E;indirect beneficial interest (間接實益權益) has the meaning given by section 7 of Schedule 16E. Part 2 2. For an FIHV having a direct beneficial interest in an FSPE, the extent of the beneficial interest of the FIHV in the FSPE is—(a) if the FSPE is a corporation—(i) the percentage of the issued share capital (however described) of the corporation held by the FIHV; or(ii) (if the corporation does not have any issued share capital) the percentage of the voting rights in the corporation that the FIHV is entitled to exercise or the exercise of which the FIHV is entitled to control;(b) if the FSPE is a partnership—(i) the percentage of the profits of the partnership to which the FIHV is entitled; or(ii) (if the partners in the partnership are neither entitled to the profits of the partnership nor entitled to a distribution of the assets of the partnership on its dissolution) the percentage of the voting rights in the partnership that the FIHV is entitled to exercise or the exercise of which the FIHV is entitled to control;(c) if the FSPE is a trust—the percentage in value of the trust estate in which the FIHV is interested; and(d) if the FSPE is an entity that does not fall within any of paragraphs (a), (b) and (c)—(i) the percentage of the capital of the entity to which the FIHV is entitled;(ii) (if subparagraph (i) is not applicable in relation to the entity) the percentage of the ownership interests that the FIHV has in the entity;(iii) (if neither subparagraph (i) nor (ii) is applicable in relation to the entity) the percentage of the profits of the entity to which the FIHV is entitled; or(iv) (if none of subparagraphs (i), (ii) and (iii) is applicable in relation to the entity) the percentage of the voting rights in the entity that the FIHV is entitled to exercise or the exercise of which the FIHV is entitled to control. 3. For the purposes of section 2 of this Schedule—(a) section 7(5), (6) and (7) of Schedule 16E applies; and(b) a reference in section 2(a), (b), (c) and (d) of this Schedule to the FIHV includes—(i) if the FIHV is a partnership—a partner in the partnership; and(ii) if the FIHV is a trust—a trustee of the trust. 4. For an FIHV having an indirect beneficial interest in an FSPE, the extent of the beneficial interest of the FIHV in the FSPE is—(a) if there is only one interposed entity—the percentage arrived at by multiplying the percentage representing the extent of the beneficial interest of the FIHV in the interposed entity by the percentage representing the extent of the beneficial interest of the interposed entity in the FSPE; or(b) if there is a series of 2 or more interposed entities—the percentage arrived at by multiplying the percentage representing the extent of the beneficial interest of the FIHV in the first interposed entity in the series by—(i) the percentage representing the extent of the beneficial interest of each interposed entity (other than the last interposed entity) in the series in the next interposed entity in the series; and(ii) the percentage representing the extent of the beneficial interest of the last interposed entity in the series in the FSPE. 5. For the purposes of section 4 of this Schedule—(a) section 2 of this Schedule applies in determining the extent of the beneficial interest of an FIHV in an interposed entity as if the references to an FSPE in that section were references to an interposed entity;(b) section 2 of this Schedule applies in determining the extent of the beneficial interest of an interposed entity in an FSPE as if the references to an FIHV in that section were references to an interposed entity; and(c) section 2 of this Schedule applies in determining the extent of the beneficial interest of an interposed entity (Interposed Entity A) in another interposed entity (Interposed Entity B) as if—(i) the references to an FIHV in that section were references to Interposed Entity A; and(ii) the references to an FSPE in that section were references to Interposed Entity B. Schedule 16J [s. 40AV & Schs. 16E & 16K]Provisions for Ascertaining Amount of Assessable Profits of Resident Person under Section 22 of Schedule 16E (Schedule 16J added 8 of 2023 s. 7) Part 1 1. In this Schedule—direct beneficial interest (直接實益權益) has the meaning given by section 7 of Schedule 16E;entity (實體) has the meaning given by section 1(1) of Schedule 16E;FIHV (家控工具) has the meaning given by section 5 of Schedule 16E;indirect beneficial interest (間接實益權益) has the meaning given by section 7 of Schedule 16E;resident person (居港者) has the meaning given by section 20(2) of Schedule 16E. Part 2 2. The amount regarded as the assessable profits of a resident person for a year of assessment is the total sum arrived at by adding up the assessable profits of the FIHV that are chargeable to tax under Part 4 of this Ordinance and in respect of which tax would have been payable but for section 9 of Schedule 16E (concessionary profits) for each day in the period in the year of assessment during which the resident person has a direct or indirect beneficial interest in the FIHV. 3. For the purposes of section 2 of this Schedule, the concessionary profits of an FIHV for a particular day in a year of assessment are to be ascertained in accordance with the following formula— A = B × C D where: A means the concessionary profits of the FIHV for a particular day in a year of assessment; B means the extent of the resident person’s beneficial interest in the FIHV on the particular day, expressed as a percentage determined in accordance with Part 3 of this Schedule;

C means the concessionary profits of the FIHV for the accounting period of the FIHV in which the particular day falls; D means the total number of days in the accounting period of the FIHV in which the particular day falls. Part 3 4. For a resident person having a direct beneficial interest in an FIHV, the extent of the beneficial interest of the resident person in the FIHV is—(a) if the FIHV is a corporation—(i) the percentage of the issued share capital (however described) of the corporation held by the resident person; or(ii) (if the corporation does not have any issued share capital) the percentage of the voting rights in the corporation that the resident person is entitled to exercise or the exercise of which the resident person is entitled to control;(b) if the FIHV is a partnership—(i) the percentage of the profits of the partnership to which the resident person is entitled; or(ii) (if the partners in the partnership are neither entitled to the profits of the partnership nor entitled to a distribution of the assets of the partnership on its dissolution) the percentage of the voting rights in the partnership that the resident person is entitled to exercise or the exercise of which the resident person is entitled to control;(c) if the FIHV is a trust—the percentage in value of the trust estate in which the resident person is interested; and(d) if the FIHV is an entity that does not fall within any of paragraphs (a), (b) and (c)—(i) the percentage of the capital of the entity to which the resident person is entitled;(ii) (if subparagraph (i) is not applicable in relation to the entity) the percentage of the ownership interests that the resident person has in the entity;(iii) (if neither subparagraph (i) nor (ii) is applicable in relation to the entity) the percentage of the profits of the entity to which the resident person is entitled; or(iv) (if none of subparagraphs (i), (ii) and (iii) is applicable in relation to the entity) the percentage of the voting rights in the entity that the resident person is entitled to exercise or the exercise of which the resident person is entitled to control. 5. Section 7(5), (6) and (7) of Schedule 16E applies for the purposes of section 4 of this Schedule. 6. For a resident person having an indirect beneficial interest in an FIHV, the extent of the beneficial interest of the resident person in the FIHV is—(a) if there is only one interposed entity—the percentage arrived at by multiplying the percentage representing the extent of the beneficial interest of the resident person in the interposed entity by the percentage representing the extent of the beneficial interest of the interposed entity in the FIHV; or(b) if there is a series of 2 or more interposed entities—the percentage arrived at by multiplying the percentage representing the extent of the beneficial interest of the resident person in the first interposed entity in the series by—(i) the percentage representing the extent of the beneficial interest of each interposed entity (other than the last interposed entity) in the series in the next interposed entity in the series; and(ii) the percentage representing the extent of the beneficial interest of the last interposed entity in the series in the FIHV. 7. For the purposes of section 6 of this Schedule—(a) section 4 of this Schedule applies in determining the extent of the beneficial interest of a resident person in an interposed entity as if the references to an FIHV in that section were references to an interposed entity;(b) section 4 of this Schedule applies in determining the extent of the beneficial interest of an interposed entity in an FIHV as if the references to a resident person in that section were references to an interposed entity; and(c) section 4 of this Schedule applies in determining the extent of the beneficial interest of an interposed entity (Interposed Entity A) in another interposed entity (Interposed Entity B) as if—(i) the references to a resident person in that section were references to Interposed Entity A; and(ii) the references to an FIHV in that section were references to Interposed Entity B. Schedule 16K [s. 40AV & Sch. 16E]Provisions for Ascertaining Amount of Assessable Profits of Resident Person under Section 23 of Schedule 16E (Schedule 16K added 8 of 2023 s. 7) Part 1 1. In this Schedule—direct beneficial interest (直接實益權益) has the meaning given by section 7 of Schedule 16E;entity (實體) has the meaning given by section 1(1) of Schedule 16E;FIHV (家控工具) has the meaning given by section 5 of Schedule 16E;FSPE (家族特體) has the meaning given by section 6 of Schedule 16E;indirect beneficial interest (間接實益權益) has the meaning given by section 7 of Schedule 16E;resident person (居港者) has the meaning given by section 20(2) of Schedule 16E. Part 2 2. The amount regarded as the assessable profits of a resident person for a year of assessment is the total sum arrived at by adding up the assessable profits of the FSPE that are chargeable to tax under Part 4 of this Ordinance and in respect of which tax would have been payable but for section 16 of Schedule 16E (concessionary profits) for each day in the period in the year of assessment during which the resident person has an indirect beneficial interest in the FSPE. 3. For the purposes of section 2 of this Schedule, the concessionary profits of an FSPE for a particular day in a year of assessment are to be ascertained in accordance with the following formula— A = B1 × B2 × C D where: A means the concessionary profits of the FSPE for a particular day in a year of assessment; B1 means the extent of the resident person’s beneficial interest in the FIHV on the particular day, expressed as a percentage determined in accordance with Part 3 of Schedule 16J; B2 means the extent of the FIHV’s beneficial interest in the FSPE on the particular day, expressed as a percentage determined in accordance with Part 3 of this Schedule; C means the concessionary profits of the FSPE for the accounting period of the FSPE in which the particular day falls; D means the total number of days in the accounting period of the FSPE in which the particular day falls. Part 3 4. For an FIHV having a direct beneficial interest in an FSPE, the extent of the beneficial interest of the FIHV in the FSPE is—(a) if the FSPE is a corporation—(i) the percentage of the issued share capital (however described) of the corporation held by the FIHV; or(ii) (if the corporation does not have any issued share capital) the percentage of the voting rights in the corporation that the FIHV is entitled to exercise or the exercise of which the FIHV is entitled to control;(b) if the FSPE is a partnership—(i) the percentage of the profits of the partnership to which the FIHV is entitled; or(ii) (if the partners in the partnership are neither entitled to the profits of the partnership nor entitled to a distribution of the assets of the partnership on its dissolution) the percentage of the voting rights in the partnership that the FIHV is entitled to exercise or the exercise of which the FIHV is entitled to control;(c) if the FSPE is a trust—the percentage in value of the trust estate in which the FIHV is interested; and(d) if the FSPE is an entity that does not fall within any of paragraphs (a), (b) and (c)—(i) the percentage of the capital of the entity to which the FIHV is entitled;(ii) (if subparagraph (i) is not applicable in relation to the entity) the percentage of the ownership interests that the FIHV has in the entity;(iii) (if neither subparagraph (i) nor (ii) is applicable in relation to the entity) the percentage of the profits of the entity to which the FIHV is entitled; or(iv) (if none of subparagraphs (i), (ii) and (iii) is applicable in relation to the entity) the percentage of the voting rights in the entity that the FIHV is entitled to exercise or the exercise of which the FIHV is entitled to control. 5. For the purposes of section 4 of this Schedule—(a) section 7(5), (6) and (7) of Schedule 16E applies; and(b) a reference in section 4(a), (b), (c) and (d) of this Schedule to the FIHV includes—(i) if the FIHV is a partnership—a partner in the partnership; and(ii) if the FIHV is a trust—a trustee of the trust. 6. For an FIHV having an indirect beneficial interest in an FSPE, the extent of the beneficial interest of the FIHV in the FSPE is—(a) if there is only one interposed entity—the percentage arrived at by multiplying the percentage representing the extent of the beneficial interest of the FIHV in the interposed entity by the percentage representing the extent of the beneficial interest of the interposed entity in the FSPE; or(b) if there is a series of 2 or more interposed entities—the percentage arrived at by multiplying the percentage representing the extent of the beneficial interest of the FIHV in the first interposed entity in the series by—(i) the percentage representing the extent of the beneficial interest of each interposed entity (other than the last interposed entity) in the series in the next interposed entity in the series; and(ii) the percentage representing the extent of the beneficial interest of the last interposed entity in the series in the FSPE. 7. For the purposes of section 6 of this Schedule—(a) section 4 of this Schedule applies in determining the extent of the beneficial interest of an FIHV in an interposed entity as if the references to an FSPE in that section were references to an interposed entity;(b) section 4 of this Schedule applies in determining the extent of the beneficial interest of an interposed entity in an FSPE as if the references to an FIHV in that section were references to an interposed entity; and(c) section 4 of this Schedule applies in determining the extent of the beneficial interest of an interposed entity (Interposed Entity A) in another interposed entity (Interposed Entity B) as if—(i) the references to an FIHV in that section were references to Interposed Entity A; and(ii) the references to an FSPE in that section were references to Interposed Entity B. Schedule 17 [ss. 16H & 16K]Environmental Protection Facilities (Schedule 17 added 21 of 2008 s. 11) Part 1 Machinery or Plant 1. Low noise construction machinery or plant registered under the Quality Powered Mechanical Equipment system administered by the Environmental Protection Department. 2. Air pollution control machinery or plant in compliance with the requirements under the Air Pollution Control Ordinance (Cap. 311). 3. Waste treatment machinery or plant in compliance with the requirements under the Waste Disposal Ordinance (Cap. 354). 4. Wastewater treatment machinery or plant in compliance with the requirements under the Water Pollution Control Ordinance (Cap. 358). Part 2 Installations 1. Any of the following installations—(a) solar water heating installations;(b) solar photovoltaic installations;(c) wind turbine installations;(d) offshore wind farm installations;(e) landfill gas installations;(f) anaerobic digestion installations;(g) thermal waste treatment installations;(h) wave power installations;(i) hydroelectric installations;(j) bio-fuel installations;(k) biomass combined-heat-and-power installations;(l) geothermal installations. 2. Energy efficient building installations registered under the Hong Kong Energy Efficiency Registration Scheme for Buildings administered by the Electrical and Mechanical Services Department. Part 3 Environment-friendly Vehicles 1. Any vehicle qualified for remission of first registration tax (as defined by section 2(1) of the Motor Vehicles (First Registration Tax) Ordinance (Cap. 330)) under the following schemes administered by the Environmental Protection Department—(a) the Tax Incentives Scheme for Environment-friendly Commercial Vehicles;(b) the Tax Incentives Scheme for Environment-friendly Petrol Private Cars. 2. Any motor vehicle (as defined by section 2(1) of the Motor Vehicles (First Registration Tax) Ordinance (Cap. 330)) that is capable of drawing energy from both of the following on-vehicle sources of stored energy or power for mechanical propulsion—(a) consumable fuel;(b) battery, capacitor, flywheel, generator or other electrical energy or power storage device. 3. Any motor vehicle (as defined by section 2(1) of the Motor Vehicles (First Registration Tax) Ordinance (Cap. 330)) that is solely propelled by electric power and does not emit any exhaust gas.(Part 3 added 10 of 2010 s. 8) Schedule 17A [ss. 5B(7), 14A(6), 15(3A), 16(4A), 20AC(7), 20AN(7), 26A(2) & (4), 40AB, 51C(5), 60(4), 64(11), 79(4), 80(6) & 82A(8) & Schs. 6, 16, 16C & 29](Amended 7 of 2014 s. 9; 5 of 2019 s. 12)Specified Alternative Bond Scheme and its Treatment under this Ordinance (other than Part 4AA) (Schedule 17A added 10 of 2013 s. 4. Amended 21 of 2025 s. 30) Note—The following is an overview of the content of this Schedule and does not have legislative effect— (a) This Schedule enables particular arrangements in a specified alternative bond scheme to be regarded as debt arrangements for the purposes of this Ordinance if certain conditions are met.(b) Sections 2 and 3 provide for the basic structure of an alternative bond scheme, which comprises a bond arrangement and an investment arrangement.(c) Under section 4, a specified alternative bond scheme is, in broad terms, an alternative bond scheme whose investment arrangement is always the same specified investment arrangement.(d) Different types of specified investment arrangements are set out in section 5. Sections 6 to 12 provide for the structures of those types of specified investment arrangements and for the calculation of the investment return under them. These provisions may be amended by notice published in the Gazette under section 23.(e) Sections 13 to 20 provide for the conditions that must be met in order for the bond arrangement, and investment arrangement, in a specified alternative bond scheme to be regarded as debt arrangements for the purposes of this Ordinance. Sections 21 and 22 contain detailed provisions on the tax treatment of the arrangements.(f) Sections 24 to 29 provide for record-keeping, notifications, assessments and other miscellaneous matters. Part 1 Preliminary 1. Interpretation (1) In this Schedule, an expression specified in column 1 of the Table below is to be construed in accordance with the section of this Schedule specified opposite to it in column 2 of the Table— Table Column 1 Expression Column 2 Section acquisition cost (取得成本) 2 additional payments (額外付款) 2 agency arrangement (代理安排) 9 alternative bond (另類債券) 2 alternative bond scheme (另類債券計劃) 2 arrangements performed according to terms condition (按條款履行安排條件) 18 asset transaction between O and BU (發起人——業務實體資產交易) (in relation to a profits sharing arrangement) 7(3) BA disqualifying event (喪失債券安排資格事件) 13(5) bond arrangement (債券安排) 2 bond arrangement as financial liability condition (債券安排作金融負債條件) 15 bond-holder (持債人) 2 bond-issuer (發債人) 2 bond-issuer as conduit condition (發債人作轉付者條件) 19 bond proceeds (發債所得) 2 Hong Kong connection condition (與香港關連條件) 16 IA disqualifying event (喪失投資安排資格事件) 13(5) investment arrangement (投資安排) 2 investment arrangement as financial liability condition (投資安排作金融負債條件) 20 lease arrangement (租賃安排) 6 maximum term length condition (最長年期條件) 17 originator (發起人) 2 proceeds of disposal (處置所得) 2 profits sharing arrangement (分利安排) 7 purchase and sale arrangement (買賣安排) 8 qualified bond arrangement (合資格債券安排) 13(1) qualified investment arrangement (合資格投資安排) 13(2) reasonable commercial return condition (合理商業回報條件) 14 redemption payment (贖債付款) 2 specified alternative bond scheme (指明另類債券計劃) 4 specified asset (指明資產)— (a) in relation to an alternative bond scheme; 2 (b) in relation to a lease arrangement; 6 (c) in relation to a profits sharing arrangement; 7 (d) in relation to a purchase and sale arrangement; 8 (e) in relation to an agency arrangement 9 specified asset transaction between O and BI (發起人——發債人指明資產交易)— (a) in relation to a lease arrangement; 6(3) (b) in relation to a profits sharing arrangement; 7(3) (c) in relation to a purchase and sale arrangement; 8(6) (d) in relation to an agency arrangement 9(7) specified investment arrangement (指明投資安排) 5 specified term (指明年期) 2 (2) In this Schedule—asset (資產) means any property or any class of property; investment return (投資回報)— (a) in relation to an investment arrangement, has the meaning given by section 2 of this Schedule; (b) in relation to a lease arrangement or a profits sharing arrangement, means the investment return calculated in accordance with section 10 of this Schedule; (c) in relation to a purchase and sale arrangement, means the investment return calculated in accordance with section 11 of this Schedule; and (d) in relation to an agency arrangement, means the investment return calculated in accordance with section 12 of this Schedule; special purpose vehicle (特定目的工具), in relation to any scheme or schemes, means a corporation, partnership or any other entity that— (a) is established solely for the purposes of the scheme or schemes (as the case requires); and (b) does not carry on any trade or activities except for the purposes of the scheme or schemes (as the case requires); (Amended 21 of 2025 s. 30) tax (稅) does not include a top-up tax. (Added 21 of 2025 s. 30) Part 2 Specified Alternative Bond Scheme and its Treatment under this Ordinance (other than Part 4AA) (Amended 21 of 2025 s. 30) Division 1 Alternative Bond Scheme, Bond Arrangement and Investment Arrangement 2. Alternative bond scheme, bond arrangement and investment arrangement (1) If a scheme comprises 2 arrangements (arrangement A and arrangement B), and the scheme and the arrangements meet the description in subsections (2), (3) and (4), then—(a) the scheme is an alternative bond scheme;(b) arrangement A is the bond arrangement in the scheme; and(c) arrangement B is the investment arrangement in the scheme.(2) The scheme (and arrangement A and arrangement B in it)—(a) commences on the date on which alternative bonds are issued under arrangement A, as referred to in subsection (3)(d); and(b) ends on the date on which the alternative bonds are to be fully redeemed or cancelled under the terms of arrangement A,(the period that so commences and ends is referred to as the specified term).(3) Under arrangement A—(a) one or more persons (each is referred to as an initial bond-holder) pay a sum of money (bond proceeds) to another person (bond-issuer);(b) the bond-issuer is a special purpose vehicle for the scheme;(c) on behalf of the initial bond-holders, the bond-issuer enters into arrangement B, as referred to in subsection (4);(d) the bond-issuer issues instruments (alternative bonds) to the initial bond-holders evidencing their rights and interests in or in relation to the specified asset referred to in subsection (4)(a);(e) if the alternative bonds are transferable from 1 person to another, transferees of any such alternative bonds become holders of the alternative bonds (subsequent bond-holders) because of the transfers (any initial bond-holder or subsequent bond-holder is referred to as a bond-holder); and(f) the bond-issuer undertakes—(i) to make a payment (redemption payment), whether or not by instalments, to the bond-holders during or at the end of the specified term to redeem the alternative bonds;(ii) to make other payments (additional payments) to the bond-holders on one or more occasions during, or at the end of, the specified term; and(iii) to use the investment return and the proceeds of disposal under arrangement B as referred to in subsection (4)(b) and (c), or part of these sums, for payment of the redemption payment and additional payments.(4) The bond-issuer enters into arrangement B with another person (originator), under which—(a) the bond-issuer uses the bond proceeds (acquisition cost) to acquire an asset (which asset, or an asset that is subject to the scheme in the circumstances described in section 3(2)(b), (3) and (4) of this Schedule, is referred to as the specified asset);(b) the bond-issuer arranges for the management of the specified asset with a view to generating income or gains during the specified term (the income or gains are referred to as the investment return); and(c) the bond-issuer is to dispose of the specified asset by the end of the specified term (the consideration received by the bond-issuer for the disposal of the specified asset is referred to as the proceeds of disposal). 3. Construction of references in section 2(3)(b) and (4)(b) of this Schedule (1) For the purposes of section 2(3)(b) of this Schedule, a special purpose vehicle for 2 or more schemes (whether existing or intended to be set up) is regarded as a special purpose vehicle for each of those schemes if—(a) each of the schemes would have been, or when set up would have been, an alternative bond scheme but for that section; and(b) each of the schemes has, or is intended to have, that special purpose vehicle as the bond-issuer and the same other person as the originator.(2) A reference in section 2(4)(b) of this Schedule to the management of the specified asset includes—(a) its disposal; and(b) a change of the specified asset described in subsection (3) with the consequences described in subsection (4).(3) A change of the specified asset refers to—(a) the asset that is at any time the specified asset under the scheme (pre-change asset) being disposed of, destroyed or lost, in whole or in part (the asset or part disposed of, destroyed or lost is referred to as the outgoing asset); and (b) another asset (incoming asset) being acquired.(4) The consequences of the change of the specified asset are—(a) the outgoing asset ceases to be subject to the scheme; and(b) either—(i) if the outgoing asset constitutes the whole of the pre-change asset, the incoming asset is subject to the scheme, until another asset is subject to the scheme in the circumstances described in subsections (2)(b) and (3) and this subsection; or(ii) if the outgoing asset constitutes only part of the pre-change asset, the asset comprising the incoming asset and the remaining part of the pre-change asset is subject to the scheme, until another asset is subject to the scheme in the circumstances described in subsections (2)(b) and (3) and this subsection. 4. Specified alternative bond scheme A scheme is a specified alternative bond scheme at any time (material time) if at the material time, and from the commencement of the specified term of the scheme up to the material time—(a) the terms of the scheme are, and have always been, those as described of an alternative bond scheme in section 2 of this Schedule; and(b) the terms of the investment arrangement in the scheme are those as described of a specified investment arrangement in Division 2 of this Part, and have always been those as so described of the same specified investment arrangement. Division 2 Specified Investment Arrangements: Description and Calculation of Investment Return 5. Specified investment arrangement The investment arrangement in an alternative bond scheme is a specified investment arrangement if it is—(a) a lease arrangement;(b) a profits sharing arrangement;(c) a purchase and sale arrangement; or(d) an agency arrangement. 6. Lease arrangement (1) The investment arrangement in an alternative bond scheme is a lease arrangement if, under the investment arrangement—(a) the bond-issuer uses the acquisition cost to acquire an asset (which asset, or an asset that is subject to the scheme in the circumstances described in subsection (2), is referred to as the specified asset);(b) subject to paragraph (d), the bond-issuer is to hold the specified asset until the end of the specified term;(c) for the purposes of generating income or gains during the specified term, the bond-issuer leases the specified asset to the originator for a consideration (specified income); and(d) the bond-issuer is to dispose of the specified asset to the originator, whether or not in stages, by the end of the specified term in return for the proceeds of disposal.(2) For the purposes of subsection (1), an asset that is at any time the specified asset under the scheme (pre-replacement asset) may be replaced in whole or in part (the asset or part replaced is referred to as the replaced asset, and any remainder is referred to as the remainder asset) by another asset (replacing asset) if—(a) either—(i) the bond-issuer acquires the replacing asset from a person in consideration of the bond-issuer’s disposal of the replaced asset to that person; or(ii) the replaced asset is destroyed or lost during the specified term with or without any remains, and the bond-issuer acquires the replacing asset from a person using—(A) the consideration received by the bond-issuer for the disposal to that person of any remains of the replaced asset; and(B) any insurance money or other compensation of any description arising in respect of the destruction or loss;(b) the person referred to in paragraph (a)(i) or (ii) is—(i) the originator, whether or not subparagraph (ii) applies; or(ii) if the asset acquired with the acquisition cost under subsection (1)(a) was acquired from a third party, the third party; and(c) on the replacement—(i) the replaced asset ceases to be subject to the scheme; and(ii) either—(A) for a replacement in whole, the replacing asset is subject to the scheme, until another asset is subject to the scheme in the circumstances described in this subsection; or(B) for a replacement in part, the asset comprising the replacing asset and the remainder asset is subject to the scheme, until another asset is subject to the scheme in the circumstances described in this subsection.(3) In relation to a lease arrangement, specified asset transaction between O and BI in section 22(3)(a) of this Schedule means—(a) any acquisition of an asset as, or as part of, the specified asset under subsection (1) or (2) from the originator;(b) any leasing of an asset as, or as part of, the specified asset under subsection (1); or(c) any disposal of an asset as, or as part of, the specified asset under subsection (1) or (2) to the originator. 7. Profits sharing arrangement (1) The investment arrangement in an alternative bond scheme is a profits sharing arrangement if, under the investment arrangement—(a) the bond-issuer and the originator form a business undertaking—(i) by the bond-issuer contributing the acquisition cost to the business undertaking in return for an interest in it; and(ii) by the originator contributing to the business undertaking in either of the following ways in return for an interest in it—(A) contributing a sum of money or in kind or both;(B) contributing expertise and management skills only, (the interest in the business undertaking acquired by the bond-issuer under subparagraph (i) is referred to as the specified asset);(b) subject to paragraph (f), the bond-issuer is to hold the specified asset until the end of the specified term;(c) for the purposes of generating income or gains during the specified term, the business undertaking carries on business activities in accordance with the terms of the arrangement;(d) for any profits generated, and any losses incurred, by the business undertaking—(i) if paragraph (a)(ii)(A) applies, the bond-issuer shares with the originator—(A) the profits in accordance with the profits sharing ratios set out in the arrangement; and(B) the losses in proportion to the capital contributions of the bond-issuer and the originator; or(ii) if paragraph (a)(ii)(B) applies, the bond-issuer—(A) shares with the originator the profits in accordance with the profits sharing ratios set out in the arrangement; and(B) bears the losses, (the profits due to the bond-issuer, less the losses borne by the bond-issuer, are referred to as the specified return);(e) the bond-issuer may pay a portion of its share of the profits to the originator as an incentive fee; and(f) the bond-issuer is to dispose of the specified asset to the originator, whether or not in stages, by the end of the specified term in return for the proceeds of disposal.(2) Business activities carried on by the business undertaking under subsection (1)(c) may include—(a) acquiring an asset;(b) leasing an asset; and(c) disposing of an asset.(3) In relation to a profits sharing arrangement—(a) asset transaction between O and BU in section 22(4)(b) of this Schedule means an acquisition of an asset by the business undertaking as a contribution in kind by the originator because of subsection (1)(a)(ii)(A), or any acquisition, leasing or disposal of an asset by the business undertaking from or to the originator referred to in subsection (2);(b) specified asset transaction between O and BI in section 22(3)(a) of this Schedule means the disposal of the specified asset under subsection (1)(f). 8. Purchase and sale arrangement (1) The investment arrangement in an alternative bond scheme is a purchase and sale arrangement if it is an investment arrangement described in subsection (2) or (3).(2) An investment arrangement described in this subsection is one under which—(a) at the commencement of the specified term, the bond-issuer acquires an asset from a third party on immediate payment of the acquisition cost to that third party;(b) for the purposes of generating income or gains, the bond-issuer, on acquiring the asset, immediately disposes of it onward to the originator in return for the proceeds of disposal, which—(i) are of an amount equal to the acquisition cost plus a markup (markup); and(ii) are payable on deferred payment terms, in a lump sum or by instalments, by the end of the specified term; and(c) on the acquisition of the asset from the bond-issuer, the originator either—(i) immediately disposes of the asset onward to another third party against immediate payment of a price equal to the acquisition cost; or(ii) retains the asset for the originator’s own use.(3) An investment arrangement described in this subsection is one under which—(a) an acquisition and disposal of an asset by the bond-issuer and an onward disposal of it by the originator occur—(i) at the commencement of the specified term; and(ii) on each date (except the last one) on which an additional payment is payable under the bond arrangement in the scheme, (a date on which transactions referred to in this paragraph occur is referred to as a transaction date); and(b) the acquisitions, disposals and onward disposals of assets on the transaction dates meet the description in subsection (4).(4) Under an investment arrangement described in subsection (3)—(a) on each transaction date (material transaction date), the bond-issuer acquires an asset (asset of the material transaction date) from a third party on immediate payment to that third party of—(i) if the material transaction date is the 1st transaction date, the acquisition cost;(ii) in any other case, an amount equal to the acquisition cost that is paid out of the proceeds of the bond-issuer’s disposal of the asset of the preceding transaction date;(b) for the purposes of generating income or gains, the bond-issuer, on acquiring the asset of the material transaction date, immediately disposes of it onward to the originator in return for an amount that—(i) is equal to the acquisition cost plus a markup (markup); and(ii) is payable in a lump sum—(A) except if sub-subparagraph (B) applies, on the next transaction date; or(B) if the material transaction date is the last transaction date, at the end of the specified term; and(c) on the acquisition of the asset of the material transaction date from the bond-issuer, the originator immediately disposes of it onward to another third party against immediate payment of a price equal to the acquisition cost.(5) In relation to a purchase and sale arrangement described in subsection (2) or (3), each asset acquired and disposed of by the bond-issuer in accordance with subsection (2) or (4) (as the case requires) is, from the acquisition until the disposal, referred to as the specified asset.(6) In section 22(3)(a) of this Schedule, specified asset transaction between O and BI means—(a) in relation to a purchase and sale arrangement described in subsection (2), the disposal of the specified asset under subsection (2)(b); or(b) in relation to a purchase and sale arrangement described in subsection (3), the disposal of a specified asset under subsection (4)(b) on a transaction date. 9. Agency arrangement (1) The investment arrangement in an alternative bond scheme is an agency arrangement if, under the investment arrangement—(a) the bond-issuer appoints the originator, and the originator undertakes to act, as the bond-issuer’s agent;(b) subject to subsection (2), the originator as the bond-issuer’s agent undertakes the matters specified below—(i) using the acquisition cost to acquire an asset (which asset, or an asset that is subject to the scheme in the circumstances described in subsections (4), (5) and (6), is referred to as the specified asset);(ii) subject to subparagraphs (iii) and (iv), holding the specified asset until the end of the specified term;(iii) the management of the specified asset for the purposes of generating income or gains; and(iv) disposing of the specified asset, whether or not in stages, by the end of the specified term in return for the proceeds of disposal; and(c) the bond-issuer is entitled to the profits from the management of the specified asset (specified return), and the originator is entitled to an agency fee or an incentive fee, or both.(2) For the purposes of subsection (1), the bond-issuer may act otherwise than through the originator as its agent—(a) partly in the matter specified in subsection (1)(b)(iii); and(b) wholly or partly in the matters specified in subsection (1)(b)(i), (ii) and (iv).(3) For the purposes of this section, the management of the specified asset may include leasing and disposing of an asset as, or as part of, the specified asset.(4) For the purposes of this section, the management of the specified asset may also include a replacement described in subsection (5) with the consequences described in subsection (6).(5) A replacement refers to—(a) the asset that is at any time the specified asset under the scheme (pre-replacement asset) being disposed of, destroyed or lost, in whole or in part (the asset or part disposed of, destroyed or lost is referred to as the replaced asset, and any remainder is referred to as the remainder asset); and(b) another asset (replacing asset) being acquired.(6) The consequences of a replacement are—(a) the replaced asset ceases to be subject to the scheme; and(b) either—(i) if the replaced asset constitutes the whole of the pre-replacement asset, the replacing asset is subject to the scheme, until another asset is subject to the scheme in the circumstances described in subsections (4) and (5) and this subsection; or(ii) if the replaced asset constitutes only part of the pre-replacement asset, the asset comprising the replacing asset and the remainder asset is subject to the scheme, until another asset is subject to the scheme in the circumstances described in subsections (4) and (5) and this subsection.(7) In relation to an agency arrangement, specified asset transaction between O and BI in section 22(3)(a) of this Schedule means any acquisition, leasing or disposal of an asset as, or as part of, the specified asset by the bond-issuer (whether or not acting through the originator as its agent) from or to the originator under subsection (1)(b) or (2). 10. Lease arrangement and profits sharing arrangement—investment return (1) This section applies to a specified investment arrangement that is—(a) a lease arrangement; or(b) a profits sharing arrangement.(2) The investment return paid or payable under a specified investment arrangement to which this section applies in a period in the specified term is to be calculated in accordance with the following formula—A + B – C + D – E(3) If the formula is used for calculating the investment return paid under a specified investment arrangement in the period— A means— (a) for a lease arrangement, the total amount of specified income (referred to in section 6(1)(c) of this Schedule) paid under the arrangement in the period, plus any amount regarded under subsection (5)(b) as specified income paid under the arrangement in the period; or (b) for a profits sharing arrangement, the total amount of specified return (referred to in section 7(1)(d) of this Schedule) paid under the arrangement in the period; B means the specified proceeds of disposal paid under the arrangement in the period; C means the specified acquisition cost paid under the arrangement in the period; D means the total amount of any other sums paid by the originator to the bond-issuer under the arrangement in the period; E means— (a) for a lease arrangement, nil; or (b) for a profits sharing arrangement, the total amount of any incentive fee (referred to in section 7(1)(e) of this Schedule) that is paid by the bond-issuer to the originator under the arrangement in the period. (4) In this section, in relation to a specified investment arrangement in a specified alternative bond scheme—full redemption of bonds (全額贖回債券) means full redemption or cancellation of the alternative bonds under the bond arrangement in the scheme;partial redemption of bonds (局部贖回債券) means partial redemption or cancellation of the alternative bonds under the bond arrangement in the scheme; specified acquisition cost (指明取得成本), in relation to a period in the specified term, means the sum specified in paragraph (a) or (b) or the total amount of the sums specified in paragraphs (a) and (b) (as the case requires)— (a) if the specified proceeds of disposal is wholly or partly attributable to the consideration for the disposal of an asset as, or as part of, the specified asset—the acquisition cost or the part of the acquisition cost attributable to the asset disposed of (as the case requires); (b) if the specified proceeds of disposal is wholly or partly attributable to the money deemed under subsection (5)(c)(ii) to be the consideration for the deemed disposal of an asset as, or as part of, the specified asset—the acquisition cost or the part of the acquisition cost attributable to the asset deemed to be disposed of (as the case requires); specified proceeds of disposal (指明處置所得), in relation to a period in the specified term, means the sum specified in paragraph (a) or (b) or the total amount of the sums specified in paragraphs (a) and (b) (as the case requires)— (a) the consideration for the disposal of an asset as, or as part of, the specified asset if the consideration is used for full or partial redemption of bonds in the period; (b) the money deemed under subsection (5)(c)(ii) to be the consideration for the deemed disposal of an asset as, or as part of, the specified asset. (5) If an asset (asset A) that is or forms part of the specified asset under a lease arrangement is destroyed or lost—(a) the money arising from the destruction or loss is the total amount of the following—(i) any insurance money or other compensation of any description arising in respect of the destruction or loss;(ii) any consideration received for the disposal of any remains left of asset A after the destruction or loss;(b) if in a period—(i) the money arising from the destruction or loss is received by the bond-issuer but is not used for full or partial redemption of bonds; and(ii) the money or part of it is not used for any acquisition of an asset as, or as part of, the specified asset referred to in section 6(2)(a)(ii) of this Schedule, then the unused money or part is to be regarded as specified income paid under the arrangement in the period for the purposes of subsection (3); and(c) if the money arising from the destruction or loss is received by the bond-issuer who uses the money for full or partial redemption of bonds in a period, then—(i) asset A is deemed to be disposed of in the period; and(ii) the money arising from the destruction or loss is deemed to be consideration for the deemed disposal of asset A in the period.(6) If the formula is used for calculating the investment return payable under a specified investment arrangement in the period, then subsections (3), (4) and (5) apply with necessary modifications including—(a) paid is to be read as payable;(b) disposed of is to be read as to be disposed of;(c) received is to be read as receivable; and(d) used is to be read as to be used. 11. Purchase and sale arrangement—investment return (1) The investment return paid or payable under a purchase and sale arrangement in a period in the specified term is to be calculated in accordance with the following formula—A + B(2) If the formula is used for calculating the investment return paid under a purchase and sale arrangement in the period— A means— (a) for a purchase and sale arrangement described in section 8(2) of this Schedule, the markup referred to in that section, or part of it, that is paid under the arrangement in the period; or (b) for a purchase and sale arrangement described in section 8(3) of this Schedule, the total amount of the markups referred to in section 8(4)(b) of this Schedule paid under the arrangement in the period; B means the total amount of any other sums paid by the originator to the bond-issuer under the arrangement in the period. (3) If the formula is used for calculating the investment return payable under a purchase and sale arrangement in the period, A and B have the meaning given by subsection (2), except that a reference in that subsection to paid is to be read as payable. 12. Agency arrangement—investment return (1) The investment return paid or payable under an agency arrangement in a period in the specified term is to be calculated in accordance with the following formula—A + B – C(2) If the formula is used for calculating the investment return paid under an agency arrangement in the period— A means the total amount of specified return (referred to in section 9(1)(c) of this Schedule) paid under the arrangement in the period; B means the total amount of any other sums paid by the originator to the bond-issuer under the arrangement in the period; C means the total amount of any agency fee and incentive fee (referred to in section 9(1)(c) of this Schedule) that is paid by the bond-issuer to the originator under the arrangement in the period. (3) If the formula is used for calculating the investment return payable under an agency arrangement in the period, A, B and C have the meaning given by subsection (2), except that a reference in that subsection to paid is to be read as payable. Division 3 Qualified Bond Arrangement, and Qualified Investment Arrangement, in Specified Alternative Bond Scheme Regarded as Debt Arrangements 13. Qualified bond arrangement, and qualified investment arrangement, in specified alternative bond scheme (1) Subject to subsection (3), the bond arrangement in a specified alternative bond scheme is a qualified bond arrangement at any time (material time) if the scheme at the material time complies with, and from the commencement of the specified term of the scheme up to the material time has always complied with—(a) the reasonable commercial return condition;(b) the bond arrangement as financial liability condition;(c) the Hong Kong connection condition;(d) the maximum term length condition; and(e) the arrangements performed according to terms condition.(2) Subject to subsection (4), the specified investment arrangement in a specified alternative bond scheme is a qualified investment arrangement at any time (material time) if—(a) the bond arrangement in the scheme at the material time is, and from the commencement of the specified term of the scheme up to the material time has always been, a qualified bond arrangement; and(b) the scheme at the material time complies with, and from the commencement of the specified term up to the material time has always complied with—(i) the bond-issuer as conduit condition; and(ii) the investment arrangement as financial liability condition.(3) Despite subsection (1) but subject to section 28 of this Schedule, an arrangement in a scheme is to be regarded as never having been a qualified bond arrangement in a specified alternative bond scheme if a BA disqualifying event occurs in relation to the arrangement at any time during the specified term.(4) Despite subsection (2) but subject to section 28 of this Schedule, an arrangement in a scheme is to be regarded as never having been a qualified investment arrangement in a specified alternative bond scheme if an IA disqualifying event occurs in relation to the arrangement at any time during the specified term.(5) In this section— BA disqualifying event (喪失債券安排資格事件), in relation to an arrangement in a scheme that has been claimed or accepted to be a qualified bond arrangement in a specified alternative bond scheme for the purposes of ascertaining the tax chargeable on a person, means— (a) the scheme is not a specified alternative bond scheme at any time during the specified term of the scheme; or (b) although the scheme is a specified alternative bond scheme at all times during the specified term of the scheme, the scheme fails to comply with any of the conditions specified in subsection (1) at any time during the specified term; IA disqualifying event (喪失投資安排資格事件), in relation to an arrangement in a scheme that has been claimed or accepted to be a qualified investment arrangement in a specified alternative bond scheme for the purposes of ascertaining the tax chargeable on a person, means— (a) the scheme is not a specified alternative bond scheme at any time during the specified term of the scheme; or (b) although the scheme is a specified alternative bond scheme at all times during the specified term of the scheme, the scheme fails to comply with any of the conditions specified in subsection (1) or (2)(b) at any time during the specified term. 14. Reasonable commercial return condition (1) A specified alternative bond scheme complies with the reasonable commercial return condition if the requirements in subsections (2) and (3) are met.(2) The Commissioner is satisfied that, in each period ending on a scheduled payment date, the maximum total amount of the bond return that may be payable under the terms of the bond arrangement in the scheme will not exceed an amount that would be a reasonable commercial return on money borrowed of an amount equal to the bond proceeds.(3) In each period ending on an actual payment date, the total amount of the bond return actually paid under the bond arrangement in the scheme does not exceed an amount that would be a reasonable commercial return on money borrowed of an amount equal to the bond proceeds.(4) In this section— period ending on a scheduled payment date (於預定付款日期告終的期間), in relation to a specified alternative bond scheme, means a period— (a) beginning on the commencement of the specified term of the scheme; and (b) ending on a date on which an additional payment, or the redemption payment or part of it, may be payable under the terms of the bond arrangement in the scheme; period ending on an actual payment date (於實際付款日期告終的期間), in relation to a specified alternative bond scheme, means a period— (a) beginning on the commencement of the specified term of the scheme; and (b) ending on a date on which an additional payment, or the redemption payment or part of it, is actually paid under the bond arrangement in the scheme.

(5) For the purposes of this section, the bond return paid or payable under a bond arrangement in a period in the specified term is to be calculated in accordance with the following formula—(A – (B x A / C)) + D(6) If the formula is used for calculating the bond return paid under a bond arrangement in the period— A is the amount of the redemption payment or part of it that is paid under the arrangement in the period; B is the whole amount of the bond proceeds under the arrangement; C is the whole amount of the redemption payment under the arrangement; D is the total amount of additional payments paid under the arrangement in the period. (7) If the formula is used for calculating the bond return payable under a bond arrangement in the period, A, B, C and D have the meaning given by subsection (6), except that a reference in that subsection to paid is to be read as payable. 15. Bond arrangement as financial liability condition A specified alternative bond scheme complies with the bond arrangement as financial liability condition if the bond arrangement in the scheme—(a) is treated as a financial liability of the bond-issuer, in accordance with—(i) the Hong Kong Financial Reporting Standards (issued by the Hong Kong Institute of Certified Public Accountants); or(ii) the International Financial Reporting Standards (issued by the International Accounting Standards Board); or(b) would be treated as a financial liability of the bond-issuer if the bond-issuer applied those standards. 16. Hong Kong connection condition A specified alternative bond scheme complies with the Hong Kong connection condition if alternative bonds issued under the bond arrangement in the scheme—(a) are listed on a stock exchange in Hong Kong;(b) are issued in good faith and in the course of carrying on business in Hong Kong;(c) are marketed in Hong Kong; or(d) are lodged with and cleared by the Central Moneymarkets Unit operated by the Monetary Authority. 17. Maximum term length condition (1) A specified alternative bond scheme complies with the maximum term length condition if its specified term is not longer than 15 years.(2) The Financial Secretary may, by notice published in the Gazette, amend the period specified in subsection (1). 18. Arrangements performed according to terms condition (1) A specified alternative bond scheme complies with the arrangements performed according to terms condition if the bond arrangement and specified investment arrangement in the scheme are performed according to the terms of the arrangements as described—(a) in section 2 of this Schedule; and(b) in the provisions in Division 2 of this Part that describe the specified investment arrangement.(2) Despite subsection (1), a specified alternative bond scheme does not cease to comply with the arrangements performed according to terms condition solely because of a delay, of not more than 30 days, in disposing of the specified asset. 19. Bond-issuer as conduit condition (1) A specified alternative bond scheme complies with the bond-issuer as conduit condition if the requirements in subsections (2) and (3) are met.(2) The Commissioner is satisfied that, in each period ending on a scheduled payment date, the maximum total amount of the investment return that may be payable under the terms of the specified investment arrangement in the scheme will not exceed the maximum total amount of the bond return that may be payable under the terms of the bond arrangement in the scheme.(3) In each period ending on an actual payment date, the total amount of the investment return actually paid under the specified investment arrangement in the scheme does not exceed the total amount of the bond return actually paid under the bond arrangement in the scheme.(4) Section 14(4), (5), (6) and (7) of this Schedule applies for the purposes of this section in the same way it applies for the purposes of section 14 of this Schedule. 20. Investment arrangement as financial liability condition A specified alternative bond scheme complies with the investment arrangement as financial liability condition if the specified investment arrangement in the scheme—(a) is treated as a financial liability of the originator, in accordance with—(i) the Hong Kong Financial Reporting Standards (issued by the Hong Kong Institute of Certified Public Accountants); or(ii) the International Financial Reporting Standards (issued by the International Accounting Standards Board); or(b) would be treated as a financial liability of the originator if the originator applied those standards. 21. Qualified bond arrangement regarded as debt arrangement (1) This Ordinance applies, with the modifications set out in this section, to a qualified bond arrangement in a specified alternative bond scheme.(2) For the purposes of this Ordinance, the qualified bond arrangement is to be regarded as a debt arrangement and—(a) the bond proceeds paid by the bond-holders to the bond-issuer under the qualified bond arrangement are to be regarded as money borrowed by the bond-issuer from the bond-holders;(b) the additional payments payable by the bond-issuer to the bond-holders under the qualified bond arrangement are to be regarded as interest payable on the money borrowed by the bond-issuer from the bond-holders;(c) the bond-issuer is to be regarded as not being a trustee in respect of the specified asset under the specified alternative bond scheme; and(d) the bond-holders are to be regarded as not having any legal or beneficial interest in the specified asset under the specified alternative bond scheme.(3) For the purposes of sections 14A and 26A of this Ordinance—(a) if the rights in an alternative bond under the qualified bond arrangement are transferable by delivery of the alternative bond, with or without endorsement, the alternative bond is to be regarded as an instrument specified in item 3 of Part 1 of Schedule 6;(b) the issue of alternative bonds under the qualified bond arrangement is to be regarded as a debt issue for the purpose of paragraph (a) of the definition of debt instrument in section 14A(4) of this Ordinance; and(c) if an alternative bond is for the purposes of section 14A of this Ordinance regarded as a debt instrument because of paragraphs (a) and (b), the making of the redemption payment for the alternative bond is to be regarded as the redemption on maturity or presentment of a debt instrument.(4) For the purposes of section 15(1)(j), (k), (l) and (la) of this Ordinance— (Amended 12 of 2016 s. 10)(a) if the rights in an alternative bond under the qualified bond arrangement are transferable by delivery of the alternative bond, with or without endorsement, the alternative bond is to be regarded as a certificate of deposit; and(b) the making of the redemption payment for the alternative bond is to be regarded as the redemption on maturity or presentment of a certificate of deposit.(5) Section 16(2)(f) of this Ordinance is to apply to additional payments payable on alternative bonds under the qualified bond arrangement by the bond-issuer as if they were interest payable on debentures or instruments by the bond-issuer.(6) Sections 20AC and 20AN of this Ordinance and item 1 of Part 1 of Schedules 16 and 16C are to apply as if alternative bonds issued under the qualified bond arrangement were bonds for the purposes of paragraph (a) of the definition of securities in those Schedules. (Amended 13 of 2015 s. 12; 5 of 2019 s. 12)(7) For the purposes of section 26A of this Ordinance, the qualified bond arrangement is to be regarded as not being a mutual fund, unit trust or similar investment scheme described in subsection (1A)(a) of that section. 22. Qualified investment arrangement regarded as debt arrangement (1) This Ordinance applies, with the modifications set out in this section, to a qualified investment arrangement in a specified alternative bond scheme.(2) For the purposes of this Ordinance, the qualified investment arrangement is to be regarded as a debt arrangement in the following respects—(a) the acquisition cost under the qualified investment arrangement is to be regarded as money borrowed by the originator from the bond-issuer;(b) the investment return payable under the qualified investment arrangement is to be regarded as interest payable on the money borrowed by the originator from the bond-issuer;(c) the bond-issuer is to be regarded as not having any legal or beneficial interest in the specified asset under the specified alternative bond scheme.(3) For the purposes of this Ordinance, whether or not subsection (4) applies—(a) any specified asset transaction between O and BI under the qualified investment arrangement is to be disregarded;(b) if an asset is acquired as, or as part of, the specified asset under the qualified investment arrangement by the bond-issuer from a third party, the asset is to be regarded as acquired by the originator directly from the third party;(c) if an asset is disposed of as, or as part of, the specified asset under the qualified investment arrangement by the bond-issuer to a third party, the asset is to be regarded as disposed of by the originator directly to the third party; and(d) any income, expenditure, profits, gains or losses arising from or attributable to any asset as, or as part of, the specified asset under the qualified investment arrangement are to be regarded as income, expenditure, profits, gains or losses (as the case requires) of the originator.(4) If the qualified investment arrangement in the specified alternative bond scheme involves the bond-issuer holding, as the specified asset under the scheme, an interest in a business undertaking that is formed by the originator and the bond-issuer, then for the purposes of this Ordinance—(a) without limiting subsection (3)(a), the business undertaking, the acquisition of the interest in the business undertaking as the specified asset by the bond-issuer and the disposal of that interest in favour of the originator, are to be disregarded;(b) any asset transaction between O and BU under the qualified investment arrangement is to be disregarded;(c) if an asset is acquired by the business undertaking from a third party, the asset is to be regarded as acquired by the originator directly from the third party;(d) if an asset is disposed of by the business undertaking to a third party, the asset is to be regarded as disposed of by the originator directly to the third party;(e) any other business activities carried on by the business undertaking during the specified term are to be regarded as business activities carried on by the originator directly; and(f) any income, expenditure, profits, gains or losses arising from or attributable to—(i) an asset held by the business undertaking during the specified term; or(ii) other business activities carried on by the business undertaking during that specified term, are to be regarded as income, expenditure, profits, gains or losses (as the case requires) of the originator.(5) Without limiting subsection (2)(b), (3)(a) or (b) or (4)(b) or (c), the investment return, or any part of it, under the qualified investment arrangement that, but for this section, would have constituted consideration payable in respect of the right of use of land or buildings, or both, for the purposes of section 5B of this Ordinance is to be regarded as not being such consideration.(6) In relation to a qualified investment arrangement, specified asset transaction between O and BI in subsection (3)(a) or asset transaction between O and BU in subsection (4)(b) (as the case requires) has the meaning given by the provisions in Division 2 of this Part in which the relevant specified investment arrangement is described.(7) Section 16(2)(f)(iii) of this Ordinance is to apply—(a) as if the alternative bonds issued under the qualified bond arrangement in the specified alternative bond scheme were debentures or instruments; and(b) for the bond-issuer who is not an associated corporation of the originator, as if the bond-issuer were an associated corporation of the originator.(8) Subsection (7)(b) does not apply to a qualified investment arrangement in a specified alternative bond scheme to which section 3(1) of this Schedule applies if—(a) any of the other schemes referred to in that section is not, or is not intended to be, a specified alternative bond scheme; or(b) although each of those other schemes is, or is intended to be, a specified alternative bond scheme, any of those other schemes does not comply, or is not intended to comply with—(i) the reasonable commercial return condition; or(ii) the bond-issuer as conduit condition. Division 4 Miscellaneous 23. Power to amend Division 2 of this Part, etc. The Financial Secretary may, by notice published in the Gazette—(a) amend Division 2 of this Part, including—(i) adding any investment arrangement into that Division as a specified investment arrangement, and providing for calculation of its investment return; and(ii) specifying any transaction as a specified asset transaction between O and BI or an asset transaction between O and BU; and(b) make amendments to section 1 of this Schedule if the amendments are consequential on or necessary as a result of any amendments made under paragraph (a). Part 3 Record-keeping, Notifications, Assessments and Other Miscellaneous Matters 24. Interpretation (Part 3 of this Schedule) (1) Subsections (2), (3) and (4) apply for the purposes of this Part.(2) In relation to an arrangement in a scheme and for a year of assessment—(a) a person makes a BA claim if, for the purposes of ascertaining the tax chargeable on the person for the year of assessment, the person claims—(i) that the arrangement is a qualified bond arrangement in a specified alternative bond scheme; and(ii) that the person is the bond-issuer under the alleged specified alternative bond scheme; and(b) a person makes an IA claim if, for the purposes of ascertaining the tax chargeable on the person for the year of assessment, the person claims—(i) that the arrangement is a qualified investment arrangement in a specified alternative bond scheme; and(ii) that the person is the originator or bond-issuer under the alleged specified alternative bond scheme.(3) A BA claim or IA claim by a person in relation to an arrangement in a scheme for a year of assessment is accepted if the matters specified in subsection (2)(a) or (b) (as the case requires) are accepted for the purposes specified in that subsection.(4) A reference to the disqualification of an arrangement is a reference to—(a) if the arrangement is one for which a BA claim by a person for a year of assessment has been accepted, the fact that the arrangement is under section 13(3) of this Schedule regarded as never having been a qualified bond arrangement in a specified alternative bond scheme; or(b) if the arrangement is one for which an IA claim by a person for a year of assessment has been accepted, the fact that the arrangement is under section 13(4) of this Schedule regarded as never having been a qualified investment arrangement in a specified alternative bond scheme.(5) In this Part—specified assessment (指明評稅) has the meaning given by section 27(7)(c) of this Schedule; specified event (指明事件) means— (a) (for a person who has made a BA claim, or whose BA claim has been accepted, in relation to an arrangement in a scheme) a BA disqualifying event; or (b) (for a person who has made an IA claim, or whose IA claim has been accepted, in relation to an arrangement in a scheme) an IA disqualifying event. 25. Records to be kept (1) Section 51C of this Ordinance applies, with the modifications specified in subsection (2), to a person who makes a BA claim or IA claim in relation to an arrangement in a scheme (alleged specified alternative bond scheme) for the purposes of ascertaining the assessable profits of the trade, profession or business for any year of assessment.(2) The person must retain records relating to transactions, acts or operations relating to the alleged specified alternative bond scheme under section 51C(1) of this Ordinance at least until the later of the following—(a) the expiry of 7 years after the completion of the transactions, acts or operations to which they relate; or(b) the expiry of 3 years after the end of the specified term of the scheme.(3) Section 80 of this Ordinance applies to a failure to comply with section 51C of this Ordinance, as modified by subsection (2) in the same way that section 80 applies to a failure to comply with that section 51C.(4) Subsection (1) ceases to apply to the retention, by a person who makes a BA claim or IA claim in relation to an arrangement in an alleged specified alternative bond scheme, of records relating to transactions, acts or operations relating to the scheme if—(a) one or more assessments have been made on the person on the basis that the claim is not accepted for any years of assessment, and the assessments have all become final and conclusive under section 70 of this Ordinance; or(b) after the claim has been accepted for any years of assessment, one or more specified assessments have been made on the person because of the disqualification of the arrangement, and the specified assessments have all become final and conclusive under section 70 of this Ordinance. 26. Obligation to inform Commissioner of disqualifying event (1) A person who has made a BA claim or IA claim in relation to an arrangement in a scheme must inform the Commissioner, in writing, of any specified event that occurs in relation to the arrangement within 30 days after the occurrence.(2) The following provisions apply as if references in those provisions to a failure to comply with section 51(2) of this Ordinance included a failure to comply with subsection (1)—(a) section 80 of this Ordinance;(b) section 82A of this Ordinance.(3) A person who has made a BA claim or IA claim in relation to an arrangement in a scheme is not required to inform the Commissioner of a specified event in relation to the arrangement under subsection (1) if—(a) one or more assessments have been made on the person on the basis that the claim is not accepted for any years of assessment, and the assessments have all become final and conclusive under section 70 of this Ordinance; or(b) after the claim has been accepted for any years of assessment, one or more specified assessments have been made on the person on the basis that the arrangement is disqualified because of an earlier specified event, and the specified assessments have all become final and conclusive under section 70 of this Ordinance. 27. Additional assessments; tax paid in excess to be refunded (1) In this section, an arrangement in a scheme is an accepted arrangement in relation to a person and a year of assessment if the person’s BA claim or IA claim in relation to the arrangement has been accepted for the purposes of ascertaining the tax chargeable on the person for the year of assessment.(2) Section 60 of this Ordinance applies, with modifications specified in subsection (3), to the making of an assessment or additional assessment on a person for a year of assessment because of the disqualification of an accepted arrangement.(3) For the purposes of subsection (2), each of the following periods begins to run after the expiry of the year of disqualification if that year falls after the year of assessment—(a) 6 years referred to in section 60(1) of this Ordinance;(b) 10 years referred to in paragraph (b) of the proviso to section 60(1) of this Ordinance; and(c) 6 years referred to in section 60(2) of this Ordinance.(4) Section 79 of this Ordinance applies, with modifications specified in subsections (5) and (6), to an amount of tax that is, because of the disqualification of an accepted arrangement, found to be paid in excess by a person for a year of assessment.(5) For the purposes of subsection (4), the period of 6 years referred to in section 79(1) of this Ordinance begins to run after the end of the year of disqualification if that year falls after the year of assessment.(6) If—(a) because of the disqualification of an accepted arrangement, an assessor makes an assessment or additional assessment under section 60 of this Ordinance on the person for a year of assessment; and(b) it appears to the assessor that, because of the same disqualification, an amount of tax has been paid in excess by the person for another year of assessment, then, even in the absence of a claim in writing being made under section 79 of this Ordinance for the refund—(c) a refund of that amount of tax paid in excess may be made under section 79 of this Ordinance; or(d) the refundable amount may be set off against any amount payable under the assessment or additional assessment referred to in paragraph (a).(7) The provisions of this Ordinance relating to a notice of assessment, appeal and other proceedings that apply—(a) to an assessment, additional assessment or reassessment made under section 60 or 79 (as the case requires) of this Ordinance; and(b) to any tax charged under it, are to apply—(c) to an assessment, additional assessment or reassessment (specified assessment) made under section 60 or 79 (as the case requires) of this Ordinance as modified by this section; and(d) to any tax charged accordingly.(8) Despite subsection (7), if—(a) a specified assessment is made for a year of assessment because of the disqualification of an accepted arrangement; and(b) a person makes an objection under section 64 of this Ordinance against the specified assessment, disputing the disqualification, the objection is to be regarded as objections so made by the person against all specified assessments made for all years of assessment because of that disqualification.(9) In this section— year of disqualification (喪失資格年度), in relation to a person whose BA claim or IA claim in relation to an arrangement in a scheme has been accepted, means the year of assessment in which— (a) a specified event occurs in relation to the arrangement; or (b) if there are 2 or more specified events, the earliest specified event occurs in relation to the arrangement. 28. Delay in disposing of specified asset may be disregarded in certain circumstances (1) Section 13(3) and (4) of this Schedule does not apply in relation to an arrangement in a scheme, despite the fact that a BA disqualifying event or IA disqualifying event occurs in relation to the arrangement, if—(a) the scheme is at the time of the occurrence, and from the commencement of the specified term of the scheme up to that time has always been, a specified alternative bond scheme;(b) among the conditions specified in section 13(1) and (2)(b) of this Schedule, the scheme only fails to comply with the arrangements performed according to terms condition; and(c) the Commissioner disregards the non-compliance under subsection (2).(2) The Commissioner may disregard a non-compliance with the arrangements performed according to terms condition by a specified alternative bond scheme if—(a) the non-compliance was solely constituted by a delay, of more than 30 days, in disposing of the specified asset; and(b) it is proved to the satisfaction of the Commissioner that there was a reasonable excuse for the delay. 29. Commissioner may apportion acquisition cost For the purposes of calculating, under Division 2 of Part 2 of this Schedule, the investment return under a specified investment arrangement in a specified alternative bond scheme under which the specified asset is or is to be disposed of in parts, the Commissioner may allocate a part of the acquisition cost as attributable to each part of the specified asset having regard to all the circumstances of the scheme. Schedule 17B [s. 14C]Qualifying Corporate Treasury Centre: Corporate Treasury Services, Corporate Treasury Transactions and Prescribed Percentages (Schedule 17B added 12 of 2016 s. 6) Part 1 Corporate Treasury Services 1. Meaning of corporate treasury service (1) For the purposes of sections 14C, 14D and 14E— corporate treasury service (企業財資服務), in relation to a corporation, means any of the following services that is provided by the corporation to an associated corporation— (a) managing the cash and liquidity position, including cash forecasting or pooling, of the associated corporation and providing related advice; (b) processing payments to the vendors or suppliers of the associated corporation; (c) managing the associated corporation’s relationships with financial institutions; (d) providing corporate finance advisory service, including—(i) activities supporting the raising of capital, such as by way of debt or equity, by the associated corporation; and(ii) capital budgeting for the associated corporation; (e) advising on the management of the investment of the funds of the associated corporation; (f) managing investor relations regarding the investors in the debt or equity instruments issued by the associated corporation; (g) providing service in relation to—(i) the provision of guarantees, performance bonds, standby letters of credit or other credit risk instruments to or on behalf of the associated corporation; or(ii) remittances to or on behalf of the associated corporation; (h) providing advice or service in relation to the management of interest rate risk, foreign exchange risk, liquidity risk, credit risk, commodity risk or any other financial risk of the associated corporation; (i) providing assistance in the merger or acquisition of a business by the associated corporation; (j) providing advice or service in relation to the associated corporation’s compliance with—(i) accounting standards;(ii) internal treasury policies; or(iii) regulatory requirements in relation to treasury management; (k) providing advice or service in relation to the operations of the treasury management system of the associated corporation; (l) providing business planning and co-ordination, including economic or investment research and analysis, for the associated corporation in connection with any of the activities specified in paragraphs (a) to (k). (2) In this section—associated corporation (相聯法團) has the meaning given by section 14C(1). Part 2 Corporate Treasury Transactions 2. Meaning of corporate treasury transaction (1) For the purposes of sections 14C, 14D and 14E— corporate treasury transaction (企業財資交易), in relation to a corporation, means any of the following transactions that is entered into by the corporation on its own account and related to the business of an associated corporation— (a) a transaction in relation to the provision of guarantees, performance bonds, standby letters of credit or other credit risk instruments in respect of the borrowing of money by the associated corporation; (b) a transaction investing the funds of the corporation or the associated corporation in any of the following financial instruments for managing the cash and liquidity position of the corporation or the associated corporation—(i) deposits;(ii) certificates of deposit;(iii) bonds;(iv) notes;(v) debentures;(vi) money-market funds;(vii) other financial instruments (except securities issued by a private company as defined by section 20ACA(2)); (c) a transaction in respect of any of the following contracts that are entered into for the purpose of hedging interest rate risk, foreign exchange risk, liquidity risk, credit risk, commodity risk or any other financial risk of the associated corporation—(i) contracts for difference;(ii) foreign exchange contracts;(iii) forward or futures contracts;(iv) swap contracts;(v) options contracts; (d) a factoring or forfaiting transaction. (2) In this section—associated corporation (相聯法團) has the meaning given by section 14C(1). Part 3 Prescribed Percentages for Safe Harbour Rule 3. Prescribed profits percentage For the purposes of section 14E, the prescribed profits percentage is 75%. 4. Prescribed asset percentage For the purposes of section 14E, the prescribed asset percentage is 75%. Schedule 17C [ss. 2(1), 50A(1), 50J & 50L(4)](Amended 6 of 2019 s. 7)Non-reporting Financial Institutions and Excluded Accounts (Schedule 17C added 22 of 2016 s. 11) Part 1 Interpretation 1. Interpretation In this Schedule—account holder (帳户持有人) has the meaning given by section 50A;annuity contract (年金合約) has the meaning given by section 50A;cash value insurance contract (現金值保險合約) has the meaning given by section 50A;central bank (中央銀行) has the meaning given by section 50A;controlling person (控權人) has the meaning given by section 50A;depository account (存款帳户) has the meaning given by section 50A;entity (實體) has the meaning given by section 50A;established securities market (具規模證券市場) has the meaning given by section 50A;financial account (財務帳户) has the meaning given by section 50A;financial asset (財務資產) has the meaning given by section 50A;financial institution (財務機構) has the meaning given by section 50A;governmental entity (政府實體) has the meaning given by section 50A;international organization (國際組織) has the meaning given by section 50A;investment entity (投資實體) has the meaning given by section 50A;non-reporting financial institution (免申報財務機構) has the meaning given by section 50A;passive NFE (被動非財務實體) has the meaning given by section 50A;regularly traded (經常買賣) has the meaning given by section 50A;reportable person (申報對象) has the meaning given by section 50A. Part 2 Non-reporting Financial Institutions 1. Governmental entity A governmental entity, other than with respect to a payment that is derived from an obligation held in connection with a commercial financial activity of a type engaged in by a specified insurance company, custodial institution or depository institution, is a non-reporting financial institution. 2. International organization An international organization, other than with respect to a payment that is derived from an obligation held in connection with a commercial financial activity of a type engaged in by a specified insurance company, custodial institution or depository institution, is a non-reporting financial institution. 3. Central bank A central bank, other than with respect to a payment that is derived from an obligation held in connection with a commercial financial activity of a type engaged in by a specified insurance company, custodial institution or depository institution, is a non-reporting financial institution. 4. Hong Kong Monetary Authority The Hong Kong Monetary Authority, other than with respect to a payment that is derived from an obligation held in connection with a commercial financial activity of a type engaged in by a specified insurance company, custodial institution or depository institution, is a non-reporting financial institution. 5. Pension fund of governmental entity, international organization, central bank or Hong Kong Monetary Authority A fund is a non-reporting financial institution if it is established by a governmental entity, international organization, central bank or the Hong Kong Monetary Authority to provide retirement, disability, or death benefits to beneficiaries or participants who—(a) are current or former employees (or persons designated by such employees); or(b) are not current or former employees, if the benefits provided to such beneficiaries or participants are in consideration of personal services rendered for the governmental entity, international organization, central bank or the Hong Kong Monetary Authority. 6. Broad participation retirement fund A fund is a non-reporting financial institution if—(a) it is established to provide retirement, disability or death benefits, or any combination of the above, to beneficiaries that are current or former employees (or persons designated by such employees) of one or more employers in consideration for services rendered; and(b) it—(i) does not have a single beneficiary with a right to more than 5% of the fund’s assets;(ii) is subject to government regulation and provides information reporting to the tax authorities; and(iii) meets any of the following conditions—(A) the fund is generally exempt from tax on investment income, or taxation of such income is deferred or taxed at a reduced rate, owing to its status as a retirement or pension plan;(B) the fund receives at least 50% of its total contributions (other than transfers of assets from other funds described in this section or section 5 or 7 of this Part or from a retirement and pension account described in section 1 of Part 3 of this Schedule) from the sponsoring employers;(C) distributions or withdrawals from the fund are allowed only on the occurrence of specified events related to retirement, disability or death (except rollover distributions to other retirement funds described in this section or section 5 or 7 of this Part or to a retirement and pension account described in section 1 of Part 3 of this Schedule), or penalties apply to distributions or withdrawals made before such specified events;(D) contributions (other than certain permitted make-up contributions) by employees to the fund are limited by reference to the earned income of the employee, or may not exceed $390,000 annually, applying the rules of account aggregation and currency set out in the due diligence requirements in Schedule 17D. 7. Narrow participation retirement fund A fund is a non-reporting financial institution if—(a) it is established to provide retirement, disability or death benefits to beneficiaries that are current or former employees (or persons designated by such employees) of one or more employers in consideration for services rendered; and(b) it—(i) has less than 50 participants;(ii) is sponsored by an employer that is not an investment entity or a passive NFE; and(iii) meets all of the following conditions—(A) the employee and employer contributions to the fund (other than transfers of assets from a retirement and pension account described in section 1 of Part 3 of this Schedule) are limited by reference to the earned income and compensation of the employee;(B) the participants who are not residents for tax purposes for the jurisdiction in which the fund is established are not entitled to more than 20% of the fund’s assets;(C) the fund is subject to government regulation and provides information reporting to the tax authorities. 8. Qualified credit card issuer (1) An entity is a non-reporting financial institution if—(a) the entity is a financial institution and it is so solely because it is an issuer of credit cards that accepts deposits only when a customer makes a payment in excess of a balance due with respect to the credit card of the customer and the overpayment is not immediately returned to the customer; and(b) by 1 January 2017, the entity has begun to implement policies and procedures—(i) to prevent a customer from making an overpayment in excess of $390,000; or(ii) to ensure that any customer overpayment in excess of $390,000 is refunded to the customer within 60 days,in each case applying the rules of account aggregation and currency set out in the due diligence requirements in Schedule 17D.(2) For the purposes of subsection (1)(b), a customer overpayment does not refer to credit balances to the extent of disputed charges but includes credit balances resulting from merchandise returns. (Amended 5 of 2018 s. 8) 9. Exempt collective investment vehicle (1) An investment entity is a non-reporting financial institution if—(a) the investment entity is regulated as a collective investment vehicle; and(b) all of the interests in the investment entity are held by or through any of the following—(i) individuals who are not reportable persons;(ii) entities that are not reportable persons. (Replaced 5 of 2018 s. 9)(1A) Subsection (1) does not apply to an investment entity if—(a) any of the interests in the entity is held by, or through, an entity that is a passive NFE; and(b) any one of the controlling persons of the passive NFE is a reportable person. (Added 5 of 2018 s. 9)(2) An investment entity that is regulated as a collective investment vehicle does not fail to qualify under subsection (1) as a non-reporting financial institution solely because the investment entity has issued physical shares in bearer form, if—(a) the investment entity has not issued, and does not issue, any physical shares in bearer form after 1 January 2017;(b) the investment entity retires all such shares on surrender;(c) the investment entity applies the due diligence requirements in Schedule 17D and reports any information required to be reported with respect to any such shares when such shares are presented for redemption or other payment; and(d) the investment entity has in place policies and procedures to ensure that such shares are redeemed or immobilized as soon as possible, and in any event prior to 1 January 2018. 10. Trustee-documented trust A trust is a non-reporting financial institution if it is established to the extent that the trustee of the trust is a reporting financial institution and reports all information required to be reported pursuant to this Ordinance with respect to all reportable accounts of the trust. 11. Grant Schools Provident Fund and Subsidized Schools Provident Fund (1) The Grant Schools Provident Fund maintained for teachers under the Grant Schools Provident Fund Rules (Cap. 279 sub. leg. C) is a non-reporting financial institution.(2) The Subsidized Schools Provident Fund maintained for teachers under the Subsidized Schools Provident Fund Rules (Cap. 279 sub. leg. D) is a non-reporting financial institution. 12-13. (Repealed 6 of 2019 s. 7) Part 3 Excluded Accounts 1. Retirement and pension account (1) A retirement or pension account is an excluded account if all of the following conditions are met—(a) the account is subject to regulation as a personal retirement account or is part of a registered or regulated retirement or pension plan for the provision of retirement or pension benefits (including disability or death benefits);(b) the account is tax-favoured (i.e. contributions to the account that would otherwise be subject to tax are deductible or excluded from the gross income of the account holder, or are taxed at a reduced rate, or taxation of the investment income from the account is deferred or made at a reduced rate);(c) information reporting to the tax authorities is required in respect of the account;(d) withdrawals are conditioned on reaching a specified retirement age, disability, or death, or penalties apply to withdrawals made before such events;(e) either—(i) the annual contributions are limited to $390,000 or less; or(ii) there is a maximum lifetime contribution limit to the account of $7,800,000 or less,in each case applying the rules of account aggregation and currency set out in the due diligence requirements in Schedule 17D.(2) A financial account that does not meet the condition under subsection (1)(e) does not fail to meet the condition solely because the financial account may receive assets or funds transferred from one or more financial accounts as described in this section and section 2 of this Part or from one or more retirement or pension funds as described in sections 5, 6 and 7 of Part 2 of this Schedule. 2. Non-retirement tax-favoured accounts (1) An account is an excluded account if all of the following conditions are met—(a) the account is, for purposes other than for retirement, subject to regulation as an investment vehicle that is regularly traded on an established securities market, or the account is, for purposes other than for retirement, subject to regulation as a savings vehicle;(b) the account is tax-favoured (i.e. contributions to the account that would otherwise be subject to tax are deductible or excluded from the gross income of the account holder, or are taxed at a reduced rate, or taxation of the investment income from the account is deferred or made at a reduced rate);(c) withdrawals are conditioned on meeting specific criteria related to the purpose of the investment or savings account (including the provision of educational or medical benefits), or penalties apply to withdrawals made before such criteria are met;(d) the annual contributions are limited to $390,000 or less, applying the rules of account aggregation and currency set out in the due diligence requirements in Schedule 17D.(2) A financial account that does not meet the condition under subsection (1)(d) does not fail to meet the condition solely because the financial account may receive assets or funds transferred from one or more financial accounts as described in this section and section 1 of this Part or from one or more retirement or pension funds as described in sections 5, 6 and 7 of Part 2 of this Schedule. 3. Term life insurance contracts A life insurance contract with a coverage period that will end before the insured individual attains age 90 is an excluded account if all of the following conditions are met—(a) periodic premiums, which do not decrease over time, are payable at least annually during the period the contract is in existence or until the insured attains age 90, whichever is shorter;(b) the contract has no contract value that any person can access (by withdrawal, loan, or otherwise) without terminating the contract;(c) the amount (other than a death benefit) payable on cancellation or termination of the contract cannot exceed the aggregate premiums paid for the contract, less the sum of mortality, morbidity, and expense charges (whether or not actually imposed) for the period or periods of the contract’s existence and any amounts paid prior to the cancellation or termination of the contract;(d) the contract is not held by a transferee for value. 4. Estate account An account held solely by an estate is an excluded account if its documentation includes a copy of the deceased’s will or death certificate. 5. Escrow account An account established in connection with any of the following is an excluded account—(a) a court order or judgment;(b) a sale, exchange, or lease of real or personal property, provided that the account meets the following conditions—(i) the account is funded solely with a down payment, earnest money, deposit in an amount appropriate to secure an obligation directly related to the transaction, or a similar payment, or is funded with a financial asset that is deposited in the account in connection with the sale, exchange, or lease of the property;(ii) the account is established and used solely to secure the obligation of the purchaser to pay the purchase price for the property, the seller to pay any contingent liability, or the lessor or lessee to pay for any damages relating to the leased property as agreed under the lease;(iii) the assets of the account, including the income earned on the assets, will be paid or otherwise distributed for the benefit of the purchaser, seller, lessor or lessee (including satisfying the obligation of the purchaser, seller, lessor or lessee) when the property is sold, exchanged, or surrendered, or the lease terminates;(iv) the account is not a margin or similar account established in connection with a sale or exchange of a financial asset; and(v) the account is not associated with an account described in section 6 of this Part;(c) an obligation of a financial institution servicing a loan secured by real property to set aside a portion of a payment solely to facilitate the payment of taxes or insurance related to the real property at a later time;(d) an obligation of a financial institution solely to facilitate the payment of taxes at a later time. 6. Depository account owing to not-returned overpayments (1) A depository account is an excluded account if both of the following conditions are met—(a) the account exists solely because a customer makes a payment in excess of a balance due with respect to a credit card or other revolving credit facility and the overpayment is not immediately returned to the customer; and(b) beginning on or before 1 January 2017, the financial institution implements policies and procedures either to prevent a customer from making an overpayment in excess of $390,000, or to ensure that any customer overpayment in excess of $390,000 is refunded to the customer within 60 days, in each case applying the rules of account aggregation and currency set out in the due diligence requirements in Schedule 17D.(2) For the purpose of subsection (1)(b), a customer overpayment does not refer to credit balances to the extent of disputed charges but includes credit balances resulting from merchandise returns. 7. Dormant account (1) An account (other than an annuity contract) with a balance that does not exceed $7,800 is an excluded account if— (Amended 5 of 2018 s. 10)(a) the account holder has not initiated a transaction with regard to the account or any other account held by the account holder with a reporting financial institution in the previous 3 years;(b) the account holder has not communicated with the reporting financial institution regarding the account or any other account held by the account holder with the reporting financial institution in the previous 6 years; and (Amended 5 of 2018 s. 10)(c) (Repealed 5 of 2018 s. 10)(d) (for the account being a cash value insurance contract) the reporting financial institution has not communicated with the account holder regarding the account or any other account held by the account holder with the reporting financial institution in the previous 6 years.(2) An account (other than an annuity contract) with a balance that does not exceed $7,800 maintained with a reporting financial institution is also an excluded account if—(a) the account is treated as a dormant account—(i) in accordance with the laws or regulations applicable to the institution; or(ii) under the normal operating procedures of the institution that are consistently applied for all accounts maintained with the institution; and(b) the laws, regulations or procedures mentioned in paragraph (a) contain provisions that are substantially similar to subsection (1)(a), (b) and (d). (Added 5 of 2018 s. 10) Schedule 17D [ss. 2(1), 50A(1) & (2), 50B(1), 50J, 50L(4), 80(2E) & 80D(1) & Sch. 17C](Amended 6 of 2019 s. 8)Due Diligence Requirements (Schedule 17D added 22 of 2016 s. 11) Part 1 Interpretation 1. Interpretation In this Schedule—2020-covered institution (2020年涵蓋機構) has the meaning given by section 50A; (Added 6 of 2019 s. 8)account holder (帳户持有人) has the meaning given by section 50A;active NFE (主動非財務實體) has the meaning given by section 50A;AML/KYC procedures (打擊洗錢暨認識客户程序) has the meaning given by section 50A;annuity contract (年金合約) has the meaning given by section 50A;cash value insurance contract (現金值保險合約) has the meaning given by section 50A;controlling person (控權人) has the meaning given by section 50A;depository account (存款帳户) has the meaning given by section 50A; documentary evidence (文件證據) includes— (a) a certificate of residence issued by an authorized government body (including a government, a government agency and a municipality) of the jurisdiction of which the payee claims to be a resident for tax purposes; (b) for an individual, a valid identification issued by an authorized government body (including a government, a government agency and a municipality) of a jurisdiction that includes the individual’s name and is typically used for identification purposes; (c) for an entity, an official documentation issued by an authorized government body (including a government, a government agency and a municipality) of a jurisdiction that includes the entity’s name and—(i) the address of the entity’s principal office in the jurisdiction of which it claims to be a resident for tax purposes; or(ii) the jurisdiction in which the entity was incorporated or organized; and (d) an audited financial statement, third-party credit report, bankruptcy filing, or securities regulator’s report;

entity (實體) has the meaning given by section 50A;financial account (財務帳户) has the meaning given by section 50A;financial institution (財務機構) has the meaning given by section 50A;high value account (高值帳户) means a pre-existing individual account with an aggregate balance or value that exceeds $7,800,000 as at 31 December of the second year before the reporting year or 31 December of any subsequent year;jurisdiction of residence (居留司法管轄區) has the meaning given by section 50A;low value account (低值帳户) means a pre-existing individual account with an aggregate balance or value that does not exceed $7,800,000 as at 31 December of the second year before the reporting year;new account (新帳户) means a financial account opened and maintained by a reporting financial institution on or after—(a) if the institution is not a 2020-covered institution—1 January 2017; or(b) if the institution is a 2020-covered institution—1 January 2020; (Replaced 6 of 2019 s. 8)new entity account (新實體帳户) means a new account held by one or more entities;new individual account (新個人帳户) means a new account held by one or more individuals;participating jurisdiction (參與稅務管轄區) has the meaning given by section 50A;participating jurisdiction financial institution (參與稅務管轄區財務機構) has the meaning given by section 50A;passive NFE (被動非財務實體) has the meaning given by section 50A;pre-existing account (先前帳户) has the meaning given by section 50A;pre-existing entity account (先前實體帳户) means a pre-existing account held by one or more entities;pre-existing individual account (先前個人帳户) means a pre-existing account held by one or more individuals;related entity (有關連實體)—see section 50A(2);reportable person (申報對象) has the meaning given by section 50A;reporting year (申報年) has the meaning given by section 50A;resident for tax purposes (稅務居民) has the meaning given by section 50A;TIN (稅務編號) has the meaning given by section 50A. Part 2 General Due Diligence Requirements 1. An account is to be treated as a reportable account beginning as at the date it is identified as such pursuant to the due diligence requirements in this Part and Parts 3, 4, 5, 6 and 7 of this Schedule and information in relation to a reportable account must be reported as required under section 50C. 2. The balance or value of an account is to be determined as at the last day of the calendar year or other appropriate reporting period of 12 months. 3. If a balance or value threshold is to be determined as at the last day of a calendar year, the relevant balance or value must be determined as at the last day of the reporting period that ends with or within that calendar year. 4. A reporting financial institution may—(a) apply the due diligence requirements for new accounts to pre-existing accounts (but in such cases the requirements that otherwise apply to pre-existing accounts continue to apply); and(b) apply the due diligence requirements for high value accounts to low value accounts. 5. A financial account held by an individual as a partner of a partnership is to be treated as an entity account and is not to be treated as an individual account. 6. In applying the rules of account aggregation and currency set out in the due diligence requirements in this Schedule, an account balance that has a negative value is to be treated as having a nil value. Part 3 Due Diligence Requirements for Pre-existing Individual Accounts 1. Application This Part specifies the requirements that apply to pre-existing individual accounts in identifying a reportable account. 2. Accounts not required to be reviewed, identified, or reported A pre-existing individual account that is a cash value insurance contract or an annuity contract is not required to be reviewed, identified or reported, if the reporting financial institution is effectively prevented by law from selling the contract to residents for tax purposes of a reportable jurisdiction. 3. Low value accounts (1) The requirements in this section apply to low value accounts.(2) If a reporting financial institution has in its records a current residence address for the individual account holder based on documentary evidence, the institution may treat the individual account holder as a resident for tax purposes of the jurisdiction in which the address is located for the purpose of determining whether the individual account holder is a reportable person.(3) If a reporting financial institution does not rely on the current residence address for the individual account holder based on documentary evidence as mentioned in subsection (2), the institution must review electronically searchable data maintained by the institution for any of the following indicia and apply the provisions in subsections (4), (5), (6), (7), (8) and (9)—(a) identification of the account holder as a resident for tax purposes of a reportable jurisdiction;(b) current mailing or residence address (including a post office box) in a reportable jurisdiction;(c) one or more telephone numbers in a reportable jurisdiction outside Hong Kong with no telephone number in Hong Kong;(d) standing instructions (other than with respect to a depository account) to transfer funds to an account maintained in a reportable jurisdiction;(e) currently effective power of attorney or signatory authority granted to a person with an address in a reportable jurisdiction;(f) a hold mail instruction or in-care-of address in a reportable jurisdiction if the institution does not have any other address on file for the account holder.(4) If none of the indicia described in subsection (3) is discovered in the electronic search, then no further action is required until—(a) there is a change in circumstances that results in one or more indicia being associated with the account; or(b) the account becomes a high value account.(5) If any of the indicia described in subsection (3)(a), (b), (c), (d) and (e) is discovered in the electronic search, or if there is a change in circumstances that results in one or more indicia being associated with the account, then the reporting financial institution must treat the account holder as a resident for tax purposes of a reportable jurisdiction for which an indicium is identified, unless it elects to apply subsection (8) or (9), or both, and any of the exceptions in subsections (8) and (9) applies to the account.(6) If a hold mail instruction or in-care-of address is discovered in the electronic search and no other address and none of the other indicia described in subsection (3)(a), (b), (c), (d) and (e) is identified for the account holder, the reporting financial institution must—(a) in the order most appropriate to the circumstances, perform the paper record search described in section 4(4) of this Part; or(b) seek to obtain from the account holder a self-certification or documentary evidence to establish the jurisdiction of residence for the account holder.(7) If—(a) the paper record search under subsection (6)(a) fails to establish an indicium; and(b) the attempt to obtain the self-certification or documentary evidence under subsection (6)(b) is not successful,the reporting financial institution must report the account as an undocumented account.(8) Despite any finding of an indicium described in subsection (3)(b), (c) or (d) for a financial account, a reporting financial institution is not required to treat its account holder as a resident for tax purposes of a reportable jurisdiction if it obtains, or has previously reviewed and maintains a record of, both of the following—(a) a self-certification from the account holder showing that his or her jurisdiction of residence does not include that reportable jurisdiction;(b) documentary evidence establishing the jurisdiction of residence for the account holder other than that reportable jurisdiction.(9) Despite any finding of an indicium described in subsection (3)(e) for a financial account, a reporting financial institution is not required to treat its account holder as a resident for tax purposes of a reportable jurisdiction if it obtains, or has previously reviewed and maintains a record of, any of the following—(a) a self-certification from the account holder showing that his or her jurisdiction of residence does not include that reportable jurisdiction;(b) documentary evidence establishing the jurisdiction of residence for the account holder other than that reportable jurisdiction. 4. Enhanced review procedures for high value accounts (1) This section provides for enhanced review procedures and applies to high value accounts.(2) With respect to a high value account, the reporting financial institution must review electronically searchable data maintained by the institution for any of the indicia described in section 3(3) of this Part.(3) If the reporting financial institution’s electronically searchable databases (e-databases) include fields for, and capture all of the information described in, subsection (5), then a further paper record search is not required.(4) However, if the e-databases do not capture all of the information described in subsection (5), then with respect to a high value account, the reporting financial institution must also review the current customer master file and, to the extent not contained in the current customer master file, the following documents associated with the account and obtained by the institution within the last 5 years for any of the indicia described in section 3(3) of this Part—(a) the most recent documentary evidence collected with respect to the account;(b) the most recent account opening contract or documentation;(c) the most recent documentation collected by the reporting financial institution pursuant to AML/KYC procedures or for other regulatory purposes;(d) any standing instructions (other than with respect to a depository account) to transfer funds currently in effect;(e) any power of attorney or signatory authority currently in effect.(5) A reporting financial institution is not required to perform the paper record search described in subsection (4) if its electronically searchable information includes the following information—(a) the account holder’s residence status;(b) the account holder’s mailing and residence address currently on file with the reporting financial institution;(c) the account holder’s telephone number currently on file, if any, with the reporting financial institution;(d) for financial accounts other than depository accounts, whether there are standing instructions to transfer funds in the account to another account (including an account at another branch of the reporting financial institution or another financial institution);(e) whether there is a current hold mail instruction or in-care-of address for the account holder;(f) whether there is any power of attorney or signatory authority for the account.(6) Apart from conducting the electronic and paper record searches described in subsections (2) and (4), the reporting financial institution must treat as a reportable account any high value account assigned to a relationship manager of the institution (including any financial accounts aggregated with that high value account) if the relationship manager has actual knowledge that the account holder is a reportable person.(7) After an enhanced review of a high value account under subsection (2) or (4) is performed—(a) if—(i) none of the indicia described in section 3(3) of this Part is discovered; and(ii) the account is not identified as held by a resident for tax purposes of a reportable jurisdiction in subsection (6),then further action is not required until there is a change in circumstances that results in one or more indicia being associated with the account;(b) if—(i) any of the indicia described in section 3(3)(a), (b), (c), (d) and (e) of this Part is discovered; or(ii) there is a subsequent change in circumstances that results in one or more indicia being associated with the account,then the reporting financial institution must treat the account holder as a resident for tax purposes of each reportable jurisdiction for which an indicium is identified unless it elects to apply subsection (8) or (9), or both, of section 3 of this Part and any of the exceptions in subsections (8) and (9) of that section applies to the account; and(c) if—(i) a hold mail instruction or in-care-of address is discovered; and(ii) no other address and none of the other indicia described in section 3(3)(a), (b), (c), (d) and (e) of this Part is identified for the account holder,then the reporting financial institution must obtain from the account holder a self-certification or documentary evidence to establish the jurisdiction of residence for the account holder and (if it cannot obtain such self-certification or documentary evidence) must report the account as an undocumented account.(8) If a pre-existing individual account is not a high value account as at 31 December of the second year before the reporting year, but becomes a high value account as at the last day of a subsequent calendar year—(a) the reporting financial institution must complete the enhanced review procedures under this section with respect to the account within the calendar year following the year in which the account becomes a high value account; and(b) (if based on the review under paragraph (a), the account is identified as a reportable account) the reporting financial institution must report the required information about the account with respect to the year in which it is identified as a reportable account and subsequent years on an annual basis, unless the account holder ceases to be a reportable person.(9) Once a reporting financial institution applies the enhanced review procedures under this section to a high value account, the reporting financial institution is not required to reapply the procedures, other than the procedure in subsection (6), to the same high value account in any subsequent year unless the account is undocumented where the reporting financial institution must reapply them annually until the account ceases to be undocumented.(10) If there is a change of circumstances with respect to a high value account that results in one or more indicia described in subsection (3) of section 3 of this Part being associated with the account, then the reporting financial institution must treat the account as a reportable account with respect to each reportable jurisdiction for which an indicium is identified unless it elects to apply subsection (8) or (9), or both, of section 3 of this Part and any of the exceptions in subsections (8) and (9) of that section applies to the account.(11) A reporting financial institution must implement procedures to ensure that a relationship manager of the institution identifies any change in circumstances of an account.(12) Without limiting subsection (11), if a relationship manager is notified that the account holder has a new mailing address in a reportable jurisdiction, the reporting financial institution—(a) must treat the new address as a change in circumstances; and(b) if the institution elects to apply subsection (8) or (9), or both, of section 3 of this Part, must obtain the appropriate documentation from the account holder. 5. Review of pre-existing individual accounts (1) Review of a pre-existing individual account that is a high value account must be completed on or before 31 December of the year before the reporting year for the account.(2) Review of a pre-existing individual account that is a low value account must be completed on or before 31 December of the reporting year for the account. Part 4 Due Diligence Requirements for New Individual Accounts 1. Application This Part specifies the requirements that apply to new individual accounts in identifying a reportable account. 2. Requirements (1) On the opening of a new individual account, a reporting financial institution must—(a) obtain a self-certification, which may be part of the account opening documentation, that allows the institution to determine the jurisdiction of residence for the account holder; and(b) confirm the reasonableness of the self-certification based on the information obtained by the institution in connection with the opening of the account, including any documentation collected pursuant to AML/KYC procedures.(2) If the self-certification establishes that the account holder is a resident for tax purposes of a reportable jurisdiction—(a) the reporting financial institution must treat the account as a reportable account; and(b) the self-certification must also include the account holder’s date of birth and (subject to section 50G(1)(b)) the account holder’s TIN with respect to the reportable jurisdiction.(3) If there is a change of circumstances with respect to a new individual account that causes the reporting financial institution to know, or have reason to know, that the original self-certification is incorrect or unreliable, the institution—(a) cannot rely on the original self-certification; and(b) must obtain a valid self-certification that establishes the jurisdiction of residence for the account holder. Part 5 Due Diligence Requirements for Pre-existing Entity Accounts Division 1 General 1. Application This Part specifies the requirements that apply to pre-existing entity accounts in identifying a reportable account. Division 2 Entity Accounts subject to Review 2. Entity accounts not required to be reviewed, identified or reported (1) A pre-existing entity account with an aggregate account balance or value that does not exceed $1,950,000 as at 31 December of the second year before the reporting year, is not required to be reviewed, identified, or reported as a reportable account until the aggregate account balance or value exceeds $1,950,000 as at the last day of any subsequent calendar year.(2) Subsection (1) does not apply if the reporting financial institution elects otherwise, whether with respect to all pre-existing entity accounts or, separately, with respect to any clearly identified group of such accounts. 3. Entity accounts subject to review A pre-existing entity account must be reviewed in accordance with the review procedures under section 4 of this Part if—(a) the account has an aggregate account balance or value that exceeds $1,950,000 as at 31 December of the second year before the reporting year; or(b) the account does not exceed $1,950,000 as at 31 December of the second year before the reporting year but the aggregate account balance or value of the account exceeds $1,950,000 as at the last day of any subsequent calendar year. Division 3 Review Procedures 4. Review procedures for identifying entity accounts with respect to which reporting may be required For a pre-existing entity account described in section 3 of this Part, a reporting financial institution must apply the review procedures under this Division. 5. Determining residence of entity that holds pre-existing entity account (1) The reporting financial institution must review information maintained for regulatory or customer relationship purposes (including information collected and maintained pursuant to AML/KYC procedures) to determine the account holder’s residence.(2) For the purpose of subsection (1), information indicating the account holder’s residence includes a place of incorporation or organization, or an address in a reportable jurisdiction.(3) If the information indicates that the account holder is a reportable person, the reporting financial institution must treat the account as a reportable account unless it obtains a self-certification from the account holder, or reasonably determines, based on information in its possession or that is publicly available, that the account holder is not a reportable person. 6. Determining residence of controlling persons of passive NFE (1) With respect to an account holder of a pre-existing entity account (including an entity that is a reportable person), the reporting financial institution must identify whether the account holder is a passive NFE with one or more controlling persons, and determine the residence of the controlling persons.(2) If any of the controlling persons of a passive NFE is a reportable person, then the account is to be treated as a reportable account.(3) In making the determinations, the reporting financial institution must follow the guidance in sections 7, 8 and 9 of this Part in the order most appropriate under the circumstances. 7. Determining whether account holder is passive NFE For the purpose of determining whether the account holder is a passive NFE, the reporting financial institution must obtain and rely on a self-certification from the account holder to establish the account holder’s status, unless it has information in its possession or that is publicly available, based on which it can reasonably determine that the account holder is—(a) an active NFE; or(b) a financial institution other than an investment entity within the meaning of paragraph (e) of the definition of investment entity in section 50A(1) that is not a participating jurisdiction financial institution. 8. Determining controlling persons of an account holder For the purpose of determining the controlling persons of an account holder, a reporting financial institution may rely on information collected and maintained pursuant to AML/KYC procedures. 9. Determining residence of controlling person of passive NFE (1) For the purpose of determining the residence of a controlling person of a passive NFE, a reporting financial institution may rely on—(a) information collected and maintained pursuant to AML/KYC procedures in the case of a pre-existing entity account held by one or more passive NFEs with an aggregate account balance or value that does not exceed $7,800,000; or(b) a self-certification from the account holder or the controlling person of the jurisdiction for which the controlling person is a resident for tax purposes.(2) For the purpose of subsection (1)(b), if a self-certification is not provided, the reporting financial institution must establish the residence by applying the review procedures under section 4 of Part 3 of this Schedule. Division 4 Timing of Review, etc. 10. Timing of review (1) Review of a pre-existing entity account with an aggregate account balance or value that exceeds $1,950,000 as at 31 December of the second year before a reporting year must be completed on or before 31 December of the reporting year for the account.(2) Review of a pre-existing entity account with an aggregate account balance or value that does not exceed $1,950,000 as at 31 December of the second year before the reporting year, but exceeds $1,950,000 as at the last day of a subsequent calendar year, must be completed within the calendar year following the year in which the aggregate account balance or value exceeds $1,950,000. 11. Additional procedures applicable to pre-existing entity accounts If there is a change of circumstances with respect to a pre-existing entity account that causes the reporting financial institution to know, or have reason to know, that the self-certification or other documentation associated with an account is incorrect or unreliable, the institution must re-determine the status of the account in accordance with the review procedures under Division 3 of this Part. Part 6 Due Diligence Requirements for New Entity Accounts 1. Application This Part specifies the requirements that apply to new entity accounts in identifying a reportable account. 2. Determining residence of entity (1) A reporting financial institution must—(a) obtain a self-certification from an entity that opens an account, which may be part of the account opening documentation, that allows the institution to determine the jurisdiction of residence for the account holder; and(b) confirm the reasonableness of the self-certification based on the information obtained by the institution in connection with the opening of the account, including any documentation collected and maintained pursuant to AML/KYC procedures.(2) If the entity certifies that it is not a resident for tax purposes of any jurisdiction, the reporting financial institution may rely on the address of the principal office of the entity to determine the residence of the account holder.(3) If the self-certification indicates that the account holder is a resident for tax purposes of a reportable jurisdiction, the reporting financial institution must treat the account as a reportable account unless it reasonably determines, based on information in its possession or that is publicly available, that the account holder is not a reportable person with respect to the reportable jurisdiction. 3. Determining residence of controlling persons of passive NFE (1) With respect to an account holder of a new entity account (including an entity that is a reportable person), the reporting financial institution must identify whether the account holder is a passive NFE with one or more controlling persons, and determine the residence of the reportable persons.(2) If any of the controlling persons of a passive NFE is a reportable person, then the account is to be treated as a reportable account.(3) In making the determination, the reporting financial institution must follow the guidance in sections 4, 5 and 6 of this Part in the order most appropriate under the circumstances. 4. Determining whether account holder is passive NFE For the purpose of determining whether the account holder is a passive NFE, the reporting financial institution must obtain and rely on a self-certification from the account holder to establish the account holder’s status, unless it has information in its possession or that is publicly available, based on which it can reasonably determine that the account holder is—(a) an active NFE; or(b) a financial institution other than an investment entity within the meaning of paragraph (e) of the definition of investment entity in section 50A(1) that is not a participating jurisdiction financial institution. 5. Determining controlling persons of account holder For the purpose of determining the controlling persons of an account holder, a reporting financial institution may rely on information collected and maintained pursuant to AML/KYC procedures if those procedures are consistent with Recommendations 10 and 25 of the FATF Recommendations (as defined by section 50A(1)). (Amended L.N. 43 of 2020) 6. Determining residence of controlling person of passive NFE For the purpose of determining the residence of a controlling person of a passive NFE, a reporting financial institution may rely only on a self-certification from the account holder or the controlling person. (Amended 5 of 2018 s. 11) Part 7 Special Due Diligence Requirements 1. Application This Part specifies the additional requirements that apply in applying the due diligence requirements in Parts 2, 3, 4, 5 and 6 of this Schedule. 2. Reliance on self-certifications and documentary evidence A reporting financial institution may not rely on self-certification or documentary evidence if it knows or has reason to know that the self-certification or documentary evidence is incorrect or unreliable. 3. Alternative procedures for financial accounts held by individual beneficiaries of cash value insurance contract or annuity contract (1) A reporting financial institution may presume that an individual beneficiary (other than the owner) of a cash value insurance contract or an annuity contract receiving a death benefit is not a reportable person and may treat the financial account as other than a reportable account unless the institution has actual knowledge, or reason to know, that the beneficiary is a reportable person.(2) A reporting financial institution has reason to know that a beneficiary of a cash value insurance contract or an annuity contract is a reportable person if the information collected by the institution and associated with the beneficiary contains indicia of residence in a reportable jurisdiction as described in section 3 of Part 3 of this Schedule.(3) If a reporting financial institution has actual knowledge, or reason to know, that the beneficiary is a reportable person, the institution must apply the requirements in section 3 of Part 3 of this Schedule. 4. Alternative procedures for group cash value insurance contract or group annuity contract (1) A reporting financial institution may treat a financial account that is a member’s interest in a group cash value insurance contract or group annuity contract as a financial account that is not a reportable account until the date on which an amount is payable to the employee, certificate holder or beneficiary, if the financial account that is a member’s interest in a group cash value insurance contract or group annuity contract meets all of the following conditions—(a) the group cash value insurance contract or group annuity contract is issued to the employer and covers 25 or more employees or certificate holders;(b) the employees or certificate holders are entitled to receive any contract value related to their interests and to name beneficiaries for the benefit payable on the death of the employee or certificate holder;(c) the aggregate amount payable to any employee or certificate holder or beneficiary does not exceed $7,800,000.(2) In subsection (1)—group annuity contract (團體年金合約) means an annuity contract under which the obligees are individuals who are affiliated through an employer, trade association, labour union, or other association or group; group cash value insurance contract (團體現金值保險合約) means a cash value insurance contract that— (a) provides coverage on individuals who are affiliated through an employer, trade association, labour union, or other association or group; and (b) charges a premium for each member of the group (or member of a class within the group) that is determined without regard to the individual health characteristics other than age, gender, and smoking habits of the member (or class of members) of the group. 5. Rules of account aggregation and currency (1) For the purpose of determining the aggregate balance or value of financial accounts held by an individual, a reporting financial institution must aggregate all financial accounts maintained by the institution, or by a related entity, but only to the extent that the institution’s computerized systems—(a) link the financial accounts by reference to a data element such as client number or TIN; and(b) allow account balances or values to be aggregated.(2) Each holder of a jointly held financial account must be attributed the entire balance or value of the jointly held financial account for the purpose of applying the aggregation requirements described in subsection (1).(3) For the purpose of determining the aggregate balance or value of financial accounts held by an entity, a reporting financial institution must take into account all financial accounts that are maintained by the institution, or by a related entity, but only to the extent that the institution’s computerized systems—(a) link the financial accounts by reference to a data element such as client number or TIN; and(b) allow account balances or values to be aggregated.(4) Each holder of a jointly held financial account must be attributed the entire balance or value of the jointly held financial account for the purpose of applying the aggregation requirements described in subsection (3).(5) For the purpose of determining the aggregate balance or value of financial accounts held by a person and whether a financial account is a high value account, if a relationship manager of a reporting financial institution knows, or has reason to know, any financial accounts are directly or indirectly owned, controlled, or established (other than in a fiduciary capacity) by the same person, the institution must aggregate all those accounts.(6) References to a dollar amount in this Schedule are to be read as including an equivalent amount in a foreign currency. Schedule 17E [ss. 50A(1), 50J & 50L(4)](Amended 6 of 2019 s. 9)Reportable Jurisdictions and Participating Jurisdictions (Schedule 17E added 22 of 2016 s. 11. Amended L.N. 165 of 2016; 4 of 2017 s. 4) Part 1 Reportable Jurisdictions and Reporting Year Column 1 Column 2 Reportable jurisdiction Reporting year Albania, Republic of 2021 Andorra, Principality of 2021 Anguilla 2021 Antigua and Barbuda 2018 Argentina, Republic of 2018 Armenia, Republic of 2021 Aruba 2021 Australia, Commonwealth of 2018 Austria, Republic of 2018 Azerbaijan, Republic of 2021 Bahamas, Commonwealth of the 2018 Bahrain, Kingdom of 2021 Barbados 2021 Belgium, Kingdom of 2018 Belize 2021 Bermuda 2021 Brazil, Federative Republic of 2018 British Virgin Islands 2021 Brunei Darussalam 2018 Bulgaria, Republic of 2018 Burkina Faso 2021 Cameroon, Republic of 2021 Canada 2018 Cayman Islands 2018 Chile, Republic of 2018 China, Mainland of 2018 Colombia, Republic of 2018 Cook Islands 2021 Costa Rica, Republic of 2018 Croatia, Republic of 2018 Curacao, Country of 2018 Cyprus, Republic of 2018 Czech Republic 2018 Denmark, Kingdom of 2018 Dominica, Commonwealth of 2021 Dominican Republic 2021 Ecuador, Republic of 2026 El Salvador, Republic of 2021 Estonia, Republic of 2018 Faroes 2018 Finland, Republic of 2018 French Republic 2018 Gabonese Republic 2021 Georgia 2021 Germany, Federal Republic of 2018 Ghana, Republic of 2021 Gibraltar 2018 Greenland 2018 Grenada 2018 Guatemala, Republic of 2021 Guernsey 2018 Hellenic Republic (Greece) 2018 Hungary, Republic of 2018 Iceland, Republic of 2018 India, Republic of 2018 Indonesia, Republic of 2018 Ireland 2018 Isle of Man 2018 Israel, State of 2018 Italian Republic 2018 Jamaica 2021 Japan 2018 Jersey 2018 Kazakhstan, Republic of 2021 Kenya, Republic of 2021 Korea, Republic of 2019 Kuwait, State of 2018 Latvia, Republic of 2018 Lebanon, Republic of 2018 Liberia, Republic of 2021 Liechtenstein, Principality of 2018 Lithuania, Republic of 2018 Luxembourg, Grand Duchy of 2018 Macao Special Administrative Region 2021 Macedonia, Republic of 2021 Malaysia 2018 Maldives, Republic of 2021 Malta 2018 Marshall Islands, Republic of the 2021 Mauritius, Republic of 2018 Moldova, Republic of 2021 Monaco, Principality of 2021 Montserrat 2018 Morocco, Kingdom of 2021 Nauru, Republic of 2021 Netherlands, Kingdom of the 2018 New Zealand 2018 Nigeria, Federal Republic of 2021 Niue 2021 Norway, Kingdom of 2018 Oman, Sultanate of 2026 Pakistan, Islamic Republic of 2021 Panama, Republic of 2021 Paraguay, Republic of 2021 Peru, Republic of 2021 Philippines, Republic of the 2021 Poland, Republic of 2018 Portuguese Republic 2018 Qatar, State of 2018 Romania 2018 Russian Federation 2018 Saint Kitts and Nevis, Federation of 2021 Saint Lucia 2021 Saint Vincent and the Grenadines 2018 Samoa, Independent State of 2021 San Marino, Republic of 2021 Saudi Arabia, Kingdom of 2018 Senegal, Republic of 2021 Seychelles, Republic of 2018 Singapore, Republic of 2018 Sint Maarten 2021 Slovak Republic 2018 Slovenia, Republic of 2018 South Africa, Republic of 2018 Spain, Kingdom of 2018 Sweden, Kingdom of 2018 Swiss Confederation 2018 Thailand, Kingdom of 2026 Trinidad and Tobago, Republic of 2021 Tunisia, Republic of 2021 Turkey, Republic of 2018 Turks and Caicos Islands 2021 Uganda, Republic of 2021 Ukraine 2021 United Arab Emirates 2018 United Kingdom of Great Britain and Northern Ireland 2018 United Mexican States 2018 Uruguay, Oriental Republic of 2018 Vanuatu, Republic of 2018 (Replaced 6 of 2019 s. 9. Amended L.N. 71 of 2024) Note—The reporting year for a reportable jurisdiction is the year beginning from which a notice may be given under section 50C(2) requiring information on reportable accounts with respect to that jurisdiction.(This note does not have legislative effect.) Part 2 Participating Jurisdictions Albania, Republic ofAndorra, Principality ofAnguillaAntigua and BarbudaArgentina, Republic ofArubaAustralia, Commonwealth ofAustria, Republic ofAzerbaijan, Republic ofBahamas, Commonwealth of theBarbadosBelgium, Kingdom ofBermudaBrazil, Federative Republic ofBritish Virgin IslandsBrunei DarussalamBulgaria, Republic ofCanadaCayman IslandsChile, Republic ofChina, Mainland ofColombia, Republic ofCook IslandsCosta Rica, Republic ofCroatia, Republic ofCuracao, Country ofCyprus, Republic ofCzech RepublicDenmark, Kingdom ofDominica, Commonwealth ofEcuador, Republic ofEstonia, Republic ofFaroesFinland, Republic ofFrench RepublicGermany, Federal Republic ofGhana, Republic ofGibraltarGreenlandGrenadaGuernseyHellenic Republic (Greece)Hungary, Republic ofIceland, Republic ofIndia, Republic ofIndonesia, Republic ofIrelandIsle of ManIsrael, State ofItalian RepublicJamaicaJapanJerseyKazakhstan, Republic ofKenya, Republic ofKorea, Republic ofKuwait, State ofLatvia, Republic ofLebanon, Republic ofLiechtenstein, Principality ofLithuania, Republic ofLuxembourg, Grand Duchy ofMacao Special Administrative RegionMalaysiaMaldives, Republic ofMaltaMauritius, Republic ofMonaco, Principality ofNetherlands, Kingdom of theNew ZealandNigeria, Federal Republic ofNorway, Kingdom ofOman, Sultanate ofPakistan, Islamic Republic ofPanama, Republic ofPeru, Republic ofPoland, Republic ofPortuguese RepublicQatar, State ofRomaniaRussian FederationSaint Kitts and Nevis, Federation ofSaint LuciaSamoa, Independent State ofSan Marino, Republic ofSaudi Arabia, Kingdom ofSingapore, Republic ofSint MaartenSlovak RepublicSlovenia, Republic ofSouth Africa, Republic ofSpain, Kingdom ofSweden, Kingdom ofSwiss ConfederationThailand, Kingdom ofTurkey, Republic ofTurks and Caicos IslandsUnited Arab EmiratesUnited Kingdom of Great Britain and Northern IrelandUnited Mexican StatesUruguay, Oriental Republic ofVanuatu, Republic of(Amended L.N. 71 of 2024) Schedule 17F [ss. 2, 14G, 14HA, 14I, 14IH, 14IJ, 14LA & 14N & Schs. 57 & 58] (Amended 5 of 2024 s. 22)Aircraft Leasing Tax Concessions (Schedule 17F added 9 of 2017 s. 16) Part 1 Aircraft Leasing Activity and Aircraft Leasing Management Activity 1. Meaning of aircraft leasing activity and aircraft leasing management activity (1) In this Schedule and Subdivision 4 of Division 2 of Part 4— (Amended 10 of 2022 s. 2; 5 of 2024 s. 22)aircraft leasing activity (飛機租賃活動), in relation to a corporation, means an activity comprising—(a) the leasing of an aircraft by the corporation to any other person; and(b) any of the following activities carried out by the corporation—(i) agreeing funding terms in relation to the lease concerned;(ii) identify or acquiring the aircraft to be so leased;(iii) setting the terms and duration of the lease;(iv) monitoring or revising any funding or other agreements in relation to the lease;(v) managing any risks associated with the lease or with an activity mentioned in subparagraph (i), (ii), (iii) or (iv); (Replaced 5 of 2024 s. 22)aircraft leasing management activity (飛機租賃管理活動), in relation to a corporation, means any of the following activities—(a) managing another corporation that is a relevant qualifying aircraft lessor;(b) establishment or administration of a special purpose entity for the purpose of owning an aircraft by that entity;(c) providing, or arranging for the provision of, finance in obtaining the ownership of an aircraft by a special purpose entity wholly or partly owned by the corporation or its associated corporation; (Amended 5 of 2024 s. 22)(d) providing, or arranging for the provision of, a guarantee in respect of a financial or performance obligation as regards the aircraft leasing business of a special purpose entity wholly or partly owned by the corporation or its associated corporation, or granting security in respect of that business; (Amended 5 of 2024 s. 22)(e) managing leases;(f) arranging for the procurement or leasing of aircraft;(g) arranging for the operation, crewing, maintenance, repair, insurance, storage, scrapping or modification of aircraft; (Amended 5 of 2024 s. 22)(h) arranging for the evaluation, appraisal, provision or inspection of aircraft, airline facilities or maintenance facilities for aircraft;(i) arranging for the assessment of the aviation and aircraft market conditions;(j) marketing of leases; (Amended 5 of 2024 s. 22)(k) providing, or arranging for the provision of, finance in obtaining the ownership of an aircraft by an airline enterprise from another corporation that is a relevant qualifying aircraft lessor; (Amended 5 of 2024 s. 22)(l) providing a residual value guarantee or contingent purchase arrangement;(m) providing services in relation to an aircraft leasing activity for or to another corporation that is a relevant qualifying aircraft lessor.(2) For the purposes of paragraph (a), (k) or (m) of the definition of aircraft leasing management activity in subsection (1), a corporation is a relevant qualifying aircraft lessor if—(a) the activity mentioned in that paragraph is carried out in the basis period of the corporation for a year of assessment; and(b) the corporation is a qualifying aircraft lessor for that year of assessment.(3) In paragraph (l) of the definition of aircraft leasing management activity in subsection (1)—contingent purchase arrangement (待確定購買安排) means an arrangement under which a person is required to purchase an aircraft at a pre-determined amount if the actual residual value falls below the estimated residual value.(4) The words and expressions used in this section and defined in section 14G for the purposes of Subdivision 4 of Division 2 of Part 4 have the same meaning as in that Subdivision. (Amended 10 of 2022 s. 2) Part 2 Prescribed Percentage for Calculation of Net Lease Payments 2. Prescribed percentage for calculation of net lease payments For the purposes of section 14I, the prescribed percentage is 20%. Part 3 Prescribed Percentages for Safe Harbour Rule 3. Prescribed profits percentage For the purposes of section 14K, the prescribed profits percentage is 75%. 4. Prescribed asset percentage For the purposes of section 14K, the prescribed asset percentage is 75%. Part 4 Prescribed Requirements for Sections 14HA and 14LA (Part 4 added 5 of 2024 s. 22) 5. Prescribed requirements for section 14HA (1) The requirements prescribed for the purposes of section 14HA are—(a) that the average number of qualified employees during the basis period for the year of assessment concerned—(i) is adequate in the Commissioner’s opinion; and(ii) is in any event not less than 1; and(b) that the total amount of operating expenditure incurred in Hong Kong for the activity during that period—(i) is adequate in the Commissioner’s opinion; and(ii) is in any event not less than $2,000,000.(2) For the purposes of subsection (1)(a), a person is a qualified employee if—(a) the person is a full-time employee in Hong Kong; and(b) the person—(i) carries out the activity during the basis period; and(ii) has the qualifications necessary to do so. 6. Prescribed requirements for section 14LA (1) The requirements prescribed for the purposes of section 14LA are—(a) that the average number of qualified employees during the basis period for the year of assessment concerned—(i) is adequate in the Commissioner’s opinion; and(ii) is in any event not less than 2; and(b) that the total amount of operating expenditure incurred in Hong Kong for the activity during that period—(i) is adequate in the Commissioner’s opinion; and(ii) is in any event not less than $1,000,000.(2) For the purposes of subsection (1)(a), a person is a qualified employee if—(a) the person is a full-time employee in Hong Kong; and(b) the person—(i) carries out the activity during the basis period; and(ii) has the qualifications necessary to do so. Schedule 17FA [ss. 2, 14O, 14R, 14U, 14W & 14ZB]Ship Leasing Tax Concessions (Schedule 17FA added 5 of 2020 s. 19) Part 1 Ship Leasing Activity and Ship Leasing Management Activity 1. Meaning of ship leasing activity and ship leasing management activity (1) In this section and Subdivision 5 of Division 2 of Part 4— (Amended 10 of 2022 s. 2)ship leasing activity (船舶租賃活動), in relation to a person, means an activity comprising—(a) the leasing of a ship by the person to a ship lessor, ship leasing manager or ship operator; and(b) any of the following activities carried out by the person—(i) agreeing funding terms in relation to the lease concerned;(ii) identifying or acquiring the ship to be so leased;(iii) setting the terms and duration of that lease;(iv) monitoring or revising any funding or other agreements in relation to that lease;(v) managing any risks associated with that lease or with an activity mentioned in subparagraph (i), (ii), (iii) or (iv);ship leasing management activity (船舶租賃管理活動), in relation to a person, means any of the following activities—(a) managing another person that is a ship lessor;(b) establishment or administration of a special purpose entity for the purpose of owning a ship by that entity;(c) providing, or arranging for the provision of, finance in obtaining the ownership of a ship by a special purpose entity wholly or partly owned by the person, or evaluating financial proposals from external financiers in relation to the obtaining of that ownership;(d) providing, or arranging for the provision of, a guarantee in respect of a financial or performance obligation as regards the ship leasing business of a special purpose entity wholly or partly owned by the person, or granting security in respect of that business;(e) managing leases;(f) arranging for the procurement or leasing of ships;(g) arranging for the operation, crewing, voyage monitoring, maintenance, repair, certification, insurance, storage, scrapping or modification of ships, or the port agency services or security services for ships;(h) arranging for the evaluation, appraisal, provision or inspection of ships or maintenance facilities for ships (including internal audits of ship quality);(i) arranging for the assessment of the shipping market conditions;(j) marketing of leases;(k) providing, or arranging for the provision of, finance in obtaining the ownership of a ship by a shipping enterprise from another person that is a ship lessor;(l) providing a residual value guarantee or contingent purchase arrangement;(m) providing services in relation to a ship leasing activity for or to another person that is a ship lessor;(n) overseeing the design and construction of newbuild ships.(2) In paragraphs (c) and (d) of the definition of ship leasing management activity in subsection (1), a reference to the person includes—(a) if the person is a corporation—an associated corporation of the person; or(b) in any other case—an associate of the person.(3) In paragraph (l) of the definition of ship leasing management activity in subsection (1)—contingent purchase arrangement (待確定購買安排) means an arrangement under which a person is required to purchase a ship at a predetermined amount if the actual residual value falls below the estimated residual value.(4) The words and expressions used in this section and defined in section 14O for the purposes of Subdivision 5 of Division 2 of Part 4 have the same meaning as in that Subdivision. (Amended 10 of 2022 s. 2) Part 2 Prescribed Percentage for Calculation of Net Lease Payments 2. Prescribed percentage for calculation of net lease payments For the purposes of section 14R, the prescribed percentage is 20%. Part 3 Prescribed Percentages for Safe Harbour Rule 3. Prescribed profits percentage For the purposes of section 14U, the prescribed profits percentage is 75%. 4. Prescribed asset percentage For the purposes of section 14U, the prescribed asset percentage is 75%. Part 4 Threshold Requirements for Section 14W 5.

Qualifying Ship Leasing Activity For the purposes of paragraph (a) of the definition of threshold requirements in section 14W(4), the requirements are that—(a) during the basis period for the year of assessment concerned, the average number of full-time employees in Hong Kong who carry out the activity concerned and have the qualifications necessary for doing so is adequate in the opinion of the Commissioner and in any event not less than 2; and(b) the total amount of operating expenditure incurred in Hong Kong for the activity during the basis period for that year of assessment is adequate in the opinion of the Commissioner and in any event not less than $7,800,000. 6. Qualifying Ship Leasing Management Activity For the purposes of paragraph (b) of the definition of threshold requirements in section 14W(4), the requirements are that—(a) during the basis period for the year of assessment concerned, the average number of full-time employees in Hong Kong who carry out the activity concerned and have the qualifications necessary for doing so is adequate in the opinion of the Commissioner and in any event not less than 1; and(b) the total amount of operating expenditure incurred in Hong Kong for the activity during the basis period for that year of assessment is adequate in the opinion of the Commissioner and in any event not less than $1,000,000. Schedule 17FB [ss. 14ZC, 14ZE, 14ZG, 14ZK, 14ZL, 14ZN, 14ZP, 14ZT, 14ZU, 14ZW, 14ZY, 14ZZC & 16]Tax Concessions for Ship Agency Activities, Ship Management Activities and Ship Broking Activities (Schedule 17FB added 10 of 2022 s. 12) Part 1 General Interpretation Provisions 1. Interpretation of Schedule 17FB and Subdivisions 6, 7 and 8 of Division 2 of Part 4 (1) In this Schedule and Subdivisions 6, 7 and 8 of Division 2 of Part 4—associate (相聯者), in relation to a corporation, means—(a) a person who has control over the corporation;(b) a partner of a person mentioned in paragraph (a);(c) if a person mentioned in paragraph (a) is a natural person—a relative of the person;(d) if a partner mentioned in paragraph (b) is a natural person—a relative of the partner;(e) a director or principal officer of—(i) the corporation; or(ii) an associated corporation of the corporation;(f) a relative of a director (if the director is a natural person) or principal officer mentioned in paragraph (e);(g) a partner of the corporation;(h) if a partner of the corporation is a natural person—a relative of the partner;(i) a partnership in which the corporation is a partner; or(j) an associated corporation of the corporation;associated corporation (相聯法團), in relation to a corporation, means—(a) another corporation over which the corporation has control;(b) another corporation that has control over the corporation; or(c) another corporation that is under the control of the same person as is the corporation;associated qualifying ship leasing manager (相聯合資格船舶租賃管理商) means an associated corporation that is a qualifying ship leasing manager;associated qualifying ship lessor (相聯合資格船舶出租商) means an associated corporation that is a qualifying ship lessor;connected person (有關連者), in relation to a corporation, means—(a) an associated corporation of the corporation;(b) a person (other than a corporation)—(i) over whom the corporation has control;(ii) who has control over the corporation; or(iii) who is under the control of the same person as is the corporation; or(c) a partnership in which the corporation or its associate is a partner;control (控制), in relation to the definitions of associate, associated corporation and connected person—see subsection (2);operation (營運), in relation to a ship, includes the use or possession of the ship;permanent establishment (常設機構)—(a) means a branch, management or other place of business; but(b) does not include an agency unless the agent has, and habitually exercises, a general authority to negotiate and conclude contracts on behalf of a principal;principal officer (主要職員), in relation to a corporation, means—(a) a person employed by the corporation who, either alone or jointly with one or more other persons, is responsible under the immediate authority of the directors of the corporation for the conduct of the business of the corporation; or(b) a person employed by the corporation who, under the immediate authority of a director of the corporation or a person to whom paragraph (a) applies, exercises managerial functions in respect of the corporation;qualifying ship leasing management activity (合資格船舶租賃管理活動) means a qualifying ship leasing management activity within the meaning of section 14O(7);qualifying ship leasing manager (合資格船舶租賃管理商) means a qualifying ship leasing manager within the meaning of section 14T(2);qualifying ship lessor (合資格船舶出租商) means a qualifying ship lessor within the meaning of section 14P(2);relative (親屬), in relation to a person, means the spouse, parent, child, brother or sister of the person, and, in deducing such a relationship—(a) an adopted child is to be regarded as a child of both the natural parents and any adopting parent; and(b) a step child is to be regarded as a child of both the natural parents and any step parent;ship (船舶) means a vessel of any description capable of navigating in water and—(a) includes—(i) a barge or lighter;(ii) an air-cushion vehicle; and(iii) a dynamically supported craft as defined by section 2 of the Shipping and Port Control Ordinance (Cap. 313); and(b) does not include—(i) a junk as defined by section 2 of the Merchant Shipping Ordinance (Cap. 281);(ii) a vessel propelled by oars; or(iii) a vessel solely for military use;ship leasing manager (船舶租賃管理商) has the meaning given by section 14O(1);ship lessor (船舶出租商) has the meaning given by section 14O(1);ship operation business (船舶營運業務)—(a) means a business of operating ships as an owner or a charterer for providing services for the carriage by ships of passengers, cargo or mail; but(b) does not include dealing in ships or agency business in connection with sea transport;ship operator (船舶營運商) means a person carrying on a ship operation business;ship owner (船舶擁有人) means the following person who is not a ship operator or ship lessor—(a) a person registered as the owner of a ship, or in the absence of registration, a person owning a ship; or(b) a demise charterer of a ship;tax benefit (稅務利益) means an avoidance, postponement or reduction of a liability to pay tax;tax treaty (稅收協定) means an arrangement made between 2 or more jurisdictions (whether including Hong Kong or otherwise) with a view to affording relief from double taxation.(2) For the purposes of the definitions of associate, associated corporation and connected person in subsection (1)—(a) a person has control over a corporation if the person has the power to secure—(i) by means of the holding of shares or the possession of voting power in or in relation to that or any other corporation; or(ii) by virtue of any powers conferred by the articles of association or other document regulating that or any other corporation,that the affairs of the first-mentioned corporation are conducted in accordance with the wishes of that person; and(b) a person (first person) has control over another person (other than a corporation) (second person) if the second person is accustomed or under an obligation (whether express or implied, and whether or not enforceable or intended to be enforceable by legal proceedings) to act, in relation to the investment or business affairs of the second person, in accordance with the directions, instructions or wishes of the first person. Part 2 Ship Agency Activity 2. Meaning of ship agency activity In Subdivision 6 of Division 2 of Part 4—ship agency activity (船舶代理活動), in relation to a person, means an activity carried out by the person on behalf of a ship lessor, ship leasing manager, ship operator or ship owner (collectively principal) in respect of the principal’s ships, masters and crews, cargoes or customers. 3. Prescribed profits percentage for section 14ZE The profits percentage prescribed for the purposes of section 14ZE is 75%. 4. Prescribed asset percentage for section 14ZE The asset percentage prescribed for the purposes of section 14ZE is 75%. 5. Prescribed requirements for qualifying ship agency activity The requirements prescribed for the purposes of the definition of prescribed requirements in section 14ZG(3) are—(a) that during the basis period for the year of assessment concerned, the average number of full-time employees in Hong Kong who carry out the activity concerned and have the qualifications necessary for doing so is—(i) adequate in the Commissioner’s opinion; and(ii) in any event not less than one; and(b) that the total amount of operating expenditure incurred in Hong Kong for the activity during the basis period for that year of assessment is—(i) adequate in the Commissioner’s opinion; and(ii) in any event not less than $1,000,000. Part 3 Ship Management Activity 6. Meaning of ship management activity (1) In this section and Subdivision 7 of Division 2 of Part 4—ship management activity (船舶管理活動), in relation to a person, means any of the following activities carried out by the person for a ship lessor, ship leasing manager, ship operator or ship owner—(a) arranging for or supervising the dry-docking, repair, overhaul, alteration, upkeep, maintenance or lay-up of a ship;(b) arranging for the operation, crewing, voyage monitoring, certification, storage or scrapping of a ship;(c) ensuring through procurement contracts the adequacy of supplies, provisions, spares, stores and lubricating oil for a ship;(d) liaising with relevant authorities or other bodies on safety or manning requirements, or other similar requirements, for a ship;(e) appointing a surveyor or any other technical consultant for a ship;(f) appointing another person as a ship manager or ship agent, or engaging a stevedore, for a ship;(g) supervising the sale (including the physical delivery on sale) of a ship;(h) arranging for the provision of bunkers for a ship;(i) arranging for the sampling and testing of bunkers for a ship;(j) ensuring that organizational, flag state, local port state and international requirements applicable to a ship are complied with (including auditing such requirements);(k) supervising the general efficiency of a ship;(l) handling crew-related matters such as the provision of a qualified crew, the appointment of a crew manager, the provision of crew training, or the arrangement of crew insurance or payroll, for a ship;(m) arranging for the transportation of the crew of a ship (including such transportation for their repatriation) or related logistics;(n) supervising crew efficiency for a ship;(o) ensuring that requirements concerning medical examinations and the possession of medical certificates applicable to the crew of a ship are complied with;(p) awarding contracts, entering into alliances, or deciding on pooling, in respect of a ship;(q) securing the engagement of a ship by a ship operator for the carriage of cargoes;(r) planning a ship’s route and freight tonnage, including the issuance of voyage instructions;(s) collecting or arranging for the collection of—(i) the freight of a ship; or(ii) the charter hire for a ship, or any other payment in exchange for a ship’s use;(t) arranging for or providing post-fixture services for a ship, including—(i) voyage estimating; and(ii) accounting in respect of, or calculating—(A) hire;(B) freight;(C) demurrage; or(D) dispatch moneys,due from or to charterers;(u) arranging for surveys of a ship;(v) making a purchase or sale of a ship, or a decision regarding its ownership;(w) deciding on a ship’s flag and registry;(x) sourcing for or deciding on financing for the acquisition of a ship;(y) arranging for the insurance for a ship or handling relevant insurance claims;(z) advising on or supervising the construction, conversion or registration of a ship, including the approval of plans for a ship, based on a ship owner’s requirements;(za) arranging for, advising on or undertaking any work requiring technical expertise (including basic design and front end engineering work) for a ship;(zb) arranging for or providing marine-related consultancy or technology services for a ship (including ones concerning the environmental, technological and vessel performance aspects);(zc) arranging for port agency services or security services for a ship;(zd) managing any risks ancillary or incidental to any activity mentioned in any other paragraph of this definition.(2) In paragraph (f) of the definition of ship management activity in subsection (1)—ship agent (船舶代理商) means a person carrying on a business of carrying out ship agency activities as defined by section 2 of this Schedule;ship manager (船舶管理商) means a person carrying on a business of carrying out ship management activities. 7. Prescribed profits percentage for section 14ZN The profits percentage prescribed for the purposes of section 14ZN is 75%. 8. Prescribed asset percentage for section 14ZN The asset percentage prescribed for the purposes of section 14ZN is 75%. 9. Prescribed requirements for qualifying ship management activity The requirements prescribed for the purposes of the definition of prescribed requirements in section 14ZP(3) are—(a) that during the basis period for the year of assessment concerned, the average number of full-time employees in Hong Kong who carry out the activity concerned and have the qualifications necessary for doing so is—(i) adequate in the Commissioner’s opinion; and(ii) in any event not less than one; and(b) that the total amount of operating expenditure incurred in Hong Kong for the activity during the basis period for that year of assessment is—(i) adequate in the Commissioner’s opinion; and(ii) in any event not less than $1,000,000. Part 4 Ship Broking Activity 10. Meaning of ship broking activity (1) In Subdivision 8 of Division 2 of Part 4—ship broking activity (船舶經紀活動), in relation to a corporation, means any of the following activities carried out by the corporation for a ship lessor, ship leasing manager, ship operator or ship owner—(a) the broking of sale and purchase of ships;(b) the matching of ship owners (who intend to build new ships) to shipyards based on the ship owners’ requirements;(c) the matching of ships to—(i) cargoes; or(ii) ship owners or ship charterers;(d) the valuation of ships;(e) providing any research, consultancy or advisory service for, or in connection with, an activity mentioned in paragraph (a), (b), (c) or (d) (specified activity) that is carried out by the corporation.(2) For the purposes of paragraph (e) of the definition of ship broking activity in subsection (1), any research, consultancy or advisory service provided by a corporation for, or in connection with, a specified activity that is carried out by the corporation during the basis period for the year of assessment concerned is taken to be not so provided if the condition specified in subsection (3) is met.(3) The condition specified for subsection (2) is that the total fees and commissions derived by the corporation from the provision of the service exceed 20% of the aggregate fees and commissions derived by the corporation from the carrying out of all specified activities that are carried out during that basis period. 11. Prescribed profits percentage for section 14ZW The profits percentage prescribed for the purposes of section 14ZW is 75%. 12. Prescribed asset percentage for section 14ZW The asset percentage prescribed for the purposes of section 14ZW is 75%. 13. Prescribed requirements for qualifying ship broking activity The requirements prescribed for the purposes of the definition of prescribed requirements in section 14ZY(3) are—(a) that during the basis period for the year of assessment concerned, the average number of full-time employees in Hong Kong who carry out the activity concerned and have the qualifications necessary for doing so is—(i) adequate in the Commissioner’s opinion; and(ii) in any event not less than one; and(b) that the total amount of operating expenditure incurred in Hong Kong for the activity during the basis period for that year of assessment is—(i) adequate in the Commissioner’s opinion; and(ii) in any event not less than $1,000,000. Schedule 17FC [ss. 15L, 15OA, 15P, 51C, 80 & 82A & Schs. 55 & 56](Amended 32 of 2023 s. 11)Qualifying IP Income: Nexus Requirement for Ascertaining Excepted Portion etc. (Schedule 17FC added 17 of 2022 s. 14) Part 1 Preliminary 1. Interpretation of Schedule 17FC (1) An expression used in this Schedule, and defined or otherwise explained in Division 3A of Part 4, has the same meaning as in that Division.(2) In this Schedule—excepted portion (例外部分)—see section 3 of this Schedule;non-Hong Kong resident person (非香港居民人士) has the meaning given by section 50AAC(1);non-qualifying expenditure (不合資格開支)—see section 6 of this Schedule; qualifying general IP income (合資格一般知識產權收入) means any income derived from qualifying intellectual property in respect of— (a) the exhibition or use of, or a right to exhibit or use, (whether in or outside Hong Kong) the property; or (b) the imparting of, or undertaking to impart, knowledge directly or indirectly connected with the use (whether in or outside Hong Kong) of the property; (Added 32 of 2023 s. 11) qualifying intellectual property (合資格知識產權) means—(a) a patent granted under the Patents Ordinance (Cap. 514) (Cap. 514) or under the law of any place outside Hong Kong;(b) a patent application made under Cap. 514 or under the law of any place outside Hong Kong; or(c) a copyright subsisting in software under the Copyright Ordinance (Cap. 528) or under the law of any place outside Hong Kong;qualifying IP disposal gain (合資格知識產權處置收益) means any gain or profit derived from the sale of qualifying intellectual property; (Added 32 of 2023 s. 11) qualifying IP income (合資格知識產權收入) means— (Amended 32 of 2023 s. 11) (a) any qualifying general IP income; or (b) any qualifying IP disposal gain; (Amended 32 of 2023 s. 11) qualifying R&D expenditure (合資格研發開支)—see section 5 of this Schedule;R&D activity (研發活動) has the meaning given by section 2 of Schedule 45;R&D fraction (研發分數)—see section 4 of this Schedule;specified period (指明期間), in relation to an MNE entity to which any qualifying IP income accrues, means the period—(a) if the income is qualifying general IP income—(i) beginning on 1 January 2023 or on an earlier date elected by the entity; and(ii) ending on the last day of the entity’s basis period of the year of assessment during which the income accrues; or(b) if the income is a qualifying IP disposal gain—(i) beginning on 1 January 2024 or on an earlier date elected by the entity; and(ii) ending on the last day of the entity’s basis period of the year of assessment during which the income accrues. (Amended 32 of 2023 s. 11)(3) For the purposes of this Schedule—(a) a person is to be regarded as associated with another person if, as between them, the participation condition is met under section 50AAG; and(b) a reference to associated person is to be read accordingly. 2. Consistency with OECD 2015 Report (1) This Schedule is to be read in the way that best secures consistency with the requirements and guidance in Chapter 4 of the OECD 2015 Report.(2) In this section—OECD 2015 Report (《經合組織2015年報告》) means the Countering Harmful Tax Practices More Effectively, Taking into Account Transparency and Substance, Action 5 ‑ 2015 Final Report published by the Organisation for Economic Co-operation and Development in 2015. Part 2 Excepted Portion of Qualifying IP Income 3. Ascertaining excepted portion The excepted portion of qualifying IP income received by an MNE entity is to be ascertained in accordance with the following formula— P = I × F where: P means the excepted portion; I means the qualifying IP income; and F means the R&D fraction applicable to the qualifying IP income. 4. Ascertaining R&D fraction (1) The R&D fraction applicable to qualifying IP income received by an MNE entity is to be ascertained in accordance with the following formula— F = QE × 130% QE + NE where: F means the R&D fraction; QE means the qualifying R&D expenditure incurred in respect of the qualifying intellectual property to which the qualifying IP income relates (subject intellectual property); and NE means the non-qualifying expenditure incurred in respect of the subject intellectual property. (2) However, an R&D fraction is to be regarded as 100% if the percentage ascertained in accordance with subsection (1) is more than 100%. 5. Meaning of QE: qualifying R&D expenditure (1) This section explains the meaning of qualifying R&D expenditure in relation to qualifying IP income received by an MNE entity.(2) Any expenditure (including capital expenditure) incurred by the MNE entity during the specified period for an R&D activity that—(a) is connected to the qualifying intellectual property to which the qualifying IP income relates (subject intellectual property); and(b) is carried out—(i) by the MNE entity;(ii) on behalf of the MNE entity by a person that is not associated with the MNE entity; or(iii) in Hong Kong on behalf of the MNE entity by an associated person of the MNE entity that is a Hong Kong resident person,is, subject to subsections (3), (4), (5) and (6), a qualifying R&D expenditure incurred in respect of the subject intellectual property.(3) The following expenditures are not to be regarded as qualifying R&D expenditures—(a) interest payments;(b) payments for any land or building, or for any alteration, addition or extension to any building;(c) any expenditure (including capital expenditure) incurred by the MNE entity for obtaining from another person (whether by acquisition, licensing, amalgamating with another company or otherwise) the subject intellectual property.(4) Subsection (5) applies if—(a) the subject intellectual property is or was owned by another company that is a Hong Kong resident person (original owner);(b) the MNE entity—(i) obtained the property by amalgamating with the original owner; or(ii) acquired all equity interests in the original owner and subsequently acquired, or obtained a licence for, the property from the original owner; and(c) the original owner has sufficient records of the expenditures it incurred in respect of the property, so that the MNE entity would still be able to comply with section 51C (as modified by section 9(2) and (3) of this Schedule) in respect of the expenditures even if—(i) the references to the MNE entity in subsections (2) and (3)(c) were regarded as including the original owner; and(ii) as a result, the expenditures became qualifying R&D expenditures.(5) Subsections (2) and (3)(c) apply as if the references to the MNE entity in those subsections included the original owner.(6) If, in addition to the subject intellectual property, a qualifying R&D expenditure is also connected to other items of intellectual property (including other qualifying intellectual property), the expenditure is to be apportioned between the subject intellectual property and those other items on a just and reasonable basis.(7) For the purposes of subsection (6), an expenditure is apportioned between the subject intellectual property and other items on a just and reasonable basis if the amount apportioned to the subject intellectual property represents the extent to which the expenditure was incurred in respect of the property. 6. Meaning of NE: non-qualifying expenditure (1) This section explains the meaning of non-qualifying expenditure in relation to qualifying IP income received by an MNE entity.(2) Each of the following expenditures is, subject to subsections (3), (4), (5), (6) and (7), a non-qualifying expenditure incurred in respect of the qualifying intellectual property to which the qualifying IP income relates (subject intellectual property)—(a) any expenditure (including capital expenditure) incurred by the MNE entity during the specified period for obtaining from another person (whether by acquisition, licensing, amalgamating with another company or otherwise) the subject intellectual property;(b) any expenditure (including capital expenditure) incurred by the MNE entity during the specified period for an R&D activity that—(i) is connected to the subject intellectual property; and(ii) is carried out—(A) on behalf of the MNE entity by an associated person of the MNE entity that is a non-Hong Kong resident person; or(B) outside Hong Kong on behalf of the MNE entity by an associated person of the MNE entity that is a Hong Kong resident person.(3) The following expenditures are not to be regarded as non-qualifying expenditures—(a) interest payments;(b) payments for any land or building, or for any alteration, addition or extension to any building.(4) Subsections (5) and (6) apply if—(a) the subject intellectual property is or was owned by another company that is a Hong Kong resident person (original owner);(b) the MNE entity—(i) obtained the property by amalgamating with the original owner; or(ii) acquired all equity interests in the original owner and subsequently acquired, or obtained a licence for, the property from the original owner; and(c) the original owner has sufficient records of the expenditures it incurred in respect of the property, so that the MNE entity would still be able to comply with section 51C (as modified by section 9(2) and (3) of this Schedule) in respect of the expenditures even if—(i) the references to the MNE entity in subsection (2) were regarded as including the original owner; and(ii) as a result, the expenditures became non-qualifying expenditures.(5) Subsection (2) applies as if the references to the MNE entity in that subsection included the original owner.(6) In calculating the total amount of non-qualifying expenditures, the expenditure incurred by the MNE entity during the specified period for obtaining the subject intellectual property from the original owner is to be deducted.(7) If, in addition to the subject intellectual property, a non-qualifying expenditure is also connected to other items of intellectual property (including other qualifying intellectual property), the expenditure is to be apportioned between the subject intellectual property and those other items on a just and reasonable basis.(8) For the purposes of subsection (7), an expenditure is apportioned between the subject intellectual property and other items on a just and reasonable basis if the amount apportioned to the subject intellectual property represents the extent to which the expenditure was incurred in respect of the property. Part 3 Supplementary Provisions for Qualifying IP Income 7. Setting off loss sustained in respect of qualifying intellectual property (1) This section applies if—(a) any qualifying general IP income received by an MNE entity is chargeable to profits tax for a year of assessment because of section 15I(1); and(b) during the basis period of that year of assessment, a loss (general loss) is sustained in respect of the qualifying intellectual property to which the income relates.(1A) This section also applies if—(a) an MNE entity sustains a loss (sale loss) from a sale in a territory outside Hong Kong of qualifying intellectual property;(b) the proceeds of the sale are received in Hong Kong by the MNE entity during the basis period of a year of assessment; and(c) had a gain been derived from the sale and received in Hong Kong by the MNE entity, the gain, or part of the gain, would have been chargeable to profits tax because of section 15I(1). (Added 32 of 2023 s. 11)(2) The qualifying portion of the general loss or sale loss may, subject to subsection (3A), be set off against the MNE entity’s assessable profits for that year of assessment.(3) Any amount of the qualifying portion of the general loss or sale loss not so set off may, subject to subsection (3A), be carried forward and set off, in accordance with section 19C, against the MNE entity’s assessable profits for subsequent years of assessment.(3A) A sale loss may only be set off to the extent that the assessable profits concerned are derived from specified foreign-sourced income that is chargeable to profits tax because of section 15I(1). (Added 32 of 2023 s. 11)(4) The qualifying portion of a general loss or sale loss sustained in respect of qualifying intellectual property is to be ascertained in accordance with the following formula— (Amended 32 of 2023 s. 11) QP = L × (1 – F) where: QP means the qualifying portion; L means the loss; and F means the R&D fraction applicable to the qualifying intellectual property. (5) To avoid doubt, the non-qualifying portion of a general loss or sale loss sustained in respect of qualifying intellectual property must not be set off against any assessable profits of the MNE entity.(6) The non-qualifying portion of a general loss or sale loss sustained in respect of qualifying intellectual property is to be ascertained in accordance with the following formula— (Amended 32 of 2023 s. 11) NP = L × F where: NP means the non-qualifying portion; L means the loss; and F means the R&D fraction applicable to the qualifying intellectual property. (7) For ascertaining the R&D fraction applicable to qualifying intellectual property under subsections (4) and (6), sections 4, 5 and 6 of this Schedule are to apply with the following modifications—(a) in section 1(2) of this Schedule, the following definition is substituted for the definition of specified period— “specified period (指明期間), in relation to an MNE entity that sustains a loss in respect of qualifying intellectual property, means the period— (a) if the loss is a general loss within the meaning of section 7(1)(b) of this Schedule—(i) beginning on 1 January 2023 or on an earlier date elected by the entity; and(ii) ending on the last day of the entity’s basis period of the year of assessment during which the loss is sustained; or (b) if the loss is a sale loss within the meaning of section 7(1A)(a) of this Schedule—(i) beginning on 1 January 2024 or on an earlier date elected by the entity; and(ii) ending on the last day of the entity’s basis period of the year of assessment during which the loss is sustained.”; (b) in section 4(1) of this Schedule—(i) the words “qualifying intellectual property (subject intellectual property) held” are substituted for the words “qualifying IP income received”; and(ii) the words “subject intellectual property” are substituted for the words “qualifying intellectual property to which the qualifying IP income relates (subject intellectual property)”;(c) in sections 5(1) and 6(1) of this Schedule, the words “qualifying intellectual property (subject intellectual property) held” are substituted for the words “qualifying IP income received”;(d) in sections 5(2) and 6(2) of this Schedule, the words “subject intellectual property” are substituted for the words “qualifying intellectual property to which the qualifying IP income relates (subject intellectual property)”. (Added 32 of 2023 s. 11)(Amended 32 of 2023 s. 11) 8. Effect of withdrawal, abandonment and refusal of patent application (1) This section applies if—(a) because of section 15L, section 15I(1) does not operate in relation to the excepted portion of qualifying IP income received by an MNE entity in a year of assessment;(b) the income is derived from a patent application made under the Patents Ordinance (Cap. 514) or under the law of any place outside Hong Kong; and(c) the application is withdrawn, abandoned or refused in a subsequent year of assessment.(2) The MNE entity must notify the Commissioner in writing of the withdrawal, abandonment or refusal within 4 months after the end of the basis period of that subsequent year of assessment, unless the entity has already been required to furnish a return under section 51(1).(3) Section 15I(1) applies to the excepted portion of the qualifying IP income as if it were specified foreign-sourced income received in Hong Kong during the basis period of that subsequent year of assessment. 9. Records to be kept (1) Without limiting section 15S, section 51C applies, with the modifications specified in subsections (2) and (3), to an MNE entity that relies on section 15L to claim that section 15I(1) does not operate in relation to the excepted portion of qualifying IP income it receives.(2) The MNE entity must retain records of transactions, acts or operations relating to the qualifying IP income under section 51C at least until the later of the following—(a) the expiry of 7 years after the completion of those transactions, acts or operations; or(b) the expiry of 7 years after making the claim mentioned in subsection (1).(3) The MNE entity must keep records of the following, in addition to records within the meaning of section 51C(3) and (4)—(a) information sufficient to establish that the income concerned is qualifying IP income;(b) details of all corresponding expenditures incurred;(c) details of the qualifying intellectual property to which the income relates;(d) if an apportionment is made under section 5(6) or 6(7) of this Schedule—information sufficient to establish that the apportionment is made on a just and reasonable basis;(e) if a loss is set off under section 7 of this Schedule—details of the loss.(4) To avoid doubt, the records mentioned in subsection (3) are records of transactions, acts or operations relating to the qualifying IP income.(5) Section 80 applies to a failure to comply with section 51C as modified by subsections (2) and (3) in the same way section 80 applies to a failure to comply with section 51C.(6) In this section—corresponding expenditures (相應開支), in relation to qualifying IP income, means all of the following expenditures—(a) qualifying R&D expenditures incurred in respect of the qualifying intellectual property to which the income relates;(b) non-qualifying expenditures incurred in respect of the qualifying intellectual property to which the income relates;(c) any other expenditures incurred in producing the income. 10. Transitional arrangement for MNE entity with insufficient records (1) This section applies if—(a) qualifying IP income accrues to an MNE entity during the period—(i) if the income is qualifying general IP income—(A) beginning on 1 January 2023; and(B) ending on the last day of the entity’s basis period of the year of assessment beginning on 1 April 2024; or(ii) if the income is a qualifying IP disposal gain—(A) beginning on 1 January 2024; and(B) ending on the last day of the entity’s basis period of the year of assessment beginning on 1 April 2025; and (Amended 32 of 2023 s. 11)(b) the entity is unable to ascertain the R&D fraction applicable to the income under Part 2 of this Schedule because there are insufficient records.(2) For ascertaining the R&D fraction and keeping records, the MNE entity may elect that sections 5, 6 and 9 of this Schedule apply on the following basis—(a) the references to “specified period” in sections 5(2) and 6(2)(a) and (b) of this Schedule are to be regarded as references to the period of 3 years ending on the last day of the entity’s basis period of the year of assessment during which the qualifying IP income accrues;(b) the references to “the subject intellectual property” in sections 5(3)(c) and 6(2)(a) of this Schedule are to be regarded as references to any intellectual property;(c) the following provisions of this Schedule are to be omitted—(i) section 5(2)(a), (4), (5), (6) and (7);(ii) section 6(2)(b)(i), (4), (5), (6), (7) and (8);(iii) section 9(3)(d). Schedule 17FD [ss. 14, 19CA, 40AY, 40AZ, 51C, 63H, 80, 82A & 100] (Amended 10 of 2025 s. 4)Eligible IP Income: Concessionary Tax Treatment and Nexus Requirement for Ascertaining Concessionary Portion (Schedule 17FD added 17 of 2024 s. 12) Part 1 Preliminary 1. Interpretation of Schedule 17FD (1) In this Schedule—application for a standard patent (R) (轉錄標準專利的申請) and standard patent (R) application (轉錄標準專利申請) have the meaning given by section 3 of Cap. 514;Cap. 490 (《第490章》) means the Plant Varieties Protection Ordinance (Cap. 490);Cap. 514 (《第514章》) means the Patents Ordinance (Cap. 514);concessionary portion (特惠部分)—see section 10 of this Schedule;concessionary tax rate (特惠稅率)—see section 3(3) of this Schedule;corresponding local patent (相應本地專利) has the meaning given by section 6(3) of this Schedule;corresponding local plant variety right (相應本地植物品種權利) has the meaning given by section 6(3) of this Schedule; date of filing (提交日期) means— (a) in relation to a patent application that is filed with, or a patent that is granted by, a patent office of any place outside Hong Kong—(i) if the patent application, or the application for the patent, is an international application that has validly entered its national phase in a patent office—the international filing date accorded to the international application for the purposes of Article 11 of the Patent Cooperation Treaty; or(ii) in any other case—the date of filing accorded to the patent application, or the application for the patent, by the patent office with which the application is filed; (b) in relation to a standard patent (R) application or a standard patent (R)—(i) if the corresponding designated patent application within the meaning of section 4(2)(b) of Cap. 514 is an international application that has validly entered its national phase in the corresponding designated patent office—the international filing date accorded to the international application for the purposes of Article 11 of the Patent Cooperation Treaty; or(ii) in any other case—(A) for a standard patent (R) application—the date of filing of the corresponding designated patent application; or(B) for a standard patent (R)—the deemed date of filing (within the meaning of section 38 of Cap. 514) of the application for the standard patent (R); (c) in relation to a standard patent (O) application or a standard patent (O)—the date of filing accorded under section 37M(2) or 37Z(2) of Cap. 514 to the standard patent (O) application or application for the standard patent (O); or (d) in relation to a short-term patent application or a short-term patent—(i) for a short-term patent application or an application for a short-term patent based on an international application designating the People’s Republic of China that has entered its national phase in the People’s Republic of China—the international filing date referred to in section 125(5) of Cap. 514 that is deemed to be the date of filing of the short-term patent application or application for the short-term patent; or(ii) in any other case—the date of filing accorded under section 114(2) or 116 of Cap. 514 to the short-term patent application or application for the short-term patent; designated patent office (指定專利當局) has the meaning given by section 4(1) of Cap. 514; divisional patent application (專利的分開申請) means— (a) in relation to a patent application that is made under Cap. 514—(i) if the patent application is a standard patent (R) application—a request to enter a record of a divisional patent application filed under section 22(1) of Cap. 514;(ii) if the patent application is a standard patent (O) application—a divisional standard patent (O) application filed under section 37Z of Cap. 514; or(iii) if the patent application is a short-term patent application—a divisional short-term patent application filed under section 116 of Cap. 514; or (b) in relation to a patent application that is filed with a patent office of any place outside Hong Kong—an application for a divisional patent filed under the law, instruments or rules of the patent office applicable to that application; eligible intellectual property (具資格知識產權) means any of the following intellectual property that is generated from an R&D activity— (a) an eligible patent; (b) an eligible plant variety right; (c) a copyright subsisting in software under the Copyright Ordinance (Cap. 528) or under the law of any place outside Hong Kong; eligible IP income (具資格知識產權收入)—see section 7 of this Schedule;eligible patent (具資格專利)—see section 8 of this Schedule;eligible person (具資格人士) means a person who is entitled to derive eligible IP income from an eligible intellectual property;eligible plant variety right (具資格植物品種權利)—see section 9 of this Schedule;eligible R&D expenditure (具資格研發開支)—see section 13 of this Schedule;Hong Kong resident person (香港居民人士) has the meaning given by section 50AAC(1);non-eligible expenditure (不具資格開支)—see section 14 of this Schedule;non-Hong Kong resident person (非香港居民人士) has the meaning given by section 50AAC(1);patent office (專利當局), in relation to a place outside Hong Kong, means a competent authority in that place that receives or processes patent applications, or grants patents;R&D activity (研發活動) has the meaning given by section 2 of Schedule 45;R&D fraction (研發分數)—see section 12 of this Schedule;specified date (指明日期) means the date of expiry of a period of 24 months after the commencement date* of the Inland Revenue (Amendment) (Tax Concessions for Intellectual Property Income) Ordinance 2024 (17 of 2024); specified period (指明期間), in relation to an eligible person to whom any eligible IP income accrues, means the period— (a) beginning on 1 April 2023 or on an earlier date elected by the eligible person; and (b) ending on the last day of the eligible person’s basis period for the year of assessment during which the income accrues. (2) In this Schedule, the following expressions have the meanings given by section 2(1) of Cap. 514—application for a short-term patent (短期專利的申請) and short-term patent application (短期專利申請);application for a standard patent (O) (原授標準專利的申請) and standard patent (O) application (原授標準專利申請);international application (國際申請);Patent Cooperation Treaty (《專利合作條約》);short-term patent (短期專利);standard patent (O) (原授標準專利);standard patent (R) (轉錄標準專利);substantive examination (實質審查).(3) For the purposes of this Schedule—(a) a person is to be regarded as associated with another person if, as between them, the participation condition is met under section 50AAG; and(b) a reference to an associated person is to be read accordingly.(4) In this Schedule—(a) a reference to a patent granted by a patent office of a place outside Hong Kong, includes—(i) the registration of a utility model by the patent office;(ii) a utility certificate issued by the patent office; and(iii) an inventor’s certificate issued by the patent office,and a patent application filed with a patent office of a place outside Hong Kong is to be construed accordingly; and(b) a reference to a divisional patent application includes all subsequent divisional patent applications in respect of that application. Editorial Note: * Commencement date: 5 July 2024. 2. Consistency with OECD 2015 Report (1) This Schedule is to be read in the way that best secures consistency with the requirements and guidance in Chapter 4 of the OECD 2015 Report.(2) In this section—OECD 2015 Report (《經合組織2015年報告》) means the Countering Harmful Tax Practices More Effectively, Taking into Account Transparency and Substance, Action 5 - 2015 Final Report published by the Organisation for Economic Co-operation and Development in 2015. Part 2 Tax Concession for Eligible IP Income 3. Concessionary portion of assessable profits from eligible IP income subject to concessionary tax rate (1) This section applies in relation to the assessable profits of an eligible person from an eligible IP income for a year of assessment.(2) If—(a) the eligible IP income is derived from an eligible intellectual property; and(b) an election is made under section 4 of this Schedule in respect of the eligible intellectual property,then, subject to Part 4 of this Schedule, the concessionary portion of the assessable profits is chargeable to tax at the concessionary tax rate specified in subsection (3).(3) The concessionary tax rate is 5%. 4. Election for purposes of section 3 of this Schedule (1) The election to apply the concessionary tax rate in relation to the concessionary portion of the assessable profits of an eligible person from an eligible IP income is to be made—(a) in respect of an eligible intellectual property; and(b) in writing.(2) The election, once made, is irrevocable. 5. Election: granted patents and divisional patent applications If an election has been made under section 4 of this Schedule in respect of an eligible patent that is a patent application (original patent application), the election is to be regarded as having also been made, for the purposes of section 3 of this Schedule, in respect of—(a) the patents granted in pursuance of the original patent application; and(b) the divisional patent applications of the original patent application and the patents granted in pursuance of such divisional patent applications. 6. Election: eligible patent or eligible plant variety right with date of filing on or after specified date (1) This section applies to an election under section 4 of this Schedule in respect of any of the following eligible intellectual property the date of filing of which is on or after the specified date—(a) an eligible patent that is not—(i) a standard patent (O);(ii) a standard patent (O) application;(iii) a short-term patent; or(iv) a short-term patent application;(b) an eligible plant variety right that is not—(i) a grant as defined by section 2 of Cap. 490; or(ii) an application as defined by section 2 of Cap. 490.(2) An election under section 4 of this Schedule is not valid unless, in addition to meeting the requirements of that section—(a) for an election made in respect of the eligible patent—there is a corresponding local patent; or(b) for an election made in respect of the eligible plant variety right—there is a corresponding local plant variety right.(3) In this section— corresponding local patent (相應本地專利), in relation to an eligible patent in respect of which an election is made under section 4 of this Schedule, means— (a) a standard patent (O); (b) a standard patent (O) application; (c) a short-term patent; or (d) a short-term patent application, the subject of which is the same invention as the invention that is the subject of the eligible patent; corresponding local plant variety right (相應本地植物品種權利), in relation to an eligible plant variety right in respect of which an election is made under section 4 of this Schedule, means— (a) a grant; or (b) an application, the variety of which is the subject variety of the eligible plant variety right. (4) In the definition of corresponding local patent in subsection (3), a reference to the same invention—(a) for a standard patent (O) or a standard patent (O) application—is to be construed in the same way as it is construed for the purposes of section 37C(2) of Cap. 514; and(b) for a short-term patent or a short-term patent application—is to be construed in the same way as it is construed for the purposes of section 110(1A) of Cap. 514.(5) In the definition of corresponding local plant variety right in subsection (3), the following expressions have the meanings given by section 2 of Cap. 490—application (申請);grant (授權證);variety (品種). 7. Meaning of eligible IP income (1) In this Schedule, an eligible IP income is an income of any one or more of the following descriptions—(a) income derived from an eligible intellectual property in respect of—(i) the exhibition or use of, or a right to exhibit or use, (whether in or outside Hong Kong) the property;

or(ii) the imparting of, or undertaking to impart, knowledge directly or indirectly connected with the use (whether in or outside Hong Kong) of the property;(b) income derived from the sale of an eligible intellectual property;(c) if the price of a sale of a product or service includes an amount that is attributable to an eligible intellectual property—such portion of the income from that sale as, on a just and reasonable basis, is attributable to the value of the property (embedded IP income);(d) amount of insurance, damages or compensation derived in relation to an eligible intellectual property.(2) For the purpose of ascertaining the embedded IP income under subsection (1)(c), the income attributed to the eligible intellectual property is to be calculated in the way that best secures consistency with the requirements and guidance in the OECD rules.(3) In subsection (2)— OECD rules (《經合組織規則》) means— (a) the commentary on the business profits article as defined by section 50AAC(1); and (b) the Transfer Pricing Guidelines for Multinational Enterprises and Tax Administrations published by the Organisation for Economic Co-operation and Development on 10 January 2022. 8. Meaning of eligible patent (1) In this Schedule, an eligible patent is—(a) a patent—(i) that is granted under Cap. 514 or granted by a patent office of any place outside Hong Kong; and(ii) if the date of filing of the application for the patent is on or after the specified date—that is not a standard patent (R); or(b) a patent application—(i) that is made under Cap. 514 or filed with a patent office of any place outside Hong Kong; and(ii) if the date of filing of the patent application is on or after the specified date—that is not a standard patent (R) application.(2) For the purposes of subsection (1)(b)(i), if the patent application is an international application, the reference to the patent application being filed with a patent office of any place outside Hong Kong is a reference to the patent application having validly entered its national phase in the patent office in which the national phase is entered. 9. Meaning of eligible plant variety right In this Schedule, an eligible plant variety right is—(a) a right—(i) that is granted under Cap. 490; or(ii) that corresponds to the right mentioned in subparagraph (i) and subsists under the law of any place outside Hong Kong; or(b) an application—(i) that is an application as defined by section 2 of Cap. 490; or(ii) that corresponds to the application mentioned in subparagraph (i) and subsists under the law of any place outside Hong Kong. Part 3 Concessionary Portion of Assessable Profits from Eligible IP Income 10. Ascertaining concessionary portion The concessionary portion of the assessable profits from an eligible IP income is to be ascertained in accordance with the following formula— P = I × F where: P means the concessionary portion; I means the assessable profits from the eligible IP income; and F means the R&D fraction applicable to those assessable profits. 11. Ascertaining assessable profits from eligible IP income The assessable profits from an eligible IP income is to be ascertained in accordance with the following formula— I = A – B – C + D where: I means the assessable profits from the eligible IP income; A means the eligible IP income; B means the outgoings and expenses to the extent that they are incurred during the basis period for the year of assessment (relevant basis period) to produce A; C means the allowances allowed under Part 6, to the extent that the relevant assets counted for the allowances are used during the relevant basis period to produce A; and D means the balancing charge to be made under Part 6, to the extent that the relevant assets counted for the balancing charge are used during the relevant basis period to produce A. 12. Ascertaining R&D fraction (1) For any assessable profits from an eligible IP income, the R&D fraction applicable to those profits is to be ascertained in accordance with the following formula— F = EE × 130% EE + NE where: F means the R&D fraction; EE means the eligible R&D expenditure incurred in respect of the eligible intellectual property to which the eligible IP income relates (subject intellectual property); and NE means the non-eligible expenditure incurred in respect of the subject intellectual property. (2) An R&D fraction is to be regarded as 100% if the percentage ascertained in accordance with subsection (1) is more than 100%. 13. Meaning of EE: eligible R&D expenditure (1) Any expenditure (including capital expenditure) incurred by an eligible person during the specified period for an R&D activity that—(a) is connected to the eligible intellectual property to which the eligible IP income relates (subject intellectual property); and(b) is carried out—(i) by the eligible person;(ii) on behalf of the eligible person by a person that is not associated with the eligible person; or(iii) in Hong Kong on behalf of the eligible person by an associated person of the eligible person that is a Hong Kong resident person,is, subject to subsections (2), (3), (4) and (5), an eligible R&D expenditure incurred in respect of the subject intellectual property.(2) The following expenditures are not to be regarded as eligible R&D expenditures—(a) interest payments;(b) payments for any land or building, or for any alteration, addition or extension to any building;(c) any expenditure (including capital expenditure) incurred by the eligible person for obtaining the subject intellectual property or any right in respect of the property (whether by acquisition, licensing, amalgamating with another company or otherwise) from another person.(3) Subsection (4) applies if—(a) the subject intellectual property or any right in respect of the property is or was vested in a company that is a Hong Kong resident person (original owner) (whether by acquisition, licensing, amalgamating with another person or otherwise);(b) the eligible person—(i) obtained the property or any right in respect of the property by amalgamating with the original owner; or(ii) acquired all equity interests in the original owner and subsequently acquired, or obtained a licence for, the property from the original owner; and(c) the original owner has sufficient records of the expenditures it incurred in respect of the property, so that the eligible person would still be able to comply with section 51C (as modified by section 22(2) and (3) of this Schedule) in respect of the expenditures even if—(i) the references to the eligible person in subsections (1) and (2)(c) were regarded as including the original owner; and(ii) as a result, the expenditures became eligible R&D expenditures.(4) Subsections (1) and (2)(c) apply as if the references to the eligible person in those subsections included the original owner.(5) If, in addition to the subject intellectual property, an eligible R&D expenditure is also connected to other items of intellectual property (including other items of eligible intellectual property), the expenditure is to be apportioned between the subject intellectual property and those other items on a just and reasonable basis.(6) For the purposes of subsection (5), an expenditure is apportioned between the subject intellectual property and other items on a just and reasonable basis if the amount apportioned to the subject intellectual property represents the extent to which the expenditure was incurred in respect of the property. 14. Meaning of NE: non-eligible expenditure (1) Each of the following expenditures is, subject to subsections (2), (3), (4), (5) and (6), a non-eligible expenditure incurred in respect of the eligible intellectual property to which the eligible IP income relates (subject intellectual property)—(a) any expenditure (including capital expenditure) incurred by the eligible person during the specified period for obtaining the subject intellectual property or any right in respect of the property (whether by acquisition, licensing, amalgamating with another company or otherwise) from another person;(b) any expenditure (including capital expenditure) incurred by the eligible person during the specified period for an R&D activity that—(i) is connected to the subject intellectual property; and(ii) is carried out—(A) on behalf of the eligible person by an associated person of the eligible person that is a non-Hong Kong resident person; or(B) outside Hong Kong on behalf of the eligible person by an associated person of the eligible person that is a Hong Kong resident person.(2) The following expenditures are not to be regarded as non-eligible expenditures—(a) interest payments;(b) payments for any land or building, or for any alteration, addition or extension to any building.(3) Subsections (4) and (5) apply if—(a) the subject intellectual property or any right in respect of the property is or was vested in a company that is a Hong Kong resident person (original owner) (whether by acquisition, licensing, amalgamating with another person or otherwise);(b) the eligible person—(i) obtained the property or any right in respect of the property by amalgamating with the original owner; or(ii) acquired all equity interests in the original owner and subsequently acquired, or obtained a licence for, the property from the original owner; and(c) the original owner has sufficient records of the expenditures it incurred in respect of the property, so that the eligible person would still be able to comply with section 51C (as modified by section 22(2) and (3) of this Schedule) in respect of the expenditures even if—(i) the references to the eligible person in subsection (1) were regarded as including the original owner; and(ii) as a result, the expenditures became non-eligible expenditures.(4) Subsection (1) applies as if the references to the eligible person in that subsection included the original owner.(5) In calculating the total amount of non-eligible expenditures, the expenditure incurred by the eligible person during the specified period for obtaining the subject intellectual property or any right in respect of the property from the original owner is to be deducted.(6) If, in addition to the subject intellectual property, a non-eligible expenditure is also connected to other items of intellectual property (including other items of eligible intellectual property), the expenditure is to be apportioned between the subject intellectual property and those other items on a just and reasonable basis.(7) For the purposes of subsection (6), an expenditure is apportioned between the subject intellectual property and other items on a just and reasonable basis if the amount apportioned to the subject intellectual property represents the extent to which the expenditure was incurred in respect of the property. Part 4 Exception to Section 3 of this Schedule: Tax Treatments under Certain Circumstances and Conditions 15. Meaning of abandonment, cancellation, declination, lapse, unconditional revocation and withdrawal, etc. (1) In this Part, a reference to the abandonment, refusal, unconditional revocation or withdrawal of a patent or patent application is to be construed—(a) in relation to a patent granted, or a patent application made, under Cap. 514—in accordance with Cap. 514; and(b) in relation to a patent granted by, or a patent application filed with, a patent office of any place outside Hong Kong—in accordance with the law, instruments or rules of the relevant patent office, court or competent authority applicable to the abandonment, refusal, unconditional revocation or withdrawal of the patent or patent application.(2) In this Part, a reference to the cancellation, declination, lapse or withdrawal of a plant variety right or plant variety right application, or a reference to a plant variety right or plant variety right application being no longer in subsistence, is to be construed—(a) in relation to a plant variety right granted, or a plant variety right application made, under Cap. 490—in accordance with Cap. 490; and(b) in relation to a plant variety right granted, or a plant variety right application made, under the law of any place outside Hong Kong—in accordance with the law of that place applicable to the plant variety right or plant variety right application.(3) In subsection (2)—plant variety right (植物品種權利) means a right mentioned in section 9(a)(i) or (ii) of this Schedule;plant variety right application (植物品種權利申請) means an application mentioned in section 9(b)(i) or (ii) of this Schedule. 16. Tax treatment under certain circumstances (1) The tax treatment under subsection (2) applies for a year of assessment (relevant year) in relation to the concessionary portion of the assessable profits of an eligible person from an eligible IP income derived from an eligible intellectual property, in respect of which an election is made under section 4 of this Schedule, unless during the relevant year, none of the circumstances specified in section 17 of this Schedule occurs in relation to the eligible intellectual property.(2) The tax treatment is—(a) section 3 of this Schedule does not apply in relation to the eligible IP income derived from the eligible intellectual property for the relevant year and subsequent years of assessment;(b) all concessionary portions of the assessable profits from the eligible IP income subject to the concessionary tax rate under section 3 of this Schedule for the years of assessment preceding the relevant year (relevant concessionary portions) are to be regarded as trading receipts of the trade, profession or business of the eligible person for the relevant year; and(c) for the purpose of computing the tax payable on the trading receipts referred to in paragraph (b)—the assessor is to take into account the tax that has already been charged on the relevant concessionary portions at the concessionary tax rate under section 3 of this Schedule. 17. Circumstances for purposes of section 16 of this Schedule (1) For the purposes of section 16 of this Schedule, in relation to an eligible intellectual property that is an eligible patent, the circumstances are—(a) if the eligible patent is a patent—the eligible patent is unconditionally revoked; and(b) if the eligible patent is a patent application—the eligible patent is abandoned, refused or withdrawn.(2) For the purposes of section 16 of this Schedule, in relation to an eligible intellectual property that is an eligible plant variety right, the circumstances are—(a) if the eligible plant variety right is a right mentioned in section 9(a) of this Schedule—the eligible plant variety right is cancelled or no longer subsists; and(b) if the eligible plant variety right is an application mentioned in section 9(b) of this Schedule—the eligible plant variety right lapses, is declined or withdrawn or no longer subsists. 18. Tax treatment: eligible intellectual property with date of filing on or after specified date (1) This section applies in relation to the concessionary portion of the assessable profits of an eligible person from an eligible IP income derived from any of the following eligible intellectual property, in respect of which an election is made under section 4 of this Schedule, the date of filing of which is on or after the specified date—(a) an eligible patent;(b) an eligible plant variety right.(2) The tax treatment under subsection (3) applies in relation to the concessionary portion for a year of assessment (relevant year), unless during the relevant year, all the conditions specified in section 19 of this Schedule applicable to the eligible intellectual property have been met.(3) The tax treatment is—(a) section 3 of this Schedule does not apply in relation to the eligible IP income derived from the eligible intellectual property for the relevant year and subsequent years of assessment;(b) all concessionary portions of the assessable profits from the eligible IP income subject to the concessionary tax rate under section 3 of this Schedule for the years of assessment preceding the relevant year (relevant concessionary portions) are to be regarded as trading receipts of the trade, profession or business of the eligible person for the relevant year; and(c) for the purpose of computing the tax payable on the trading receipts referred to in paragraph (b)—the assessor is to take into account the tax that has already been charged on the relevant concessionary portions at the concessionary tax rate under section 3 of this Schedule. 19. Conditions for purposes of section 18 of this Schedule (1) For the purposes of section 18 of this Schedule, in relation to an eligible intellectual property that is an eligible patent, in respect of which an election is made under section 4 of this Schedule, the conditions are—(a) if the eligible patent is a short-term patent—a request for substantive examination of the eligible patent has been made in the year of assessment immediately following the year of assessment in which—(i) any election under section 4 of this Schedule is made in respect of the eligible patent; or(ii) the short-term patent is granted,whichever is the later; and(b) if the eligible patent is a patent granted by, or a patent application filed with, a patent office of any place outside Hong Kong—(i) if the corresponding local patent of the eligible patent is a standard patent (O)—the corresponding local patent has not been unconditionally revoked;(ii) if the corresponding local patent of the eligible patent is a short-term patent—(A) the corresponding local patent has not been unconditionally revoked; and(B) a request for substantive examination of the corresponding local patent has been made in the year of assessment immediately following the year of assessment in which—(I) any election under section 4 of this Schedule is made in respect of the eligible patent; or(II) the short-term patent is granted,whichever is the later; and(iii) if the corresponding local patent of the eligible patent is a standard patent (O) application or short-term patent application—the corresponding local patent, or any of its divisional patent applications, has not been abandoned, refused or withdrawn.(2) For the purposes of section 18 of this Schedule, in relation to an eligible intellectual property that is an eligible plant variety right mentioned in section 9(a)(ii) or (b)(ii) of this Schedule, in respect of which an election is made under section 4 of this Schedule, the conditions are—(a) if the corresponding local plant variety right of the eligible plant variety right is a grant as defined by section 2 of Cap. 490—the corresponding local plant variety right has not been cancelled; and(b) if the corresponding local plant variety right of the eligible plant variety right is an application as defined by section 2 of Cap. 490—(i) the corresponding local plant variety right has not been withdrawn and has not lapsed; and(ii) the Registrar of Plant Variety Rights has not declined to make a grant in respect of the corresponding local plant variety right. 20. Tax treatment for divisional patents (1) For the purposes of sections 5 and 16 of this Schedule, if—(a) an election has been made under section 4 of this Schedule in respect of an eligible patent that is a patent application (original patent application);(b) a divisional patent application has been made in pursuance of the original patent application;(c) the original patent application is abandoned, refused or withdrawn; and(d) a patent is granted in pursuance of the divisional patent application,section 16(2)(b) of this Schedule does not apply in relation to the part of the concessionary portion of the assessable profits derived from the original patent application attributable to the patent mentioned in paragraph (d) (relevant part).(2) For the purposes of subsection (1), the relevant part is to be calculated in the way that best secures consistency with the requirements and guidance in the OECD rules.(3) In subsection (2)—OECD rules (《經合組織規則》) has the meaning given by section 7(3) of this Schedule. 21. Notification by eligible person (1) This section applies if—(a) there is a notifiable matter in relation to an eligible intellectual property in respect of which an election is made under section 4 of this Schedule; and(b) the concessionary tax rate is applicable to the concessionary portion of the assessable profits of an eligible person from an eligible IP income derived from the eligible intellectual property for a year of assessment.(2) The eligible person must notify the Commissioner in writing of the notifiable matter within 4 months after the end of the basis period for the year of assessment in which the notifiable matter takes place, unless the eligible person has already been required to furnish a return under section 51(1).(3) In this section— notifiable matter (須具報事宜), in relation to an eligible intellectual property in respect of which an election is made under section 4 of this Schedule, means any of the following— (a) an occurrence of any of the circumstances specified in section 17 of this Schedule; (b) a failure to meet any of the conditions specified in section 19 of this Schedule. Part 5 Keeping of Records 22. Records to be kept (1) Section 51C applies, with the modifications specified in subsections (2) and (3), in relation to an eligible person who makes an election under section 4 of this Schedule that the concessionary tax rate is applicable to the concessionary portion of the assessable profits of the eligible person from an eligible IP income for a year of assessment.(2) The eligible person must retain records of transactions, acts or operations relating to the eligible IP income under section 51C at least until the later of the following—(a) the expiry of 7 years after the completion of those transactions, acts or operations; or(b) the expiry of 7 years after making the election mentioned in subsection (1).(3) The eligible person must keep records of the following, in addition to records within the meaning of section 51C(3) and (4)—(a) information sufficient to establish that the income concerned is an eligible IP income;(b) details of all corresponding expenditures incurred;(c) details of the eligible intellectual property to which the income relates;(d) if an apportionment is made under section 13(5) or 14(6) of this Schedule—information sufficient to establish that the apportionment is made on a just and reasonable basis.(4) To avoid doubt, the records mentioned in subsection (3) are records of transactions, acts or operations relating to the eligible IP income.(5) Section 80 applies to a failure to comply with section 51C as modified by subsections (2) and (3) in the same way as section 80 applies to a failure to comply with section 51C.(6) In this section— corresponding expenditures (相應開支), in relation to an eligible IP income, means all of the following expenditures— (a) eligible R&D expenditures incurred in respect of the eligible intellectual property to which the income relates; (b) non-eligible expenditures incurred in respect of the eligible intellectual property to which the income relates; (c) any other expenditures incurred in producing the income. 23. Transitional arrangement for eligible person with insufficient records (1) This section applies if—(a) an eligible IP income accrues to an eligible person during the period—(i) beginning on the first day of the eligible person’s basis period for the year of assessment beginning on 1 April 2023; and(ii) ending on the last day of the eligible person’s basis period for the year of assessment beginning on 1 April 2025; and(b) the eligible person is unable to ascertain the R&D fraction applicable to the income under Part 3 of this Schedule because there are insufficient records.(2) For ascertaining the R&D fraction and keeping records, the eligible person may elect that sections 13, 14 and 22 of this Schedule apply on the following basis—(a) the references to “specified period” in sections 13(1) and 14(1)(a) and (b) of this Schedule are to be regarded as references to the period of 3 years ending on the last day of the eligible person’s basis period for the year of assessment during which the eligible IP income accrues;(b) the references to “subject intellectual property” in sections 13(2)(c) and 14(1)(a) of this Schedule are to be regarded as references to any intellectual property as defined by section 15H(1);(c) the following provisions of this Schedule are to be omitted—(i) section 13(1)(a), (3), (4), (5) and (6);(ii) section 14(1)(b)(i), (3), (4), (5), (6) and (7);(iii) section 22(3)(d). Schedule 17G [ss. 15H, 50AAC & 58B & Sch. 44] (Amended 17 of 2022 s. 15)Meaning of Permanent Establishment in Hong Kong (Schedule 17G added 27 of 2018 s. 10) Part 1 Preliminary 1. Interpretation (1) An expression used in this Schedule, and defined or otherwise explained in Part 8AA, has the same meaning as in that Part.(2) In this Schedule—company (公司) means any body corporate or any entity that is treated as a body corporate for tax purposes. 2. Interpretation: closely related, closely related person and closely related enterprise (1) For the purposes of this Schedule, a person (person A) is closely related to another person (person B) if, based on all the relevant facts and circumstances—(a) person A has control of person B;(b) person B has control of person A; or(c) person A and person B are both under the control of the same other person or enterprise.(2) Also, a person (person A) is taken to be closely related to another person (person B) if—(a) person A possesses directly or indirectly more than the specified interest in person B;(b) person B possesses directly or indirectly more than the specified interest in person A; or(c) another person possesses directly or indirectly more than the specified interest in each of person A and person B.(3) In subsection (2)— specified interest (指明權益), in relation to a person, means— (a) 50% of the beneficial interest in the person; or (b) if the person is a company, 50% of the aggregate vote and value of the company’s shares or of the beneficial equity interest in the company. (4) A reference to closely related person or closely related enterprise is to be read accordingly. Part 2 Permanent Establishment of DTA Territory Resident Person 3. Permanent establishment of DTA territory resident person Whether a DTA territory resident person has a permanent establishment in Hong Kong is to be determined in accordance with the relevant provisions under the double taxation arrangements concerned. Part 3 Permanent Establishment of Non-DTA Territory Resident Person 4. Permanent establishment constituted by fixed place of business (1) Subject to sections 5, 6 and 7 of this Schedule, an enterprise that is a non-DTA territory resident person has a permanent establishment in Hong Kong if it has a fixed place of business in Hong Kong through which the business of the enterprise is wholly or partly carried on.(2) For the purpose of subsection (1), a fixed place of business includes, but is not limited to—(a) a place of management;(b) a branch;(c) an office;(d) a factory;(e) a workshop; and(f) a mine, an oil or gas well, a quarry or any other place of extraction of natural resources.(3) For the purpose of subsection (1), a building site or construction or installation project is a permanent establishment of an enterprise (subject enterprise) only if—(a) the subject enterprise has carried on activities at the site or project for a period of more than 12 months; or(b) all of the following apply—(i) the subject enterprise has carried on activities at the site or project for a period that exceeds, or 2 or more periods that in the aggregate exceed, 30 days;(ii) connected activities have been carried on at the site or project by one or more closely related enterprises of the subject enterprise for one or more different periods that each exceeds 30 days;(iii) all the periods referred to in subparagraphs (i) and (ii) in the aggregate exceed 12 months.(4) In determining whether different activities are connected for the purposes of subsection (3)(b)(ii), regard is to be had to the facts and circumstances of the case, including in particular—(a) whether the contracts covering the different activities were concluded with the same person or closely related persons;(b) whether the conclusion of additional contracts with a person is a logical consequence of a previous contract concluded with the person or closely related persons;(c) whether the activities would have been covered by a single contract absent tax planning considerations;(d) whether the nature of the work involved under the different contracts is the same or similar; and(e) whether the same employees are performing the activities under the different contracts. 5. Preparatory or auxiliary activities not constitute permanent establishment (1) This section applies subject to section 6 of this Schedule.(2) If the 1st or 2nd set of conditions are met in relation to an enterprise, the enterprise is not regarded under section 4(1) of this Schedule as having a permanent establishment in Hong Kong even if it has a fixed place of business in Hong Kong through which the business of the enterprise is carried on.(3) The 1st set of conditions are—(a) the activity carried on for the enterprise through the place consists solely of one of the following—(i) the use of facilities solely for the purpose of storage, display or delivery of goods or merchandize belonging to the enterprise;(ii) the maintenance of a stock of goods or merchandize belonging to the enterprise solely for the purpose of storage, display or delivery;(iii) the maintenance of a stock of goods or merchandize belonging to the enterprise solely for the purpose of processing by another enterprise;(iv) the maintenance of a fixed place of business solely for the purpose of purchasing goods or merchandize, or collecting information, for the enterprise;(v) the maintenance of a fixed place of business solely for the purpose of carrying on any other activity for the enterprise; and(b) in relation to the business of the enterprise as a whole, the activity is of a preparatory or auxiliary character.(4) The 2nd set of conditions are—(a) the activities carried on for the enterprise through the place consist solely of any combination of the activities mentioned in subsection (3)(a)(i), (ii), (iii), (iv) and (v); and(b) the overall activity of the place resulting from the combination of the activities is of a preparatory or auxiliary character. 6. Section 5(2) of this Schedule does not apply if certain activities constitute complementary functions Section 5(2) of this Schedule does not apply to an enterprise (subject enterprise) with a fixed place of business (place A) in Hong Kong if—(a) either or both of the following apply—(i) business activities at place A are carried on by a closely related enterprise of the subject enterprise;(ii) business activities are carried on at another place (place B) in Hong Kong by the subject enterprise or its closely related enterprise;(b) the business activities carried on at place A by the subject enterprise and those referred to in paragraph (a) constitute complementary functions that are part of a cohesive business operation; and(c) any one or more of the following apply—(i) place A would have constituted a permanent establishment for the subject enterprise but for section 5(2) of this Schedule;(ii) place A constitutes a permanent establishment for the closely related enterprise;(iii) place B constitutes a permanent establishment for the subject enterprise or the closely related enterprise;(iv) the overall activity resulting from the combination of the following is not of a preparatory or auxiliary character—(A) the business activities carried on at place A by the subject enterprise;(B) business activities referred to in paragraph (a). 7. Permanent establishment constituted by agent’s activities (1) Despite section 4(1) of this Schedule, an enterprise (the enterprise) that is a non-DTA territory resident person is taken to have a permanent establishment in Hong Kong in respect of any activities (the activities) that a person (the person) undertakes for the enterprise if—(a) the person is acting in Hong Kong on behalf of the enterprise and in doing so—(i) habitually concludes contracts; or(ii) habitually plays the principal role leading to the conclusion of contracts that are routinely concluded without material modification by the enterprise; and(b) the contracts are—(i) in the name of the enterprise;(ii) for the transfer of the ownership of, or for the granting of the right to use, property owned by the enterprise or that the enterprise has the right to use; or(iii) for the provision of services by the enterprise.(2) Subsection (1) does not apply if the activities of the person are limited to activities that, if exercised through a fixed place of business, would not make the fixed place of business a permanent establishment under section 4(1) of this Schedule, having regard to sections 5 and 6 of this Schedule.(3) Subsection (1) does not apply if the person—(a) carries on business in Hong Kong as an independent agent; and(b) acts for the enterprise in the ordinary course of that business.(4) A person is not an independent agent for the purposes of subsection (3) if the person acts exclusively, or almost exclusively, on behalf of one or more enterprises that are closely related to the person. 8. Company not constituted permanent establishment of another company (1) Even if—(a) a company (company A) controls or is controlled by another company (company B);(b) company A is resident for tax purposes in a non-DTA territory;(c) company B—(i) is resident for tax purposes in Hong Kong; or(ii) carries on business in Hong Kong (whether through a permanent establishment or otherwise),these matters do not of themselves constitute either company a permanent establishment of the other.(2) This section does not affect the operation of the other provisions of this Schedule. Schedule 17H [ss. 50AAP, 50AAV & 80 & Sch. 44]Advance Pricing Arrangement (Schedule 17H added 27 of 2018 s. 10) 1. Interpretation (1) An expression used in this Schedule, and defined or otherwise explained in Part 8AA, has the same meaning as in that Part.(2) In this Schedule—(a) application (申請) means an application for an advance pricing arrangement made under section 50AAP(1); and(b) applicant (申請人) means a person who makes an application. 2. Contents of application An application must include—(a) the details of the applicant and associated persons of the applicant involved in the transactions in respect of which the advance pricing arrangement is applied for;(b) the facts and documents relating to the applicant, the associated persons and the transactions;(c) the proposed methodology for determining the income or loss of the applicant;(d) the evidence showing that the proposed methodology can produce a result that complies with sections 50AAF and 50AAK (as applicable);(e) the period in respect of which an advance pricing arrangement is applied for; and(f) a draft advance pricing arrangement. 3. Information to be provided for purposes of application The applicant must provide further information in respect of an application if required by the Commissioner by notice. 4. Commissioner may appoint independent expert The Commissioner may appoint an independent expert to inquire into and report on any matters in relation to an application. 5. Withdrawal of application An applicant may withdraw an application by written notice to the Commissioner. 6. Reasons to be given for refusal If the Commissioner refuses to make an advance pricing arrangement, the Commissioner must give the applicant a written notice stating the decision and the reasons for the refusal. 7. Fees (1) The fees specified in subsection (9) and incurred in respect of an application are payable by the applicant.(2) The Commissioner may require that an applicant must pay a deposit of an amount determined by the Commissioner before the application is entertained.(3) When the application is determined, the Commissioner, on ascertaining the total amount of the fees payable, must apply the deposit already paid to settle the fees and—(a) if the amount of the deposit is less than the amount of the fees payable—the applicant must pay the balance; or(b) if the amount of the deposit exceeds the amount of the fees payable—the Commissioner must refund the surplus to the applicant.(4) Subject to subsections (5), (6) and (8), subsection (1) applies even if the application is refused or withdrawn.(5) If an application is withdrawn, the applicant is liable to pay all the fees specified in subsection (9) and incurred in respect of the application before the Commissioner receives notice of withdrawal given under section 5 of this Schedule.(6) In exceptional circumstances, the Commissioner may, at the Commissioner’s discretion, waive all or part of any fees payable in respect of an application.(7) Any fees due and payable in respect of an application are recoverable as a civil debt due to the Government.(8) In exceptional circumstances, the Commissioner may, at the Commissioner’s discretion, direct that all or part of any fees paid in respect of an application be refunded to the applicant if the Commissioner does not make an advance pricing arrangement.(9) The fees payable in respect of an application are—(a) subject to subsection (10), a service charge calculated on the basis of each hour (or any part of an hour) spent by— (i) a Deputy Commissioner $2,650 (ii) an Assistant Commissioner $2,240 (iii) a Chief Assessor $1,960 (iv) any other person appointed under this Ordinance; and $1,730 (b) payment or reimbursement of—(i) any fees paid by the Commissioner to any independent expert appointed under section 4 of this Schedule; and(ii) any costs and reasonable expenses incurred by the Commissioner in relation to the application.(10) The service charge payable under subsection (9)(a) in respect of an application must not exceed $500,000. Schedule 17I [s. 58C & Sch. 44]Master File and Local File: Thresholds and Prescribed Information (Schedule 17I added 27 of 2018 s. 18) Part 1 Interpretation 1. Except for accounting period and permanent establishment, an expression used in this Schedule, and defined or otherwise explained in Part 8AA or 9A, has the same meaning as in that Part. 2. In this Schedule—accounting period (會計期)—(a) in relation to a Hong Kong entity that is an enterprise—means the period with respect to which the enterprise’s financial statements are prepared; and(b) in relation to a Hong Kong entity that is a permanent establishment—means the period with respect to which the permanent establishment’s financial statements are prepared;advance pricing agreements and arrangements (預先定價協議及安排) means—(a) any advance pricing arrangements made under section 50AAP; and(b) any agreements, and any arrangements, that determine, in advance of controlled transactions, an appropriate set of criteria, such as method, comparables and appropriate adjustments thereto, critical assumptions as to future events, for the determination of the transfer pricing for those transactions over a fixed period of time;associated entity (有聯繫實體), in relation to an entity (subject entity) of a group in the extended sense, means—(a) if the subject entity is an enterprise—(i) another constituent entity of the group;(ii) an associated person of the subject entity; or(iii) a permanent establishment of an associated enterprise of the subject entity; or(b) if the subject entity forms part of an enterprise (subject enterprise)—(i) another constituent entity of the group;(ii) an associated person of the subject enterprise; or(iii) a permanent establishment of an associated enterprise of the subject enterprise;controlled transaction (受管交易), in relation to a Hong Kong entity of a group in the extended sense, means a transaction between the entity and its associated entity;corresponding accounting period (相應會計期), in relation to an accounting period of a Hong Kong entity of a group in the extended sense, means a period that meets the following 2 conditions—(a) either—(i) if the group is also a group in the usual sense—the period is one in respect of which the consolidated financial statements of the group are prepared; or(ii) if the group falls within paragraph (b) of the definition of group in the extended sense in section 58B(2)—the period is one in respect of which the financial statements of the single enterprise referred to in that paragraph are prepared;(b) either—(i) the period coincides with the accounting period of the entity; or(ii) the period ends within the accounting period of the entity;financial asset (財務資產) has the meaning given by section 50A(1);intangible (無形物) means something—(a) that is not a physical asset or a financial asset;(b) that is capable of being owned or controlled for use in commercial activities; and(c) whose use or transfer would have been compensated had it occurred in a transaction between independent persons in comparable circumstances;permanent establishment (常設機構) has the meaning given by section 58B(5);specified domestic transaction (指明本地交易) means a controlled transaction between a Hong Kong entity of a group in the extended sense and an associated entity of that Hong Kong entity if, in relation to the transaction—(a) subject to section 3 of this Schedule, either of the following conditions is met—(i) the transaction is undertaken in connection with each entity’s trade, profession or business carried on in Hong Kong; or(ii) both—(A) the transaction is undertaken in connection with either entity’s trade, profession or business carried on in Hong Kong; and(B) the other entity is resident for tax purposes in Hong Kong and the transaction is not undertaken in connection with that other entity’s trade, profession or business; and(b) either of the following conditions is also met—(i) each entity’s income arising from the transaction is chargeable to Hong Kong tax or each entity’s loss so arising is allowable for the purposes of Hong Kong tax; or(ii) the transaction relates to lending money otherwise than in the ordinary course of a business of lending money or an intra-group financing business (as defined by section 16(3));uncontrolled transaction (非受管交易), in relation to a Hong Kong entity of a group in the extended sense, means a transaction that is not a controlled transaction. 3. For the purposes of paragraph (a) of the definition of specified domestic transaction in section 2 of this Schedule, a trade, profession or business is not regarded as being carried on in Hong Kong by an entity only because a sum received or receivable by or accrued to the entity is deemed under section 15(1) to be a receipt arising in or derived from Hong Kong from a trade, profession or business carried on in Hong Kong. Part 2 Thresholds for Purposes of Section 58C 4. The thresholds specified for the purposes of section 58C(1) are— (a) total amount of revenue $400 million (b) total value of assets $300 million (c) average number of employees 100 5. The amounts of controlled transactions specified for the purposes of section 58C(4) are— (a) transfers of properties (whether movable or immovable but excluding financial assets and intangibles) $220 million (b) transactions in respect of financial assets $110 million (c) transfers of intangibles $110 million (d) other transactions $44 million Part 3 Prescribed Information Division 1 Local File 6. A local file prepared and retained by a Hong Kong entity (subject entity) of a group in the extended sense in respect of an accounting period of the subject entity (subject accounting period) must include the following information—(a) in relation to the subject entity—(i) a description of the management structure of the subject entity, an organization chart of the subject entity, and a description of the individuals to whom the subject entity’s management reports and the territory or territories in which the individuals maintain their principal offices;(ii) a detailed description of the business and business strategy pursued by the subject entity including an indication whether the subject entity has been involved in or affected by business restructurings or intangibles transfers in the subject accounting period of the subject entity or the subject entity’s accounting period immediately before it and an explanation of those aspects of such transactions affecting the subject entity; and(iii) a list of key competitors;(b) in relation to controlled transactions, the following information for each material category of controlled transactions—(i) a description of the material controlled transactions and the context in which the transactions took place;(ii) the amount of payments and receipts among the subject entity and its associated entities for each category of controlled transactions broken down by tax jurisdictions of the payers or recipients;(iii) an identification of the subject entity’s associated entities involved in each category of controlled transactions, and the relationship among them;(iv) copies of all material agreements concluded by the subject entity with any of its associated entities;(v) a detailed comparability and functional analysis of the subject entity and the relevant associated entities with respect to each documented category of controlled transactions, including any changes compared to the accounting periods before the subject accounting period;(vi) an indication of the most appropriate transfer pricing method with regard to the category of transaction and the reasons for selecting that method;(vii) an indication of which associated entity is selected as the tested party, if applicable, and an explanation of the reasons for this selection;(viii) a summary of the important assumptions made in applying the transfer pricing methodology;(ix) if applicable, an explanation of the reasons for performing a multi-year analysis;(x) a list and description of the selected comparable uncontrolled transactions (internal or external), if any, and information on the financial indicators that are relied on in the transfer pricing analysis, including a description of the comparable search methodology and the source of such information;(xi) a description of any comparability adjustments performed, and an indication of whether adjustments have been made to the results of the tested party, the comparable uncontrolled transactions, or both;(xii) a description of the reasons for concluding that the controlled transactions were priced on an arm’s length basis based on the application of the selected transfer pricing method;(xiii) a summary of financial information used in applying the transfer pricing methodology; and(xiv) a copy of existing unilateral, bilateral and multilateral advance pricing agreements and arrangements and other tax rulings that are related to the controlled transactions;(c) in relation to financial information—(i) the subject entity’s audited financial statements for the subject accounting period or, if no audited financial statements exist, the subject entity’s existing unaudited statements for the subject accounting period;(ii) information and allocation schedules showing how the financial data used in applying the transfer pricing method may be tied to the financial statements; and(iii) summary schedules of the financial data relating to the comparables used in the analysis and the sources from which that data was obtained. Division 2 Master File 7.

A master file to be prepared and retained, by a Hong Kong entity (subject entity) of a group in the extended sense (together with a local file in respect of an accounting period of the subject entity) must include the following information—(a) in relation to organizational structure—a chart illustrating—(i) the group’s legal and ownership structure; and(ii) (if the group is a multinational enterprise group) geographical location of constituent entities of the group;(b) in relation to description of group’s business—a general written description of the group’s business including—(i) important drivers of business profits;(ii) a description of the supply chain for the group’s 5 largest products or service offerings by turnover and for any other products or services amounting to more than 5% of group turnover;(iii) a list and brief description of important service arrangements (other than those relating to research and development services) between constituent entities of the group, including a description of the capabilities of the principal locations providing the services and transfer pricing policies for allocating services costs and determining prices to be paid for the services;(iv) a description of the main geographic markets for the group’s products and services that are referred to in subparagraph (ii);(v) a brief written functional analysis describing the principal contributions to value creation (including key functions performed, important risks assumed, and important assets used) by individual constituent entities within the group; and(vi) a description of important business restructuring transactions, acquisitions and divestitures occurring during the corresponding accounting period of the group;(c) in relation to the group’s intangibles—(i) a general description of the group’s overall strategy for the development, ownership and exploitation of intangibles, including location of principal research and development facilities and location of research and development management;(ii) a list of intangibles or categories of intangibles of the group that are important for transfer pricing purposes, identifying which constituent entities of the group legally own or effectively control the intangibles;(iii) a list of important agreements among the group’s constituent entities related to intangibles, including cost contribution arrangements, principal research service agreements and licence agreements;(iv) a general description of the group’s transfer pricing policies related to research and development and intangibles; and(v) a general description of any important transfers of interests in or control of intangibles among the group’s constituent entities during the group’s corresponding accounting period, including the constituent entities, territories, and compensation involved;(d) in relation to the financial activities between constituent entities of the group—(i) a general description of how the group is financed, including important financing arrangements with unrelated lenders;(ii) the identification of any constituent entity (financing entity) of the group that provides a central financing function for the group, including the territory under whose laws the financing entity is organized and the place of effective management of the financing entity; and(iii) a general description of the group’s general transfer pricing policies related to financing arrangements among the group’s constituent entities; and(e) in relation to the group’s financial and tax positions—(i) the group’s consolidated financial statements for the corresponding accounting period ; and(ii) a list and brief description of the group’s existing unilateral advance pricing agreements and arrangements and other tax rulings relating to the allocation of income among territories. Schedule 17J [s. 40AM & Schs. 57 & 58] (Amended 5 of 2024 s. 23)Qualifying Amalgamations—Special Tax Treatment (Schedule 17J added 18 of 2021 s. 4) 1. Interpretation (1) In this Schedule—commercial building or structure (商業建築物或構築物) has the meaning given by section 40(1);industrial building or structure (工業建築物或構築物) has the meaning given by section 40(1);R&D activity (研發活動)—see section 2 of Schedule 45;R&D expenditure (研發開支)—see section 6 of Schedule 45;specified event (指明事件)—see section 40AP;trading stock (營業存貨), in relation to a trade or business, means anything that is—(a) held for sale in the ordinary course of the trade or business;(b) in the production process for the sale; or(c) in the form of materials or supplies to be consumed in the production process or rendering of services.(2) The following expressions have the same meaning in this Schedule as in section 40AE—(a) amalgamated company;(b) amalgamating company;(c) body corporate;(d) company;(e) date of amalgamation;(f) qualifying amalgamation;(g) year of cessation. 2. Application of Schedule 17J This Schedule applies in relation to a qualifying amalgamation—(a) that takes effect on or after the date of commencement* of the Inland Revenue (Amendment) (Miscellaneous Provisions) Ordinance 2021 (18 of 2021); and(b) for which an election has been made under section 40AM(1). Editorial Note: * Commencement date: 11 June 2021. 3. Succession of business and asset etc. (1) Despite section 40AG, the trade, profession or business carried on by each amalgamating company in a qualifying amalgamation in Hong Kong immediately before the date of amalgamation is, unless the Commissioner is notified otherwise, treated as being carried on by the amalgamated company in Hong Kong beginning on the date of amalgamation.(2) If the amalgamated company succeeds to any asset (excluding any trading stock) of an amalgamating company on the amalgamation—(a) subject to section 4 of this Schedule, any asset on revenue account of the amalgamating company is treated as an asset on revenue account of the amalgamated company; and(b) subject to section 5 of this Schedule, any asset on capital account of the amalgamating company is treated as an asset on capital account of the amalgamated company.(3) In relation to each asset referred to in subsection (2), the amalgamated company is treated as—(a) having acquired the asset—(i) on the date on which the amalgamating company acquired the asset; and(ii) for an amount that was incurred by the amalgamating company for acquiring the asset; and(b) having been charged to tax on all such profits, or allowed all such deductions, in connection with the asset, as charged on, or allowed to, the amalgamating company. 4. Reclassification of asset from revenue account to capital account on amalgamation (1) This section applies if any asset on revenue account of an amalgamating company in a qualifying amalgamation becomes an asset on capital account of the amalgamated company on the amalgamation.(2) The amalgamating company is deemed to have sold the asset to the amalgamated company immediately before the date of amalgamation for a consideration equal to the amount that the asset would have been realized had it been sold in the open market on the date of amalgamation.(3) The amalgamated company is deemed to have purchased the asset from the amalgamating company immediately before the date of amalgamation for a consideration equal to the amount referred to in subsection (2).(4) Any profit arising from the deemed sale under subsection (2) is to be brought into account for the purpose of computing the chargeable profits of the amalgamating company for its year of cessation. 5. Reclassification of asset from capital account to revenue account on amalgamation (1) This section applies if any asset on capital account of an amalgamating company in a qualifying amalgamation becomes an asset on revenue account of the amalgamated company on the amalgamation.(2) The amount that the amalgamated company would have incurred, had the asset been purchased in the open market on the date of amalgamation, is taken as the cost of the asset to the amalgamated company for the purpose of computing the profits of the amalgamated company chargeable to tax under Part 4.(3) The amalgamating company is deemed to have sold the asset to the amalgamated company immediately before the date of amalgamation for a consideration equal to the amount referred to in subsection (2). 6. Succession of trading stock (1) This section applies if—(a) the amalgamated company in a qualifying amalgamation succeeds to any trading stock of a trade or business carried on by an amalgamating company in Hong Kong on the amalgamation; and(b) the amalgamated company uses the trading stock as its trading stock for carrying on a trade or business in Hong Kong.(2) Section 15C does not apply to the amalgamating company.(3) Subject to section 7 of this Schedule, if the trading stock is accounted for in the financial account of the amalgamated company at a value equal to the carrying amount of the trading stock of the amalgamating company immediately before the date of amalgamation, the amalgamated company is deemed to have purchased the trading stock on the amalgamation for a consideration equal to that value.(4) Also, subject to section 7 of this Schedule, any unrealized gain or loss in respect of the trading stock that has not been brought into account in ascertaining the chargeable profits of the amalgamating company—(a) is treated as an unrealized gain or loss of the amalgamated company in respect of the trading stock; and(b) is to be brought into account in ascertaining the chargeable profits of the amalgamated company—(i) when it is realized; or(ii) in accordance with the tax treatment applicable to the amalgamated company. 7. Trading stock accounted for in financial account of amalgamated company at different value (1) This section applies if the trading stock mentioned in section 6 of this Schedule is accounted for in the financial account of the amalgamated company at a value other than the carrying amount of the trading stock of the amalgamating company immediately before the date of amalgamation.(2) The amalgamating company is deemed to have sold the trading stock to the amalgamated company immediately before the date of amalgamation for a consideration equal to the value as reflected in the financial account of the amalgamated company on the date of amalgamation.(3) The amalgamated company is deemed to have purchased the trading stock from the amalgamating company immediately before the date of amalgamation for a consideration equal to the value as reflected in the financial account of the amalgamated company on the date of amalgamation.(4) Any profit arising from the deemed sale under subsection (2) is to be brought into account for the purpose of computing the chargeable profits of the amalgamating company for its year of cessation. 8. Amalgamating company’s trading stock not used by amalgamated company as trading stock (1) This section applies if—(a) the amalgamated company in a qualifying amalgamation succeeds to any trading stock of a trade or business carried on by an amalgamating company in Hong Kong (relevant stock) on the amalgamation; and(b) the amalgamated company does not use the relevant stock as its trading stock for carrying on a trade or business in Hong Kong.(2) Section 15C applies to the amalgamating company.(3) The relevant stock is to be valued in accordance with section 15C(b) for the purpose of computing the profits of the amalgamating company chargeable to tax under Part 4 for its year of cessation.(4) The amalgamated company is deemed to have purchased the relevant stock for a consideration equal to the value referred to in subsection (3). 9. Effect of cancellation of shares of amalgamating company (1) This section applies if in a qualifying amalgamation, an amalgamating company (first company) holds shares of another amalgamating company (second company).(2) The first company is deemed to have sold the shares of the second company immediately before the date of amalgamation for an amount equal to the cost incurred by the first company for acquiring the shares.(3) If—(a) the first company has borrowed money to acquire shares of the second company; and(b) the liability arising from the money borrowed is transferred to, and becomes the liability of, the amalgamated company,subject to subsection (4), no deduction is to be allowed for any interest or other borrowing costs incurred by the amalgamated company on or after the date of amalgamation on the liability (incurred costs).(4) The incurred costs are allowable for deduction—(a) if the shares of the second company are held by the first company on revenue account; and(b) to the extent that they are incurred in the production of profits for which the amalgamated company is chargeable to tax under Part 4. 9A. Succession of aircraft (1) This section applies to—(a) a company that is an amalgamated company in a qualifying amalgamation (Company A); and(b) a company that is an amalgamating company in the qualifying amalgamation (Company B).(2) Sections 14I, 14IA, 14IB, 14IC, 14ID, 14IE, 14IF, 14IG, 14IH, 14II, 14IJ and 14IK do not apply to Company B in relation to any aircraft succeeded by Company A in the qualifying amalgamation (specified aircraft).(3) Sections 14I, 14IA, 14IB, 14IC, 14ID, 14IE, 14IF, 14IG, 14IH, 14II, 14IJ and 14IK with the modifications set out in Part 2 of Schedule 57, have effect in relation to Company A and a specified aircraft.(4) In this section—aircraft (飛機) has the meaning given by section 14G.(Added 5 of 2024 s. 23) 10. Succession of machinery or plant, or rights or entitlement to rights, related to R&D activities (1) This section applies if—(a) the amalgamated company in a qualifying amalgamation succeeds to—(i) any machinery or plant used for; or(ii) any rights or entitlement to any rights generated from,R&D activities of an amalgamating company on the amalgamation; and(b) a deduction for the related R&D expenditure has been allowed to the amalgamating company under section 16B(2).(2) Section 16B(5) does not apply to the amalgamating company because of the succession.(3) If a situation mentioned in section 16(1) or 17(1) of Schedule 45 arises, or a specified event occurs, in respect of the machinery or plant, or the rights or entitlement to the rights, on or after the date of amalgamation, section 16B(5) applies to the amalgamated company as it would have applied to the amalgamating company had the circumstances specified in subsection (4) occurred.(4) The circumstances are—(a) that the amalgamating company had continued to own the machinery or plant, or the rights or entitlement to the rights; and(b) that the amalgamating company had done all such things in connection with owning the machinery or plant, or the rights or entitlement to the rights, as were done by the amalgamated company. 11. Succession of patent rights etc. (1) This section applies if—(a) the amalgamated company in a qualifying amalgamation succeeds to any patent rights (as defined by section 16E(4)), or rights to any know-how (as defined by that section), of an amalgamating company on the amalgamation; and(b) a deduction for the capital expenditure incurred on the purchase of the rights has been allowed to the amalgamating company under section 16E(1).(2) Section 16E(3) does not apply to the amalgamating company because of the succession.(3) If a situation mentioned in section 16E(3) arises, or a specified event occurs, in respect of the rights on or after the date of amalgamation, that section applies to the amalgamated company as it would have applied to the amalgamating company had the circumstances specified in subsection (4) occurred.(4) The circumstances are—(a) that the amalgamating company had continued to own the rights; and(b) that the amalgamating company had done all such things in connection with owning the rights as were done by the amalgamated company. 12. Succession of specified intellectual property rights (1) This section applies if the amalgamated company in a qualifying amalgamation succeeds to any specified intellectual property rights (as defined by section 16EA(11)) of an amalgamating company on the amalgamation.(2) Subject to subsection (4), any balance of deduction allowable under section 16EA(2) in respect of the rights is to be allowed to the amalgamated company for a year of assessment as it would have been allowed to the amalgamating company for that year of assessment had the circumstances specified in subsection (3) occurred.(3) The circumstances specified for the purposes of subsection (2) are—(a) that the amalgamating company had continued to own the rights; and(b) that the amalgamating company had done all such things in connection with owning the rights as were done by the amalgamated company.(4) If the amalgamating company is eligible to claim a deduction under section 16EA(2) for its year of cessation, no deduction under that section is to be allowed to the amalgamated company for the same year of assessment.(5) Section 16EB(2) does not apply to the amalgamating company because of the succession.(6) If a situation mentioned in section 16EB(2) arises, or a specified event occurs, in respect of the rights on or after the date of amalgamation, that section applies to the amalgamated company as it would have applied to the amalgamating company had the circumstances specified in subsection (7) occurred.(7) The circumstances specified for the purposes of subsection (6) are—(a) that the amalgamating company had continued to own the rights; and(b) that the amalgamating company had done all such things in connection with owning the rights as were done by the amalgamated company.(8) However, if any deduction under subsection (2) has been allowed to the amalgamated company, the circumstances specified in subsection (7) for the purposes of subsection (6) would then be—(a) that the amalgamating company had continued to own the rights;(b) that the amalgamating company had done all such things in connection with owning the rights as were done by the amalgamated company; and(c) that the amalgamating company had continued to be allowed all such deductions in connection with owning the rights as were allowed to the amalgamated company. 13. Succession of refurbished buildings or structures (1) This section applies if—(a) the amalgamated company in a qualifying amalgamation succeeds to an amalgamating company’s interest in any renovation or refurbishment of a building or structure (as defined by section 16F(5)) on the amalgamation; and(b) a deduction for the capital expenditure incurred on the renovation or refurbishment has been allowed to the amalgamating company under section 16F(1).(2) Subject to subsection (4), any balance of deduction allowable under section 16F(1) in respect of the expenditure is to be allowed to the amalgamated company.(3) However, no deduction is to be allowed to the amalgamated company for a year of assessment unless the deduction would have been allowed to the amalgamating company for that year of assessment but for the amalgamation.(4) If the amalgamating company is eligible to claim a deduction under section 16F(1) for its year of cessation, no deduction under that section is to be allowed to the amalgamated company for the same year of assessment. 14. Succession of prescribed fixed assets (1) This section applies if—(a) the amalgamated company in a qualifying amalgamation succeeds to any prescribed fixed assets (as defined by section 16G(6)) of an amalgamating company on the amalgamation; and(b) a deduction for the specified capital expenditure (as defined by section 16G(6)) incurred on the provision of the assets has been allowed to the amalgamating company under section 16G(1).(2) Section 16G(3) does not apply to the amalgamating company because of the succession.(3) If a situation mentioned in section 16G(3) arises, or a specified event occurs, in respect of the assets on or after the date of amalgamation, that section applies to the amalgamated company as it would have applied to the amalgamating company had the circumstances specified in subsection (4) occurred.(4) The circumstances are—(a) that the amalgamating company had continued to own the assets; and(b) that the amalgamating company had done all such things in connection with owning the assets as were done by the amalgamated company. 15. Succession of environmental protection facilities (1) This section applies if—(a) the amalgamated company in a qualifying amalgamation succeeds to any environmental protection facilities (as defined by section 16H(1)) of an amalgamating company on the amalgamation; and(b) a deduction for the specified capital expenditure (as defined by section 16H(1)) in relation to the facilities has been allowed to the amalgamating company under section 16I(2), (3), (3A), (3B) or (4).(2) Section 16J(2), (2A), (3), (3A), (5), (5A) and (5B) does not apply to the amalgamating company because of the succession.(3) If a situation mentioned in section 16J(2), (2A), (3), (3A), (5), (5A) or (5B) arises, or a specified event occurs, in respect of the facilities on or after the date of amalgamation, section 16J applies to the amalgamated company as it would have applied to the amalgamating company had the circumstances specified in subsection (4) occurred.(4) The circumstances are—(a) that the amalgamating company had continued to own the facilities; and(b) that the amalgamating company had done all such things in connection with owning the facilities as were done by the amalgamated company. 16. Succession of commercial or industrial buildings or structures—initial and annual allowances (1) This section applies if—(a) the amalgamated company in a qualifying amalgamation succeeds to an amalgamating company’s interest in any commercial building or structure, or in any industrial building or structure, on the amalgamation; and(b) the interest is the relevant interest (as defined by section 40(1)) in relation to the capital expenditure (as defined by that section) incurred on the construction of the building or structure.(2) If—(a) an initial allowance has been made to the amalgamating company in relation to the capital expenditure incurred on the construction of the building or structure under section 34(1); and(b) the building or structure has not been used before the date of amalgamation,paragraph (b) of the proviso to section 34(1) does not apply to the amalgamating company because of the succession.(3) If the building or structure has not been used before the date of amalgamation, and when it first comes to be used, it is not an industrial building or structure—(a) paragraph (b) of the proviso to section 34(1) does not apply in relation to the initial allowance made to the amalgamating company; and(b) a sum equal to the amount of the initial allowance made to the amalgamating company is deemed to be a trading receipt—(i) arising in, or derived from, Hong Kong of a trade, profession or business carried on by the amalgamated company in Hong Kong; and(ii) accruing on the date of amalgamation.(4) Despite section 34(1), no initial allowance is to be made to the amalgamated company because of the succession.(5) The annual allowances under section 33A or 34(2) are, subject to subsection (7), to be made to the amalgamated company for a year of assessment as they would have been made to the amalgamating company for that year of assessment had the circumstances specified in subsection (6) occurred.(6) The circumstances are—(a) that the amalgamating company had continued to be entitled to the relevant interest in relation to the capital expenditure incurred on the construction of the building or structure; and(b) that the amalgamating company had done all such things in connection with the entitlement to the relevant interest as were done by the amalgamated company.(7) If the amalgamating company is eligible to claim an annual allowance under section 33A or 34(2) for its year of cessation, no annual allowance under that section is to be made to the amalgamated company for the same year of assessment. 17. Succession of commercial or industrial buildings or structures—balancing allowances and charges (1) This section applies if—(a) the amalgamated company in a qualifying amalgamation succeeds to an amalgamating company’s interest in any commercial building or structure, or in any industrial building or structure, on the amalgamation; and(b) the interest is the relevant interest (as defined by section 40(1)) in relation to the capital expenditure (as defined by that section) incurred on the construction of the building or structure.(2) Section 35 does not apply to the amalgamating company because of the succession.(3) If an event mentioned in section 35(1)(a) or a specified event occurs in respect of the relevant interest on or after the date of amalgamation, any balancing allowance or balancing charge under section 35 in respect of the relevant interest is to be made to the amalgamated company as it would have been made to the amalgamating company had the circumstances specified in subsection (4) occurred.(4) The circumstances specified for the purposes of subsection (3) are—(a) that the amalgamating company had continued to be entitled to the relevant interest in relation to the capital expenditure incurred on the construction of the building or structure; and(b) that the amalgamating company had done all such things in connection with the entitlement to the relevant interest as were done by the amalgamated company.(5) However, if any allowance under section 16(5) of this Schedule has been made to the amalgamated company, the circumstances specified in subsection (4) for the purposes of subsection (3) would then be—(a) that the amalgamating company had continued to be entitled to the relevant interest in relation to the capital expenditure incurred on the construction of the building or structure;(b) that the amalgamating company had done all such things in connection with the entitlement to the relevant interest as were done by the amalgamated company; and(c) that the amalgamating company had continued to be made all such allowances in connection with the entitlement of the relevant interest as were made to the amalgamated company. 18. Succession of machinery or plant not related to R&D activities—annual allowances (1) This section applies if the amalgamated company in a qualifying amalgamation succeeds to any machinery or plant not related to R&D activities of an amalgamating company on the amalgamation.(2) Despite sections 37(1), 37A(1) and 39B(1), no initial allowance is to be made to the amalgamated company because of the succession.(3) Despite sections 37(4) and 39B(7), the annual allowances under section 37(2), 37A(2) or 39B(2) are, subject to subsection (6), to be made to the amalgamated company for a year of assessment as they would have been made to the amalgamating company for that year of assessment had the circumstances specified in subsection (4) occurred.(4) The circumstances specified for the purposes of subsection (3) are—(a) that the amalgamating company had continued to own the machinery or plant; and(b) that the amalgamating company had done all such things in connection with owning the machinery or plant as were done by the amalgamated company.(5) However, if any annual allowance in respect of the machinery or plant has been made to the amalgamated company for the previous years of assessment, the circumstances specified in subsection (4) for the purposes of subsection (3) would then be—(a) that the amalgamating company had continued to own the machinery or plant;(b) that the amalgamating company had done all such things in connection with owning the machinery or plant as were done by the amalgamated company; and(c) that the amalgamating company had been made all such allowances in connection with owning the machinery or plant as were made to the amalgamated company for the previous years of assessment.(6) If the amalgamating company is eligible to claim an annual allowance under section 37(2), 37A(2) or 39B(2) for its year of cessation, no annual allowance under that section is to be made to the amalgamated company for the same year of assessment. 19. Succession of machinery or plant not related to R&D activities—balancing allowances and charges (1) This section applies if the amalgamated company in a qualifying amalgamation succeeds to any machinery or plant not related to R&D activities of an amalgamating company on the amalgamation.(2) Sections 38 and 39D do not apply to the amalgamating company because of the succession.(3) If an event mentioned in section 38(1) or a specified event occurs in respect of the machinery or plant on or after the date of amalgamation, section 38 applies to the amalgamated company as it would have applied to the amalgamating company had the circumstances specified in subsection (5) occurred.(4) If a situation mentioned in section 39D arises, or a specified event occurs, in respect of the machinery or plant on or after the date of amalgamation, that section applies to the amalgamated company as it would have applied to the amalgamating company had the circumstances specified in subsection (5) occurred.(5) The circumstances specified for the purposes of subsections (3) and (4) are—(a) that the amalgamating company had continued to own the machinery or plant; and(b) that the amalgamating company had done all such things in connection with owning the machinery or plant as were done by the amalgamated company.(6) However, if any annual allowance in respect of the machinery or plant has been made to the amalgamated company, the circumstances specified in subsection (5) for the purposes of subsections (3) and (4) would then be—(a) that the amalgamating company had continued to own the machinery or plant;(b) that the amalgamating company had done all such things in connection with owning the machinery or plant as were done by the amalgamated company; and(c) that the amalgamating company had continued to be made all such allowances in connection with owning the machinery or plant as were made to the amalgamated company. 20. Deduction of special payment under recognized retirement scheme (1) This section applies if—(a) an amalgamating company in a qualifying amalgamation has made a payment to a recognized retirement scheme; and(b) a deduction in respect of the payment has been allowed to the amalgamating company under section 16A.(2) Subject to subsection (4), any balance of deduction allowable under section 16A(1) in respect of the payment is to be allowed to the amalgamated company.(3) However, no deduction is to be allowed to the amalgamated company for a year of assessment unless the deduction would have been allowed to the amalgamating company for that year of assessment but for the amalgamation.(4) If the amalgamating company is eligible to claim a deduction under section 16A(1) for its year of cessation, no deduction under that section is to be allowed to the amalgamated company for the same year of assessment. 21. Deduction for bad debts, impairment losses, expenditure or losses (1) This section applies if at any time after a qualifying amalgamation, the amalgamated company—(a) writes off as bad or doubtful the amount of a debt, or recognizes an impairment loss in respect of a credit-impaired debt, to which the amalgamated company succeeds from an amalgamating company on the amalgamation; or(b) incurs an amount of expenditure or loss as a result of an act, or a failure to act, of an amalgamating company on the amalgamation.(2) A deduction is to be allowed to the amalgamated company for the amount of the debt, impairment loss, expenditure or loss (whichever is applicable) if—(a) the amalgamating company would have been allowed the deduction but for the amalgamation; and(b) the amalgamated company is not otherwise allowed the deduction. 22. Amount of debt recovered or impairment loss reversed treated as trading receipt (1) This section applies if at any time after a qualifying amalgamation, the amalgamated company—(a) recovers any amount of a debt; or(b) reverses any amount of impairment loss of a debt,that has been deducted under section 16(1)(d) or 18K(3) in ascertaining the profits of an amalgamating company in the amalgamation chargeable to tax under Part 4.(2) The amount of a debt recovered, or the amount of impairment loss reversed, is, if the condition specified in subsection (3) is met, treated as a trading receipt—(a) arising in, or derived from, Hong Kong of a trade, profession or business carried on by the amalgamated company in Hong Kong; and(b) accruing on the date of recovery or reversal.(3) The condition is that the amount would have been treated as the amalgamating company’s trading receipt chargeable to tax under Part 4 but for the amalgamation. 23. Release of debt (1) This section applies if any amount of a debt owed by an amalgamating company in a qualifying amalgamation in the course of carrying on a trade, profession or business in Hong Kong before the date of amalgamation is released at any time on or after that date.(2) The amount released is, if the condition specified in subsection (3) is met, deemed to be a trading receipt—(a) arising in, or derived from, Hong Kong of a trade, profession or business carried on by the amalgamated company in Hong Kong; and(b) accruing at the time when the release was effected.(3) The condition is that the amount would have been deemed to be the amalgamating company’s trading receipt chargeable to tax under Part 4 but for the amalgamation. 24. Treatment of pre-amalgamation losses of amalgamating companies (1) This section applies if an amalgamating company in a qualifying amalgamation has any pre-amalgamation loss.(2) Except as provided for in subsection (3), a pre-amalgamation loss of the amalgamating company cannot be—(a) carried forward to the amalgamated company; or(b) set off against the assessable profits of the amalgamated company.(3) Subject to subsections (4) and (5), sections 19C, 19CAB, 19CAC, 19CB, 19CD, 19CE, 19CF and 19CG apply in relation to any qualifying loss of the amalgamating company as if the amalgamated company were the amalgamating company for the purposes of— (Amended 17 of 2024 s. 13)(a) carrying forward the qualifying loss; and(b) setting off against the assessable profits of the amalgamated company.(4) Any set off mentioned in subsection (3)(b) can only be made against—(a) the assessable profits of the amalgamated company derived from the same trade, profession or business—(i) that was carried on by the amalgamating company immediately before the date of amalgamation; and(ii) that is succeeded by the amalgamated company; or(b) the amalgamated company’s share of assessable profits of a partnership through succession to the amalgamating company’s interest in the partnership.(5) However, no set off mentioned in subsection (3)(b) can be made unless the amalgamated company proves to the satisfaction of the Commissioner—(a) that there are good commercial reasons for carrying out the qualifying amalgamation; and(b) that avoidance of tax is not the main purpose, or one of the main purposes, of carrying out the qualifying amalgamation.(6) In this section—pre-amalgamation loss (合併前虧損), in relation to an amalgamating company in a qualifying amalgamation, means—(a) any loss—(i) that is sustained in a trade, profession or business carried on by the amalgamating company before the date of amalgamation; and(ii) that is not set off under section 19C, 19CAB, 19CAC, 19CB, 19CD, 19CE, 19CF or 19CG; or(b) the amalgamating company’s share of loss—(i) that is incurred in a trade, profession or business carried on by the amalgamating company in a partnership with another person before the date of amalgamation; and(ii) that is not set off under section 19C, 19CAB, 19CAC, 19CB, 19CD, 19CE, 19CF or 19CG; (Amended 17 of 2024 s. 13)qualifying loss (合資格虧損), in relation to an amalgamating company and the amalgamated company in a qualifying amalgamation, means such part of a pre-amalgamation loss of the amalgamating company that was incurred at any time after the amalgamating company and the amalgamated company entered into a qualifying relationship.(7) For the purposes of the definition of qualifying loss in subsection (6), 2 companies have a qualifying relationship if—(a) one of the companies is a wholly owned subsidiary of the other company; or(b) both companies are wholly owned subsidiaries of a body corporate. 25. Treatment of pre-amalgamation losses of amalgamated companies (1) This section applies if the amalgamated company in a qualifying amalgamation has any pre-amalgamation loss.(2) Subject to subsections (3) and (4), sections 19C, 19CAB, 19CAC, 19CB, 19CD, 19CE, 19CF and 19CG apply in relation to a pre-amalgamation loss of the amalgamated company. (Amended 17 of 2024 s. 13)(3) In relation to an amalgamating company in the qualifying amalgamation, except as provided for in subsection (4), a pre-amalgamation loss of the amalgamated company cannot be used to set off against—(a) the assessable profits of the amalgamated company derived from the same trade, profession or business—(i) that was carried on by the amalgamating company immediately before the date of amalgamation; and(ii) that is succeeded by the amalgamated company; or(b) the amalgamated company’s share of assessable profits of a partnership through succession to the amalgamating company’s interest in the partnership.(4) Subsection (3) does not apply to the qualifying loss of the amalgamated company if all of the following conditions are met—(a) the trade continuation condition specified in section 26(1) of this Schedule;(b) the financial resources condition specified in section 26(2) of this Schedule;(c) the Commissioner’s satisfaction condition specified in section 26(3) of this Schedule.(5) In this section—pre-amalgamation loss (合併前虧損), in relation to an amalgamated company in a qualifying amalgamation, means—(a) any loss—(i) that is sustained in a trade, profession or business carried on by the amalgamated company before the date of amalgamation; and(ii) that is not set off under section 19C, 19CAB, 19CAC, 19CB, 19CD, 19CE, 19CF or 19CG; or(b) the amalgamated company’s share of loss—(i) that is incurred in a trade, profession or business carried on by the amalgamated company in partnership with another person before the date of amalgamation; and(ii) that is not set off under section 19C, 19CAB, 19CAC, 19CB, 19CD, 19CE, 19CF or 19CG; (Amended 17 of 2024 s. 13)qualifying loss (合資格虧損), in relation to the amalgamated company and an amalgamating company in a qualifying amalgamation, means such part of a pre-amalgamation loss of the amalgamated company that was incurred at any time after the amalgamated company and the amalgamating company entered into a qualifying relationship.(6) For the purposes of the definition of qualifying loss in subsection (5), 2 companies have a qualifying relationship if—(a) one of the companies is a wholly owned subsidiary of the other company; or(b) both companies are wholly owned subsidiaries of a body corporate. 26. Conditions for purposes of section 25(4) of this Schedule (1) For the purposes of section 25(4)(a) of this Schedule, the trade continuation condition is—(a) that the amalgamated company has continued to carry on a trade, profession or business since the qualifying loss was incurred up to the date of amalgamation; and(b) if the qualifying loss was a share of loss incurred in a trade, profession or business carried on by the amalgamated company in partnership with another person—that the partnership has continued to carry on a trade, profession or business since the qualifying loss was incurred up to the date of amalgamation.(2) For the purposes of section 25(4)(b) of this Schedule, the financial resources condition is that the amalgamated company has adequate financial resources (excluding any loan from an associated corporation of the amalgamated company) immediately before the date of amalgamation to purchase, other than through amalgamation—(a) the trade, profession or business carried on by the amalgamating company immediately before the date of amalgamation; and(b) the amalgamating company’s interest in any partnership in which the amalgamating company was a partner immediately before the date of amalgamation.(3) For the purposes of section 25(4)(c) of this Schedule, the Commissioner’s satisfaction condition is that the amalgamated company proves to the satisfaction of the Commissioner—(a) that there are good commercial reasons for carrying out the qualifying amalgamation; and(b) that avoidance of tax is not the main purpose, or one of the main purposes, of carrying out the qualifying amalgamation.(4) In this section—associated corporation (相聯法團), in relation to an amalgamated company in a qualifying amalgamation, has the meaning in relation to a corporation given by section 14C(1);qualifying loss (合資格虧損) has the meaning given by section 25(5) of this Schedule. 27. Election for basis for ascertainment of profits and concessionary tax rate treatment etc. (1) This section applies if—(a) an amalgamating company in a qualifying amalgamation has, in carrying on a trade, profession or business in Hong Kong before the date of amalgamation, made an irrevocable election under a provision of this Ordinance for the purpose of—(i) ascertaining the profits derived from the trade, profession or business in respect of which the amalgamating company is chargeable to tax under Part 4;(ii) applying the rate specified in one of the concession provisions (as defined by section 19CA) to the assessable profits (or part of the assessable profits) of the amalgamating company derived from the trade, profession or business; or(iii) furnishing a return under section 50C as a reporting financial institution (as defined by section 50A(1)); and(b) the amalgamated company continues to carry on the trade, profession or business of the amalgamating company on or after the date of amalgamation.(2) The amalgamated company is treated as if it had made the same irrevocable election for the purpose of—(a) ascertaining the profits derived from the trade, profession or business mentioned in subsection (1)(a)(i) in respect of which the amalgamated company is chargeable to tax under Part 4;(b) applying the rate specified in one of the concession provisions (as defined by section 19CA) to the assessable profits (or part of the assessable profits) of the amalgamated company derived from the trade, profession or business mentioned in subsection (1)(a)(ii); or(c) furnishing a return under section 50C as a reporting financial institution (as defined by section 50A(1)).(3) Despite subsection (2), the election ceases to have effect if the conditions for the election in the relevant provisions are not met by the amalgamated company at any time after the amalgamation. 28. Income accrued or derived after date of amalgamation (1) This section applies if—(a) a sum is accrued to, or derived by, the amalgamated company in a qualifying amalgamation; or(b) a sum (that would have been deemed to be an income of an amalgamating company in the amalgamation chargeable to tax under Part 4 but for the amalgamation) is accrued to, or derived by, a person,as a result of a certain thing that the amalgamating company did, or did not do, before the date of amalgamation.(2) If the condition specified in subsection (3) is met, the sum is deemed to be a trading receipt arising in, or derived from, Hong Kong of a trade, profession or business carried on by the amalgamated company in Hong Kong.(3) The condition is that the sum would have been a trading receipt (or would have been deemed to be a trading receipt) of the amalgamating company chargeable to tax under Part 4 but for the amalgamation. 29. Refund from approved retirement scheme after date of amalgamation (1) This section applies if, in ascertaining the assessable profits of an amalgamating company in a qualifying amalgamation, deductions have been allowed for—(a) contributions paid as an employer to a recognized occupational retirement scheme; or(b) voluntary contributions paid as an employer to a mandatory provident fund scheme.(2) If the condition specified in subsection (3) is met, any refund of the contributions or voluntary contributions (whichever is applicable) received by, or accrued to, the amalgamated company on or after the date of amalgamation is deemed to be a trading receipt arising in, or derived from, Hong Kong of a trade, profession or business carried on by the amalgamated company in Hong Kong.(3) The condition is that the refund would have been deemed to be the amalgamating company’s trading receipt chargeable to tax under Part 4 but for the amalgamation. Schedule 17K [s. 40AX]Disposal Gain by Holder of Qualifying Equity Interests (Schedule 17K added 33 of 2023 s. 4) Part 1 Preliminary 1. Interpretation (1) In this Schedule—closely related entity (密切相關實體)—see section 2 of this Schedule; construction (建造)— (a) means—(i) any building operation, or demolition and rebuilding operation, in, on, over or under any land for the purpose of erecting a building or part of a building; or(ii) any alteration or addition to, or partial demolition and rebuilding of, a building or part of a building,that requires the consent of the Building Authority under section 14(1) of the Buildings Ordinance (Cap. 123) or, if carried out in a territory outside Hong Kong, of a similar supervisory authority of that territory; but (b) does not include works for the renovation or refurbishment, of a building or part of a building, with a view to maintaining the commercial value of the building or part; disposal (處置), in relation to equity interests, means a transfer of the interests (other than a transfer effected by extinguishing the interests) for valuable consideration; entity (實體) means— (a) a legal person (other than a natural person); or (b) an arrangement that prepares separate financial accounts, such as a partnership and a trust; equity holding conditions (股權持有條件) means the equity holding conditions referred to in section 5(2) of this Schedule;equity interest (股權權益)—see subsection (2); immovable property (不動產)— (a) means—(i) land (whether covered by water or not);(ii) any estate, right, interest or easement in or over any land; and(iii) things attached to land or permanently fastened to anything attached to land; but (b) does not include infrastructure;

infrastructure (基礎設施) means any publicly or privately owned facility providing or distributing services for the benefit of the public, and includes any water, sewage, energy, fuel, transportation or communication facility;investee entity (獲投資實體)—see section 5(1) of this Schedule;investee entity’s relevant basis period (獲投資實體的有關評稅基期), in relation to a disposal of equity interests in an investee entity, means the basis period of the investee entity for the year of assessment in which the disposal occurs;investor entity (投資者實體)—see section 5(1) of this Schedule;property development (物業發展) means construction or causing the construction of any building or part of a building, and includes acquisition of any land or building or part of a building for such construction and sale of any building or part of a building after such construction;property trading (物業交易)—see subsection (4);qualifying interests (合資格權益)—see subsection (3);reference period (參考期間), in relation to a disposal of equity interests, means the continuous period of 24 months immediately before the date of the disposal.(2) In this Schedule, a reference to an equity interest in an entity is a reference to an interest that carries rights to the profits, capital or reserves of the entity where the interest is accounted for as equity, in the books of the entity, under applicable accounting principles.(3) In this Schedule, equity interests in an investee entity constitute qualifying interests in the investee entity if the interests, in aggregate, entitle the holder of the interests to at least a 15% share in the profits, capital or reserves of the investee entity.(4) For the purposes of this Schedule, an entity carries on a business of property trading if it carries on a business of acquisition and sale of immovable properties, situated in Hong Kong or elsewhere, unless the acquisition and sale of immovable properties is incidental to the undertaking of any property development by the entity. 2. Meaning of closely related entity (1) For the purposes of this Schedule, an entity is a closely related entity of another entity if—(a) one of them has control over the other; or(b) both of them are under the control of the same entity.(2) For the purposes of subsection (1), an entity (entity A) has control over another entity (entity B) if—(a) entity A has more than 50% of direct or indirect beneficial interest in, or in relation to, entity B; or(b) entity A is directly or indirectly entitled to exercise, or control the exercise of, more than 50% of voting rights in, or in relation to, entity B. 3. Meaning and extent of direct and indirect beneficial interest and voting rights (1) In applying section 2(2) of this Schedule, if an entity (entity A) has a direct beneficial interest in another entity (entity B), the extent of the beneficial interest of entity A in entity B is—(a) if entity B is a corporation that is not a trustee of a trust estate—the percentage of the issued share capital (however described) of the corporation held by entity A;(b) if entity B is a partnership that is not a trustee of a trust estate—the percentage of the income of the partnership to which entity A is entitled;(c) if entity B is a trustee of a trust estate—the percentage in value of the trust estate in which entity A is interested; or(d) if entity B is an entity that does not fall within any of paragraphs (a), (b) and (c)—the percentage of entity A’s ownership interest in the entity.(2) In applying section 2(2) of this Schedule, if entity A has an indirect beneficial interest in, or is indirectly entitled to exercise or control the exercise of voting rights in, entity B through another entity (interposed entity), the extent of the beneficial interest or voting rights of entity A in entity B is—(a) if there is only one interposed entity—the percentage arrived at by multiplying the percentage representing the extent of the beneficial interest or voting rights of entity A in the interposed entity by the percentage representing the extent of the beneficial interest or voting rights of the interposed entity in entity B; or(b) if there is a series of 2 or more interposed entities—the percentage arrived at by multiplying the percentage representing the extent of the beneficial interest or voting rights of entity A in the first interposed entity in the series by—(i) the percentage representing the extent of the beneficial interest or voting rights of each interposed entity (other than the last interposed entity) in the series in the next interposed entity in the series; and(ii) the percentage representing the extent of the beneficial interest or voting rights of the last interposed entity in the series in entity B.(3) For the purposes of subsection (2)—(a) subsection (1) applies in determining the extent of the beneficial interest of entity A in an interposed entity as if the references to entity B in subsection (1) were references to an interposed entity;(b) subsection (1) applies in determining the extent of the beneficial interest of an interposed entity in entity B as if the references to entity A in subsection (1) were references to an interposed entity; and(c) subsection (1) applies in determining the extent of the beneficial interest of an interposed entity (interposed entity X) in another interposed entity (interposed entity Y) as if—(i) the references to entity A in subsection (1) were references to interposed entity X; and(ii) the references to entity B in subsection (1) were references to interposed entity Y.(4) In applying section 2(2)(b) of this Schedule, the voting rights attributed to entity A include all the voting rights of persons other than entity A so far as they are required, or may be required, to be exercised in one or more of the following ways—(a) on behalf of entity A;(b) under the direction of entity A;(c) for the benefit of entity A.(5) For the purposes of this section and section 2(2)(b) of this Schedule, if—(a) a reference is made to the exercise of the voting rights in an entity; and(b) the entity is a corporation,the reference is to be read as a reference to the exercise of the voting rights at general meetings of the entity. 4. Application of Schedule 17K This Schedule applies to a gain or profit derived from a disposal of equity interests if—(a) the disposal occurs on or after 1 January 2024; and(b) the gain or profit accrues in the basis period for a year of assessment beginning on or after 1 April 2023. Part 2 Basic Provisions 5. Gain on disposal of equity interests regarded as capital in nature if equity holding conditions met (1) Subject to subsections (2) and (5) and sections 7, 8, 9 and 10 of this Schedule, any gain or profit (disposal gain), arising in or derived from Hong Kong, that an entity (investor entity) derives from a disposal (subject disposal) of equity interests (subject interests) in another entity (investee entity)—(a) is to be regarded as arising from the sale of capital assets; and(b) is not chargeable to profits tax under section 14.(2) Subject to section 6 of this Schedule, subsection (1) does not apply to the subject disposal of the subject interests unless the equity holding conditions are met for the subject disposal of the subject interests in the manner specified in subsection (3) or (4).(3) The equity holding conditions are met for the subject disposal of the subject interests if—(a) the investor entity has held the subject interests throughout the reference period in relation to the subject disposal of the subject interests; and(b) the subject interests by themselves, or together with certain other equity interests in the investee entity also having been held by the investor entity throughout the reference period, constitute qualifying interests in the investee entity.(4) Alternatively, the equity holding conditions are met for the subject disposal of the subject interests if—(a) the investor entity has held the subject interests throughout the reference period in relation to the subject disposal of the subject interests, with or without also having held certain other equity interests in the investee entity throughout the reference period;(b) one or more entities—(i) each has been the investor entity’s closely related entity throughout the reference period; and(ii) each has held certain equity interests in the investee entity throughout the reference period; and(c) the equity interests referred to in paragraphs (a) and (b), in aggregate, constitute qualifying interests in the investee entity.(5) Subsection (1) does not apply to an investor entity unless it elects in writing that the subsection applies to it. 6. Exception to equity holding conditions: long-held left-overs from section 5(2) disposal (1) Even if the equity holding conditions are not met for a subject disposal by an investor entity of subject interests in an investee entity referred to in section 5(1) of this Schedule, section 5(2) of this Schedule does not prevent section 5(1) of this Schedule from applying to the subject disposal of the subject interests if—(a) the subject disposal of the subject interests is a disposal of long-held left-overs from a section 5(2) disposal, that is to say—(i) before the subject disposal of the subject interests, other equity interests in the investee entity (earlier disposed interests) were disposed of by the investor entity (earlier disposal);(ii) the earlier disposal of the earlier disposed interests was a section 5(2) disposal; and(iii) the equity holding conditions were met for the earlier disposal of the earlier disposed interests on the basis (among other things) that the subject interests—(A) had been held by the investor entity throughout the reference period in relation to the earlier disposal of the earlier disposed interests; and(B) constituted a part of the qualifying interests in the investee entity in relation to the earlier disposal of the earlier disposed interests; and(b) the subject disposal of the subject interests occurs within 24 months after the section 5(2) disposal.(2) In this section—section 5(2) disposal (第5(2)條處置) means a disposal of equity interests to which section 5(1) of this Schedule applies on the basis that the equity holding conditions are met for that disposal of those interests within the meaning of section 5(2) of this Schedule. 7. Provisions supplementary to sections 5 and 6 of this Schedule (1) Any specified foreign-sourced income (as defined by section 15H(1)) is not gain or profit arising in or derived from Hong Kong for the purposes of section 5(1) of this Schedule (even if the specified foreign-sourced income is regarded under section 15I(1) as a receipt arising in or derived from Hong Kong).(2) For the purposes of sections 5 and 6 of this Schedule, equity interests in an investee entity held by an investor entity or a closely related entity of an investor entity (holding entity) that—(a) are of the same class and carry the same rights; but(b) were acquired by the holding entity on different occasions,are taken to be disposed of by the holding entity in the order in which they were acquired (that is, on a first-in-first-out basis).(3) For the purposes of sections 5 and 6 of this Schedule, an investor entity or a closely related entity of an investor entity is treated as the holder of the equity interests in an investee entity during the borrowing period when the legal interest in the equity interests has been transferred by the investor entity or the closely related entity (as the case requires) to another entity under a stock borrowing and lending agreement.(4) In subsection (3)—borrowing period (借用期間) has the meaning given by section 15E(8);stock borrowing and lending agreement (證券借用及借出協議) has the meaning given by section 19(16) of the Stamp Duty Ordinance (Cap. 117).(5) For the purposes of the definitions of borrowing period and stock borrowing and lending agreement in subsection (4)—(a) recognized exchange company (認可交易所) has the meaning given by section 2(1) of the Stamp Duty Ordinance (Cap. 117); and(b) the following expressions have the meanings given by section 19(16) of the Stamp Duty Ordinance (Cap. 117)— borrowed stock (被借用證券); borrower (借用人); lender (借出人); recognized clearing house (認可結算所); rules (規章); sale or purchase (售賣或購買); stock borrowing (證券借用); stock return (證券交還); but (c) a reference to Hong Kong stock in the definitions of borrowed stock, borrower, lender and stock borrowing referred to in paragraph (b) is to be construed as a reference to equity interest as defined by section 1(1) of this Schedule. Part 3 Equity Interests to which Section 5(1) of this Schedule does not Apply 8. No application to equity interests disposed of by insurer Section 5(1) of this Schedule does not apply to a disposal of any equity interests by an investor entity in the basis period for a year of assessment of the investor entity if Subdivision 1 of Division 11 of Part 4 applies to the ascertainment of the investor entity’s assessable profits for the year of assessment. 9. No application to equity interests regarded as trading stock (1) Any equity interests (firstly mentioned interests) held by an entity that are regarded as trading stock for any period are to be disregarded for the purposes of sections 5 and 6 of this Schedule, to the extent of that period (disregarded period), and accordingly—(a) no part of the disregarded period may be counted as a period during which the firstly mentioned interests are held by the entity for the purposes of sections 5 and 6 of this Schedule;(b) section 5(1) of this Schedule does not apply to a disposal of the firstly mentioned interests if any part of the disregarded period coincides with any part of the reference period in relation to the disposal of the firstly mentioned interests; and(c) the firstly mentioned interests must not be counted towards constituting the qualifying interests in the investee entity concerned in relation to a disposal of any equity interests by the entity (or by another entity of which the entity is a closely related entity) if any part of the disregarded period coincides with any part of the reference period in relation to the disposal of those equity interests.(2) For the purposes of this section, equity interests (specified equity interests) held by an entity (holding entity) are to be regarded as trading stock—(a) from the first day of the basis period for a year of assessment if any profit, gain or loss in respect of the specified equity interests has been brought into account for tax purposes for the year of assessment;(b) from the first day of the basis period for a year of assessment if—(i) the specified equity interests and other equity interests were acquired by the holding entity on the same occasion; and(ii) any profit, gain or loss in respect of any of the other equity interests (not arising from a disposal) has been brought into account for tax purposes for the year of assessment; or(c) from a day (that day) if—(i) the specified equity interests and other equity interests were acquired by the holding entity on the same occasion; and(ii) any profit, gain or loss arising from a disposal, on that day, of any of the other equity interests has been brought into account for tax purposes for a year of assessment.(3) Any equity interests regarded as trading stock under subsection (2) cease to be regarded as such if—(a) the equity interests are appropriated for a non-trade purpose; and(b) the holding entity has the amount that the appropriated equity interests would have realized, if sold in the open market on the date of the appropriation, brought into account as a receipt in accordance with section 15BA(2).(4) In this section, a reference to a period for which any equity interests are regarded as trading stock is a reference to a period—(a) beginning on the day from which the equity interests are regarded as trading stock under subsection (2); and(b) ending on the day on which the equity interests cease to be regarded as trading stock under subsection (3).(5) For the purposes of subsection (2), a sum has been brought into account for tax purposes for a year of assessment if the sum has been brought into account for computing the holding entity’s assessable profits or losses for the basis period for the year of assessment under—(a) an assessment made on the holding entity that has become final and conclusive under section 70; or(b) a computation of losses issued in respect of the holding entity. 10. No application to non-listed equity interests in property-related entities (1) Section 5(1) of this Schedule does not apply to a disposal of any equity interests in an investee entity (specified disposal) if—(a) the equity interests are not listed or traded on a stock exchange in Hong Kong or elsewhere at the time of the specified disposal; and(b) the investee entity is an excluded entity under subsection (2), (3) or (5).(2) The investee entity is an excluded entity under this subsection if it carries on a business of property trading in the investee entity’s relevant basis period.(3) Where the investee entity is not an excluded entity under subsection (2), the investee entity is an excluded entity under this subsection if it undertakes or has undertaken property development, in Hong Kong or elsewhere, in or before the investee entity’s relevant basis period.(4) However, an investee entity does not become an excluded entity under subsection (3) if—(a) the investee entity has not undertaken property development, whether in Hong Kong or elsewhere, for at least a continuous period of 60 months before the specified disposal;(b) in the investee entity’s relevant basis period, the immovable properties held by the investee entity are used by it to carry on its trade or business, including used by it to carry on a business of letting immovable properties; and(c) in the investee entity’s relevant basis period, none of the immovable properties held by the investee entity is for sale.(5) Where—(a) the investee entity is not an excluded entity under subsection (2); and(b) the investee entity is not an excluded entity under subsection (3) and this is not because of the operation of subsection (4),the investee entity is an excluded entity under this subsection if the investee entity holds any immovable properties, in Hong Kong or elsewhere, in the investee entity’s relevant basis period, and the investee entity’s immovable property holding (as calculated under section 11 of this Schedule) in that basis period exceeds 50%. 11. Calculation of immovable property holding (1) For determining, in relation to a disposal of equity interests in an investee entity (specified disposal), whether the investee entity is an excluded entity under section 10(5) of this Schedule, the investee entity’s immovable property holding in the investee entity’s relevant basis period is to be calculated in accordance with the following formula— A × 100% B where: A means the aggregate of the following— (a) the value of any specified immovable property of the investee entity; (b) the value of any direct or indirect beneficial interest, or any direct or indirect voting rights, of the investee entity in another entity to the extent to which the value is attributable to any specified immovable property of the other entity; B means the total value of the investee entity’s assets. (2) For the purposes of subsection (1), the value of a direct or indirect beneficial interest, or direct or indirect voting rights, of the investee entity in another entity that is attributable to any specified immovable property of the other entity is the value arrived at by multiplying—(a) the percentage representing the extent of the direct or indirect beneficial interest, or direct or indirect voting rights, of the investee entity in the other entity; by(b) the value of the specified immovable property.(3) For the purposes of this section, each of the following (each a specified item’s value)—(a) the value of any specified immovable property of the investee entity or another entity;(b) the value of any direct or indirect beneficial interest, or any direct or indirect voting rights, of the investee entity;(c) the total value of the investee entity’s assets,is to be calculated in accordance with the following formula— C + D 2 where: C means the specified item’s value as at the beginning of the investee entity’s relevant basis period; D means the specified item’s value as at— (a) the end of the investee entity’s relevant basis period; or (b) the time of the specified disposal. (4) In this section, a reference to any direct or indirect voting rights of an investee entity in another entity is a reference to any voting rights in the other entity that the investee entity is directly or indirectly entitled to exercise, or the exercise of which the investee entity is directly or indirectly entitled to control.(5) Section 3 of this Schedule applies for the purposes of this section as it applies for the purposes of section 2(2) of this Schedule.(6) In this section—specified immovable property (指明不動產), in relation to an entity, means any immovable property, in Hong Kong or elsewhere, that is directly held by the entity, other than any immovable property used by the entity to carry on its trade or business.(7) In subsection (6), a reference to any immovable property being used by an entity to carry on its trade or business—(a) subject to paragraph (b), includes any immovable property being used by the entity to carry on a business of letting immovable properties; and(b) excludes any immovable property for sale. Part 4 Application of Section 5(1) of this Schedule: Mixture of Equity Interests 12. Equity interests only partly eligible to be regarded as capital in nature (1) If equity interests in an investee entity, consisting partly of eligible interests and partly of ineligible interests, are disposed of by an investor entity on an occasion, section 5(1) of this Schedule applies to the disposal to the extent of the eligible interests.(2) In relation to a disposal of equity interests in an investee entity by an investor entity on an occasion—(a) an equity interest so disposed of is an eligible interest if, had it been the only equity interest disposed of on the occasion, section 5(1) of this Schedule would have applied to the disposal; and(b) an equity interest so disposed of is an ineligible interest if, had it been the only equity interest disposed of on the occasion, section 5(1) of this Schedule would not have applied to the disposal. Schedule 17L [ss. 23, 23AAA, 23AAAC, 23AA & 40AZA & Sch. 45]Tax Treatment for Re-domiciled Company (Schedule 17L added 14 of 2025 s. 154) Part 1 Preliminary 1. Interpretation In this Schedule—Cap. 41 (《第41章》) means the Insurance Ordinance (Cap. 41);Cap. 622 (《第622章》) means the Companies Ordinance (Cap. 622);critical basis period (關鍵評稅基期), in relation to a corporation that is a re-domiciled insurer, means the basis period of the corporation in which the critical date falls;critical date (關鍵日), in relation to a corporation that is a re-domiciled insurer, means the date on which the corporation becomes such an insurer under section 3BA or 3BB of Cap. 41;critical year (關鍵年度), in relation to a corporation that is a re-domiciled insurer, means the year of assessment to which its critical basis period relates;designated insurer (指定保險人) has the meaning given by section 2(1) of Cap. 41;life insurance business (人壽保險業務) has the meaning given by section 22D;life insurance fund (人壽保險基金) has the meaning given by section 22D;non-HK insurer (非香港保險人) has the meaning given by section 2(1) of Cap. 41;non-life long term insurance business (非人壽長期保險業務) has the meaning given by section 22D;non-life long term insurance fund (非人壽長期保險基金) has the meaning given by section 22D;place of incorporation (成立地), in relation to a re-domiciled company, has the meaning given by section 820A of Cap. 622;re-domiciled insurer (經遷冊保險人) has the meaning given by section 3BA or 3BB of Cap. 41;re-domiciliation date (遷冊日) has the meaning given by section 820A of Cap. 622;re-domiciliation year (遷冊年度), in relation to a re-domiciled company, means the year of assessment in which the re-domiciliation date falls;report (報告) has the meaning given by section 22D. Part 2 Provisions Relating to Part 4 2. Provisions regarding expense or expenditure incurred before re-domiciliation date—supplementary provisions for ascertaining profits chargeable to tax under Part 4 (1) Without affecting Division 4 of Part 4, in ascertaining the profits in respect of which a re-domiciled company is chargeable to tax under Part 4, any expense or expenditure incurred by the re-domiciled company before the re-domiciliation date in producing the profits is allowed to be deducted if—(a) no deduction or relief is allowable in respect of the expense or expenditure for tax under Part 4; and(b) no deduction or relief has been allowed in respect of the expense or expenditure for a similar tax imposed under the law of a place outside Hong Kong.(2) In this section—similar tax (類似稅項) means a tax of substantially the same nature as tax imposed under Part 4. 3. Provisions regarding cost of trading stock acquired before re-domiciliation date—supplementary provisions for ascertaining profits chargeable to tax under Part 4 (1) This section applies to a re-domiciled company if—(a) the re-domiciled company—(i) has, before the re-domiciliation date, acquired any trading stock for a trade or business carried on outside Hong Kong by the company; but(ii) has not carried on in Hong Kong, before that date, the trade or business; and(b) the trading stock—(i) was not used, before the re-domiciliation date, for any other Hong Kong business; but(ii) is used by the company, on or after that date, for a Hong Kong business.(2) Without affecting sections 15BA and 15C, and subject to subsection (3), in ascertaining the profits in respect of which the re-domiciled company is chargeable to tax under Part 4, the cost of the trading stock is—(a) the cost incurred by the company in acquiring the trading stock; or(b) the net realizable value of the trading stock on the re-domiciliation date,whichever is the lower.(3) If the amount under subsection (2)(a) (relevant amount) and that under subsection (2)(b) are the same, the cost of the trading stock is the relevant amount.(4) In this section—Hong Kong business (香港業務), in relation to a re-domiciled company, means a trade or business carried on in Hong Kong by the re-domiciled company;trading stock (營業存貨) has the meaning given by section 15BA(1). 4. Provisions regarding expenditure incurred on registration of intellectual property rights or building refurbishment—supplementary provisions for sections 16(1)(g) and 16F (1) This section applies to a re-domiciled company if—(a) the re-domiciled company—(i) has, before the re-domiciliation date, incurred any specified expenditure on asset or right (specified expenditure) in relation to a trade, profession or business carried on outside Hong Kong by the company; but(ii) has not carried on in Hong Kong, before that date, the trade, profession or business;(b) section 2(1)(a) and (b) of this Schedule is satisfied in relation to the specified expenditure; and(c) the asset or right to which the specified expenditure relates—(i) was not used, before the re-domiciliation date, for any other Hong Kong business; but(ii) is used by the company, on or after that date, for a Hong Kong business.(2) For the purposes of section 16(1)(g) or 16F (as the case requires), the specified expenditure incurred by the re-domiciled company before the re-domiciliation date is taken to have been incurred by the company in the basis period for the relevant year of assessment.(3) In this section— asset or right (資產或權利) means— (a) a trade mark or design; (b) a patent or plant variety right; or (c) a building or structure within the meaning of section 16F; Hong Kong business (香港業務), in relation to a re-domiciled company, means a trade, profession or business carried on in Hong Kong by the re-domiciled company; relevant year of assessment (相關課稅年度), in relation to a re-domiciled company— (a) if the re-domiciled company uses the asset or right for any Hong Kong business in the re-domiciliation year—means the re-domiciliation year; and (b) in any other case—means the year of assessment in which the company begins to use the asset or right for any Hong Kong business; specified expenditure on asset or right (在資產或權利方面的指明開支) means— (a) a sum expended for the registration of a trade mark or design; (b) a sum expended for the registration or grant of a patent or plant variety right; or (c) any capital expenditure on the renovation or refurbishment of a building or structure to which section 16F applies. 5. Provisions regarding expenditure in relation to R&D activity—supplementary provisions for section 16B (1) This section applies to a re-domiciled company if—(a) the re-domiciled company—(i) has, before the re-domiciliation date, incurred any R&D expenditure in relation to a trade, profession or business carried on outside Hong Kong by the company; but(ii) has not carried on in Hong Kong, before the re-domiciliation date, the trade, profession or business;(b) section 2(1)(a) and (b) of this Schedule is satisfied in relation to the R&D expenditure;(c) before the re-domiciliation date, the R&D activity to which the R&D expenditure relates (relevant activity) was not an R&D activity related to any other Hong Kong business; and(d) on or after the re-domiciliation date, the relevant activity becomes, or becomes also, an R&D activity related to a Hong Kong business.(2) For the purposes of section 16B, the R&D expenditure incurred by the re-domiciled company before the re-domiciliation date is taken to have been incurred by the company in the basis period for the relevant year of assessment.(3) In this section—Hong Kong business (香港業務), in relation to a re-domiciled company, means a trade, profession or business carried on in Hong Kong by the re-domiciled company; R&D activity (研發活動)— (a) has the meaning given by section 2 of Schedule 45; and (b) includes—(i) an R&D activity related to a trade, profession or business; and(ii) an R&D activity related to a class of trade, profession or business; R&D activity related to a class of trade, profession or business (關乎某類行業、專業或業務的研發活動) has the same meaning as in section 3(2) of Schedule 45;R&D activity related to a trade, profession or business (關乎某行業、專業或業務的研發活動) has the same meaning as in section 3(1) of Schedule 45;R&D expenditure (研發開支) has the meaning given by section 6 of Schedule 45; relevant year of assessment (相關課稅年度), in relation to a re-domiciled company— (a) if, in the re-domiciliation year, the relevant activity becomes, or becomes also, an R&D activity related to a Hong Kong business—means the re-domiciliation year; and (b) in any other case—means the year of assessment in which the relevant activity first becomes, or first becomes also, an R&D activity related to a Hong Kong business. (4) For the purposes of this section, a reference to a trade, profession or business includes a class of a trade, profession or business. 6. Provisions regarding expenditure incurred on purchase of patent rights etc. or on provision of prescribed fixed assets or environmental protection facilities—supplementary provisions for sections 16E, 16EA, 16G and 16I (1) This section applies to a re-domiciled company if—(a) the re-domiciled company—(i) has, before the re-domiciliation date, incurred any specified expenditure on asset or right (specified expenditure) in relation to a trade, profession or business carried on outside Hong Kong by the company; but(ii) has not carried on in Hong Kong, before the re-domiciliation date, the trade, profession or business;(b) section 2(1)(a) and (b) of this Schedule is satisfied in relation to the specified expenditure; and(c) the asset or right to which the specified expenditure relates (specified asset or right)—(i) was not used, before the re-domiciliation date, for any other Hong Kong business; but(ii) is used by the company, on or after that date, for a Hong Kong business.(2) Subsections (3) and (4) apply in relation to the specified asset or right for the purposes of section 16E, 16EA, 16G or 16I (as the case requires).(3) The specified expenditure is taken to have been incurred by the re-domiciled company in the basis period for the relevant year of assessment.(4) The total amount of the specified expenditure is—(a) the amount determined in accordance with subparagraph (i) or the amount mentioned in subparagraph (ii), whichever is the lower—(i) the aggregate of the actual amount of the specified expenditure minus the accumulated amortization and impairment losses in respect of the specified asset or right up to the re-domiciliation date;(ii) the amount of the market value of the specified asset or right as at the re-domiciliation date; or(b) if the amount determined in accordance with paragraph (a)(i) (relevant amount) and the amount mentioned in paragraph (a)(ii) are the same—the relevant amount.(5) In this section—Hong Kong business (香港業務), in relation to a re-domiciled company, means a trade, profession or business carried on in Hong Kong by the re-domiciled company;know-how (工業知識) has the meaning given by section 16E(4);patent rights (專利權) has the meaning given by section 16E(4); relevant year of assessment (相關課稅年度), in relation to a re-domiciled company— (a) if the re-domiciled company uses the specified asset or right for any Hong Kong business in the re-domiciliation year—means the re-domiciliation year; and (b) in any other case—means the year of assessment in which the company begins to use the specified asset or right for any Hong Kong business; specified expenditure on asset or right (在資產或權利方面的指明開支), in relation to a re-domiciled company, means— (a) any capital expenditure incurred by the company on the purchase of any patent rights or rights to any know-how; or (b) any specified capital expenditure within the meaning of section 16EA, 16G or 16H. 7. Supplementary provisions for section 23—provisions regarding life insurance business carried on by re-domiciled insurers in Hong Kong in critical basis period—for non-HK insurers who become re-domiciled insurers (1) This section applies to a corporation that is a re-domiciled insurer within the meaning of section 3BA of Cap. 41 if the conditions set out in subsection (2) are satisfied.(2) The conditions are—(a) the corporation was not a designated insurer immediately before the critical date;(b) the corporation carries on any life insurance business in Hong Kong on the critical date or after that date in the critical basis period; and(c) the corporation—(i) has carried on, before the critical date, any life insurance business outside Hong Kong;(ii) continues to carry on, or carries on, such business outside Hong Kong on the critical date or after that date in the critical basis period; and(iii) has elected to be assessed in the manner provided in section 23(1)(b).(3) Subject to subsection (4), if a report is made under section 23(2) by the corporation in respect of a period ending immediately before the critical basis period—(a) the deficit as at the date immediately before the critical date that is attributable to the life insurance business carried on by the corporation outside Hong Kong (specified deficit) is to be added to the deficit required to be added under section 23(4B)(a)(i) for the purpose of ascertaining the adjusted surplus deemed to arise in the critical basis period (adjusted surplus); and(b) the surplus as at the date immediately before the critical date that is attributable to the life insurance business carried on by the corporation outside Hong Kong (specified surplus) is to be added to the surplus required to be deducted under section 23(4B)(b)(i) for the purpose mentioned in paragraph (a).(4) Subsections (5) and (6) apply if—(a) the corporation has not carried on any life insurance business in Hong Kong before the critical date; or(b) did not make any report under section 23(2) in respect of a period ending immediately before the critical basis period.(5) The specified deficit is to be the deficit required to be added under section 23(4B)(a)(i) for the purpose of ascertaining the adjusted surplus.(6) The specified surplus is to be the surplus required to be deducted under section 23(4B)(b)(i) for the purpose mentioned in subsection (5). 8. Supplementary provisions for section 23—provisions regarding life insurance business carried on by certain other re-domiciled insurers in Hong Kong in critical basis period (1) This section applies to a corporation that is a re-domiciled insurer within the meaning of section 3BB of Cap. 41 if—(a) the corporation carries on any life insurance business in Hong Kong on the critical date or after that date in the critical basis period;(b) the corporation—(i) has carried on, before the critical date, any life insurance business outside Hong Kong; and(ii) continues to carry on, or carries on, such business outside Hong Kong on the critical date or after that date in the critical basis period; and(c) the corporation has elected to be assessed in the manner provided in section 23(1)(b).(2) The deficit required to be added under section 23(4B)(a)(i) for the purpose of ascertaining the adjusted surplus deemed to arise in the critical basis period is to be the deficit as at the date immediately before the critical date that is attributable to the life insurance business carried on by the corporation outside Hong Kong.(3) The surplus required to be deducted under section 23(4B)(b)(i) for the purpose mentioned in subsection (2) is to be the surplus as at the date immediately before the critical date that is attributable to the life insurance business carried on by the corporation outside Hong Kong. 9. Supplementary provisions for section 23AAA—provisions regarding non-life long term insurance business carried on by re-domiciled insurers in critical year—for non-HK insurers who become re-domiciled insurers (1) This section applies to a corporation that is a re-domiciled insurer within the meaning of section 3BA of Cap. 41 if the corporation was not a designated insurer immediately before the critical date.(2) The assessable profits for the critical year of the corporation, whether mutual or proprietary, from its non-life long term insurance business, are that part of the adjusted surplus deemed to arise in the critical basis period, as ascertained in accordance with section 23(4), (4A), (4B), (5) and (7) and section 7 of this Schedule (as applied and modified under subsection (3)).(3) Section 23(4), (4A), (4B), (5), (7), (8) and (9) and section 7 of this Schedule apply in relation to the non-life long term insurance business as if—(a) a reference in those sections to life insurance business were a reference to non-life long term insurance business;(b) a reference in those sections to non-life long term insurance business were a reference to life insurance business; and(c) a reference in those sections to life insurance fund were a reference to non-life long term insurance fund. 10. Supplementary provisions for section 23AAA—provisions regarding non-life long term insurance business carried on by certain other re-domiciled insurers in critical year (1) This section applies to a corporation that is a re-domiciled insurer within the meaning of section 3BB of Cap. 41.(2) The assessable profits for the critical year of the corporation, whether mutual or proprietary, from its non-life long term insurance business, are that part of the adjusted surplus deemed to arise in the basis period for that year, as ascertained in accordance with section 23(4), (4A), (4B), (5) and (7) and section 8 of this Schedule (as applied and modified under subsection (3)).(3) Section 23(4), (4A), (4B), (5), (7), (8) and (9) and section 8 of this Schedule apply in relation to the non-life long term insurance business as if—(a) a reference in those sections to life insurance business were a reference to non-life long term insurance business;(b) a reference in those sections to non-life long term insurance business were a reference to life insurance business; and(c) a reference in those sections to life insurance fund were a reference to non-life long term insurance fund. Part 3 Provisions Relating to Part 6 11. Provisions regarding expenditure on provision of machinery and plant—supplementary provisions for Part 6 (1) This section applies to a re-domiciled company if—(a) the re-domiciled company has, before the re-domiciliation date, incurred any capital expenditure on the provision of machinery or plant in relation to a trade, profession or business carried on outside Hong Kong by the company;(b) the company has not carried on in Hong Kong, before the re-domiciliation date, the trade, profession or business; and(c) the machinery or plant to which the capital expenditure relates (specified asset)—(i) was not used before that date for a Hong Kong business; but(ii) is used on or after the re-domiciliation date by the company for a Hong Kong business.(2) Subsections (3), (4) and (5) apply in relation to the specified asset for the purposes of Part 6.(3) Any capital expenditure on the provision of machinery or plant incurred before the re-domiciliation date by the re-domiciled company in relation to the specified asset (specified capital expenditure) is taken to have been incurred for the purpose of producing profits chargeable to tax under Part 4 by the company in the basis period for the relevant year of assessment.(4) The total amount of specified capital expenditure incurred in relation to the specified asset is—(a) if the specified asset is acquired by the company otherwise than under a hire purchase agreement—(i) the amount determined in accordance with sub-subparagraph (A) or the amount mentioned in sub-subparagraph (B), whichever is the lower—(A) the amount of the actual cost of the specified asset minus the notional amount of the annual allowance which would have been made under section 37(2) or 39B(2) if the specified asset had been used by the company for the purpose of producing profits chargeable to tax under Part 4 after its acquisition;(B) the amount of the market value of the specified asset as at the re-domiciliation date; or(ii) where the amount determined in accordance with subparagraph (i)(A) and the amount mentioned in subparagraph (i)(B) are the same—the amount so determined; and(b) if the specified asset is acquired by the re-domiciled company under a hire purchase agreement—the amount determined in accordance with the following formula— A × C B where: A means the aggregate of the capital portion of each instalment payment made by the re-domiciled company up to the end of the basis period for the re-domiciliation year; B means the aggregate of the capital portion of each instalment payment required to be made by the re-domiciled company under the hire purchase agreement; and C means the amount ascertained in the manner specified in subsection (4)(a). (5) If the specified asset is acquired by the re-domiciled company under a hire purchase agreement, the total amount of capital expenditure on the provision of machinery or plant incurred by the company in relation to the specified asset in the basis period for a year of assessment after the re-domiciliation year is to be determined in accordance with the following formula— D × F E where: D means the aggregate of the capital portion of each instalment payment made by the re-domiciled company in the basis period; E means the aggregate of the capital portion of each instalment payment required to be made by the company under the hire purchase agreement; and F means the amount ascertained in the manner specified in subsection (4)(a). (6) In this section—capital expenditure on the provision of machinery or plant (在提供機械或工業裝置方面的資本開支) has the meaning given by section 40(1);Hong Kong business (香港業務), in relation to a re-domiciled company, means a trade, profession or business carried on in Hong Kong by the re-domiciled company; relevant year of assessment (相關課稅年度), in relation to a re-domiciled company— (a) if the re-domiciled company uses the specified asset for any Hong Kong business in the re-domiciliation year—means the re-domiciliation year; and (b) in any other case—means the year of assessment in which the company begins to use the specified asset for any Hong Kong business. Part 4 Specified Tax Credits 12. Provisions regarding unilateral tax credits for re-domiciled company (1) This section applies to a re-domiciled company if—(a) the re-domiciled company has been charged to tax under the law of its place of incorporation (specified tax) in respect of any income derived or received, or taken to have been derived or received, by the company because of its registration under section 820C(1) of Cap. 622 (specified income);(b) the specified tax is of substantially the same nature as tax imposed under Part 4 (profits tax); and(c) profits tax is payable in relation to any such income (relevant income) for the re-domiciliation year or any subsequent year of assessment (particular year).(2) If a claim is made under section 13 of this Schedule in relation to the specified tax that has been charged in respect of the specified income, subject to section 14 of this Schedule and subsections (3), (4), (5), (6), (7) and (8), the amount so claimed may be allowed as a credit against the profits tax payable in relation to the relevant income (credit).(3) The amount of the relevant income in respect of which credit may be allowed for each claim must not exceed the amount of the specified income to which the claim relates.(4) Without affecting subsection (3), if more than one claim is made under section 13 of this Schedule in relation to the registration of a corporation under section 820C(1) of Cap. 622, the aggregate of the amounts of the relevant income in respect of which credit may be allowed in relation to that registration must not exceed the total amount of the specified income concerned.(5) Subject to subsections (3) and (4), the amount of the credit that may be allowed to the re-domiciled company for a particular year is to be determined in accordance with subsections (6), (7) and (8).(6) The amount of the credit allowed for a particular year is to be—(a) the amount claimed by the company under section 13 of this Schedule, to the extent that it has been paid for the specified tax; or(b) the amount of the profits tax payable for that year by the company in respect of the relevant income,whichever is the lower.(7) If the amount mentioned in subsection (6)(a) is equal to the amount mentioned in subsection (6)(b) (relevant amount), the amount of the credit allowed to the re-domiciled company for the particular year is to be the relevant amount.(8) If the amount mentioned in subsection (6)(a) exceeds the amount mentioned in subsection (6)(b), the excess amount is allowed to be deducted for the re-domiciled company for the particular year.(9) In this section—income (收入) includes profits. 13. Claim for allowance by way of credit—supplementary provisions for section 12 of this Schedule (1) A re-domiciled company may make a claim for an allowance, by way of a credit against tax payable under Part 4 (profits tax), in relation to any income described in section 12(1) of this Schedule (specified income).(2) However—(a) a claim may only be made by a re-domiciled company under subsection (1) before—(i) the end of 6 years after the end of the year of assessment for which the specified income concerned (relevant income) is chargeable to profits tax;

or(ii) the end of 6 months after the date on which an assessment is made imposing liability or additional liability to profits tax in respect of the relevant income,whichever is the later; and(b) no claim may be made if a copy of the revocation order against the company is published in the Gazette under section 820F of Cap. 622.(3) If a re-domiciled company makes a claim under subsection (1), and an assessor refuses to allow a credit pursuant to the claim, the assessor must give the re-domiciled company a written notice of the refusal.(4) The re-domiciled company to whom the notice is given has the same rights of objection and appeal under Part 11 as if the notice were a notice of assessment.(5) In this section—income (收入) includes profits. 14. General provisions on specified tax credits (1) The amount of credit allowed under section 12 of this Schedule (specified tax credit) to a re-domiciled company must not exceed the amount of the relief that would be granted had all foreign tax minimization steps been taken by the company.(2) For the purposes of subsection (1)—(a) all foreign tax minimization steps are taken only if all reasonable steps are taken under the law of the place of incorporation of the company to minimize the amount of the tax payable in that place in respect of the income mentioned in section 12(1)(a) of this Schedule (specified tax); and(b) the reasonable steps mentioned in paragraph (a) include—(i) claiming, or otherwise securing the benefit of, relief, deductions, reductions or allowances; and(ii) making elections for tax purposes.(3) For the purposes of subsections (1) and (2), a question as to the steps which it would have been reasonable for a person to take is to be determined on the basis of what the person might reasonably be expected to have done in the absence of the specified tax credit.(4) If—(a) the specified tax credit has been allowed to a re-domiciled company; and(b) subsequently, the amount of the specified tax credit becomes excessive as a result of an adjustment to the amount of the specified tax under the law of the place of incorporation of the company,the company must give the Commissioner written notice of the adjustment within 3 months after the adjustment is made.(5) If, in relation to a re-domiciled company, the amount of the specified tax credit becomes excessive or insufficient by reason of an adjustment to the amount of the specified tax or the tax payable in Hong Kong, an assessment, additional assessment or claim to which the adjustment gives rise may be made before—(a) the end of 2 years from the time when all assessments, adjustments and other determinations have been made, whether in the place of incorporation of the company or in Hong Kong, that are material in determining whether any, and if so what, relief is to be allowed; or(b) the expiry of the time limit for making an assessment, additional assessment or claim for specified tax credit under this Ordinance,whichever is the later.(6) In this section—income (收入) includes profits. Schedule 18 [s. 90]Reduction of Taxes for Year of Assessment 2007/08 (Schedule 18 added 21 of 2008 s. 11. Amended E.R. 1 of 2012) 1. Property tax (1) The amount of property tax charged under Part 2 of this Ordinance for the year of assessment commencing on 1 April 2007 shall be reduced by an amount equivalent to—(a) 75% of the amount of the tax as computed under section 5(1) of this Ordinance; or(b) $25,000,whichever is the less.(2) Where a person is the sole owner of 2 or more properties, the reduction under subsection (1) applies separately to each of those properties.(3) Where 2 or more persons are joint owners or owners in common of 2 or more properties, the reduction under subsection (1) applies separately to each of those properties.(4) Where 2 or more persons are joint owners or owners in common of a property, and any of them has elected to be assessed in accordance with Part 7 of this Ordinance for the year of assessment commencing on 1 April 2007, the reduction under subsection (1) applies to the tax chargeable on the whole of the net assessable value of the property, and not the tax charged on the net assessable value of the property shared by those persons who have not made that election.(5) In this section— property (物業) means any land or buildings or land and buildings as defined in section 7A of this Ordinance— (a) that is a separate tenement for which a rateable value is estimated in accordance with section 10 of the Rating Ordinance (Cap. 116) for the financial year commencing on 1 April 2007;(b) if paragraph (a) does not apply, that is the subject tenement of any agreement, whether in writing or not, providing for the right of use of the land or buildings or land and buildings; or(c) if paragraphs (a) and (b) do not apply, that is considered as a separate tenement by the Commissioner having regard to the circumstances of the case. 2. Salaries tax The amount of salaries tax charged under Part 3 of this Ordinance for the year of assessment commencing on 1 April 2007 shall be reduced by an amount equivalent to—(a) 75% of the amount of the tax as computed under section 13(1) of this Ordinance read together with section 13(2) of this Ordinance; or(b) $25,000,whichever is the less. 3. Profits tax (1) The amount of profits tax charged under Part 4 of this Ordinance for the year of assessment commencing on 1 April 2007 shall be reduced by an amount equivalent to—(a) 75% of the amount of the tax as computed under section 14 of this Ordinance read together with sections 14A and 14B of this Ordinance; or(b) $25,000,whichever is the less.(2) Where a trade, profession or business is carried on by a partnership, and any of the partners has elected to be assessed in accordance with Part 7 of this Ordinance for the year of assessment commencing on 1 April 2007, the reduction under subsection (1) applies to the tax chargeable on the whole of the net assessable profits of the trade, profession or business, and not the tax charged on the net assessable profits of the trade, profession or business shared by those partners who have not made that election. 4. Tax under personal assessment (1) The amount of tax charged under Part 7 of this Ordinance for the year of assessment commencing on 1 April 2007 shall be reduced by an amount equivalent to—(a) 75% of the amount of the tax as computed under section 43(1) of this Ordinance read together with section 43(1A) of this Ordinance; or(b) $25,000,whichever is the less.(2) For the purposes of section 43(2B) of this Ordinance, in ascertaining the portion of tax to be charged on each spouse in the year of assessment commencing on 1 April 2007, the amount of tax to be apportioned between the husband and wife shall be the amount as reduced under subsection (1). Schedule 19 [s. 91]Reduction of Taxes for Year of Assessment 2008/09 (Schedule 19 added 8 of 2009 s. 3. Amended E.R. 1 of 2012) 1. Salaries tax The amount of salaries tax charged under Part 3 of this Ordinance for the year of assessment commencing on 1 April 2008 is reduced by an amount equivalent to—(a) 100% of the amount of the tax as computed under section 13(1) of this Ordinance read together with section 13(2) of this Ordinance; or(b) $8,000,whichever is the lesser. 2. Tax under personal assessment (1) The amount of tax charged under Part 7 of this Ordinance for the year of assessment commencing on 1 April 2008 is reduced by an amount equivalent to—(a) 100% of the amount of the tax as computed under section 43(1) of this Ordinance read together with section 43(1A) of this Ordinance; or(b) $8,000, whichever is the lesser.(2) For the purposes of section 43(2B) of this Ordinance, in ascertaining the portion of tax to be charged on each spouse in the year of assessment commencing on 1 April 2008, the amount of tax to be apportioned between the husband and wife is the amount as reduced under subsection (1). Schedule 20 [s. 92]Reduction of Taxes for Year of Assessment 2009/10 (Schedule 20 added 10 of 2010 s. 9. Amended E.R. 1 of 2012) 1. Salaries tax The amount of salaries tax charged under Part 3 of this Ordinance for the year of assessment commencing on 1 April 2009 is reduced by an amount equivalent to—(a) 75% of the amount of the tax as computed under section 13(1) of this Ordinance read together with section 13(2) of this Ordinance; or(b) $6,000,whichever is the lesser. 2. Tax under personal assessment (1) The amount of tax charged under Part 7 of this Ordinance for the year of assessment commencing on 1 April 2009 is reduced by an amount equivalent to—(a) 75% of the amount of the tax as computed under section 43(1) of this Ordinance read together with section 43(1A) of this Ordinance; or(b) $6,000,whichever is the lesser.(2) For the purposes of section 43(2B) of this Ordinance, in ascertaining the portion of tax to be charged on each spouse in the year of assessment commencing on 1 April 2009, the amount of tax to be apportioned between the husband and wife is the amount as reduced under subsection (1). Schedule 21 [s. 89(6)]Transitional Provisions Relating to Inland Revenue (Amendment) Ordinance 2011 (Schedule 21 added 4 of 2011 s. 9) 1. In this Schedule—amending Ordinance (《修訂條例》) means the Inland Revenue (Amendment) Ordinance 2011 (4 of 2011). 2. Paragraph (e) of the definition of debt instrument in section 14A(4) of this Ordinance that was in force immediately before the date of commencement* of the amending Ordinance continues to have effect in relation to an instrument issued before that date as if the amending Ordinance had not been enacted. Editorial Note: * Commencement date: 25 March 2011 Schedule 22 [s. 89(7)]Transitional Provisions Relating to Provisional Salaries Tax in respect of Year of Assessment 2011/12 (Schedule 22 added 9 of 2011 s. 7. Amended E.R. 1 of 2012) 1. Interpretation In this Schedule—current year of assessment (本課稅年度) means the year of assessment commencing on 1 April 2011;preceding year of assessment (上一課稅年度) means the year of assessment commencing on 1 April 2010. 2. Allowances granted for current year of assessment (1) For the purposes of section 63C(1) of this Ordinance, in calculating the net chargeable income of a person for the preceding year of assessment to ascertain the provisional salaries tax in respect of the current year of assessment—(a) the reference to “such allowances as are under Part 5 permitted for that person” in section 12B(1)(b) of this Ordinance; and(b) the reference to “such allowances as are under Part 5 permitted in their case” in section 12B(2)(b) of this Ordinance,are to be construed as allowances that may be granted to that person, or that person and his or her spouse, whichever is applicable, for the current year of assessment under Part 5 of this Ordinance as amended by the Inland Revenue (Amendment) (No. 2) Ordinance 2011 (9 of 2011).(2) For the purposes of an application under section 63E(1) of this Ordinance to hold over the payment of provisional salaries tax in respect of the current year of assessment, the reference to “net chargeable income for the year preceding the year of assessment” in section 63E(2)(a) and (b) of this Ordinance is to be construed as the net chargeable income for the preceding year of assessment as calculated in accordance with subsection (1). 3. Applications for holding over of payment of provisional salaries tax on additional ground (1) Without affecting section 63E of this Ordinance, if in relation to the current year of assessment a person is liable to pay provisional salaries tax, that person may, by notice in writing lodged with the Commissioner, apply to the Commissioner on the ground specified in subsection (3) to have the payment of the whole or part of the tax held over until that person is required to pay salaries tax for the current year of assessment.(2) An application under subsection (1) must be made not later than—(a) 28 days before the day by which the provisional salaries tax is to be paid; or(b) 14 days after the date of the notice for payment of provisional salaries tax under section 63C(6) of this Ordinance,whichever is the later.(3) The ground specified for the purposes of subsection (1) is that the aggregate amount of the residential care expenses paid or to be paid by the person or his or her spouse, not being a spouse living apart from the person, during the current year of assessment exceeds, or is likely to exceed $60,000 in respect of a parent or grandparent of the person.(4) If the Commissioner is satisfied that it is appropriate to do so, the Commissioner may, either generally or in a particular case, extend the time within which an application may be made under subsection (1).(5) On receipt of an application made under subsection (1), the Commissioner must consider the application and may hold over the payment of the whole or part of the provisional salaries tax.(6) The Commissioner must, by notice in writing, inform the person applying under subsection (1) of the Commissioner’s decision.(7) In this section—parent or grandparent (父母或祖父母) and residential care expenses (住宿照顧開支) have the meanings given to them by section 26D(5) of this Ordinance. Schedule 23 [s. 93]Reduction of Taxes for Year of Assessment 2010/11 (Schedule 23 added 9 of 2011 s. 7. Amended E.R. 1 of 2012) 1. Salaries tax The amount of salaries tax charged under Part 3 of this Ordinance for the year of assessment commencing on 1 April 2010 is reduced by an amount equivalent to—(a) 75% of the amount of the tax as computed under section 13(1) of this Ordinance read together with section 13(2) of this Ordinance; or(b) $6,000,whichever is the lesser. 2. Tax under personal assessment (1) The amount of tax charged under Part 7 of this Ordinance for the year of assessment commencing on 1 April 2010 is reduced by an amount equivalent to—(a) 75% of the amount of the tax as computed under section 43(1) of this Ordinance read together with section 43(1A) of this Ordinance; or(b) $6,000,whichever is the lesser.(2) For the purposes of section 43(2B) of this Ordinance, in ascertaining the portion of tax to be charged on each spouse in the year of assessment commencing on 1 April 2010, the amount of tax to be apportioned between the husband and wife is the amount as reduced under subsection (1). Schedule 24 [s. 89(8)]Transitional Provisions for Inland Revenue (Amendment) (No. 3) Ordinance 2011 (Schedule 24 added. 21 of 2011 s. 9. Amended E.R. 1 of 2012) 1. The amendments made to section 16E(1), (2), (2A), (2B), (4) and (5) of this Ordinance by section 5(1), (2), (4), (5), (8), (9) and (11) of the Inland Revenue (Amendment) (No. 3) Ordinance 2011 (21 of 2011) (2011 Ordinance) do not apply in ascertaining the profits in respect of which a person is chargeable to tax under Part 4 of this Ordinance for any year of assessment preceding the year of assessment beginning on 1 April 2011. 2. Section 16E(1A), (3A) and (9) of this Ordinance applies only in ascertaining the profits in respect of which a person is chargeable to tax under Part 4 of this Ordinance for the year of assessment beginning on 1 April 2011 and any subsequent year of assessment. 3. The amendments made to section 16E(3) and (4) of this Ordinance by section 5(6) and (10) of the 2011 Ordinance do not apply in respect of any rights of a kind referred to in section 16E(1) of this Ordinance—(a) in respect of which a deduction has been allowed under section 16E(1) of this Ordinance to any person; and(b) that are sold by the person during the basis period for any year of assessment preceding the year of assessment beginning on 1 April 2011 or are sold by the person under a contract entered into during such a basis period. 4. Section 16E(7) and (8) of this Ordinance does not apply in respect of any rights of a kind referred to in section 16E(1) of this Ordinance that are purchased or sold during the basis period for any year of assessment preceding the year of assessment beginning on 1 April 2011 or are purchased or sold under a contract entered into during such a basis period. Schedule 25 [s. 89(9)]Transitional Provisions Relating to Provisional Salaries Tax and Provisional Profits Tax in respect of Years of Assessment 2012/13 and 2013/14 (Schedule 25 added 21 of 2012 s. 10) 1. Interpretation In this Schedule—current year of assessment (本課稅年度) means the year of assessment commencing on 1 April 2012;following year of assessment (下一課稅年度) means the year of assessment commencing on 1 April 2013;preceding year of assessment (上一課稅年度) means the year of assessment commencing on 1 April 2011. 2. Allowances granted for current year of assessment (1) For the purposes of section 63C(1) of this Ordinance, in calculating the net chargeable income of a person for the preceding year of assessment to ascertain the provisional salaries tax in respect of the current year of assessment—(a) the reference to “such allowances as are under Part 5 permitted for that person” in section 12B(1)(b) of this Ordinance; and(b) the reference to “such allowances as are under Part 5 permitted in their case” in section 12B(2)(b) of this Ordinance, are to be construed as allowances that may be granted to that person, or that person and his or her spouse, whichever is applicable, for the current year of assessment under Part 5 of this Ordinance as amended by the Inland Revenue (Amendment) Ordinance 2012 (21 of 2012). (2) For the purposes of an application under section 63E(1) of this Ordinance to hold over the payment of provisional salaries tax in respect of the current year of assessment, the reference to “net chargeable income for the year preceding the year of assessment” in section 63E(2)(a) and (b) of this Ordinance is to be construed as the net chargeable income for the preceding year of assessment as calculated in accordance with subsection (1). 3. Applications for holding over of payment of provisional salaries tax on additional grounds (1) Without affecting section 63E of this Ordinance—(a) if in relation to the current year of assessment a person is liable to pay provisional salaries tax, that person may, by notice in writing lodged with the Commissioner, apply to the Commissioner on any ground specified in subsection (3) to have the payment of the whole or part of the tax held over until that person is required to pay salaries tax for the current year of assessment; and(b) if in relation to the following year of assessment a person is liable to pay provisional salaries tax, that person may, by notice in writing lodged with the Commissioner, apply to the Commissioner on the ground specified in subsection (4) to have the payment of the whole or part of the tax held over until that person is required to pay salaries tax for the following year of assessment.(2) An application under subsection (1) must be made not later than—(a) 28 days before the day by which the provisional salaries tax is to be paid; or(b) 14 days after the date of the notice for payment of provisional salaries tax under section 63C(6) of this Ordinance, whichever is the later.(3) The following grounds are specified for the purposes of subsection (1)(a)—(a) the aggregate amount of the residential care expenses paid or to be paid by the person or his or her spouse, not being a spouse living apart from the person, during the current year of assessment, to the extent to which a deduction in respect of those expenses is allowable under section 26D of this Ordinance for that year, exceeds or is likely to exceed $72,000 in respect of a parent or grandparent of the person;(b) the amount of contributions to a recognized retirement scheme paid or to be paid by the person during the current year of assessment, to the extent to which a deduction in respect of those contributions is allowable under section 26G of this Ordinance for that year, exceeds or is likely to exceed $12,000.(4) The ground specified for the purposes of subsection (1)(b) is that the amount of contributions to a recognized retirement scheme paid or to be paid by the person during the following year of assessment, to the extent to which a deduction in respect of those contributions is allowable under section 26G of this Ordinance for that year, exceeds or is likely to exceed $14,500.(5) If the Commissioner is satisfied that it is appropriate to do so, the Commissioner may, either generally or in a particular case, extend the time within which an application may be made under subsection (1).(6) On receipt of an application made under subsection (1), the Commissioner must consider the application and may hold over the payment of the whole or part of the provisional salaries tax.(7) The Commissioner must, by notice in writing, inform the person applying under subsection (1) of the Commissioner’s decision.(8) In this section—parent or grandparent (父母或祖父母) has the meaning given to it by section 26D(5) of this Ordinance;residential care expenses (住宿照顧開支) has the meaning given to it by section 26D(5) of this Ordinance. 4. Applications for holding over of payment of provisional profits tax on additional ground (1) Without affecting section 63J of this Ordinance—(a) if in relation to the current year of assessment a person is liable to pay provisional profits tax, that person may, by notice in writing lodged with the Commissioner, apply to the Commissioner on the ground specified in subsection (3) to have the payment of the whole or part of the tax held over until that person is required to pay profits tax for the current year of assessment; and(b) if in relation to the following year of assessment a person is liable to pay provisional profits tax, that person may, by notice in writing lodged with the Commissioner, apply to the Commissioner on the ground specified in subsection (4) to have the payment of the whole or part of the tax held over until that person is required to pay profits tax for the following year of assessment.(2) An application under subsection (1) must be made not later than—(a) 28 days before the day by which the provisional profits tax is to be paid; or(b) 14 days after the date of the notice for payment of provisional profits tax under section 63H(7) of this Ordinance, whichever is the later.(3) The ground specified for the purposes of subsection (1)(a) is that the amount of mandatory contributions paid or to be paid by the person in the basis period for the current year of assessment in respect of any liability of the person to pay the contributions as a self-employed person under the Mandatory Provident Fund Schemes Ordinance (Cap. 485), to the extent to which a deduction in respect of those contributions is allowable under section 16AA of this Ordinance for that year, exceeds or is likely to exceed $12,000.(4) The ground specified for the purposes of subsection (1)(b) is that the amount of mandatory contributions paid or to be paid by the person in the basis period for the following year of assessment in respect of any liability of the person to pay the contributions as a self-employed person under the Mandatory Provident Fund Schemes Ordinance (Cap. 485), to the extent to which a deduction in respect of those contributions is allowable under section 16AA of this Ordinance for that year, exceeds or is likely to exceed $14,500.(5) If the Commissioner is satisfied that it is appropriate to do so, the Commissioner may, either generally or in a particular case, extend the time within which an application may be made under subsection (1).(6) On receipt of an application made under subsection (1), the Commissioner must consider the application and may hold over the payment of the whole or part of the provisional profits tax.(7) The Commissioner must, by notice in writing, inform the person applying under subsection (1) of the Commissioner’s decision. Schedule 26 [s. 94]Reduction of Taxes for Year of Assessment 2011/12 (Schedule 26 added 21 of 2012 s. 10) 1. Salaries tax The amount of salaries tax charged under Part 3 of this Ordinance for the year of assessment commencing on 1 April 2011 is reduced by an amount equivalent to—(a) 75% of the amount of the tax as computed under section 13(1) of this Ordinance read together with section 13(2) of this Ordinance; or(b) $12,000,whichever is the lesser. 2. Profits tax (1) The amount of profits tax charged under Part 4 of this Ordinance for the year of assessment commencing on 1 April 2011 is reduced by an amount equivalent to—(a) 75% of the amount of the tax as computed under section 14 of this Ordinance read together with sections 14A and 14B of this Ordinance; or(b) $12,000, whichever is the lesser.(2) If a trade, profession or business is carried on by a partnership, and any of the partners has elected to be assessed in accordance with Part 7 of this Ordinance for the year of assessment commencing on 1 April 2011, the reduction under subsection (1) applies to the tax chargeable on the whole of the net assessable profits of the trade, profession or business, and not the tax charged on the net assessable profits of the trade, profession or business shared by those partners who have not made that election. 3. Tax under personal assessment (1) The amount of tax charged under Part 7 of this Ordinance for the year of assessment commencing on 1 April 2011 is reduced by an amount equivalent to—(a) 75% of the amount of the tax as computed under section 43(1) of this Ordinance read together with section 43(1A) of this Ordinance; or(b) $12,000, whichever is the lesser.(2) For the purposes of section 43(2B) of this Ordinance, in ascertaining the portion of tax to be charged on each spouse in the year of assessment commencing on 1 April 2011, the amount of tax to be apportioned between the husband and wife is the amount as reduced under subsection (1). Schedule 27 [s. 89(10)]Transitional Provisions Relating to Provisional Salaries Tax in respect of Year of Assessment 2013/14 (Schedule 27 added 5 of 2013 s. 7) 1. Interpretation In this Schedule—current year (本年度) means the year of assessment commencing on 1 April 2013; preceding year (上一年度) means the year of assessment commencing on 1 April 2012. 2. Allowances granted for current year (1) For the purposes of section 63C(1) of this Ordinance, in calculating the net chargeable income of a person for the preceding year to ascertain the provisional salaries tax in respect of the current year—(a) the reference to “such allowances as are under Part 5 permitted for that person” in section 12B(1)(b) of this Ordinance; and (b) the reference to “such allowances as are under Part 5 permitted in their case” in section 12B(2)(b) of this Ordinance, are to be construed as allowances that may be granted to that person, or that person and his or her spouse, whichever is applicable, for the current year under Part 5 of this Ordinance as amended by the Inland Revenue (Amendment) Ordinance 2013 (5 of 2013). (2) For the purposes of an application under section 63E(1) of this Ordinance to hold over the payment of provisional salaries tax in respect of the current year, the reference to “net chargeable income for the year preceding the year of assessment” in section 63E(2)(a) and (b) of this Ordinance is to be construed as the net chargeable income for the preceding year as calculated in accordance with subsection (1). 3. Applications for holding over of payment of provisional salaries tax on additional ground (1) Without affecting section 63E of this Ordinance, if in relation to the current year a person is liable to pay provisional salaries tax, that person may, by notice in writing lodged with the Commissioner, apply to the Commissioner on the ground specified in subsection (3) to have the payment of the whole or part of the tax held over until that person is required to pay salaries tax for the current year. (2) An application under subsection (1) must be made not later than—(a) 28 days before the day by which the provisional salaries tax is to be paid; or (b) 14 days after the date of the notice for payment of provisional salaries tax under section 63C(6) of this Ordinance, whichever is the later. (3) The ground specified for the purposes of subsection (1) is that the amount of the expenses of self-education paid or to be paid by the person during the current year, to the extent to which a deduction in respect of those expenses is allowable under section 12 of this Ordinance for that year, exceeds or is likely to exceed $60,000. (4) If the Commissioner is satisfied that it is appropriate to do so, the Commissioner may, either generally or in a particular case, extend the time within which an application may be made under subsection (1). (5) On receipt of an application made under subsection (1), the Commissioner must consider the application and may hold over the payment of the whole or part of the provisional salaries tax. (6) The Commissioner must, by notice in writing, inform the person applying under subsection (1) of the Commissioner’s decision. (7) In this section—expenses of self-education (個人進修開支) has the meaning given to it by section 12(6)(b) of this Ordinance. Schedule 28 [s. 95]Reduction of Taxes for Year of Assessment 2012/13 (Schedule 28 added 5 of 2013 s. 7) 1. Salaries tax The amount of salaries tax charged under Part 3 of this Ordinance for the year of assessment commencing on 1 April 2012 is reduced by an amount equivalent to—(a) 75% of the amount of the tax as computed under section 13(1) of this Ordinance read together with section 13(2) of this Ordinance; or (b) $10,000, whichever is the lesser. 2. Profits tax (1) The amount of profits tax charged under Part 4 of this Ordinance for the year of assessment commencing on 1 April 2012 is reduced by an amount equivalent to—(a) 75% of the amount of the tax as computed under section 14 of this Ordinance read together with sections 14A and 14B of this Ordinance; or (b) $10,000, whichever is the lesser. (2) If a trade, profession or business is carried on by a partnership, and any of the partners has elected to be assessed in accordance with Part 7 of this Ordinance for the year of assessment commencing on 1 April 2012, the reduction under subsection (1) applies to the tax chargeable on the whole of the net assessable profits of the trade, profession or business, and not the tax charged on the net assessable profits of the trade, profession or business shared by those partners who have not made that election. 3. Tax under personal assessment (1) The amount of tax charged under Part 7 of this Ordinance for the year of assessment commencing on 1 April 2012 is reduced by an amount equivalent to—(a) 75% of the amount of the tax as computed under section 43(1) of this Ordinance read together with section 43(1A) of this Ordinance; or (b) $10,000, whichever is the lesser. (2) For the purposes of section 43(2B) of this Ordinance, in ascertaining the portion of tax to be charged on each spouse in the year of assessment commencing on 1 April 2012, the amount of tax to be apportioned between the husband and wife is the amount as reduced under subsection (1). Schedule 29 [s. 89(11)]Transitional Provisions for Inland Revenue and Stamp Duty Legislation (Alternative Bond Schemes) (Amendment) Ordinance 2013 (Schedule 29 added 10 of 2013 s. 20) 1. The amendments made to sections 5B, 14A, 15, 16, 20AC, 26A, 51C, 60, 64, 79, 80 and 82A of, and Schedules 6 and 16 to, this Ordinance by sections 5, 6(5), 7, 8, 9, 10, 11, 12, 13, 14, 15, 16, 18 and 19 of the Inland Revenue and Stamp Duty Legislation (Alternative Bond Schemes) (Amendment) Ordinance 2013 (10 of 2013) (2013 Amendment Ordinance), do not apply to an alternative bond scheme, or the bond arrangement or investment arrangement in it, if alternative bonds are issued under the bond arrangement in the scheme before the date of commencement of section 3 of the 2013 Amendment Ordinance. 2. Section 40AB of, and Schedule 17A to, this Ordinance do not apply to an alternative bond scheme, or the bond arrangement or investment arrangement in it, if alternative bonds are issued under the bond arrangement in the scheme before the date of commencement* of section 3 of the 2013 Amendment Ordinance. Editorial Note: * Commencement date: 19 July 2013. Schedule 30 [s. 89(12)]Transitional Provisions Relating to Provisional Salaries Tax and Provisional Profits Tax in respect of Years of Assessment 2014/15 and 2015/16 (Schedule 30 added 3 of 2014 s. 9) 1. Interpretation In this Schedule—MPFSO (《強積金條例》) means the Mandatory Provident Fund Schemes Ordinance (Cap. 485);year of assessment 2014/15 (2014/15 課稅年度) means the year of assessment commencing on 1 April 2014;year of assessment 2015/16 (2015/16 課稅年度) means the year of assessment commencing on 1 April 2015. 2. Application for holding over payment of provisional salaries tax on additional grounds (1) If a person is liable to pay provisional salaries tax for the year of assessment 2014/15, that person may apply to the Commissioner on the ground specified in subsection (2) to have the payment of the whole or part of that tax held over until that person is required to pay salaries tax for that year.(2) The ground is that the amount of contributions to a recognized retirement scheme paid or to be paid by the person during the year of assessment 2014/15, to the extent to which a deduction in respect of those contributions is allowable under section 26G for that year, exceeds or is likely to exceed $15,000.(3) If a person is liable to pay provisional salaries tax for the year of assessment 2015/16, that person may apply to the Commissioner on the ground specified in subsection (4) to have the payment of the whole or part of that tax held over until that person is required to pay salaries tax for that year.(4) The ground is that the amount of contributions to a recognized retirement scheme paid or to be paid by the person during the year of assessment 2015/16, to the extent to which a deduction in respect of those contributions is allowable under section 26G for that year, exceeds or is likely to exceed $17,500.(5) This section does not affect the operation of section 63E. 3. Supplementary provisions for application under section 2 (1) This section applies to an application under section 2(1) or (3) of this Schedule.(2) The application must be made by notice in writing lodged with the Commissioner.(3) The application must be made not later than—(a) 28 days before the day by which the provisional salaries tax is to be paid; or(b) 14 days after the date of the notice for payment of provisional salaries tax under section 63C(6),whichever is the later. (4) If the Commissioner is satisfied that it is appropriate to do so, the Commissioner may, either generally or in a particular case, extend the time within which the application may be made.(5) On receipt of the application, the Commissioner—(a) must consider the application; and(b) may hold over the payment of the whole or part of the provisional salaries tax.(6) The Commissioner must, by notice in writing, inform the applicant of the Commissioner’s decision. 4. Application for holding over payment of provisional profits tax on additional grounds (1) If a person is liable to pay provisional profits tax for the year of assessment 2014/15, that person may apply to the Commissioner on the ground specified in subsection (2) to have the payment of the whole or part of that tax held over until that person is required to pay profits tax for that year.(2) The ground is that the amount of mandatory contributions paid or to be paid by the person in the basis period for the year of assessment 2014/15 in respect of any liability of the person to pay the contributions as a self-employed person under MPFSO, to the extent to which a deduction in respect of those contributions is allowable under section 16AA for that year, exceeds or is likely to exceed $15,000.(3) If a person is liable to pay provisional profits tax for the year of assessment 2015/16, that person may apply to the Commissioner on the ground specified in subsection (4) to have the payment of the whole or part of that tax held over until that person is required to pay profits tax for that year.(4) The ground is that the amount of mandatory contributions paid or to be paid by the person in the basis period for the year of assessment 2015/16 in respect of any liability of the person to pay the contributions as a self-employed person under MPFSO, to the extent to which a deduction in respect of those contributions is allowable under section 16AA for that year, exceeds or is likely to exceed $17,500.(5) This section does not affect the operation of section 63J. 5. Supplementary provisions for application under section 4 (1) This section applies to an application under section 4(1) or (3) of this Schedule.(2) The application must be made by notice in writing lodged with the Commissioner.(3) The application must be made not later than—(a) 28 days before the day by which the provisional profits tax is to be paid; or(b) 14 days after the date of the notice for payment of provisional profits tax under section 63H(7),whichever is the later.(4) If the Commissioner is satisfied that it is appropriate to do so, the Commissioner may, either generally or in a particular case, extend the time within which the application may be made.(5) On receipt of the application, the Commissioner—(a) must consider the application; and(b) may hold over the payment of the whole or part of the provisional profits tax.(6) The Commissioner must, by notice in writing, inform the applicant of the Commissioner’s decision. Schedule 31 [s. 89(13)]Transitional Provisions Relating to Provisional Salaries Tax in respect of Year of Assessment 2014/15 (Schedule 31 added 10 of 2014 s. 7) 1. Interpretation In this Schedule—parent or grandparent (父母或祖父母) has the meaning given by section 26D(5); residential care expenses (住宿照顧開支) has the meaning given by section 26D(5); year of assessment 2013/14 (2013/14課稅年度) means the year of assessment commencing on 1 April 2013; year of assessment 2014/15 (2014/15課稅年度) means the year of assessment commencing on 1 April 2014. 2. Allowances granted for year of assessment 2014/15 (1) For the purposes of section 63C(1), in calculating the net chargeable income of a person for the year of assessment 2013/14 to ascertain the provisional salaries tax in respect of the year of assessment 2014/15—(a) the reference to “such allowances as are under Part 5 permitted for that person” in section 12B(1)(b); and (b) the reference to “such allowances as are under Part 5 permitted in their case” in section 12B(2)(b), are to be construed as allowances that may be granted to that person, or that person and his or her spouse, whichever is applicable, for the year of assessment 2014/15 under Part 5 as amended by the Inland Revenue (Amendment) (No. 2) Ordinance 2014 (10 of 2014). (2) For the purposes of an application under section 63E(1) to hold over the payment of provisional salaries tax in respect of the year of assessment 2014/15, the reference to “net chargeable income for the year preceding the year of assessment” in section 63E(2)(a) and (b) is to be construed as the net chargeable income for the year of assessment 2013/14 as calculated in accordance with subsection (1). 3. Application for holding over payment of provisional salaries tax on additional ground (1) A person who is liable to pay provisional salaries tax in respect of the year of assessment 2014/15 may apply to the Commissioner on the ground specified in subsection (2) to have the payment of the whole or part of the tax held over until that person is required to pay salaries tax for that year. (2) The ground is that the aggregate amount of the residential care expenses paid or to be paid by the person or his or her spouse, not being a spouse living apart from the person, during the year of assessment 2014/15, to the extent to which a deduction in respect of those expenses is allowable under section 26D for that year, exceeds or is likely to exceed $76,000 in respect of a parent or grandparent of the person. (3) This section does not affect the operation of section 63E. 4. Provisions supplementary to section 3 of this Schedule (1) This section applies to an application under section 3(1) of this Schedule. (2) The application must be made by notice in writing lodged with the Commissioner. (3) The application must be made not later than—(a) 28 days before the day by which the provisional salaries tax is to be paid; or (b) 14 days after the date of the notice for payment of provisional salaries tax under section 63C(6), whichever is the later. (4) If the Commissioner is satisfied that it is appropriate to do so, the Commissioner may, either generally or in a particular case, extend the time within which the application may be made. (5) On receipt of the application, the Commissioner—(a) must consider the application; and (b) may hold over the payment of the whole or part of the provisional salaries tax. (6) The Commissioner must, by notice in writing, inform the applicant of the Commissioner’s decision. Schedule 32 [s. 96]Reduction of Taxes for Year of Assessment 2013/14 (Schedule 32 added 10 of 2014 s. 7) 1. Salaries tax The amount of salaries tax charged under Part 3 for the year of assessment commencing on 1 April 2013 is reduced by an amount equivalent to—(a) 75% of the amount of the tax as computed under section 13(1) read together with section 13(2); or (b) $10,000, whichever is the lesser. 2. Profits tax (1) The amount of profits tax charged under Part 4 for the year of assessment commencing on 1 April 2013 is reduced by an amount equivalent to—(a) 75% of the amount of the tax as computed under section 14 read together with sections 14A and 14B; or(b) $10,000, whichever is the lesser. (2) If a trade, profession or business is carried on by a partnership, and any of the partners has elected to be assessed in accordance with Part 7 for the year of assessment commencing on 1 April 2013, the reduction under subsection (1) applies to the tax chargeable on the whole of the net assessable profits of the trade, profession or business, and not the tax charged on the net assessable profits of the trade, profession or business shared by those partners who have not made that election. 3. Tax under personal assessment (1) The amount of tax charged under Part 7 for the year of assessment commencing on 1 April 2013 is reduced by an amount equivalent to—(a) 75% of the amount of the tax as computed under section 43(1) read together with section 43(1A); or (b) $10,000, whichever is the lesser. (2) For the purposes of section 43(2B), in ascertaining the portion of tax to be charged on each spouse in the year of assessment commencing on 1 April 2013, the amount of tax to be apportioned between the husband and wife is the amount as reduced under subsection (1). Schedule 33 [s. 89(14)]Transitional Provisions Relating to Provisional Salaries Tax in respect of Year of Assessment 2015/16 (Schedule 33 added 10 of 2015 s. 6) 1. Interpretation In this Schedule—year of assessment 2014/15 (2014/15課稅年度) means the year of assessment commencing on 1 April 2014;year of assessment 2015/16 (2015/16課稅年度) means the year of assessment commencing on 1 April 2015. 2. Allowances granted for year of assessment 2015/16 (1) For the purposes of section 63C(1), in calculating the net chargeable income of a person for the year of assessment 2014/15 to ascertain the provisional salaries tax in respect of the year of assessment 2015/16—(a) the reference to “such allowances as are under Part 5 permitted for that person” in section 12B(1)(b); and(b) the reference to “such allowances as are under Part 5 permitted in their case” in section 12B(2)(b), are to be construed as allowances that may be granted to that person, or that person and his or her spouse, whichever is applicable, for the year of assessment 2015/16 under Part 5 as amended by the Inland Revenue (Amendment) Ordinance 2015 (10 of 2015).(2) For the purposes of an application under section 63E(1) to hold over the payment of provisional salaries tax in respect of the year of assessment 2015/16, the reference to “net chargeable income for the year preceding the year of assessment” in section 63E(2)(a) and (b) is to be construed as the net chargeable income for the year of assessment 2014/15 as calculated in accordance with subsection (1). Schedule 34 [s. 97]Reduction of Taxes for Year of Assessment 2014/15 (Schedule 34 added 10 of 2015 s. 6) 1. Salaries tax The amount of salaries tax charged under Part 3 for the year of assessment commencing on 1 April 2014 is reduced by an amount equivalent to—(a) 75% of the amount of the tax as computed under section 13(1) read together with section 13(2); or(b) $20,000,whichever is the lesser. 2. Profits tax (1) The amount of profits tax charged under Part 4 for the year of assessment commencing on 1 April 2014 is reduced by an amount equivalent to—(a) 75% of the amount of the tax as computed under section 14 read together with sections 14A and 14B; or(b) $20,000, whichever is the lesser.(2) If a trade, profession or business is carried on by a partnership, and any of the partners has elected to be assessed in accordance with Part 7 for the year of assessment commencing on 1 April 2014, the reduction under subsection (1) applies to the tax chargeable on the whole of the net assessable profits of the trade, profession or business, and not the tax charged on the net assessable profits of the trade, profession or business shared by those partners who have not made that election. 3. Tax under personal assessment (1) The amount of tax charged under Part 7 for the year of assessment commencing on 1 April 2014 is reduced by an amount equivalent to—(a) 75% of the amount of the tax as computed under section 43(1) read together with section 43(1A); or(b) $20,000, whichever is the lesser.(2) For the purposes of section 43(2B), in ascertaining the portion of tax to be charged on each spouse in the year of assessment commencing on 1 April 2014, the amount of tax to be apportioned between the husband and wife is the amount as reduced under subsection (1). Schedule 35 [s. 89(15)]Transitional Provisions: Appeals against Decisions of Board of Review Made before Commencement Date of Inland Revenue (Amendment) (No. 3) Ordinance 2015 (Schedule 35 added 17 of 2015 s. 14) 1. Interpretation In this Schedule—amending Ordinance (《修訂條例》) means the Inland Revenue (Amendment) (No. 3) Ordinance 2015 (17 of 2015); commencement date (生效日期) means the date on which section 8 of the amending Ordinance comes into operation;former section 69 (原有的第69條) means section 69 as in force immediately before the commencement date. 2. Applications not made before commencement date Despite section 23 of the Interpretation and General Clauses Ordinance (Cap. 1), if—(a) but for the enactment of the amending Ordinance, a person has a right to make an application under the former section 69 in respect of a decision of the Board of Review made under section 68;(b) the person has not made the application before the commencement date; and(c) the time within which the person may make the application has not expired on the commencement date,on or after the commencement date, the person may not make the application, but may appeal to the Court of First Instance against the Board’s decision under section 69. 3. Applications made before commencement date An application that has been made and delivered under the former section 69 before the commencement date is to be continued on and after the commencement date as if the amending Ordinance had not been enacted. Schedule 36 [s. 89(16) & Sch. 47] (Replaced 4 of 2019 s. 13)Transitional Provisions for Inland Revenue (Amendment) (No. 2) Ordinance 2016 (Schedule 36 added 12 of 2016 s. 18) 1. In this Schedule—(a) 2016 Amendment Ordinance (《2016年修訂條例》) means the Inland Revenue (Amendment) (No.

2) Ordinance 2016 (12 of 2016);(b) commencement date (生效日期) means the day on which the 2016 Amendment Ordinance comes into operation;(c) qualifying profits (合資格利潤) has the meaning given by section 14C(1); and(d) in relation to a person, a year of assessment is the transitional year of assessment (過渡課稅年度) if the commencement date falls within the basis period of the person for the year of assessment. 2. For the purposes of section 14D(1), in computing the qualifying profits of a corporation, sums received by or accrued to the corporation before 1 April 2016 are not to be taken into account. 3. For the purposes of section 14E(5), in computing the corporate treasury profits of a corporation, sums received by or accrued to the corporation before 1 April 2016 are not to be taken into account. 4. Section 15(1)(ia) and (la) does not apply to sums received or accrued before the commencement date. 5. The following provisions apply only to sums payable on or after 1 April 2016—(a) the amendments made to section 16(1), (2), (2A), (2B), (2C), (2E), (3) and (3B) by section 8 of the 2016 Amendment Ordinance;(b) section 16(2)(g), (2CA), (2CB), (2CC), (2CD), (2I) and (3C). 6. Subject to section 7 of this Schedule, the following provisions apply only in ascertaining the profits in respect of which a person is chargeable to tax under Part 4 for the transitional year of assessment or any subsequent year of assessment—(a) the amendments made to sections 2, 15 and 16 and Schedules 6 and 16 by Division 3 of Part 2 of the 2016 Amendment Ordinance;(b) sections 15(1C), 16(2AA), 17A, 17B, 17C, 17D, 17E and 17F. 7. For a regulatory capital security issued before the commencement date—(a) the following provisions apply only to sums received or accrued, in respect of the security, on or after the commencement date—(i) the amendments made to section 15 and Schedule 6 by Division 3 of Part 2 of the 2016 Amendment Ordinance;(ii) section 17B (in so far as it relates to a person to whom or for whose benefit a sum is payable in respect of the security);(iii) section 17D(1);(b) the following provisions apply only to sums payable, in respect of the security, on or after the commencement date—(i) section 16(2AA);(ii) section 17B (in so far as it relates to the issuer of the security);(iii) sections 17C(1) and 17F;(c) in applying section 17C(2) to the issuer of the security who has included any sums as assessable profits or losses when bringing the security into account at a fair value—(i) the liability under the security is taken to have been released and re-assumed at its fair value on the commencement date; and(ii) any change in value between that date and the end of the basis period is to be brought into account for computing the assessable profits for the transitional year of assessment;(d) in applying section 17D(2) to a specified connected person of the issuer of the security if the specified connected person has included any sums as assessable profits or losses when bringing the security into account at a fair value—(i) the security is taken to have been disposed of and re-acquired at its fair value on the commencement date; and(ii) any change in value between that date and the end of the basis period is to be brought into account for computing the assessable profits for the transitional year of assessment;(e) sections 17C(3) and 17D(3) apply only to a write-down or conversion effected on or after the commencement date;(f) sections 17C(4) and 17D(4) apply only to a write-up effected on or after the commencement date; and(g) the amendment made to Schedule 16 by section 16 of the 2016 Amendment Ordinance applies only to a transaction carried out on or after the commencement date. 8. Section 17G applies only in ascertaining the profits in respect of which a non-resident financial institution with capital raised through the issue of a regulatory capital security (whether before, on or after the commencement date) is chargeable to tax under Part 4—(a) for the year of assessment beginning on the first day of April in the calendar year next following the commencement date; or(b) for any subsequent year of assessment. Schedule 37 [s. 89(17)]Transitional Provisions Relating to Provisional Salaries Tax in respect of Year of Assessment 2016/17 (Schedule 37 added 8 of 2016 s. 7) 1. Interpretation In this Schedule—parent or grandparent (父母或祖父母) has the meaning given by section 26D(5);residential care expenses (住宿照顧開支) has the meaning given by section 26D(5);year of assessment 2015/16 (2015/16課稅年度) means the year of assessment commencing on 1 April 2015;year of assessment 2016/17 (2016/17課稅年度) means the year of assessment commencing on 1 April 2016. 2. Allowances granted for year of assessment 2016/17 (1) For the purposes of section 63C(1), in calculating the net chargeable income of a person for the year of assessment 2015/16 to ascertain the provisional salaries tax in respect of the year of assessment 2016/17—(a) the reference to “such allowances as are under Part 5 permitted for that person” in section 12B(1)(b); and(b) the reference to “such allowances as are under Part 5 permitted in their case” in section 12B(2)(b),are to be construed as allowances that may be granted to that person, or that person and his or her spouse, whichever is applicable, for the year of assessment 2016/17 under Part 5 as amended by the Inland Revenue (Amendment) Ordinance 2016 (8 of 2016).(2) For the purposes of an application under section 63E(1) to hold over the payment of provisional salaries tax in respect of the year of assessment 2016/17, the reference to “net chargeable income for the year preceding the year of assessment” in section 63E(2)(a) and (b) is to be construed as the net chargeable income for the year of assessment 2015/16 as calculated in accordance with subsection (1). 3. Application for holding over payment of provisional salaries tax on additional ground (1) A person who is liable to pay provisional salaries tax in respect of the year of assessment 2016/17 may apply to the Commissioner on the ground specified in subsection (2) to have the payment of the whole or part of the tax held over until that person is required to pay salaries tax for that year.(2) The ground is that the aggregate amount of the residential care expenses paid or to be paid by the person or his or her spouse, not being a spouse living apart from the person, during the year of assessment 2016/17, to the extent to which a deduction in respect of those expenses is allowable under section 26D for that year, exceeds or is likely to exceed $80,000 in respect of a parent or grandparent of the person.(3) This section does not affect the operation of section 63E. 4. Provisions supplementary to section 3 of this Schedule (1) This section applies to an application under section 3(1) of this Schedule.(2) The application must be made by notice in writing lodged with the Commissioner.(3) The application must be made not later than—(a) 28 days before the day by which the provisional salaries tax is to be paid; or(b) 14 days after the date of the notice for payment of provisional salaries tax under section 63C(6),whichever is the later.(4) If the Commissioner is satisfied that it is appropriate to do so, the Commissioner may, either generally or in a particular case, extend the time within which the application may be made.(5) On receipt of the application, the Commissioner—(a) must consider the application; and(b) may hold over the payment of the whole or part of the provisional salaries tax.(6) The Commissioner must, by notice in writing, inform the applicant of the Commissioner’s decision. Schedule 38 [s. 98]Reduction of Taxes for Year of Assessment 2015/16 (Schedule 38 added 8 of 2016 s. 7) 1. Salaries tax The amount of salaries tax charged under Part 3 for the year of assessment commencing on 1 April 2015 is reduced by an amount equivalent to— (a) 75% of the amount of the tax as computed under section 13(1) read together with section 13(2); or(b) $20,000, whichever is the lesser. 2. Profits tax (1) The amount of profits tax charged under Part 4 for the year of assessment commencing on 1 April 2015 is reduced by an amount equivalent to—(a) 75% of the amount of the tax as computed under section 14 read together with sections 14A, 14B and 14D; or(b) $20,000,whichever is the lesser.(2) If a trade, profession or business is carried on by a partnership, and any of the partners has elected to be assessed in accordance with Part 7 for the year of assessment commencing on 1 April 2015, the reduction under subsection (1) applies to the tax chargeable on the whole of the net assessable profits of the trade, profession or business, and not the tax charged on the net assessable profits of the trade, profession or business shared by those partners who have not made that election. 3. Tax under personal assessment (1) The amount of tax charged under Part 7 for the year of assessment commencing on 1 April 2015 is reduced by an amount equivalent to—(a) 75% of the amount of the tax as computed under section 43(1) read together with section 43(1A); or(b) $20,000,whichever is the lesser.(2) For the purposes of section 43(2B), in ascertaining the portion of tax to be charged on each spouse in the year of assessment commencing on 1 April 2015, the amount of tax to be apportioned between the husband and wife is the amount as reduced under subsection (1). Schedule 39 [s. 89(18)]Transitional Provisions Relating to Provisional Salaries Tax in respect of Year of Assessment 2017/18 (Schedule 39 added 3 of 2017 s. 9) 1. Interpretation In this Schedule—expenses of self-education (個人進修開支) has the meaning given by section 12(6)(b);year of assessment 2016/17 (2016/17課稅年度) means the year of assessment commencing on 1 April 2016;year of assessment 2017/18 (2017/18課稅年度) means the year of assessment commencing on 1 April 2017. 2. Allowances granted for year of assessment 2017/18 (1) For the purposes of section 63C(1), in calculating the net chargeable income of a person for the year of assessment 2016/17 to ascertain the provisional salaries tax in respect of the year of assessment 2017/18—(a) the reference to “such allowances as are under Part 5 permitted for that person” in section 12B(1)(b); and(b) the reference to “such allowances as are under Part 5 permitted in their case” in section 12B(2)(b),are to be construed as allowances that may be granted to that person, or that person and his or her spouse, whichever is applicable, for the year of assessment 2017/18 under Part 5 as amended by the Inland Revenue (Amendment) Ordinance 2017 (3 of 2017).(2) For the purposes of an application under section 63E(1) to hold over the payment of provisional salaries tax in respect of the year of assessment 2017/18, the reference to “net chargeable income for the year preceding the year of assessment” in section 63E(2)(a) and (b) is to be construed as the net chargeable income for the year of assessment 2016/17 as calculated in accordance with subsection (1). 3. Application for holding over of payment of provisional salaries tax on additional ground (1) A person who is liable to pay provisional salaries tax in respect of the year of assessment 2017/18 may apply to the Commissioner on the ground specified in subsection (2) to have the payment of the whole or part of the tax held over until the person is required to pay salaries tax for the year.(2) The ground is that the total amount of the expenses of self-education paid or to be paid by the person during the year of assessment 2017/18, to the extent to which a deduction in respect of the expenses is allowable under section 12 for the year, exceeds or is likely to exceed $80,000.(3) This section does not affect the operation of section 63E. 4. Provisions supplementary to section 3 of this Schedule (1) This section applies to an application under section 3 of this Schedule.(2) The application must be made in writing.(3) The application must be made not later than—(a) the 28th day before the day by which the provisional salaries tax is to be paid; or(b) the 14th day after the date of the notice for payment of provisional salaries tax under section 63C(6),whichever is the later.(4) If the Commissioner is satisfied that it is appropriate, the Commissioner may, either generally or in a particular case, extend the time within which an application may be made.(5) On receipt of the application, the Commissioner—(a) must consider the application; and(b) may hold over the payment of the whole or part of the provisional salaries tax.(6) The Commissioner must, by notice in writing, inform the applicant of the Commissioner’s decision. Schedule 40 [s. 99]Reduction of Taxes for Year of Assessment 2016/17 (Schedule 40 added 3 of 2017 s. 9) 1. Salaries tax The amount of salaries tax charged under Part 3 for the year of assessment commencing on 1 April 2016 is reduced by an amount equal to the lesser of the following amounts—(a) 75% of the amount of the tax as computed under section 13(1) read together with section 13(2);(b) $20,000. 2. Profits tax (1) The amount of profits tax charged under Part 4 for the year of assessment commencing on 1 April 2016 is reduced by an amount equal to the lesser of the following amounts—(a) 75% of the amount of the tax as computed under section 14 read together with sections 14A, 14B and 14D;(b) $20,000.(2) If a trade, profession or business is carried on by a partnership, and any of the partners has elected to be assessed in accordance with Part 7 for the year of assessment commencing on 1 April 2016, the reduction under subsection (1) applies to the tax chargeable on the whole of the net assessable profits of the trade, profession or business, and not the tax charged on the net assessable profits of the trade, profession or business shared by those partners who have not made that election. 3. Tax under personal assessment (1) The amount of tax charged under Part 7 for the year of assessment commencing on 1 April 2016 is reduced by an amount equal to the lesser of the following amounts—(a) 75% of the amount of the tax as computed under section 43(1) read together with section 43(1A);(b) $20,000.(2) For the purposes of section 43(2B), in ascertaining the portion of tax to be charged on each spouse in the year of assessment commencing on 1 April 2016, the amount of tax to be apportioned between the husband and wife is the amount as reduced under subsection (1). Schedule 41 [s. 89(19)]Transitional Provisions for Inland Revenue (Amendment) (No. 3) Ordinance 2017 (Schedule 41 added 9 of 2017 s. 17) 1. In computing the qualifying profits in relation to a corporation for the purposes of section 14H(1), sums received by or accrued to the corporation before 1 April 2017 are not to be taken into account. 2. In computing the qualifying profits in relation to a corporation for the purposes of section 14J(1), sums received by or accrued to the corporation before 1 April 2017 are not to be taken into account. 3. Section 15(1)(n) does not apply to sums received or accrued before the Inland Revenue (Amendment) (No. 3) Ordinance 2017 (9 of 2017) comes into operation. Schedule 42 [s. 89(20)]Transitional Provisions Relating to Provisional Profits Tax in respect of Year of Assessment 2018/19 1. Interpretation In this Schedule—year of assessment 2018/19 (2018/19課稅年度) means the year of assessment commencing on 1 April 2018. 2. Application for holding over payment of provisional profits tax on additional ground (1) A person who is liable to pay provisional profits tax in respect of the year of assessment 2018/19 may apply to the Commissioner to have the payment of the whole or part of the tax held over until the person is required to pay profits tax for the year.(2) An application may be made under subsection (1) if, for the year of assessment 2018/19, the person is, or is likely to be, chargeable to profits tax in accordance with section 2 of Schedule 8A, or section 2 of Schedule 8B, under section 14.(3) This section does not affect the operation of section 63J. 3. Provisions supplementary to section 2 of this Schedule (1) This section applies to an application under section 2 of this Schedule.(2) The application must be made in writing.(3) The application must be made not later than—(a) the 28th day before the day by which the provisional profits tax is to be paid; or(b) the 14th day after the date of the notice for payment of provisional profits tax under section 63H(7),whichever is the later.(4) However, the Commissioner may, if satisfied that it is appropriate, either generally or in a particular case, postpone the deadline.(5) On receipt of the application, the Commissioner—(a) must consider the application; and(b) may hold over the payment of the whole or part of the provisional profits tax.(6) The Commissioner must, by notice in writing, inform the applicant of the Commissioner’s decision.(Schedule 42 added 13 of 2018 s. 12) Schedule 43 [s. 100]Reduction of Taxes (Schedule 43 added 20 of 2018 s. 16)For the year of assessment 2017/18 Column 1(section) Column 2(prescribed percentage or prescribed amount) 1. Salaries tax (a) section 100(1)(a) 75% (b) section 100(1)(b) $30,000 2. Profits tax (a) section 100(2)(a) 75% (b) section 100(2)(b) $30,000 3. Tax under personal assessment (a) section 100(4)(a) 75% (b) section 100(4)(b) $30,000 For the year of assessment 2018/19 Column 1(section) Column 2(prescribed percentage or prescribed amount) 1. Salaries tax (a) section 100(1)(a) 100% (b) section 100(1)(b) $20,000 2. Profits tax (a) section 100(2)(a) 100% (b) section 100(2)(b) $20,000 3. Tax under personal assessment (a) section 100(4)(a) 100% (b) section 100(4)(b) $20,000 (Added 9 of 2019 s. 5)For the year of assessment 2019/20 Column 1(section) Column 2(prescribed percentage or prescribed amount) 1. Salaries tax (a) section 100(1)(a) 100% (b) section 100(1)(b) $20,000 2. Profits tax (a) section 100(2)(a) 100% (b) section 100(2)(b) $20,000 3. Tax under personal assessment (a) section 100(4)(a) 100% (b) section 100(4)(b) $20,000 (Added 4 of 2020 s. 3)For the year of assessment 2020/21 Column 1(section) Column 2(prescribed percentage or prescribed amount) 1. Salaries tax (a) section 100(1)(a) 100% (b) section 100(1)(b) $10,000 2. Profits tax (a) section 100(2)(a) 100% (b) section 100(2)(b) $10,000 3. Tax under personal assessment (a) section 100(4)(a) 100% (b) section 100(4)(b) $10,000 (Added 10 of 2021 s. 3)For the year of assessment 2021/22 Column 1(section) Column 2(prescribed percentage or prescribed amount) 1. Salaries tax (a) section 100(1)(a) 100% (b) section 100(1)(b) $10,000 2. Profits tax (a) section 100(2)(a) 100% (b) section 100(2)(b) $10,000 3. Tax under personal assessment (a) section 100(4)(a) 100% (b) section 100(4)(b) $10,000 (Added 1 of 2022 s. 3)For the year of assessment 2022/23 Column 1(section) Column 2(prescribed percentage or prescribed amount) 1. Salaries tax (a) section 100(1)(a) 100% (b) section 100(1)(b) $6,000 2. Profits tax (a) section 100(2)(a) 100% (b) section 100(2)(b) $6,000 3. Tax under personal assessment (a) section 100(4)(a) 100% (b) section 100(4)(b) $6,000 (Added 4 of 2023 s. 4)For the year of assessment 2023/24 Column 1(section) Column 2(prescribed percentage or prescribed amount) 1. Salaries tax (a) section 100(1)(a) 100% (b) section 100(1)(b) $3,000 2. Profits tax (a) section 100(2)(a) 100% (b) section 100(2)(b) $3,000 3. Tax under personal assessment (a) section 100(4)(a) 100% (b) section 100(4)(b) $3,000 (Added 10 of 2024 s. 18)For the year of assessment 2024/25 Column 1(section) Column 2(prescribed percentage or prescribed amount) 1. Salaries tax (a) section 100(1)(a) 100% (b) section 100(1)(b) $1,500 2. Profits tax (a) section 100(2)(a) 100% (b) section 100(2)(b) $1,500 3. Tax under personal assessment (a) section 100(4)(a) 100% (b) section 100(4)(b) $1,500 (Added 10 of 2025 s. 5)For the year of assessment 2025/26 Column 1(section) Column 2(prescribed percentage or prescribed amount) 1. Salaries tax (a) section 100(1)(a) 100% (b) section 100(1)(b) $3,000 2. Profits tax (a) section 100(2)(a) 100% (b) section 100(2)(b) $3,000 3. Tax under personal assessment (a) section 100(4)(a) 100% (b) section 100(4)(b) $3,000 (Added 2 of 2026 s. 6) Schedule 44 [s. 89(21)]Transitional Provisions for Inland Revenue (Amendment) (No. 6) Ordinance 2018 (Schedule 44 added 27 of 2018 s. 35) 1. Interpretation In this Schedule—Amendment Ordinance (《修訂條例》) means the Inland Revenue (Amendment) (No. 6) Ordinance 2018 (27 of 2018);*commencement date (生效日期) means the day on which the Amendment Ordinance comes into operation. 2. Provisions relating to tax credit The amendments made to sections 8, 16 and 50 by the Amendment Ordinance, and section 50AA, apply in relation to tax payable for a year of assessment beginning on or after 1 April 2018. 3. Provisions relating to mutual agreement procedure and arbitration Section 50AAB applies in relation to—(a) any case presented for mutual agreement procedure on or after the commencement date, regardless of whether the case relates to a year of assessment that began before the date; and(b) any issue if the request for referring the issue for arbitration is made on or after the commencement date, regardless of whether the issue relates to a year of assessment that began before the date. 4. Provisions relating to transfer pricing rules, relief and advance pricing arrangement (1) Subject to subsections (3), (5) and (6), the following provisions apply in relation to a year of assessment beginning on or after 1 April 2018—(a) Divisions 2 and 3 of Part 8AA (except section 50AAK) and Schedule 17G;(b) Division 4 of Part 8AA and Schedule 17H;(c) section 15BA;(d) the amendments made to sections 80, 82 and 82A by the Amendment Ordinance (except to the extent that the amendments relate to section 50AAK).(2) Subject to subsections (4), (7) and (8), the following provisions apply in relation to a year of assessment beginning on or after 1 April 2019—(a) section 50AAK;(b) section 15F;(c) the amendments made to sections 80, 82 and 82A by the Amendment Ordinance (to the extent that the amendments relate to section 50AAK);(d) the amendments made to rules 3(1A) and 5(1) of the Inland Revenue Rules (Cap. 112 sub. leg. A) by the Amendment Ordinance;(e) rule 5(1A) of those Rules.(3) The provisions referred to in subsection (1)(a) and (d) do not apply in relation to a transaction entered into or effected before the commencement date.(4) The provisions referred to in subsection (2)(a), (c), (d) and (e) do not apply in relation to a transaction entered into or effected before 1 April 2019.(5) Subsection (1)(b) does not prevent principles developed in an advance pricing arrangement from being applied, under section 50AAQ(4), in relation to a period which wholly or partly falls before 1 April 2018 if the application for the arrangement is made on or after the commencement date.(6) Section 15BA does not apply in relation to a change in trading stock effected before the commencement date.(7) A person is not chargeable under section 15F to profits tax in respect of a sum (or any part of it) if the sum accrued to or was received by or for the benefit of an associate of the person before 1 April 2019.(8) A person is chargeable under section 15F to profits tax in respect of a sum (or any part of it) if the sum accrues to or is received by or for the benefit of an associate of the person on or after 1 April 2019, regardless of whether the sum arises from a transaction entered into or effected before 1 April 2019. 5. Provisions relating to master file and local file Division 2 of Part 9A and Schedule 17I apply in relation to an accounting period of a constituent entity of a group in the extended sense beginning on or after 1 April 2018. 6. Provisions relating to country-by-country reporting Sections 58F, 58G and 58H apply in relation to an accounting period beginning on or after 1 January 2018. 7. Provisions relating to fees for application for advance ruling The amendments made to Part 2 of Schedule 10 by the Amendment Ordinance apply in relation to an application for a ruling under section 88A received on or after the commencement date. 8. Provisions relating to profits tax concessions The amendments made to sections 14B, 14C, 14D, 14H, 14J, 16, 23A and 23B by the Amendment Ordinance, and section 26AB, apply in relation to tax payable for a year of assessment beginning on or after 1 April 2018. Editorial Note: * Commencement date: 13 July 2018. Schedule 45 [ss. 4, 15, 16, 16B, 37, 37A, 39B, 40, 40AO & 40AT & Schs. 17FC, 17FD, 17J & 17L] (Amended 18 of 2021 s. 20; 17 of 2022 s. 16; 17 of 2024 s. 14; 14 of 2025 s. 155)Deduction of R&D Expenditures (Schedule 45 added 29 of 2018 s. 13) Part 1 Preliminary 1. Interpretation (1) In this Schedule—2018 Amendment Ordinance (《2018年修訂條例》) means the Inland Revenue (Amendment) (No. 7) Ordinance 2018 (29 of 2018);amended Ordinance (《經修訂條例》) means this Ordinance as amended by the 2018 Amendment Ordinance;*commencement date (生效日期) means the day on which the 2018 Amendment Ordinance comes into operation;designated local research institution (指定本地研究機構) means a designated local research institution designated under section 19 of this Schedule;interim Type A expenditure (中期甲類開支)—see section 9 of this Schedule;interim Type B expenditure (中期乙類開支)—see section 11 of this Schedule;pre-amended Ordinance (《原有條例》) means this Ordinance as in force immediately before the commencement date;qualifying expenditure related to trade, profession or business (關乎行業、專業或業務的合資格開支)—see section 12 of this Schedule;qualifying R&D activity (合資格研發活動)—see section 4 of this Schedule;qualifying R&D activity related to trade, profession or business (關乎行業、專業或業務的合資格研發活動)—see section 5 of this Schedule;R&D activity (研發活動)—see section 2 of this Schedule;R&D activity related to trade, profession or business (關乎行業、專業或業務的研發活動)—see section 3 of this Schedule;R&D expenditure (研發開支)—see section 6 of this Schedule;specified period (指明期間) means the period beginning on 1 April 2018 and ending immediately before the commencement date;Type A expenditure (甲類開支)—see section 8 of this Schedule;Type B expenditure (乙類開支)—see section 10 of this Schedule.(2) For the purposes of this Schedule, a reference to rights includes a share or interest in rights. 2. Meaning of R&D activity An R&D activity is—(a) an activity in the fields of natural or applied science to extend knowledge;(b) a systematic, investigative or experimental activity carried on for the purposes of any feasibility study or in relation to any market, business or management research;(c) an original and planned investigation carried on with the prospect of gaining new scientific or technical knowledge and understanding; or(d) the application of research findings or other knowledge to a plan or design for producing or introducing new or substantially improved materials, devices, products, processes, systems or services before they are commercially produced or used. 3. Meaning of R&D activity related to trade, profession or business (1) An R&D activity related to a trade, profession or business includes—(a) an R&D activity that may lead to or facilitate an extension, or an improvement in the technical efficiency, of the trade, profession or business; and(b) an R&D activity of a medical nature that is of particular relevance to the welfare of employees employed in the trade, profession or business.(2) An R&D activity related to a class of trade, profession or business includes—(a) an R&D activity that may lead to or facilitate an extension, or an improvement in the technical efficiency, of the class of trade, profession or business; and(b) an R&D activity of a medical nature that is of particular relevance to the welfare of employees employed in the class of trade, profession or business. 4. Meaning of qualifying R&D activity (1) A qualifying R&D activity is an R&D activity that—(a) falls within the description in section 2(a), (c) or (d) of this Schedule; and(b) is wholly undertaken and carried on in Hong Kong.(2) A qualifying R&D activity does not include—(a) any efficiency survey, feasibility study, management study, market research or sales promotion;(b) the application of any publicly available research findings or other knowledge to a plan or design, with an anticipated outcome and without any scientific or technological uncertainty;(c) an activity that does not seek to directly contribute to achieving an advance in science or technology by resolving scientific or technological uncertainty; or(d) any work to develop the non-scientific or non-technological aspect of a new or substantially improved material, device, product, process, system or service. 5. Meaning of qualifying R&D activity related to trade, profession or business (1) A qualifying R&D activity related to a trade, profession or business includes—(a) a qualifying R&D activity that may lead to or facilitate an extension, or an improvement in the technical efficiency, of the trade, profession or business; and(b) a qualifying R&D activity of a medical nature that is of particular relevance to the welfare of employees employed in the trade, profession or business.(2) A qualifying R&D activity related to a class of trade, profession or business includes—(a) a qualifying R&D activity that may lead to or facilitate an extension, or an improvement in the technical efficiency, of the class of trade, profession or business; and(b) a qualifying R&D activity of a medical nature that is of particular relevance to the welfare of employees employed in the class of trade, profession or business. 6. Meaning of R&D expenditure (1) An R&D expenditure, in relation to a trade, profession or business in respect of which a person is chargeable to tax under Part 4, is—(a) a payment to an R&D institution for an R&D activity related to the trade, profession or business;(b) a payment to an R&D institution which has, as an object, the undertaking of an R&D activity related to the class of trade, profession or business to which the trade, profession or business belongs, where the payment is used for pursuing that object; or(c) any other expenditure on an R&D activity related to the trade, profession or business, including capital expenditure except to the extent that it is expenditure on land or buildings or on alterations, additions or extensions to buildings.(2) A payment referred to in subsection (1)(a) or (b) does not include a payment to the R&D institution for acquiring rights generated from an R&D activity.(3) For the purposes of subsection (1)(a) and (b), a payment to a local institution—(a) that is not a university or college; and(b) that is not, and never has been, a designated local research institution,is a payment to an R&D institution if the local institution is designated as a designated local research institution within 6 months after the date of payment.(4) An expenditure referred to in subsection (1)(c)—(a) includes an expenditure for carrying out, and providing facilities for carrying out, an R&D activity; and(b) does not include an expenditure for acquiring rights generated from an R&D activity.(5) In this section—R&D institution (研發機構) means—(a) a designated local research institution; or(b) a university or college that is not a designated local research institution. 7. When R&D expenditure is incurred (1) An R&D expenditure is incurred by a person—(a) for a payment referred to in section 6(1)(a) or (b) of this Schedule—at the time the payment is made by the person; or(b) for an expenditure referred to in section 6(1)(c) of this Schedule—at the time the expenditure is incurred by the person.(2) However, for a person who is about to carry on a trade, profession or business, the following R&D expenditures are treated as if they had been incurred on the first day on which the person carries on the trade, profession or business—(a) a payment referred to in section 6(1)(a) or (b) of this Schedule made by the person;(b) an expenditure referred to in section 6(1)(c) of this Schedule incurred by the person.(3) This section applies, subject to section 5 of Schedule 17L, to a person that is a re-domiciled company. (Added 14 of 2025 s. 155) 8. Meaning of Type A expenditure A Type A expenditure, in relation to a trade, profession or business in respect of which a person is chargeable to tax under Part 4, is—(a) for a payment made, or other expenditure incurred, on or after the commencement date—an R&D expenditure other than a Type B expenditure within the meaning of section 10(1)(a) of this Schedule; or(b) for a payment made, or other expenditure incurred, during the specified period—an interim Type A expenditure. 9. Meaning of interim Type A expenditure (1) An interim Type A expenditure is a payment made during the specified period that—(a) would have been deductible under section 16B(1)(a) of the pre-amended Ordinance; and(b) would not be a Type B expenditure within the meaning of section 10(1)(a) of this Schedule deductible under section 16B of the amended Ordinance if, on the date of payment, that Ordinance were in force.(2) Also, an interim Type A expenditure is a payment that—(a) is made during the specified period to a university, college, institute, association, organization or corporation (entity) that is, on the commencement date, a designated local research institution;(b) would not have been deductible under section 16B(1)(a) of the pre-amended Ordinance; and(c) would be a Type A expenditure within the meaning of section 8(a) of this Schedule deductible under section 16B of the amended Ordinance if, on the date of payment, that Ordinance were in force and the entity were a designated local research institution.(3) Also, an interim Type A expenditure is any other expenditure (specified expenditure) incurred during the specified period that—(a) would have been deductible under section 16B(1)(b) of the pre-amended Ordinance; and(b) would not be a Type B expenditure within the meaning of section 10(1)(a) of this Schedule deductible under section 16B of the amended Ordinance if, on the date on which the specified expenditure is incurred, that Ordinance were in force. 10. Meaning of Type B expenditure (1) A Type B expenditure, in relation to a trade, profession or business in respect of which a person is chargeable to tax under Part 4, is—(a) for a payment made, or other expenditure incurred, on or after the commencement date—an R&D expenditure falling within any of the following descriptions—(i) a payment to a designated local research institution for a qualifying R&D activity related to the trade, profession or business;(ii) a payment to a designated local research institution which has, as an object, the undertaking of a qualifying R&D activity related to the class of trade, profession or business to which the trade, profession or business belongs, where the payment is used for pursuing that object;(iii) a qualifying expenditure related to the trade, profession or business; or(b) for a payment made, or other expenditure incurred, during the specified period—an interim Type B expenditure.(2) For the purposes of subsection (1)(a)(i) and (ii), a payment to a local institution—(a) that is not a university or college; and(b) that is not, and never has been, a designated local research institution,is a payment to a designated local research institution if the local institution is designated as a designated local research institution within 6 months after the date of payment. 11. Meaning of interim Type B expenditure (1) An interim Type B expenditure is a payment that—(a) is made during the specified period to a university, college, institute, association, organization or corporation (entity) that is, on the commencement date, a designated local research institution; and(b) would be a Type B expenditure within the meaning of section 10(1)(a) of this Schedule deductible under section 16B of the amended Ordinance if, on the date of payment, that Ordinance were in force and the entity were a designated local research institution.(2) Also, an interim Type B expenditure is any other expenditure (specified expenditure) incurred during the specified period that—(a) would have been deductible under section 16B(1)(b) of the pre-amended Ordinance; and(b) would be a Type B expenditure within the meaning of section 10(1)(a) of this Schedule deductible under section 16B of the amended Ordinance if, on the date on which the specified expenditure is incurred, that Ordinance were in force. 12. Meaning of qualifying expenditure related to trade, profession or business (1) A qualifying expenditure related to a trade, profession or business is—(a) an expenditure in relation to an employee who is engaged directly and actively in a qualifying R&D activity related to the trade, profession or business; or(b) an expenditure on a consumable item that is used directly in a qualifying R&D activity related to the trade, profession or business.(2) In ascertaining the expenditure in relation to an employee who is only partly engaged directly and actively in a qualifying R&D activity related to the trade, profession or business, the appropriate proportion of the expenditure is to be taken into account.(3) In ascertaining the expenditure on a consumable item that is only partly used directly in a qualifying R&D activity related to the trade, profession or business, the appropriate proportion of the expenditure is to be taken into account.(4) For the purposes of this section—(a) a person is not engaged directly and actively in a qualifying R&D activity related to a trade, profession or business only because the person provides, in support of the activity, services such as—(i) any accounting service;(ii) any administrative service; or(iii) any secretarial service; and(b) a consumable item is not used directly in a qualifying R&D activity related to a trade, profession or business only because the item is used in providing, in support of the activity, services such as—(i) any accounting service;(ii) any administrative service; or(iii) any secretarial service.(5) In this section—consumable item (消耗品) means any material or item, including any fuel, power and water that, when used, is consumed or transformed in such a way that it is no longer usable in its original form;director (董事) means a person who is—(a) a director as defined by section 2(1) of the Companies Ordinance (Cap. 622) (Cap. 622 director);(b) a shadow director as defined by section 2(1) of the Companies Ordinance (Cap. 622) (shadow director); or(c) a person who has similar functions, powers and duties to a Cap. 622 director or a shadow director under the law of a place outside Hong Kong that is similar to the Companies Ordinance (Cap. 622);expenditure in relation to an employee (關於僱員的開支)—(a) means any salary, wages or any of the following items, paid or granted (whether in cash or any other form), to or in respect of an employee in relation to the employment—(i) an ordinary annual contribution to a fund duly established under a recognized occupational retirement scheme;(ii) an ordinary annual premium in respect of a contract of insurance under a recognized occupational retirement scheme;(iii) any contributions made to a mandatory provident fund scheme at regular intervals that are either of similar or substantially similar amounts or of amounts calculated by reference to a scale or a fixed percentage of the employee’s salary or other remuneration;(iv) any other benefit that constitutes a cash outlay paid by the employer; and(b) does not include any remuneration of a director, or any item that falls within the description in paragraph (a)(i), (ii), (iii) or (iv) paid or granted (whether in cash or any other form) to or in respect of a director. Part 2 Deduction for R&D Expenditures 13. Total amount of deduction under section 16B (1) This section applies subject to sections 14 and 15 of this Schedule.(2) In ascertaining the profits from a trade, profession or business in respect of which a person is chargeable to tax under Part 4 for a year of assessment, the amount allowed to be deducted under section 16B for R&D expenditures incurred by the person during the basis period for the year of assessment is the sum of—(a) for Type A expenditures—subject to subsection (3), 100% of the expenditures; and(b) for Type B expenditures—(i) if the total amount of the expenditures exceeds $2,000,000—$6,000,000 plus 200% of the part of the expenditures that exceeds $2,000,000; or(ii) if the total amount of the expenditures does not exceed $2,000,000—300% of the expenditures.(3) If—(a) a Type A expenditure is incurred for an R&D activity carried on outside Hong Kong in relation to a trade, profession or business; and(b) the trade, profession or business is carried on partly in, and partly out of, Hong Kong,the amount allowed to be deducted for the expenditure is the appropriate proportion of the expenditure that the Commissioner considers is reasonable in the circumstances. 14. Expenditures that may not be deducted No deduction is to be allowed under section 16B for an R&D expenditure incurred on or after the commencement date by a person if—(a) for an R&D expenditure incurred by the person that falls within the description in section 6(1)(a) or (c) of this Schedule—(i) any rights generated from the activity are not, or will not be, fully vested in the person; or(ii) the activity is undertaken for another person;(b) the expenditure is, or is to be, met directly or indirectly by—(i) the Government;(ii) the government of any place outside Hong Kong;(iii) any public or local authority in Hong Kong or elsewhere; or(iv) another person; or(c) the expenditure is incurred under an arrangement the main purpose, or one of the main purposes, of which is to enable the person to obtain—(i) a deduction to which the person would not otherwise be entitled under section 16B; or(ii) a deduction of a greater amount than the amount to which the person would otherwise be entitled under section 16B. 15. No multiple deduction An R&D expenditure may only be deducted for one trade, profession or business. Part 3 Proceeds of Sale 16. Proceeds of sale of certain plant or machinery treated as trading receipts (1) This section applies in relation to plant or machinery representing expenditure or expenditures of a capital nature allowed under section 16B as a deduction or deductions in ascertaining the profits from a trade, profession or business in respect of which a person is chargeable to tax under Part 4 if—(a) the plant or machinery ceases to be used by the person for any R&D activity related to the trade, profession or business; and(b) the plant or machinery is subsequently sold by the person, or destroyed, on or after 1 April 2018.(2) The proceeds of sale of the plant or machinery must be treated as a trading receipt arising in or derived from Hong Kong of the trade, profession or business accruing—(a) at the time of the sale; or(b) if the sale occurs on or after the date on which the trade, profession or business is permanently discontinued—immediately before the discontinuance.(3) However, subsection (2) applies to the proceeds of sale of the plant or machinery only to the extent that the proceeds—(a) are not chargeable to tax under any other provision of Part 4; and(b) do not exceed the total amount of deductions allowed under section 16B for expenditure or expenditures of a capital nature represented by the plant or machinery.(4) If the plant or machinery is destroyed—(a) the plant or machinery is, for the purposes of subsection (2), to be treated as if it had been sold immediately before its destruction; and(b) any insurance moneys or other compensation of any description received by the person carrying on the trade, profession or business in respect of the destruction, and any money received by the person in respect of the remains of the plant or machinery, are to be treated as if they were the proceeds of that sale.(5) For the purposes of this section, a sale occurs at the time of its completion or the time when possession of the plant or machinery is given, whichever happens earlier. 17. Proceeds of sale of rights treated as trading receipts (1) This section applies in relation to rights sold on or after 1 April 2018 where the rights were generated from one or more R&D activities for which expenditure or expenditures have been allowed under section 16B as a deduction or deductions in ascertaining the profits from a trade, profession or business in respect of which a person is chargeable to tax under Part 4.(2) This section applies despite the exclusion relating to the sale of capital assets in section 14.(3) The proceeds of sale of the rights must, to the extent that the proceeds are not chargeable to tax under any other provision of Part 4, be treated as a trading receipt arising in or derived from Hong Kong of the trade, profession or business of a specified amount accruing—(a) unless paragraph (b) applies—at the time of completion of the sale; or(b) if the sale is completed on or after the date on which the trade, profession or business is permanently discontinued—immediately before the discontinuance.(4) For the purposes of subsection (3), the specified amount is—(a) if the expenditures deducted for the R&D activity or activities that generated the rights (underlying activities) consist of both Type A expenditure and Type B expenditure—the specified amount calculated under subsection (7);(b) otherwise—the lesser of—(i) the total amount of deductions allowed under section 16B for the expenditures; and(ii) subject to subsection (5), the proceeds of sale.(5) If any relevant Type A expenditure for the underlying activities was not allowed to be deducted in full because of the operation of section 13(3) of this Schedule or section 16B(2) (as in force before the commencement date), the proceeds of sale referred to in subsection (4)(b)(ii) are to be adjusted downward.(6) The adjusted proceeds of sale are to bear the same ratio to the actual proceeds of sale as the ratio that the total amount of deduction or deductions allowed for all Type A expenditures for the underlying activities bears to those Type A expenditures.(7) The specified amount referred to in subsection (4)(a) is to be calculated in accordance with the following steps— Step 1 Divide the proceeds of sale into sale proceeds A and sale proceeds B according to the ratio between— (a) Type A expenditures that were incurred on the underlying activities; and (b) Type B expenditures that were incurred on the underlying activities. Step 2 Calculate an amount A which equals the lesser of— (a) the total amount of deductions for Type A expenditures; and (b) sale proceeds A. For the purpose of calculating amount A, sale proceeds A are to be adjusted downward if any relevant Type A expenditure for the underlying activities was not allowed to be deducted in full because of the operation of section 13(3) of this Schedule or section 16B(2) (as in force before the commencement date). The adjusted amount is to bear the same ratio to sale proceeds A as the ratio that the total amount of deduction or deductions allowed for all Type A expenditures for the underlying activities bears to those Type A expenditures. Step 3 Calculate an amount B which equals the lesser of— (a) the total amount of deductions for Type B expenditures; and (b) sale proceeds B. Step 4 Add amount A and amount B together to get the specified amount.

(8) To avoid doubt and without limiting the meaning of expenditure in this Schedule, for the purposes of subsections (1) and (4), an expenditure includes a payment.(9) In this section—proceeds of sale (售賣得益) means the proceeds of sale that are not attributable to the sale of plant or machinery;Type A expenditure (甲類開支) includes—(a) any payment described in section 16B(1)(a) (as in force before the commencement date) that is made before 1 April 2018; and(b) any expenditure described in section 16B(1)(b) (as in force before the commencement date) that is incurred before 1 April 2018. Part 4 Miscellaneous Matters 18. Commissioner may seek advice from Commissioner for I&T on certain matters (1) This section applies if a claim, or an application under section 88A(1), is made by a person to the Commissioner in relation to a deduction under section 16B.(2) On receiving the claim or application, the Commissioner may seek advice from the Commissioner for I&T, or a public officer authorized by the Commissioner for I&T, in order to ascertain—(a) for a claim made in relation to a deduction under section 16B—(i) whether an activity constitutes an R&D activity or a qualifying R&D activity; and(ii) whether an R&D expenditure was incurred by the claimant in relation to an R&D activity or a qualifying R&D activity; and(b) for an application made in relation to a deduction under section 16B—(i) whether an activity constitutes an R&D activity or a qualifying R&D activity;(ii) whether an R&D expenditure that was incurred by the applicant was incurred in relation to an R&D activity or a qualifying R&D activity; and(iii) whether an R&D expenditure to be incurred by the applicant is, if incurred, an R&D expenditure incurred in relation to an R&D activity or a qualifying R&D activity. 19. Designation of local institutions as designated local research institution (1) The Commissioner for I&T may designate any of the following institutions as a designated local research institution—(a) any university or college located in Hong Kong;(b) any other local institution that undertakes qualifying R&D activities in Hong Kong.(2) If the Commissioner for I&T decides to designate a university, college or local institution under subsection (1), the Commissioner for I&T must, as soon as reasonably practicable, give a copy of the instrument of designation to the university, college or institution.(3) A designation made under subsection (1)—(a) takes effect on the date specified in the instrument of designation; and(b) may be revoked by the Commissioner for I&T at any time.(4) If the designation of a university, college or local institution is revoked under subsection (3)(b), the Commissioner for I&T must, as soon as reasonably practicable, give a copy of the instrument of revocation to the university, college or institution.(5) The revocation takes effect on the date specified in the instrument of revocation.(6) In this section—local institution (本地機構) means an institute, association, organization or corporation that is located in Hong Kong. Part 5 Transitional Provision for Inland Revenue (Amendment) (No. 7) Ordinance 2018 20. Transitional provision relating to section 16B (1) This section applies for the purposes of ascertaining the profits from a trade, profession or business in respect of which a person is chargeable to tax under Part 4 for a year of assessment if the basis period of the person for that year of assessment includes all or any of the specified period.(2) Section 16B (other than section 16B(3) and (3A)), as in force before the commencement date, continues to apply in relation to—(a) a payment made before 1 April 2018; and(b) an expenditure incurred before 1 April 2018.(3) Section 16B, as in force before the commencement date, continues to apply in relation to a sale of plant or machinery, and to a sale of rights generated from one or more R&D activities, that occurred before 1 April 2018. Editorial Note: * Commencement date: 2 November 2018. Schedule 46 [s. 89(22)]Transitional Provisions Relating to Provisional Salaries Tax in respect of Year of Assessment 2019/20 (Schedule 46 added 31 of 2018 s. 15) 1. Interpretation In this Schedule—insured person (受保人) has the meaning given by section 26I(1);qualifying annuity premiums (合資格年金保費) has the meaning given by section 26N(1); (Added 7 of 2019 s. 9)qualifying deferred annuity policy (合資格延期年金保單) has the meaning given by section 26N(1); (Added 7 of 2019 s. 9)qualifying premiums (合資格保費) has the meaning given by section 26I(1);tax deductible MPF voluntary contributions (可扣稅強積金自願性供款) has the meaning given by section 26S(2); (Added 7 of 2019 s. 9)VHIS policy (自願醫保計劃保單) has the meaning given by section 26I(1);year of assessment 2019/20 (2019/20課稅年度) means the year of assessment commencing on 1 April 2019. 2. Application for holding over payment of provisional salaries tax on additional ground (1) A person who is liable to pay provisional salaries tax in respect of the year of assessment 2019/20 may apply to the Commissioner to have the payment of the whole or part of the tax held over until the person is required to pay salaries tax for the year.(2) An application may be made under subsection (1) if, for the year of assessment 2019/20, a deduction under section 26K in respect of qualifying premiums paid for an insured person under a VHIS policy is, or is likely to be, allowable to the person mentioned in subsection (1).(2A) An application may also be made under subsection (1) if, for the year of assessment 2019/20, either of the following deductions is, or is likely to be, allowable to the person mentioned in subsection (1)—(a) a deduction under section 26O in respect of qualifying annuity premiums paid under a qualifying deferred annuity policy;(b) a deduction under section 26S in respect of tax deductible MPF voluntary contributions paid. (Added 7 of 2019 s. 9)(3) This section does not affect the operation of section 63E. 3. Provisions supplementary to section 2 of this Schedule (1) This section applies to an application under section 2 of this Schedule.(2) The application must be made in writing.(3) The application must be made not later than—(a) the 28th day before the day by which the provisional salaries tax is to be paid; or(b) the 14th day after the date of the notice for payment of provisional salaries tax under section 63C(6),whichever is the later.(4) However, the Commissioner may, if satisfied that it is appropriate, either generally or in a particular case, postpone the deadline.(5) On receipt of the application, the Commissioner—(a) must consider the application; and(b) may hold over the payment of the whole or part of the provisional salaries tax.(6) The Commissioner must, by notice in writing, inform the applicant of the Commissioner’s decision. Schedule 47 [s. 89(23)]Transitional Provisions for Inland Revenue (Amendment) Ordinance 2019 (Schedule 47 added 4 of 2019 s. 14) 1. In this Schedule—(a) 2019 Amendment Ordinance (《2019年修訂條例》) means the Inland Revenue (Amendment) Ordinance 2019 (4 of 2019);(b) *commencement date (生效日期) means the day on which the 2019 Amendment Ordinance comes into operation;(c) specified instrument (指明票據) means an instrument falling within paragraph (c), (d) or (e) of the definition of regulatory capital security in section 17A(1) that is issued before the commencement date; and(d) in relation to a person, a year of assessment is the transitional year of assessment (過渡課稅年度) if the commencement date falls within the basis period of the person for the year of assessment. 2. Subject to sections 3, 4, 5 and 6 of this Schedule, the amendments made to sections 2, 14D, 14F, 15, 16, 17A, 17D, 17E and 17F by the 2019 Amendment Ordinance apply only in ascertaining the profits in respect of which a person is chargeable to tax under Part 4 for the transitional year of assessment or any subsequent year of assessment. 3. Section 15(1)(ib) and (lb) and (1D) does not apply to sums received or accrued before the commencement date. 4. Section 16(2)(ab) and (2AAB) applies only to sums payable on or after the commencement date. 5. For a regulatory capital security issued before the commencement date—(a) section 17D as amended by the 2019 Amendment Ordinance applies only in ascertaining profits arising on or after the commencement date in respect of which a specified connected person of the issuer of the security is chargeable to tax under Part 4;(b) in applying section 17D(2) to a specified connected person of the issuer of the security if the specified connected person has included any sums as assessable profits or losses when bringing the security into account at a fair value—(i) the security is taken to have been disposed of and re-acquired at its fair value on the commencement date; and(ii) any change in value between the end of the basis period for the year of assessment immediately preceding the transitional year of assessment and the commencement date is to be brought into account for computing the assessable profits for the transitional year of assessment;(c) section 17D(3) applies only to a write-down or conversion effected on or after the commencement date; and(d) section 17D(4) applies only to a write-up effected on or after the commencement date. 6. For a specified instrument—(a) the following provisions apply only to sums received or accrued, in respect of the instrument, on or after the commencement date—(i) section 15(1)(f), (g), (i), (ia), (j), (k), (l) and (la);(ii) section 17B (in so far as it relates to a person to whom or for whose benefit a sum is payable in respect of the instrument);(b) the following provisions apply only to sums payable, in respect of the instrument, on or after the commencement date—(i) section 16(1)(a) and (2AA);(ii) section 17B (in so far as it relates to the issuer of the instrument);(iii) section 17F;(c) in applying section 17C(2) to the issuer of the instrument who has included any sums as assessable profits or losses when bringing the instrument into account at a fair value—(i) the liability under the instrument is taken to have been released and re-assumed at its fair value on the commencement date; and(ii) any change in value between the end of the basis period for the year of assessment immediately preceding the transitional year of assessment and the commencement date is to be brought into account for computing the assessable profits for the transitional year of assessment;(d) section 17C(3) applies only to a write-down or conversion effected on or after the commencement date; and(e) section 17C(4) applies only to a write-up effected on or after the commencement date. 7. Sections 6, 7 and 8 of Schedule 36 have effect as if section 17A had not been amended by the 2019 Amendment Ordinance. Editorial Note: * Commencement date: 15 February 2019. Schedule 48 [s. 89(24)]Transitional Provisions for Inland Revenue (Amendment) (No. 2) Ordinance 2019 (Schedule 48 added 6 of 2019 s. 13) 1. Interpretation In this Schedule—Amendment Ordinance (《修訂條例》) means the Inland Revenue (Amendment) (No. 2) Ordinance 2019 (6 of 2019);*commencement date (生效日期) means the day on which the Amendment Ordinance is published in the Gazette. 2. Tax treatment of financial instruments Sections 18G, 18H, 18I, 18J, 18K and 18L apply in relation to a year of assessment for which the basis period begins on or after 1 January 2018. 3. Interest expense payable to overseas export credit agency The amendments made to section 16 by the Amendment Ordinance apply to interest accruing on or after the commencement date. 4. Income of visiting teacher or researcher The amendments made to section 8 by the Amendment Ordinance apply in relation to a year of assessment beginning on or after 1 April 2019. 5. Sibling relationship The amendment made to section 30B by the Amendment Ordinance applies in relation to a year of assessment beginning on or after 1 April 2019. Editorial Note: * Commencement date: 1 March 2019. Schedule 49 [s. 14AB]Specified Risks and Liabilities for Definition of Specified General Insurance Business in Section 14AB (Schedule 49 added 15 of 2020 s. 17) Column 1 Column 2 Column 3 Item Risks and liabilities Description 1. Health risk The risk of loss to a person attributable to sickness or infirmity. 2. Mortgage guarantee risk The risk of loss to a mortgage loan provider arising from any default in payment by a mortgagor in respect of a mortgage loan for property. 3. Motor vehicle damage risk The risk of loss of or damage to vehicles used on land, including motor vehicles but excluding railway rolling stock, or the risk of damage arising out of or in connection with the use of motor vehicles on land, including third-party risks and carrier’s liability. 4. Employees’ compensation liability The liability of an employer to pay compensation for the injury by accident or for the death of an employee that arises out of and in the course of employment. 5. Owners’ corporation third-party liability The liability of a corporation of the owners of flats in a multi-storey building, insofar as the liability relates to the common parts of the building or the property of the corporation, that is incurred by the corporation in respect of the death of, or bodily injury to, any person. Schedule 50 [s. 89(25)]Transitional Provisions for Inland Revenue (Amendment) (Profits Tax Concessions for Insurance-related Businesses) Ordinance 2020 (Schedule 50 added 15 of 2020 s. 17) 1. In this Schedule—*commencement date (生效日期) means the date on which the Inland Revenue (Amendment) (Profits Tax Concessions for Insurance-related Businesses) Ordinance 2020 (15 of 2020) comes into operation. 2. In computing the assessable profits of a corporation that fall within section 14B(1)(c) or (d), sums received by or accrued to the corporation before the commencement date are not to be taken into account. Editorial Note: * Commencement date: 19 March 2021. Schedule 51 [s. 89(26)]Transitional Provisions for Inland Revenue (Amendment) (Ship Leasing Tax Concessions) Ordinance 2020 (Schedule 51 added 5 of 2020 s. 20) 1. In calculating the qualifying profits in relation to a corporation for the purposes of section 14P(1), sums received by or accrued to the corporation before 1 April 2020 are not to be taken into account. 2. In calculating the qualifying profits in relation to a corporation for the purposes of section 14T(1), sums received by or accrued to the corporation before 1 April 2020 are not to be taken into account. 3. Section 15(1)(o) does not apply to sums received or accrued before the Inland Revenue (Amendment) (Ship Leasing Tax Concessions) Ordinance 2020 (5 of 2020) comes into operation. Schedule 52 [s. 89(27)]Transitional Provisions Relating to Provisional Salaries Tax in respect of Year of Assessment 2022/23 (Schedule 52 added 7 of 2022 s. 8) 1. Interpretation In this Schedule—year of assessment 2022/23 (2022/23課稅年度) means the year of assessment commencing on 1 April 2022. 2. Application for holding over payment of provisional salaries tax on additional ground (1) A person who is liable to pay provisional salaries tax in respect of the year of assessment 2022/23 may apply to the Commissioner to have the payment of the whole or part of the tax held over until the person is required to pay salaries tax for the year.(2) An application may be made under subsection (1) if, for the year of assessment 2022/23, a deduction under section 26X is, or is likely to be, allowable to the person mentioned in subsection (1).(3) This section does not affect the operation of section 63E. 3. Provisions supplementary to section 2 of this Schedule (1) This section applies to an application under section 2 of this Schedule.(2) The application must be made in writing.(3) The application must be made not later than—(a) the 28th day before the day by which the provisional salaries tax is to be paid; or(b) the 14th day after the date of the notice for payment of provisional salaries tax under section 63C(6),whichever is the later.(4) However, the Commissioner may, if satisfied that it is appropriate, either generally or in a particular case, postpone the deadline.(5) On receipt of the application, the Commissioner—(a) must consider the application; and(b) may hold over the payment of the whole or part of the provisional salaries tax.(6) The Commissioner must, by written notice, inform the applicant of the Commissioner’s decision. Schedule 53 [s. 89(28)]Transitional Provision for Inland Revenue (Amendment) (Tax Concessions for Certain Shipping-related Activities) Ordinance 2022 (10 of 2022) (Schedule 53 added 10 of 2022 s. 13) 1. In calculating the qualifying profits in relation to a corporation for the purposes of section 14ZD(1), 14ZM(1) or 14ZV(1), sums received by or accrued to the corporation before 1 April 2022 are not to be taken into account. Schedule 54 [ss. 2, 15OA, 50AAA & 50AAAD](Amended 32 of 2023 s. 12; 21 of 2025 s. 32)Specifications for Section 50AAA in relation to Unilateral Tax Credits (Schedule 54 added 17 of 2022 s. 17) Part 1 Preliminary 1. Interpretation of Schedule 54 In this Schedule—adequate interest (足夠權益)—see section 50AAAC;disposal gain (處置收益) has the meaning given by section 15H(1); (Added 32 of 2023 s. 12)equity interest disposal gain (股權權益處置收益) has the meaning given by section 15H(1); (Added 32 of 2023 s. 12)Hong Kong resident person (香港居民人士) has the meaning given by section 50AAC(1);resident for tax purposes (稅務居民) has the meaning given by section 50AAC(1);similar tax (類似稅項) has the meaning given by section 50AAA(7);specified foreign-sourced income (指明外地收入) has the meaning given by section 15H(1). Part 2 Specifications for Section 50AAA 2. Specified foreign-sourced income (1) For the purposes of section 50AAA(2)—(a) the following income is specified: specified foreign-sourced income; and(b) the following condition is specified for the income: the income is chargeable to profits tax because of section 15I(1).(2) For the purposes of section 50AAA(3), the following modification is specified for applying section 50 in relation to the similar tax payable in respect of specified foreign-sourced income: section 50(1A)(a)(ii) and (1B) is to be omitted.(3) For the purposes of section 50AAA(3)(a)(i), the following provisions are specified for the similar tax payable in respect of specified foreign-sourced income—(a) the similar tax is to be allowed as a credit (tax credit) against the profits tax payable in respect of the income in Hong Kong;(b) if—(i) the income is a dividend received by a Hong Kong resident person (subject person) from a company that is resident for tax purposes in the territory concerned (investee company);(ii) the dividend is paid out of the investee company’s profits; and(iii) at the time the dividend accrues, the subject person has an adequate interest in the investee company,the tax credit allowed to the subject person is, subject to paragraph (c), to include any similar tax payable in respect of the profits in the territory;(c) only the portion of the similar tax that represents the extent of—(i) the direct or indirect beneficial interest the subject person has in, or in relation to, the investee company; or(ii) the voting rights the subject person is (whether directly or indirectly) entitled to exercise, or control the exercise of, in or in relation to the investee company,as ascertained when determining whether the subject person has an adequate interest in the investee company, is to be included in the tax credit.(4) For the purposes of section 50AAA(4), the following transitional arrangement is specified for the specification of specified foreign-sourced income under subsection (1)(a)— (Amended 32 of 2023 s. 12)(a) in relation to any specified foreign-sourced income that is a disposal gain (other than equity interest disposal gain)—section 50AAA applies in relation to profits tax payable for a year of assessment beginning on or after 1 April 2023 in respect of income accrued and received on or after 1 January 2024;(b) in relation to other specified foreign-sourced income—section 50AAA applies in relation to profits tax payable for a year of assessment beginning on or after 1 April 2022 in respect of income accrued and received on or after 1 January 2023. (Amended 32 of 2023 s. 12)(5) For the purposes of the definition of similar tax in section 50AAA(7), the following tax is specified: profits tax. Schedule 55 [s. 89(29)]Transitional Provisions for Inland Revenue (Amendment) (Taxation on Specified Foreign-sourced Income) Ordinance 2022 (Schedule 55 added 17 of 2022 s. 17) 1. Interpretation of Schedule 55 In this Schedule—specified foreign-sourced income (指明外地收入) has the meaning given by section 15H(1) as in force immediately before 1 January 2024. (Amended 32 of 2023 s. 13) 2. Transitional arrangements (1) Division 3A of Part 4 as in force immediately before 1 January 2024 and Schedule 17FC as in force immediately before 1 January 2024 apply in relation to specified foreign-sourced income accrued and received on or after 1 January 2023. (Amended 32 of 2023 s. 13)(2) Without limiting subsection (1), section 7 of Schedule 17FC as in force immediately before 1 January 2024 and section 15P as in force immediately before 1 January 2024 apply in relation to losses sustained on or after 1 January 2023. (Amended 32 of 2023 s. 13)(3) Sections 50(7A) and (7B) and 50AAAB apply in relation to tax payable for a year of assessment beginning on or after 1 April 2022 in respect of income accrued and received on or after 1 January 2023.(4) The amendments made to sections 63C, 63H and 63M by the Inland Revenue (Amendment) (Taxation on Specified Foreign-sourced Income) Ordinance 2022 (17 of 2022) apply in relation to provisional tax payable for a year of assessment beginning on or after 1 April 2023. Schedule 56 [s. 89(30)]Transitional Provisions for Inland Revenue (Amendment) (Taxation on Foreign-sourced Disposal Gains) Ordinance 2023 (Schedule 56 added 32 of 2023 s. 14) 1. Interpretation of Schedule 56 In this Schedule—2023 Amendment Ordinance (《2023年修訂條例》) means the Inland Revenue (Amendment) (Taxation on Foreign-sourced Disposal Gains) Ordinance 2023 (32 of 2023);specified foreign-sourced income (指明外地收入) has the meaning given by section 15H(1). 2. Transitional arrangements (1) The amendments made to Division 3A of Part 4 and Schedule 17FC by the 2023 Amendment Ordinance apply in relation to specified foreign-sourced income accrued and received on or after 1 January 2024.(2) Without limiting subsection (1), the amendments made to section 7 of Schedule 17FC and section 15P by the 2023 Amendment Ordinance apply in relation to losses sustained on or after 1 January 2024. Schedule 57 [Schs. 17J & 58]Modifications to be Made to Certain Provisions Because of Succession of Aircraft (Schedule 57 added 5 of 2024 s. 24) Part 1 Preliminary 1. Interpretation (1) In the modified sections 14I, 14IA, 14IB, 14IC, 14ID, 14IE, 14IF, 14IG, 14IH, 14II, 14IJ and 14IK (modified provisions)—Company A (甲公司)—see section 9A(1) of Schedule 17J;Company B (乙公司)—see section 9A(1) of Schedule 17J;qualifying amalgamation (合資格合併) has the meaning given by section 40AE;specified aircraft (指明飛機), in relation to Company A, means an aircraft of Company B to which Company A has succeeded in the qualifying amalgamation.(2) The words and expressions used in modified provisions and defined in section 14G for the purposes of Subdivision 4 of Division 2 of Part 4 have the same meaning as in that Subdivision. Part 2 Modifications to Sections 14I, 14IA, 14IB, 14IC, 14ID, 14IE, 14IF, 14IG, 14IH, 14II, 14IJ and 14IK 2. Sections 14I, 14IA, 14IB, 14IC, 14ID, 14IE, 14IF, 14IG, 14IH, 14II, 14IJ and 14IK modified Sections 14I, 14IA, 14IB, 14IC, 14ID, 14IE, 14IF, 14IG, 14IH, 14II, 14IJ and 14IK are modified to read as follows— “14I. Calculation of net lease payments for right to use specified aircraft under operating lease: aircraft acquired in year of assessment preceding year of assessment beginning on 1 April 2023 (1) Subject to section 14IA, this section applies to Company A for a year of assessment (particular year) if—(a) section 14H(1) applies to Company A for the particular year; and(b) any qualifying aircraft leasing activity of Company A for the particular year relates to an operating lease of a specified aircraft—(i) that was acquired by Company B in a year of assessment preceding the year of assessment beginning on 1 April 2023; and(ii) that has been used by Company B or Company A for carrying out any qualifying aircraft leasing activity relating to an operating lease in a year of assessment preceding the year of assessment beginning on 1 April 2023.(2) The assessable profits of Company A derived from the qualifying aircraft leasing activity relating to the operating lease for the particular year are to be the net lease payments for the right to use the specified aircraft under the operating lease (NLP).(3) The NLP is to be calculated in accordance with the following formula— A = (B – C) × D where: A means the NLP; B means the aggregate amount of the gross lease payments for the right to use the specified aircraft under the operating lease (whether or not they are periodic payments and including any sum payable under a residual value guarantee) (lease income) earned by or accrued to Company A during the basis period for the particular year; C means the aggregate amount of any outgoings and expenses deductible under this Part to the extent to which they are incurred during the basis period for the particular year by Company A in the production of the lease income (relevant outgoings and expenses); and D means the percentage prescribed in section 2 of Schedule 17F. (4) If the specified aircraft is leased together with other dealings in pursuance of one bargain, then for calculating the NLP, the Commissioner must, having regard to all the circumstances of the bargain, allocate an amount of gross lease payments for the right to use the aircraft under the lease.(5) If subsection (3) applies, the relevant outgoings and expenses may not be claimed for deduction under this Part otherwise than for calculating the NLP under that subsection. 14IA. Circumstances under which section 14I does not apply (1) Section 14I does not apply to Company A for a year of assessment in respect of a qualifying aircraft leasing activity carried out by Company A in relation to an operating lease of a specified aircraft if—(a) neither Company B nor Company A has incurred any capital expenditure on the provision of the specified aircraft;(b) an allowance under Part 6 is or has been granted to a relevant person in respect of any capital expenditure incurred on the provision of the aircraft;(c) capital allowances are granted to a relevant person in a jurisdiction outside Hong Kong (non-Hong Kong jurisdiction), for the year of assessment, in respect of any capital expenditure incurred on the provision of the aircraft;(d) subject to subsection (7), the qualifying aircraft leasing activity is carried out by Company A as an owner of the aircraft and, before the aircraft is acquired by Company B—(i) the aircraft was owned and used by a lessee of the operating lease to which the qualifying aircraft leasing activity relates (lessee), whether alone or with another person; or(ii) the aircraft was owned and used by an associate of a lessee mentioned in subparagraph (i), whether alone or with another person; or(e) Company B or Company A has elected in writing that section 14IB applies in calculating its assessable profits derived from any qualifying aircraft leasing activity carried out by it in relation to any operating lease of the aircraft for the year of assessment and any subsequent year of assessment.(2) An election under subsection (1)(e), once made, is irrevocable.(3) For the purposes of subsection (1)(b), an allowance under Part 6 is to be regarded as not being or having been granted to a relevant person in respect of any capital expenditure incurred on the provision of the specified aircraft if an amount equal to the allowance has been charged to profits tax as balancing charge made on the relevant person.(4) Subsection (1)(c) does not apply to capital allowances granted to a relevant person in a non-Hong Kong jurisdiction (as described in that subsection) if Condition 1 or Condition 2 is satisfied in relation to the year of assessment.(5) Condition 1 is that—(a) the relevant person is subject to tax in the non-Hong Kong jurisdiction (non-Hong Kong tax) in respect of the gross lease payments for the right to use the specified aircraft in relation to the year of assessment (GLP);(b) the GLP is chargeable to tax under this Part;(c) the non-Hong Kong tax is a tax of substantially the same nature as tax imposed under this Part; and(d) capital allowances are granted to the relevant person in calculating any chargeable profits derived from the GLP for the purpose of the non-Hong Kong tax.(6) Condition 2 is that—(a) one or both of the specified events occur in respect of the specified aircraft in the year of assessment;(b) the relevant person is, in respect of the insurance money or other compensation or the consideration for the disposal of the aircraft (as the case requires), subject to a non-Hong Kong tax that is a tax of substantially the same nature as tax imposed under this Part (specified tax); and(c) the total amount that the relevant person is subject to the specified tax is not less than the total amount of the capital allowances granted to that person in the non-Hong Kong jurisdiction (as described in subsection (1)(c)).(7) Subsection (1)(d) does not apply if—(a) the specified aircraft was acquired by Company B from the lessee or the associate mentioned in that subsection (end-user) with a consideration that is not more than the consideration paid by the end-user to another person (supplier) for acquiring the aircraft from the supplier; and(b) no initial or annual allowance under Part 6 was or has been granted to the end-user in respect of the aircraft before the acquisition of the aircraft by Company B.(8) For the purposes of subsection (7)(b), an allowance is to be regarded as not being or having been granted if the end-user disclaims the allowance by giving the Commissioner a written notice within—(a) the period of 3 months beginning on the date on which the capital expenditure giving rise to the allowance is incurred; or(b) any further time that the Commissioner permits in a particular case.(9) In this section—relevant person (相關人士) means—(a) Company A; or(b) a connected person of Company A;specified event (指明事件)—see subsection (10).(10) For the purposes of this section, a specified event occurs in respect of an aircraft in a year of assessment if—(a) any insurance money or other compensation is accrued in relation to the aircraft in the year of assessment; or(b) the aircraft is disposed of in the year of assessment. 14IB. Calculation of net lease payments for right to use specified aircraft under operating lease: aircraft acquired in year of assessment beginning on or after 1 April 2023 and certain other aircraft (1) This section applies to Company A for a year of assessment (particular year) if—(a) section 14H(1) applies to Company A for the particular year; and(b) Condition 1, Condition 2 or Condition 3 is satisfied in relation to a specified aircraft.(2) Condition 1 is that—(a) the specified aircraft was acquired by Company B in a year of assessment beginning on or after 1 April 2023; and(b) any qualifying aircraft leasing activity carried out by Company A in the particular year relates to an operating lease of the aircraft.(3) Condition 2 is that—(a) the specified aircraft was acquired by Company B in a year of assessment preceding the year of assessment beginning on 1 April 2023 (previous year of assessment) and had not been used by Company B, nor by Company A, in any previous year of assessment for carrying out any qualifying aircraft leasing activity in relation to an operating lease; and(b) any qualifying aircraft leasing activity carried out by Company A in the particular year relates to an operating lease of the aircraft.(4) Condition 3 is that—(a) any qualifying aircraft leasing activity carried out by Company A in the particular year relates to an operating lease of the specified aircraft; and(b) either—(i) Company B or Company A has elected under section 14IA(1)(e) in relation to the specified aircraft for the particular year; or(ii) section 14I does not apply in any other case to any operating lease of the aircraft for the particular year.(5) The assessable profits derived from the qualifying aircraft leasing activity mentioned in subsection (2)(b), (3)(b) or (4)(a), as the case requires, are to be the net lease payments for the right to use the specified aircraft under the lease concerned (NLP).(6) The NLP is to be calculated in accordance with the following formula— A = B – C – D + E + F where: A means the NLP; B means the aggregate amount of the gross lease payments for the right to use the specified aircraft under the operating lease (whether or not they are periodic payments and including any sum payable under a residual value guarantee) (lease income) earned by or accrued to Company A during the basis period for the particular year; C means the aggregate amount of any outgoings and expenses deductible under this Part, to the extent to which they are incurred during the basis period for the particular year by Company A in the production of the lease income (relevant outgoings and expenses); D means the aggregate amount of the allowances granted under Part 6, to the extent that the relevant assets counted for the allowances are used during the basis period for the particular year by Company A in the production of the lease income (relevant allowances); E means the aggregate amount of the other income and trading receipts arising in or derived from Hong Kong that are attributable to the qualifying aircraft leasing activity relating to the operating lease; and F means the balancing charge to be made under Part 6 on Company A, to the extent that the relevant assets counted for the balancing charge are used in the production of specified gross lease income (relevant charge). (7) If the specified aircraft is leased together with any other dealings in pursuance of one bargain, then for calculating the NLP, the Commissioner must, having regard to all the circumstances of the bargain, allocate an amount of gross lease payments for the right to use the aircraft under the lease.(8) If subsections (5) and (6) apply—(a) the relevant outgoings and expenses and the relevant allowances may not be claimed for deduction under this Part otherwise than for calculating the NLP under subsection (6); and(b) the other income and trading receipts and the relevant charge are not taxable under this Part otherwise than for calculating the NLP under subsection (6).(9) In this section—specified gross lease income (指明總租約收入), in relation to Company A, means any gross lease payments for the right to use an aircraft of Company A under an operating lease that are used for calculating the net lease payments for the right to use the aircraft under this section;trading receipts (營業收入) does not include any amounts that are regarded as trading receipts under section 14IH, 14II or 14IJ. 14IC. Deduction of certain capital expenditure incurred in relation to specified aircraft (1) Despite section 17, this section applies to Company A for a year of assessment (particular year) if—(a) section 14IB applies to Company A for the particular year in relation to its assessable profits derived from the qualifying aircraft leasing activity relating to an operating lease of a specified aircraft;(b) the specified aircraft was an aircraft acquired by Company B; and(c) Company A uses the aircraft in the particular year for the carrying out of any qualifying aircraft leasing activity by Company A in relation to an operating lease of the aircraft.(2) Subject to section 14IF, the specified capital expenditure incurred in relation to the specified aircraft in the particular year (SCE) is deductible for Company A for that year.(3) If the particular year is the first year of assessment for which section 14IB applies to the specified aircraft, the SCE is to be determined in accordance with the formula in section 14ID(2).(4) If the particular year is any other year of assessment for which section 14IB applies to the specified aircraft, the SCE is to be determined in accordance with the formula in section 14IE(2).(5) If the SCE has been allowed to be deducted under this section for Company A, Company A is not entitled to be granted any allowance under Part 6 in respect of the capital expenditure (aircraft) incurred by it in relation to the aircraft concerned.(6) In this section—capital expenditure (aircraft) (資本開支(飛機))—see section 14IG. 14ID. Supplementary provisions for section 14IC(3) (1) This section applies for the purposes of section 14IC(3).(2) The formula referred to in section 14IC(3) is— A = B – C – D – E – F where: A means the specified capital expenditure incurred in relation to the specified aircraft in the year of assessment concerned (particular year); B means the total amount of capital expenditure (aircraft) incurred in the particular year in relation to the specified aircraft; C means the aggregate amount of the initial allowances granted under sections 37(1), 37A(1) and 39B(1) to Company A in relation to the specified aircraft; D means the aggregate amount of the annual allowances granted under sections 37(2), 37A(2) and 39B(2) to Company A in relation to the specified aircraft; E means the notional amount of the annual allowances that would have been granted to Company A in respect of the specified aircraft (NA); and F means the aggregate of the relevant amounts of capital allowances granted to relevant persons in jurisdictions outside Hong Kong. (3) For the purposes of subsection (2), the NA is the sum of the total amount determined under paragraph (a) and the total amount determined under paragraph (b)—(a) the total amount of the annual allowances that would have been granted under sections 37(2), 37A(2) and 39B(2) to Company A in respect of the specified aircraft for a section 14I-related year if the allowances had been available to Company A for that year;(b) the total amount of the annual allowances that would have been granted under sections 37(2), 37A(2) and 39B(2) to Company A in respect of the aircraft for a specific year if the allowances had been available to Company A for that year.(4) For the purposes of subsection (2), subject to subsection (6), the relevant amount of capital allowances granted to a relevant person in a jurisdiction outside Hong Kong (non-Hong Kong jurisdiction) is to be determined in accordance with the following formula— G = H – I where: G means the relevant amount of capital allowances granted to the relevant person in the non-Hong Kong jurisdiction; H means the aggregate of the total amount of capital allowances granted, to the relevant person in the non-Hong Kong jurisdiction, for each relevant year in respect of capital expenditure (aircraft) incurred in relation to the specified aircraft; and I means the aggregate of the total amount of insurance money or other compensation, accrued in each relevant year in relation to the specified aircraft, in respect of which the relevant person is subject to a specific tax in the non-Hong Kong jurisdiction. (5) For the purposes of subsection (4), G is taken to be zero if H is equal to or less than I.(6) If—(a) a relevant person is subject to a specific tax in a non-Hong Kong jurisdiction in respect of any gross lease payments for the right to use the specified aircraft in relation to the particular year (GLP);(b) the GLP is chargeable to tax under this Part; and(c) capital allowances are granted to the relevant person in calculating any chargeable profits derived from the GLP for the purpose of the specific tax,the relevant person is to be regarded as not being granted any relevant amount of capital allowances in the non-Hong Kong jurisdiction.(7) In this section—capital expenditure (aircraft) (資本開支(飛機))—see section 14IG;relevant person (相關人士) means—(a) Company A; or(b) a connected person of Company A;relevant year (相關年度) means the particular year or any year of assessment preceding the particular year;section 14I-related year (第14I條所涉年度)—see subsection (8);specific tax (指定稅)—see subsection (9);specific year (指定年度)—see subsection (10).(8) For the purposes of this section, a year of assessment is a section 14I-related year in relation to Company A if section 14I has applied to Company B or Company A because of the specified aircraft for the year of assessment.(9) For the purposes of this section, a tax is a specific tax if it is a tax of substantially the same nature as tax imposed under this Part.(10) For the purposes of this section, a year of assessment is a specific year in relation to Company A if the specified aircraft has not been used at any time during the year of assessment for producing chargeable profits of Company B or Company A.(11) For the purposes of this section, in calculating the total amount of capital expenditure (aircraft) incurred in the particular year in relation to the specified aircraft—(a) any capital expenditure (aircraft) that is incurred in the particular year in relation to the aircraft is to be taken into account unless it is regarded as being incurred or taken to be incurred in another year of assessment in relation to the aircraft under section 14IG;(b) any capital expenditure (aircraft) that is regarded as being incurred in the particular year in relation to the aircraft is to be taken into account unless it is taken to be incurred in another year of assessment in relation to the aircraft under section 14IG; and(c) any capital expenditure (aircraft) that is taken to be incurred in the particular year in relation to the aircraft is to be taken into account. 14IE. Supplementary provisions for section 14IC(4) (1) This section applies for the purposes of section 14IC(4).(2) The formula referred to in section 14IC(4) is— J = K – L where: J means the specified capital expenditure incurred in relation to the specified aircraft in the year of assessment concerned (particular year); K means the total amount of capital expenditure (aircraft) incurred in the particular year in relation to the specified aircraft; and L means the aggregate of the relevant amounts of capital allowances granted to relevant persons in jurisdictions outside Hong Kong. (3) For the purposes of subsection (2), subject to subsection (5), the relevant amount of capital allowances granted to a relevant person in a jurisdiction outside Hong Kong (non-Hong Kong jurisdiction) is to be determined in accordance with the following formula— M = N – P where: M means the relevant amount of capital allowances granted to the relevant person in the non-Hong Kong jurisdiction; N means the total amount of capital allowances granted, to the relevant person in the non-Hong Kong jurisdiction, for the particular year in respect of capital expenditure (aircraft) incurred in relation to the specified aircraft; and P means the total amount of insurance money or other compensation, accrued in the particular year in relation to the specified aircraft, in respect of which the relevant person is subject to a specific tax in the non-Hong Kong jurisdiction. (4) For the purposes of subsection (3), M is taken to be zero if N is equal to or less than P.(5) If—(a) a relevant person is subject to a specific tax in a non-Hong Kong jurisdiction in respect of any gross lease payments for the right to use the specified aircraft in relation to the particular year (GLP);(b) the GLP is chargeable to tax under this Part; and(c) capital allowances are granted to the relevant person in calculating any chargeable profits derived from the GLP for the purpose of the specific tax,the relevant person is to be regarded as not being granted any relevant amount of capital allowances in the non-Hong Kong jurisdiction.(6) In this section—capital expenditure (aircraft) (資本開支(飛機))—see section 14IG;relevant person (相關人士) means—(a) Company A; or(b) a connected person of Company A;specific tax (指定稅)—see subsection (7).(7) For the purposes of this section, a tax is a specific tax if it is a tax of substantially the same nature as tax imposed under this Part.(8) For the purposes of this section, in calculating the total amount of capital expenditure (aircraft) incurred in the particular year in relation to the specified aircraft—(a) any capital expenditure (aircraft) that is incurred in the particular year in relation to the aircraft is to be taken into account unless it is regarded as being incurred or taken to be incurred in another year of assessment in relation to the aircraft under section 14IG;(b) any capital expenditure (aircraft) that is regarded as being incurred in the particular year in relation to the aircraft is to be taken into account unless it is taken to be incurred in another year of assessment in relation to the aircraft under section 14IG; and(c) any capital expenditure (aircraft) that is taken to be incurred in the particular year in relation to the aircraft is to be taken into account. 14IF. Circumstances under which capital expenditure is not allowed to be deducted under section 14IC (1) Section 14IC does not apply to Company A in relation to a specified aircraft for a year of assessment if—(a) any allowance has been granted under Part 6 or deduction has been allowed under this Part to Company A in respect of any capital expenditure (aircraft) in relation to the specified aircraft and the aggregate amount of the allowances and deductions so granted or allowed is equal to the total amount of capital expenditure (aircraft) in relation to the aircraft; or(b) subject to subsection (2), the aircraft was, before the acquisition of the aircraft by Company B—(i) owned and used by a lessee of an operating lease of the aircraft (whether alone or with any other person); or(ii) owned and used by an associate of a lessee of an operating lease of the aircraft (whether alone or with any other person).(2) Subsection (1)(b) does not apply if—(a) the specified aircraft was acquired by Company B from the lessee or any associate of the lessee (end-user) with a consideration not more than the consideration paid by the end-user to another person (supplier) for acquiring the aircraft from the supplier; and(b) no initial or annual allowance under Part 6 was or has been granted to the end-user in respect of the aircraft before the acquisition of the aircraft by Company B.(3) For the purposes of subsection (2)(b), an allowance is to be regarded as not being or having been granted if the end-user disclaims the allowance by giving the Commissioner a written notice within—(a) the period of 3 months beginning on the date on which the capital expenditure giving rise to the allowance is incurred; or(b) any further time that the Commissioner permits in a particular case.(4) In this section—capital expenditure (aircraft) (資本開支(飛機))—see section 14IG. 14IG. Meaning of capital expenditure (aircraft)—for sections 14IC, 14ID, 14IE and 14IF (1) This section applies for the purposes of sections 14IC, 14ID, 14IE and 14IF.(2) Any capital expenditure incurred by Company A in relation to a specified aircraft is capital expenditure (aircraft) in relation to the specified aircraft.(3) Capital expenditure incurred by Company A in relation to a specified aircraft includes—(a) any capital expenditure incurred by Company B on the provision of the specified aircraft;(b) any consideration for the acquisition of the aircraft made by Company B;

and(c) any legal expenses and valuation fees incurred by Company B in connection with the acquisition.(4) However, neither the expenditure mentioned in paragraph (a) nor the expenditure mentioned in paragraph (b) is capital expenditure incurred by Company A in relation to a specified aircraft—(a) any expenditure incurred by Company B or Company A in relation to the specified aircraft that is reimbursed to Company B or Company A by way of or attributable to a grant, subsidy or similar financial assistance;(b) any capital expenditure incurred by Company B or Company A that has been deducted or may be deducted in relation to the aircraft under any section (other than section 14IC) in this Part.(5) If the specified aircraft was acquired by Company B together with any other assets in pursuance of one bargain, then for determining the actual amount of the consideration for the acquisition, the Commissioner must, having regard to all the circumstances of the bargain, allocate an amount of the consideration for the acquisition of the aircraft.(6) If the Commissioner is of the opinion that the consideration for the acquisition of the specified aircraft by Company B does not represent the true market value of the aircraft at the time of the acquisition—(a) the Commissioner may determine the true market value of the aircraft; and(b) the amount so determined is to be taken to be the consideration for the acquisition.(7) If—(a) after the qualifying amalgamation, Company A begins to use the specified aircraft in a year of assessment (particular year) for the carrying out of any qualifying aircraft leasing activity in relation to an operating lease of the aircraft but the particular year is not the year of assessment in which the acquisition takes place; and(b) Company B had not used the aircraft for the carrying out of such activity before the qualifying amalgamation,any capital expenditure (aircraft) in relation to the aircraft that was incurred before the particular year is to be regarded as being incurred in the particular year.(8) If any capital expenditure (aircraft) in relation to a specified aircraft (expenditure) is incurred or regarded as being incurred in a year of assessment preceding the year of assessment beginning on 1 April 2023, the expenditure is taken to be incurred in the year of assessment beginning on 1 April 2023. 14IH. Consideration for disposal of specified aircraft etc. to be regarded as trading receipts of Company A—aircraft in respect of which no election has been made under section 14IA(1)(e) (1) This section applies to Company A if—(a) section 14I applies or has applied to Company A or Company B in relation to a specified aircraft for a year of assessment beginning on or after 1 April 2023;(b) no election has been made under section 14IA(1)(e) in respect of the specified aircraft for any year of assessment; and(c) either or both of the following events occur on or after the qualifying amalgamation—(i) any insurance money or other compensation is accrued to Company A in relation to the aircraft;(ii) the aircraft is disposed of by Company A.(2) Despite the exclusion relating to the sale of capital assets in section 14, each of the following amounts in relation to the specified aircraft is to be regarded as a trading receipt arising in or derived from Hong Kong in relation to the qualifying aircraft leasing activity of Company A (trading receipt)—(a) the amount of any insurance money or other compensation accrued to Company A in relation to the aircraft (IMOC);(b) the actual amount of the consideration for the disposal of the aircraft determined in accordance with section 14IK.(3) However, if, in relation to the specified aircraft, the aggregate of the total amount of the IMOCs and the amount mentioned in subsection (2)(b) accrued or regarded as being accrued in a particular year exceeds the specified amount (SA), the excess amount is not regarded as any trading receipt of Company A under subsection (2) for the particular year.(4) The SA—(a) if—(i) any insurance money or other compensation—(A) is accrued or regarded as being accrued to Company B, in relation to the specified aircraft, in the particular year or a year of assessment preceding the particular year (preceding year); or(B) is accrued or regarded as being accrued to Company A, in relation to the aircraft, in a preceding year; and(ii) the insurance money or other compensation is chargeable to tax under this Part in relation to Company B or Company A,is the amount of the notional amount (NA) minus the total amount of all such insurance money or other compensation; and(b) in any other case—is the NA.(5) Subject to subsection (6), the NA is to be the amount determined in accordance with the following formula— A = B1 + B2 × (1 – C) C where: A means the NA; B1 means the aggregate of the total amount of the net lease payments for the right to use the specified aircraft, calculated in accordance with section 14I in relation to Company B, for each particular year (aggregate NLP1); B2 means the aggregate of the total amount of the net lease payments for the right to use the specified aircraft, calculated in accordance with section 14I in relation to Company A, for each particular year (aggregate NLP2); and C means the percentage prescribed in section 2 of Schedule 17F. (6) If the sum of the aggregate NLP1 and the aggregate NLP2 is equal to or less than zero, the NA is taken to be zero.(7) For a trading receipt that falls within the description in subsection (2)(a)—(a) if Company A has permanently discontinued its qualifying aircraft leasing activity before the IMOC concerned is accrued—the trading receipt is to be regarded as being accrued in the year of assessment in which the discontinuance takes place; and(b) in any other case—the trading receipt is accrued in the year of assessment in which the IMOC is accrued.(8) For a trading receipt that falls within the description in subsection (2)(b)—(a) if Company A has permanently discontinued its qualifying aircraft leasing activity before the disposal of the specified aircraft takes place—the trading receipt is to be regarded as being accrued in the year of assessment in which the discontinuance takes place; and(b) in any other case—the trading receipt is accrued in the year of assessment in which the aircraft is disposed of.(9) In this section—particular year (特定年度) means a year of assessment beginning on or after 1 April 2023. 14II. Consideration for disposal of specified aircraft etc. to be regarded as trading receipts of Company A—aircraft in respect of which section 14I has not applied for year of assessment beginning on or after 1 April 2023 (1) This section applies to Company A if—(a) section 14IB applies to Company A for a year of assessment in relation to a specified aircraft;(b) the application of that section to the specified aircraft is not because of an election made under section 14IA(1)(e); and(c) either or both of the following events occur on or after the qualifying amalgamation—(i) any insurance money or other compensation is accrued to Company A in relation to the aircraft;(ii) the aircraft is disposed of by Company A.(2) This section also applies to Company A if—(a) section 14IB applies to Company A for a year of assessment in relation to a specified aircraft because of an election made under section 14IA(1)(e);(b) section 14I has not applied to Company B, nor to Company A, in relation to the specified aircraft for any year of assessment beginning on or after 1 April 2023; and(c) either or both of the following events occur on or after the qualifying amalgamation—(i) any insurance money or other compensation is accrued to Company A in relation to the aircraft;(ii) the aircraft is disposed of by Company A.(3) Despite the exclusion relating to the sale of capital assets in section 14, each of the following amounts in relation to a specified aircraft to which this section applies is to be regarded as a trading receipt arising in or derived from Hong Kong in relation to the qualifying aircraft leasing activity of Company A (trading receipt)—(a) the amount of any insurance money or other compensation accrued to Company A in relation to the specified aircraft (IMOC);(b) the actual amount of the consideration for the disposal of the aircraft determined in accordance with section 14IK.(4) However, if, in relation to the specified aircraft, the aggregate of the total amount of the IMOCs and the amount mentioned in subsection (3)(b) accrued or regarded as being accrued in a particular year exceeds the specified amount (SA), the excess amount is not regarded as any trading receipt of Company A under subsection (3) for the particular year.(5) The SA—(a) if—(i) any insurance money or other compensation—(A) is accrued or regarded as being accrued to Company B, in relation to the specified aircraft, in the particular year or a year of assessment preceding the particular year (preceding year); or(B) is accrued or regarded as being accrued to Company A, in relation to the aircraft, in a preceding year; and(ii) the insurance money or other compensation is chargeable to tax under this Part in relation to Company B or Company A,is the amount of the D&A minus the total amount of all such insurance money or other compensation; and(b) in any other case—is the D&A.(6) For a trading receipt that falls within the description in subsection (3)(a)—(a) if Company A has permanently discontinued its qualifying aircraft leasing activity before the IMOC concerned is accrued—the trading receipt is to be regarded as being accrued in the year of assessment in which the discontinuance takes place; and(b) in any other case—the trading receipt is accrued in the year of assessment in which the IMOC is accrued.(7) For a trading receipt that falls within the description in subsection (3)(b)—(a) if Company A has permanently discontinued its qualifying aircraft leasing activity before the disposal of the specified aircraft takes place—the trading receipt is to be regarded as being accrued in the year of assessment in which the discontinuance takes place; and(b) in any other case—the trading receipt is accrued in the year of assessment in which the aircraft is disposed of.(8) In this section—D&A (扣免總額), in relation to a specified aircraft, means the aggregate of the following—(a) the total amount of the deductions allowed to Company A under section 14IC in respect of the specified aircraft;(b) the total amount of the allowances that have been granted to Company A under Part 6 in respect of the aircraft;particular year (特定年度) means a year of assessment beginning on or after 1 April 2023. 14IJ. Consideration for disposal of specified aircraft etc. to be regarded as trading receipts of Company A—aircraft in respect of which section 14I has applied for year of assessment beginning on or after 1 April 2023 (1) This section applies to Company A if—(a) section 14IB applies to Company A for a year of assessment in relation to a specified aircraft because of an election made under section 14IA(1)(e);(b) section 14I has applied to Company B or Company A in relation to the specified aircraft for a year of assessment beginning on or after 1 April 2023; and(c) either or both of the following events occur on or after the qualifying amalgamation—(i) any insurance money or other compensation is accrued to Company A in relation to the aircraft;(ii) the aircraft is disposed of by Company A.(2) Despite the exclusion relating to the sale of capital assets in section 14, each of the following amounts in relation to the specified aircraft is to be regarded as a trading receipt arising in or derived from Hong Kong in relation to the qualifying aircraft leasing activity of Company A (trading receipt)—(a) the amount of any insurance money or other compensation accrued to Company A in relation to the aircraft (IMOC);(b) the actual amount of the consideration for the disposal of the aircraft determined in accordance with section 14IK.(3) However, if, in relation to the specified aircraft, the aggregate of the total amount of the IMOCs and the amount mentioned in subsection (2)(b) accrued or regarded as being accrued in a particular year exceeds the specified amount (SA), the excess amount is not regarded as any trading receipt of Company A under subsection (2) for the particular year.(4) The SA—(a) if—(i) any insurance money or other compensation—(A) is accrued or regarded as being accrued to Company B, in relation to the specified aircraft, in the particular year or a year of assessment preceding the particular year (preceding year); or(B) is accrued or regarded as being accrued to Company A, in relation to the aircraft, in a preceding year; and(ii) the insurance money or other compensation is chargeable to tax under this Part in relation to Company B or Company A,is the amount of the D&A minus the total amount of all such insurance money or other compensation; and(b) in any other case—is the D&A.(5) For a trading receipt that falls within the description in subsection (2)(a)—(a) if Company A has permanently discontinued its qualifying aircraft leasing activity before the IMOC concerned is accrued—the trading receipt is to be regarded as being accrued in the year of assessment in which the discontinuance takes place; and(b) in any other case—the trading receipt is accrued in the year of assessment in which the IMOC is accrued.(6) For a trading receipt that falls within the description in subsection (2)(b)—(a) if Company A has permanently discontinued its qualifying aircraft leasing activity before the disposal of the specified aircraft takes place—the trading receipt is to be regarded as being accrued in the year of assessment in which the discontinuance takes place; and(b) in any other case—the trading receipt is accrued in the year of assessment in which the aircraft is disposed of.(7) In subsections (3) and (4)—D&A (扣免總額), in relation to a specified aircraft, means the aggregate of the following—(a) the total amount of the deductions allowed to Company A under section 14IC in respect of the specified aircraft;(b) the notional amount (NA) determined under subsection (8) or (9) (as the case requires);particular year (特定年度) means a year of assessment beginning on or after 1 April 2023.(8) Subject to subsection (9), the NA in relation to a specified aircraft is to be determined in accordance with the following formula— A = B × (1 – C) C where: A means the NA; B means the aggregate NLP; and C means the percentage prescribed in section 2 of Schedule 17F. (9) If the aggregate NLP is equal to or less than zero, the NA is taken to be zero.(10) In subsections (8) and (9)—aggregate NLP (淨租款總和)—(a) if section 14I has applied to Company B in relation to the specified aircraft for a year of assessment beginning on or after 1 April 2023—means the aggregate of the total amount of the net lease payments calculated in accordance with section 14I in relation to the aircraft for each year of assessment beginning on or after 1 April 2023 up to the year of assessment preceding the one in which section 14IB begins to apply in relation to the aircraft; and(b) in any other case—means the aggregate of the total amount of the net lease payments calculated in accordance with section 14I in relation to Company A for each year of assessment beginning on or after 1 April 2023 up to the year of assessment preceding the one in which section 14IB begins to apply in relation to the aircraft. 14IK. Determination of actual amount of consideration for disposal of specified aircraft—supplementary provisions for sections 14IH, 14II and 14IJ (1) This section applies for the purposes of sections 14IH, 14II and 14IJ.(2) For the purposes of section 14IH, subject to subsections (5) and (6), the actual amount of the consideration for a disposal of a specified aircraft by Company A is to be determined in accordance with the following formula— A = B × C D where: A means the actual amount of the consideration for the disposal; B means the consideration for the sale or other disposal of the aircraft; C means the total number of completed months in the specified period; and D means the total number of section 14I-related months. (3) For the purposes of section 14II, subject to subsections (5) and (6), the actual amount of the consideration for a disposal of a specified aircraft by Company A is—(a) if section 14I has applied to the specified aircraft concerned for any year of assessment preceding the year of assessment beginning on 1 April 2023, an amount determined in accordance with the following formula— E = F × G H where: E means the actual amount of the consideration for the disposal; F means the consideration for the sale or other disposal of the specified aircraft; G means the total number of completed months in the specified period; and H means the aggregate of the total number of section 14I-related months and the total number of section 14IB-related months; and (b) in any other case—the sale proceeds of the aircraft.(4) For the purposes of section 14IJ, subject to subsections (5) and (6), the actual amount of the consideration for a disposal of a specified aircraft by Company A is to be determined in accordance with the following formula— I = J × K L where: I means the actual amount of the consideration for the disposal; J means the consideration for the sale or other disposal of the specified aircraft; K means the total number of completed months in the specified period; and L means the aggregate of the total number of section 14I-related months and the total number of section 14IB-related months. (5) If the specified aircraft is disposed of together with other assets in pursuance of one bargain, the Commissioner must, having regard to all the circumstances of the bargain, allocate an amount to be the actual amount of the consideration for the disposal.(6) If the Commissioner is of the opinion that the consideration for the disposal of the specified aircraft does not represent the true market value of the aircraft at the time of the disposal—(a) the Commissioner may determine the true market value of the aircraft; and(b) the amount so determined is to be taken as the actual amount of the consideration for the disposal.(7) In this section—completed month (完整月份) means a full calendar month;section 14I-related month (第14I條所涉月份)—see subsections (8) and (9);section 14IB-related month (第14IB條所涉月份)—see subsections (10) and (11);specified day (指明日)—(a) if section 14IB has applied to Company B—means the day on which that section begins to apply to Company B; and(b) in any other case—means the day on which section 14IB begins to apply to Company A;specified period (指明期間)—(a) for the purposes of subsections (2) and (4)—(i) if Company A has permanently discontinued its qualifying aircraft leasing activity in relation to the specified aircraft before the disposal—means the period beginning on the 1st day of the basis period of Company A for the year of assessment (2023/2024) and ending on the date of the discontinuance; and(ii) in any other case—means the period beginning on the 1st day of the basis period of Company A for the year of assessment (2023/2024) and ending on the date of the disposal of the aircraft; and(b) for the purposes of subsection (3)—(i) if Company A has permanently discontinued its qualifying aircraft leasing activity in relation to the aircraft before the disposal takes place—means the period beginning on the specified day and ending on the date of the discontinuance; and(ii) in any other case—means the period beginning on the specified day and ending on the date of the disposal of the aircraft;year of assessment (2023/2024) (課稅年度(2023/2024)) means the year of assessment beginning on 1 April 2023.(8) For a specified aircraft of Company A to which subsection (2), (3) or (4) applies, each completed month in respect of which section 14I applies to Company B or Company A in relation to the specified aircraft is a section 14I-related month.(9) If, in relation to the specified aircraft, section 14I applies to Company B in respect of a part of a month and applies to Company A in respect of the other part of the month, that month is also a section 14I-related month.(10) For a specified aircraft of Company A to which subsection (3) or (4) applies, each completed month in respect of which section 14IB applies to Company B or Company A in relation to the specified aircraft is a section 14IB-related month.(11) If, in relation to the specified aircraft, section 14IB applies to Company B in respect of a part of a month and applies to Company A in respect of the other part of the month, that month is also a section 14IB-related month.(12) For the purposes of this section, the consideration for the sale or other disposal of a specified aircraft—(a) if the disposal concerned is a sale of the specified aircraft—is the proceeds of sale of the aircraft; and(b) in any other case—is the value of the consideration for the disposal of the aircraft.”. Schedule 58 [s. 89(31)]Provisions for Inland Revenue (Amendment) (Aircraft Leasing Tax Concessions) Ordinance 2024 (Schedule 58 added 5 of 2024 s. 24) 1. The amendments made to the existing provisions of this Ordinance by the Inland Revenue (Amendment) (Aircraft Leasing Tax Concessions) Ordinance 2024 (5 of 2024) (Amendment Ordinance) and the new provisions added to this Ordinance by the Amendment Ordinance apply to a corporation for a year of assessment beginning on or after 1 April 2023. 2. In this Schedule—existing provisions (現有條文) means sections 14G, 14I, 15, 16, 19CA, 26AB, 37, 37A, 39B, 40AO, 40AR, 40AS and 40AT and Schedules 17F and 17J;new provisions (新訂條文) means sections 14HA, 14HB, 14IA, 14IB, 14IC, 14ID, 14IE, 14IF, 14IG, 14IH, 14II, 14IJ, 14IK, 14IL, 14IM, 14LA and 15FA and this Schedule and Schedule 57. Schedule 59 [s. 89(32)]Provisions for Inland Revenue (Amendment) (Tax Concessions and Two-tiered Standard Rates) Ordinance 2024 (Schedule 59 added 10 of 2024 s. 17) 1. Interpretation In this Schedule—year of assessment 2024/25 (2024/25課稅年度) means the year of assessment beginning on 1 April 2024. 2. Application of amendments The amendments made to Divisions 4 and 8 of Part 4A, to Part 10A, to Part 14 and to Schedules 3D and 3G by the Inland Revenue (Amendment) (Tax Concessions and Two-tiered Standard Rates) Ordinance 2024 (10 of 2024) apply in relation to the year of assessment 2024/25 and to all subsequent years of assessment. 3. Application for holding over payment of provisional salaries tax on additional ground (1) A person who is liable to pay provisional salaries tax in respect of the year of assessment 2024/25 may apply to the Commissioner to have the payment of the whole or part of the tax held over until the person is required to pay salaries tax for the year.(2) An application may be made under subsection (1) if, for the year of assessment 2024/25, an increased deduction (as defined by section 26E(9)) is, or is likely to be, allowable to the person mentioned in subsection (1).(3) This section does not affect the operation of section 63E. 4. Provisions supplementary to section 3 of this Schedule (1) This section applies to an application under section 3 of this Schedule.(2) The application must be made in writing.(3) The application must be made not later than—(a) the 28th day before the day by which the provisional salaries tax is to be paid; or(b) the 14th day after the date of the notice for payment of provisional salaries tax under section 63C(6),whichever is later.(4) However, the Commissioner may, if satisfied that it is appropriate, either generally or in a particular case, postpone the deadline.(5) On receipt of the application, the Commissioner—(a) must consider the application; and(b) may hold over the payment of the whole or part of the provisional salaries tax.(6) The Commissioner must, by written notice, inform the applicant of the Commissioner’s decision. Schedule 60 [s. 89(33)]Transitional Provisions Relating to Provisional Salaries Tax in respect of Year of Assessment 2024/25 (Schedule 60 added 2 of 2025 s. 10) 1. Interpretation In this Schedule—year of assessment 2024/25 (2024/25課稅年度) means the year of assessment commencing on 1 April 2024. 2. Application for holding over payment of provisional salaries tax on additional ground (1) A person who is liable to pay provisional salaries tax in respect of the year of assessment 2024/25 may apply to the Commissioner to have the payment of the whole or part of the tax held over until the person is required to pay salaries tax for the year.(2) An application may be made under subsection (1) if, for the year of assessment 2024/25, a deduction under section 26ZG is, or is likely to be, allowable to the person mentioned in that subsection.(3) This section does not affect the operation of section 63E. 3. Provisions supplementary to section 2 of this Schedule (1) This section applies to an application under section 2 of this Schedule.(2) The application must be made in writing.(3) The application must be made not later than—(a) the 28th day before the day by which the provisional salaries tax is to be paid; or(b) the 14th day after the date of the notice for payment of provisional salaries tax under section 63C(6),whichever is the later.(4) However, the Commissioner may, if satisfied that it is appropriate, either generally or in a particular case, postpone the deadline.(5) On receipt of the application, the Commissioner—(a) must consider the application; and(b) may hold over the payment of the whole or part of the provisional salaries tax.(6) The Commissioner must, by notice in writing, inform the applicant of the Commissioner’s decision. Schedule 61 [ss. 25A, 26AD, 26AE, 26AF, 26AG & 79A & Schs. 62 & 63]GloBE Rules (Schedule 61 added 21 of 2025 s. 31) Part 1 Notes—1. This Part adopts the OECD GloBE model rules (except Articles 2.4.2, 8.1, 8.3 and 9.4 of those rules) with certain necessary changes made.2. Notes are added, after certain Articles in this Part, to refer to the relevant specified OECD GloBE rules guidance.3. Also, notes are added, after certain Articles in this Part, to point out modifications made to those Articles by Part 2 of this Schedule.Chapter 1 ScopeArticle 1.1. Scope of GloBE rules 1.1.1. The GloBE rules apply to constituent entities that are members of an MNE group that has annual revenue of EUR 750 million or more in the consolidated financial statements of the ultimate parent entity (UPE) in at least two of the four fiscal years immediately preceding the tested fiscal year. Further rules are set out in Article 6.1 which modify the application of the consolidated revenue threshold in certain cases. 1.1.2. If one or more of the fiscal years of the MNE group taken into account for purposes of Article 1.1.1 is of a period other than 12 months, for each of those fiscal years the EUR 750 million threshold is adjusted proportionally to correspond with the length of the relevant fiscal year. 1.1.3. Entities that are excluded entities are not subject to the GloBE rules.Article 1.2. MNE group and group 1.2.1. An MNE group means any group that includes at least one entity or permanent establishment that is not located in the jurisdiction of the ultimate parent entity. 1.2.2. A group means a collection of entities that are related through ownership or control such that the assets, liabilities, income, expenses and cash flows of those entities:(a) are included in the consolidated financial statements of the ultimate parent entity; or(b) are excluded from the consolidated financial statements of the ultimate parent entity solely on size or materiality grounds, or on the grounds that the entity is held for sale. 1.2.3. A group also means an entity that is located in one jurisdiction and has one or more permanent establishments located in other jurisdictions provided that the entity is not a part of another group described in Article 1.2.2.Article 1.3. Constituent entity 1.3.1. A constituent entity is:(a) any entity that is included in a group; and(b) any permanent establishment of a main entity that is within paragraph (a). 1.3.2. A permanent establishment that is a constituent entity under paragraph (b) above shall be treated as separate from the main entity and any other permanent establishment of that main entity. 1.3.3. A constituent entity does not include an entity that is an excluded entity.Article 1.4. Ultimate parent entity 1.4.1. Ultimate parent entity means either:(a) an entity that:i. owns directly or indirectly a controlling interest in any other entity; andii. is not owned, with a controlling interest, directly or indirectly by another entity; or(b) the main entity of a group that is within Article 1.2.3.Note—In relation to Article 1.4.1, see the specified OECD GloBE rules guidance in—(a) paragraphs 36.1 to 36.4 of Chapter 1 of the 2023 Commentary; and(b) section 1.4 of the Feb-2023 Administrative Guidance.Article 1.5. Excluded entity 1.5.1. An excluded entity is an entity that is:(a) a governmental entity;(b) an international organisation;(c) a non-profit organisation;(d) a pension fund;(e) an investment fund that is an ultimate parent entity; or(f) a real estate investment vehicle that is an ultimate parent entity. 1.5.2. An excluded entity is also an entity:(a) where at least 95% of the value of the entity is owned (directly or through a chain of excluded entities) by one or more excluded entities referred to in Article 1.5.1 (other than a pension services entity) and where that entity:i. operates exclusively or almost exclusively to hold assets or invest funds for the benefit of the excluded entity or entities; orii. only carries out activities that are ancillary to those carried out by the excluded entity or entities; or(b) where at least 85% of the value of the entity is owned (directly or through a chain of excluded entities), by one or more excluded entities referred to in Article 1.5.1 (other than a pension services entity) provided that substantially all of the entity’s income is excluded dividends or excluded equity gain or loss that is excluded from the computation of GloBE income or loss in accordance with Articles 3.2.1(b) or (c).Notes—1. In relation to Article 1.5.2, see the specified OECD GloBE rules guidance in—(a) paragraph 43.1 of Chapter 1 of the 2023 Commentary; and(b) section 1.5 of the Feb-2023 Administrative Guidance.2. In relation to Article 1.5.2(a), see the specified OECD GloBE rules guidance in paragraph 45 of Chapter 1 of the 2023 Commentary.3. In relation to Article 1.5.2(a)i, see the specified OECD GloBE rules guidance in—(a) paragraph 54.1 of Chapter 1 of the 2023 Commentary; and(b) section 1.5 of the Feb-2023 Administrative Guidance.4. In relation to Article 1.5.2(a)ii, see the specified OECD GloBE rules guidance in—(a) paragraphs 54.2 to 54.5 of Chapter 1 of the 2023 Commentary; and(b) section 1.6 of the Feb-2023 Administrative Guidance. 1.5.3. A filing constituent entity may elect not to treat an entity as an excluded entity under Article 1.5.2. An election under this Article is a five-year election.Chapter 2 Charging ProvisionsArticle 2.1. Application of the IIR 2.1.1. A constituent entity, that is the ultimate parent entity of an MNE group, located in Hong Kong that owns (directly or indirectly) an ownership interest in a low-taxed constituent entity at any time during the fiscal year shall pay a tax in an amount equal to its allocable share of the top-up tax of that low-taxed constituent entity for the fiscal year. 2.1.2. An intermediate parent entity of an MNE group located in Hong Kong owns (directly or indirectly) an ownership interest in a low-taxed constituent entity at any time during a fiscal year shall pay a tax in an amount equal to its allocable share of the top-up tax of that low-taxed constituent entity for the fiscal year. 2.1.3. Article 2.1.2 shall not apply if:(a) the ultimate parent entity of the MNE group is required to apply a qualified IIR for that fiscal year; or(b) another intermediate parent entity that owns (directly or indirectly) a controlling interest in the intermediate parent entity is required to apply a qualified IIR for that fiscal year. 2.1.4. Notwithstanding Articles 2.1.1 to 2.1.3, a partially-owned parent entity located in Hong Kong that owns (directly or indirectly) an ownership interest in a low-taxed constituent entity at any time during the fiscal year shall pay a tax in an amount equal to its allocable share of the top-up tax of that low-taxed constituent entity for the fiscal year. 2.1.5. Article 2.1.4 shall not apply if the partially-owned parent entity is wholly owned (directly or indirectly) by another partially-owned parent entity that is required to apply a qualified IIR for that fiscal year. 2.1.6. A parent entity located in Hong Kong shall apply the provisions of Articles 2.1.1 to 2.1.5 with respect to a low-taxed constituent entity that is not located in Hong Kong.Article 2.2. Allocation of top-up tax under the IIR 2.2.1. A parent entity’s allocable share of the top-up tax of a low-taxed constituent entity is an amount equal to the top-up tax of the low-taxed constituent entity as calculated under Chapter 5 multiplied by the parent entity’s inclusion ratio for the low-taxed constituent entity for the fiscal year. 2.2.2. A parent entity’s inclusion ratio for a low-taxed constituent entity for a fiscal year is the ratio of (a) the GloBE income of the low-taxed constituent entity for the fiscal year, reduced by the amount of such income attributable to ownership interests held by other owners, to (b) the GloBE income of the low-taxed constituent entity for the fiscal year. 2.2.3. The amount of GloBE income attributable to ownership interests in a low-taxed constituent entity held by other owners is the amount that would have been treated as attributable to such owners under the principles of the acceptable financial accounting standard used in the ultimate parent entity’s consolidated financial statements if the low-taxed constituent entity’s net income were equal to its GloBE income and:(a) the parent entity had prepared consolidated financial statements in accordance with that accounting standard (the hypothetical consolidated financial statements);(b) the parent entity owned a controlling interest in the low-taxed constituent entity such that all of the income and expenses of the low-taxed constituent entity were consolidated on a line-by-line basis with those of the parent entity in the hypothetical consolidated financial statements;(c) all of the low-taxed constituent entity’s GloBE income were attributable to transactions with persons that are not group entities; and(d) all ownership interests not directly or indirectly held by the parent entity were held by persons other than group entities. 2.2.4. In the case of a flow-through entity, GloBE income under this Article shall not include any income allocated, pursuant to Article 3.5.3, to an owner that is not a group entity.Article 2.3. IIR offset mechanism 2.3.1. A parent entity that owns an ownership interest in a low-taxed constituent entity indirectly through an intermediate parent entity or a partially-owned parent entity that is not eligible for an exclusion from the IIR under Article 2.1.3 or 2.1.5 shall reduce its allocable share of a top-up tax of the low-taxed constituent entity in accordance with Article 2.3.2. 2.3.2. The reduction in Article 2.3.1 will be an amount equal to the portion of the parent entity’s allocable share of the top-up tax that is brought into charge by the intermediate parent entity or the partially-owned parent entity under a qualified IIR.Article 2.4. Application of the UTPR 2.4.1. Constituent entities of an MNE group located in Hong Kong shall be denied a deduction (or required to make an equivalent adjustment under domestic law) in an amount resulting in those constituent entities having an additional cash tax expense equal to the UTPR top-up tax amount for the fiscal year allocated to Hong Kong.Note—Article 2.4.1 is modified by Part 2 of this Schedule to suit circumstances in Hong Kong. 2.4.2. [Article 2.4.2 of the OECD GloBE model rules is omitted.] 2.4.3. Article 2.4.1 shall not apply to a constituent entity that is an investment-related entity.Article 2.5. UTPR top-up tax amount 2.5.1. The total UTPR top-up tax amount for a fiscal year shall be equal to the sum of the top-up tax calculated for each low-taxed constituent entity of an MNE group for that fiscal year (determined in accordance with Article 5.2), subject to the adjustments set out in this Article 2.5 and Article 9.3. 2.5.2. The top-up tax calculated for a low-taxed constituent entity that is otherwise taken into account under Article 2.5.1 shall be reduced to zero if all of the ultimate parent entity’s ownership interests in such low-taxed constituent entity are held directly or indirectly by one or more parent entities that are required to apply a qualified IIR in the jurisdiction where they are located with respect to that low-taxed constituent entity for the fiscal year. 2.5.3. Where Article 2.5.2 does not apply, the top-up tax calculated for a low-taxed constituent entity that is otherwise taken into account under Article 2.5.1 shall be reduced by a parent entity’s allocable share of the top-up tax of that low-taxed constituent entity that is brought into charge under a qualified IIR.Article 2.6. Allocation of top-up tax for the UTPR 2.6.1. Subject to Articles 2.6.2 and 2.6.3, the UTPR top-up tax amount allocated to Hong Kong shall be determined by multiplying the total UTPR top-up tax amount determined in Article 2.5.1 by Hong Kong’s UTPR percentage. The UTPR percentage of Hong Kong shall be determined each fiscal year for each MNE group as follows: 50% x Number of employees in Hong Kong + 50% x Total value of tangible assets in Hong Kong Number of employees in all UTPR jurisdictions Total value of tangible assets in all UTPR jurisdictions where, for each fiscal year:(a) the number of employees in Hong Kong is the total number of employees of all the constituent entities of the MNE group located in Hong Kong;(b) the number of employees in all UTPR jurisdictions is the total number of employees of all the constituent entities of the MNE group located in a jurisdiction that has a qualified UTPR in force for the fiscal year;(c) the total value of tangible assets in Hong Kong is the sum of the net book values of tangible assets of all the constituent entities of the MNE group located in Hong Kong;(d) the total value of tangible assets in all UTPR jurisdictions is the sum of the net book values of tangible assets of all the constituent entities of the MNE group located in a jurisdiction that has a qualified UTPR in force for the fiscal year. 2.6.2. For purposes of Article 2.6.1,(a) the number of employees employed and the net book value of tangible assets held by an investment-related entity shall be excluded from the elements of the formula for allocating the total UTPR top-up tax amount;(b) the number of employees employed and the net book value of tangible assets held by a flow-through entity that are not allocated to permanent establishments shall be allocated to the constituent entities (if any) that are located in the jurisdiction where the flow-through entity was created. The number of employees employed and the net book value of tangible assets held by a flow-through entity that are not allocated either to permanent establishments or under this provision shall be excluded from the formula for allocating the total UTPR top-up tax amount. 2.6.3. Notwithstanding Article 2.6.1, the UTPR percentage of a UTPR jurisdiction for an MNE group is deemed to be zero for a fiscal year as long as the top-up tax amount allocated to the UTPR jurisdiction in a prior fiscal year has not resulted in the constituent entities of this MNE group located in the UTPR jurisdiction having an additional cash tax expense equal, in total, to the UTPR top-up tax amount for that prior fiscal year allocated to the UTPR jurisdiction. The number of employees and the tangible assets of the constituent entities of this MNE group located in a jurisdiction with a UTPR percentage of zero for a fiscal year shall be excluded from the formula provided under Article 2.6.1 for allocating the total UTPR top-up tax amount for that fiscal year. 2.6.4. Article 2.6.3 does not apply for a fiscal year if all jurisdictions with a qualified UTPR in force for the fiscal year have a UTPR percentage of zero for the MNE group for that fiscal year.Note—Part 2 of this Schedule provides for allocation of top-up tax for the UTPR among constituent entities of an MNE group located in Hong Kong.Chapter 3 Computation of GloBE Income or LossArticle 3.1. Financial accounts 3.1.1. The GloBE income or loss of each constituent entity is the financial accounting net income or loss determined for the constituent entity for the fiscal year adjusted for the items described in Article 3.2 to Article 3.5. 3.1.2. Financial accounting net income or loss is the net income or loss determined for a constituent entity (before any consolidation adjustments eliminating intra-group transactions) in preparing consolidated financial statements of the ultimate parent entity.Note—In relation to Article 3.1.2, see—(a) the specified OECD GloBE rules guidance in paragraphs 3 and 4 of Chapter 3 of the 2023 Commentary; and(b) the specified OECD GloBE rules guidance in—(i) paragraphs 5 to 5.6 of Chapter 3 of the 2023 Commentary; and(ii) section 1 of the Jul-2023 Administrative Guidance. 3.1.3. If it is not reasonably practicable to determine the financial accounting net income or loss for a constituent entity based on the accounting standard used in the preparation of consolidated financial statements of the ultimate parent entity, the financial accounting net income or loss for the constituent entity for the fiscal year may be determined using another acceptable financial accounting standard or an authorised financial accounting standard if:(a) the financial accounts of the constituent entity are maintained based on that accounting standard;(b) the information contained in the financial accounts is reliable; and(c) permanent differences in excess of EUR 1 million that arise from the application of a particular principle or standard to items of income or expense or transactions that differs from the financial standard used in the preparation of the consolidated financial statements of the ultimate parent entity are conformed to the treatment required under the accounting standard used in the consolidated financial statements of the ultimate parent entity.Note—In relation to Article 3.1.3, see—(a) the specified OECD GloBE rules guidance in paragraph 13 of Chapter 3 of the 2023 Commentary; and(b) the specified OECD GloBE rules guidance in—(i) paragraph 16.1 of Chapter 3 of the 2023 Commentary; and(ii) section 1 of the Jul-2023 Administrative Guidance.Article 3.2. Adjustments to determine GloBE income or loss 3.2.1. A constituent entity’s financial accounting net income or loss is adjusted for the following items to arrive at that entity’s GloBE income or loss:(a) net taxes expense;(b) excluded dividends;(c) excluded equity gain or loss;(d) included revaluation method gain or loss;(e) gain or loss from disposition of assets and liabilities excluded under Article 6.3;(f) asymmetric foreign currency gains or losses;(g) policy disallowed expenses;(h) prior period errors and changes in accounting principles; and(i) accrued pension expense.Notes—1. In relation to Article 3.2.1, see the specified OECD GloBE rules guidance in—(a) paragraphs 86.1 to 86.7 of Chapter 3 of the 2023 Commentary; and(b) section 2.4 of the Feb-2023 Administrative Guidance.2. In relation to Article 3.2.1(b), see—(a) the specified OECD GloBE rules guidance (certain movements in an insurance company’s reserves are not allowed as a deduction in the computation of GloBE income or loss) in—(i) paragraphs 36 and 45 of Chapter 3 of the 2023 Commentary; and(ii) sections 3.4 and 3.5 of the Feb-2023 Administrative Guidance; and(b) the specified OECD GloBE rules guidance (five-year election to include, in the computation of GloBE income or loss, all dividends with respect to portfolio shareholdings, whether or not short-term portfolio shareholdings) in—(i) paragraph 45 of Chapter 3 of the 2023 Commentary; and(ii) section 3.5 of the Feb-2023 Administrative Guidance.3. In relation to Article 3.2.1(c), see—(a) the specified OECD GloBE rules guidance (five-year election to treat foreign exchange gains or losses as an excluded equity gain or loss) in—(i) paragraphs 57 to 57.3 of Chapter 3 of the 2023 Commentary; and(ii) section 2.2 of the Feb-2023 Administrative Guidance;(b) the specified OECD GloBE rules guidance (equity investment inclusion election) in—(i) paragraphs 57.4 and 57.5 of Chapter 3 of the 2023 Commentary; and(ii) section 2.9 of the Feb-2023 Administrative Guidance; and(c) the specified OECD GloBE rules guidance (expenses from certain movements in insurance reserves are not allowed as a deduction in the computation of GloBE income or loss) in—(i) paragraph 54 of Chapter 3 of the 2023 Commentary; and(ii) section 3.4 of the Feb-2023 Administrative Guidance.4. In relation to Article 3.2.1(f), see the specified OECD GloBE rules guidance in—(a) paragraphs 66 to 74.1 of Chapter 3 of the 2023 Commentary; and(b) section 1 of the Jul-2023 Administrative Guidance.5. In relation to Article 3.2.1(i), see the specified OECD GloBE rules guidance in—(a) paragraph 85 of Chapter 3 of the 2023 Commentary; and(b) section 2.5 of the Feb-2023 Administrative Guidance.6. In relation to Article 3.2.1(i), see the specified OECD GloBE rules guidance in—(a) paragraph 86 of Chapter 3 of the 2023 Commentary; and(b) section 2.5 of the Feb-2023 Administrative Guidance. 3.2.2. At the election of the filing constituent entity, a constituent entity may substitute the amount allowed as a deduction in the computation of its taxable income in its location for the amount expensed in its financial accounts for a cost or expense of such constituent entity that was paid with stock-based compensation. If the stock-based compensation expense arises in connection with an option that expires without exercise, the constituent entity must include the total amount previously deducted in the computation of its GloBE income or loss for the fiscal year in which the option expires. The election is a five-year election and must be applied consistently to the stock-based compensation of all constituent entities located in the same jurisdiction for the year in which the election is made and all subsequent fiscal years. If the election is made in a fiscal year after some of the stock-based compensation of a transaction has been recorded in the financial accounts, the constituent entity must include in the computation of its GloBE income or loss for that fiscal year an amount equal to the excess of the cumulative amount allowed as an expense in the computation of its GloBE income or loss in previous fiscal years over the cumulative amount that would have been allowed as an expense if the election had been in place in those fiscal years. If the election is revoked, the constituent entity must include in the computation of its GloBE income or loss for the revocation year the amount deducted pursuant to the election that exceeds financial accounting expense accrued in respect of the stock-based compensation that has not been paid. 3.2.3. Any transaction between constituent entities located in different jurisdictions that is not recorded in the same amount in the financial accounts of both constituent entities or that is not consistent with the arm’s length principle must be adjusted so as to be in the same amount and consistent with the arm’s length principle.

A loss from a sale or other transfer of an asset between two constituent entities located in the same jurisdiction that is not recorded consistent with the arm’s length principle shall be recomputed based on the arm’s length principle if that loss is included in the computation of GloBE income or loss. Rules for allocating income or loss between a main entity and its permanent establishments are found in Article 3.4.Note—In relation to Article 3.2.3, see the specified OECD GloBE rules guidance in paragraphs 100 to 103 of Chapter 3 of the 2023 Commentary. 3.2.4. Qualified refundable tax credits and marketable transferrable tax credits shall be treated as income in the computation of GloBE income or loss of a constituent entity. Non-qualified refundable tax credits shall not be treated as income in the computation of GloBE income or loss of a constituent entity.Note—In relation to Article 3.2.4, see—(a) the specified OECD GloBE rules guidance in—(i) paragraphs 112.1 to 114.1 of Chapter 3 of the 2023 Commentary; and(ii) section 2 of the Jul-2023 Administrative Guidance;(b) the specified OECD GloBE rules guidance in—(i) paragraphs 57.6 to 57.12 of Chapter 3 of the 2023 Commentary;(ii) section 2.9 of the Feb-2023 Administrative Guidance; and(iii) section 2 of the Jul-2023 Administrative Guidance; and(c) the specified OECD GloBE rules guidance in—(i) paragraphs 57.10.1 to 57.10.3 of Chapter 3 of the 2023 Commentary; and(ii) section 2 of the Jul-2023 Administrative Guidance. 3.2.5. With respect to assets and liabilities that are subject to fair value or impairment accounting in the consolidated financial statements, a filing constituent entity may elect to determine gains and losses using the realisation principle for purposes of computing GloBE income. The election is a five-year election and applies to all constituent entities located in the jurisdiction to which the election applies. The election applies to all assets and liabilities of such constituent entities, unless the filing constituent entity chooses to limit the election to tangible assets of such constituent entities or to constituent entities that are investment-related entities. Under this election:(a) all gains or losses attributable to fair value or impairment accounting with respect to an asset or liability shall be excluded from the computation of GloBE income or loss;(b) the carrying value of an asset or liability for purposes of determining gain or loss shall be its carrying value adjusted for accumulated depreciation at the later of:(i) the first day of the election year, or(ii) the date the asset was acquired or liability was incurred; and(c) if the election is revoked, the GloBE income or loss of the constituent entities is adjusted by the difference at the beginning of the revocation year between the fair value of the asset or liability and the carrying value adjusted for accumulated depreciation of the asset or liability determined pursuant to the election. 3.2.6. Where there is aggregate asset gain in a jurisdiction in a fiscal year, the filing constituent entity may make, under this Article 3.2.6, an annual election for that jurisdiction to adjust GloBE income or loss with respect to each previous fiscal year in the look-back period in the manner described in paragraphs (b) and (c) and to spread any remaining adjusted asset gain over the look-back period in the manner described in paragraph (d). The effective tax rate (ETR) and top-up tax, if any, for any previous fiscal year must be re-calculated under Article 5.4.1. When an election is made under this Article:(a) Covered taxes with respect to any net asset gain or net asset loss in the election year shall be excluded from the computation of adjusted covered taxes.(b) The aggregate asset gain in the election year shall be carried-back to the earliest loss year and set-off rateably against any net asset loss of any constituent entity located in that jurisdiction.(c) If, for any loss year, the adjusted asset gain exceeds the total amount of net asset loss of all constituent entities located in that jurisdiction, the adjusted asset gain shall be carried forward to the following loss year (if any) and applied rateably against any net asset loss of any constituent entity located in that jurisdiction.(d) Any adjusted asset gain that remains after the application of paragraphs (b) and (c) shall be allocated evenly to each fiscal year in the look-back period. The allocated asset gain for the relevant year shall be included in the computation of GloBE income or loss for a constituent entity located in that jurisdiction in that year in accordance with the following formula: Allocated Asset Gain for relevant year x The specified constituent entity’s net asset gain in the election year The net asset gain of all specified constituent entities in the election year For the purposes of the above formula, a specified constituent entity is constituent entity that has net asset gain in the election year and was located in the jurisdiction in the relevant year. If there is no specified constituent entity for a relevant year the adjusted asset gain allocated to that year will be allocated equally to each constituent entity in the jurisdiction in that year. 3.2.7. The computation of a low-tax entity’s GloBE income or loss shall exclude any expense attributable to an intragroup financing arrangement that can reasonably be anticipated, over the expected duration of the arrangement to:(a) increase the amount of expenses taken into account in calculating the GloBE income or loss of the low-tax entity;(b) without resulting in a commensurate increase in the taxable income of the high-tax counterparty. 3.2.8. An ultimate parent entity may elect to apply its consolidated accounting treatment to eliminate income, expense, gains, and losses from transactions between constituent entities that are located, and included in a tax consolidation group, in the same jurisdiction for purposes of computing each such constituent entity’s net GloBE income or loss. The election under this Article is a five-year election. Upon making or revoking such election, appropriate adjustments shall be made for GloBE purposes such that there shall not be duplications or omissions of items of GloBE income or loss as a result of having made or revoked the election. 3.2.9. An insurance company shall exclude from the computation of GloBE income or loss amounts charged to policyholders for taxes paid by the insurance company in respect of returns to the policy holders. An insurance company shall include in the computation of GloBE income or loss any returns to policyholders that are not reflected in financial accounting net income or loss to the extent the corresponding increase or decrease in liability to the policyholders is reflected in its financial accounting net income or loss. 3.2.10. Amounts recognised as a decrease to the equity of a constituent entity attributable to distributions paid or payable in respect of additional tier one capital or restricted tier one capital issued by the constituent entity shall be treated as an expense in the computation of its GloBE income or loss. Amounts recognised as an increase to the equity of a constituent entity attributable to distributions received or receivable in respect of additional tier one capital or restricted tier one capital held by the constituent entity shall be included in the computation of its GloBE income or loss. 3.2.11. A constituent entity’s financial accounting net income or loss must be adjusted as necessary to reflect the requirements of the relevant provisions of Chapters 6 and 7.Article 3.3. International shipping income exclusion 3.3.1. For an MNE group that has international shipping income, each constituent entity’s international shipping income and qualified ancillary international shipping income shall be excluded from the computation of its GloBE income or loss under Article 3.2 for the jurisdiction in which it is located. Where the computation of a constituent entity’s international shipping income or qualified ancillary international shipping income results in a loss, the loss shall be excluded from the computation of its GloBE income or loss. 3.3.2. International shipping income means the net income obtained by a constituent entity from:(a) the transportation of passengers or cargo by ships that it operates in international traffic, whether the ship is owned, leased or otherwise at the disposal of the constituent entity;(b) the transportation of passengers or cargo by ships operated in international traffic under slot-chartering arrangements;(c) leasing a ship, to be used for the transportation of passengers or cargo in international traffic, on charter fully equipped, crewed and supplied;(d) leasing a ship on a bare boat charter basis, for the use of transportation of passengers or cargo in international traffic, to another constituent entity;(e) the participation in a pool, a joint business or an international operating agency for the transportation of passengers or cargo by ships in international traffic; and(f) the sale of a ship used for the transportation of passengers or cargo in international traffic provided that the ship has been held for use by the constituent entity for a minimum of one year.International shipping income shall not include net income obtained from the transportation of passengers or cargo by ships via inland waterways within the same jurisdiction. 3.3.3. Qualified ancillary international shipping income means net income obtained by a constituent entity from the following activities that are performed primarily in connection with the transportation of passengers or cargo by ships in international traffic:(a) leasing a ship on a bare boat charter basis to another shipping enterprise that is not a constituent entity, provided that the charter does not exceed three years;(b) sale of tickets issued by other shipping enterprises for the domestic leg of an international voyage;(c) leasing and short-term storage of containers or detention charges for the late return of containers;(d) provision of services to other shipping enterprises by engineers, maintenance staff, cargo handlers, catering staff, and customer services personnel; and(e) investment income where the investment that generates the income is made as an integral part of the carrying on the business of operating the ships in international traffic. 3.3.4. The aggregated qualified ancillary international shipping income of all constituent entities located in a jurisdiction shall not exceed 50% of those constituent entities’ international shipping income. 3.3.5. The costs incurred by a constituent entity that are directly attributable to its international shipping activities listed in Article 3.3.2 and the costs directly attributable to its qualified ancillary activities listed in Article 3.3.3 shall be deducted from the constituent entity’s revenues from such activities to compute its international shipping income and qualified ancillary international shipping income. Other costs incurred by a constituent entity that are indirectly attributable to a constituent entity’s international shipping activities and qualified ancillary activities shall be allocated on the basis of the constituent entity’s revenues from such activities in proportion to its total revenues. All direct and indirect costs attributed to a constituent entity’s international shipping income and qualified ancillary international shipping income shall be excluded from the computation of its GloBE income or loss. 3.3.6. In order for a constituent entity’s international shipping income and qualified ancillary international shipping income to qualify for the exclusion from its GloBE income or loss under this Article, the constituent entity must demonstrate that the strategic or commercial management of all ships concerned is effectively carried on from within the jurisdiction where the constituent entity is located.Article 3.4. Allocation of income or loss between a main entity and a permanent establishment 3.4.1. The financial accounting net income or loss of a constituent entity that is a permanent establishment in accordance with paragraphs (a), (b) and (c) of the definition in Article 10.1 is the net income or loss reflected in the separate financial accounts of the permanent establishment. If the permanent establishment does not have separate financial accounts, then the financial accounting net income or loss is the amount that would have been reflected in its separate financial accounts if prepared on a standalone basis and in accordance with the accounting standard used in the preparation of the consolidated financial accounts of the ultimate parent entity. 3.4.2. The financial accounting net income or loss of a permanent establishment referred to in Article 3.4.1 shall be adjusted, if necessary:(a) in the case of a permanent establishment as defined by paragraphs (a) and (b) of the definition in Article 10.1, to reflect only the amounts and items of income and expense that are attributable to the permanent establishment in accordance with the applicable tax treaty or domestic law of the jurisdiction where it is located regardless of the amount of income subject to tax and the amount of deductible expenses in that jurisdiction;(b) in the case of a permanent establishment as defined by paragraph (c) of the definition in Article 10.1, to reflect only the amounts and items of income and expense that would have been attributed to it in accordance with Article 7 of the OECD Model Tax Convention. 3.4.3. In case of a constituent entity that is a permanent establishment in accordance with paragraph (d) of the definition in Article 10.1, its income used for computing financial accounting net income or loss is the income being exempted in the jurisdiction where the main entity is located and attributable to the operations conducted outside that jurisdiction. The expenses used for computing financial accounting net income or loss are those that are not deducted for taxable purposes in the jurisdiction where the main entity is located and that are attributable to such operations. 3.4.4. The financial accounting net income or loss of a permanent establishment is not taken into account in determining the GloBE income or loss of the main entity, except as provided in Article 3.4.5. 3.4.5. A GloBE loss of a permanent establishment shall be treated as an expense of the main entity (and not of the permanent establishment) for purposes of computing its GloBE income or loss to the extent that the loss of the permanent establishment is treated as an expense in the computation of the domestic taxable income of such main entity and is not set off against an item of income that is subject to tax under the laws of both the jurisdiction of the main entity and the jurisdiction of the permanent establishment. GloBE income subsequently arising in the permanent establishment shall be treated as GloBE income of the main entity (and not the permanent establishment) up to the amount of the GloBE loss that previously was treated as an expense for purposes of computing the GloBE income or loss of the main entity.Article 3.5. Allocation of income or loss from a flow-through entity 3.5.1. The financial accounting net income or loss of a constituent entity that is a flow-through entity is allocated as follows:(a) in the case of a permanent establishment through which the business of the entity is wholly or partly carried out, the financial accounting net income or loss of the entity is allocated to that permanent establishment in accordance with Article 3.4;(b) in the case of a tax transparent entity that is not the ultimate parent entity, any financial accounting net income or loss remaining after application of paragraph (a) is allocated to its constituent entity-owners in accordance with their ownership interests; and(c) in the case of a tax transparent entity that is the ultimate parent entity or a reverse hybrid entity, any financial accounting net income or loss remaining after application of paragraph (a) is allocated to it. 3.5.2. The rules of Article 3.5.1 shall be applied separately with respect to each ownership interest in the flow-through entity. 3.5.3. Prior to the application of Article 3.5.1, the financial accounting net income or loss of a flow-through entity shall be reduced by the amount allocable to its owners that are not group entities and that hold their ownership interest in the flow-through entity directly or through a tax transparent structure.Note—In relation to Article 3.5.3, see the specified OECD GloBE rules guidance in paragraph 37 of Chapter 2 of the 2023 Commentary. 3.5.4. Article 3.5.3 does not apply to:(a) an ultimate parent entity that is a flow-through entity; or(b) any flow-through entity owned by such an ultimate parent entity (directly or through a tax transparent structure).The treatment of these entities is addressed in Article 7.1. 3.5.5. The financial accounting net income or loss of a flow-through entity is reduced by the amount that is allocated to another constituent entity.Chapter 4 Computation of Adjusted Covered TaxesArticle 4.1. Adjusted covered taxes 4.1.1. The adjusted covered taxes of a constituent entity for the fiscal year shall be equal to the current tax expense accrued in its financial accounting net income or loss with respect to covered taxes for the fiscal year adjusted by:(a) the net amount of its additions to covered taxes for the fiscal year (as determined under Article 4.1.2) and reductions to covered taxes for the fiscal year (as determined under Article 4.1.3);(b) the total deferred tax adjustment amount (as determined under Article 4.4); and(c) any increase or decrease in covered taxes recorded in equity or other comprehensive income relating to amounts included in the computation of GloBE income or loss that will be subject to tax under local tax rules. 4.1.2. The additions to covered taxes of a constituent entity for the fiscal year is the sum of:(a) any amount of covered taxes accrued as an expense in the profit before taxation in the financial accounts;(b) any amount of GloBE loss deferred tax asset used under Article 4.5.3;(c) any amount of covered taxes that is paid in the fiscal year and that relates to an uncertain tax position where that amount has been treated for a previous fiscal year as a reduction to covered taxes under Article 4.1.3(d); and(d) any amount of credit or refund in respect of a qualified refundable tax credit or marketable transferable tax credit that is recorded as a reduction to the current tax expense. 4.1.3. The reductions to covered taxes of a constituent entity for the fiscal year is the sum of:(a) the amount of current tax expense with respect to income excluded from the computation of GloBE income or loss under Chapter 3;(b) any amount of credit or refund other than qualified refundable tax credit and marketable transferable tax credit that is not recorded as a reduction to the current tax expense;(c) any amount of covered taxes refunded or credited, except for any qualified refundable tax credit and marketable transferable tax credit, to a constituent entity that was not treated as an adjustment to current tax expense in the financial accounts;(d) the amount of current tax expense which relates to an uncertain tax position; and(e) any amount of current tax expense that is not expected to be paid within three years of the last day of the fiscal year. 4.1.4. No amount of covered taxes may be taken into account more than once. 4.1.5. In a fiscal year in which there is no net GloBE income for a jurisdiction, if the adjusted covered taxes for a jurisdiction are less than zero and less than the expected adjusted covered taxes amount the constituent entities in that jurisdiction shall be treated as having additional current top-up tax for the jurisdiction under Article 5.4 arising in the current fiscal year equal to the difference between these amounts. The expected adjusted covered taxes amount is equal to the GloBE income or loss for a jurisdiction multiplied by the minimum rate.Note—In relation to Article 4.1.5, see the specified OECD GloBE rules guidance in—(a) paragraphs 21.1 to 21.8 of Chapter 4 of the 2023 Commentary; and(b) section 2.7 of the Feb-2023 Administrative Guidance.Article 4.2. Definition of covered taxes 4.2.1. Covered taxes means:(a) taxes recorded in the financial accounts of a constituent entity with respect to its income or profits or its share of the income or profits of a constituent entity in which it owns an ownership interest;(b) taxes on distributed profits, deemed profit distributions, and non-business expenses imposed under an eligible distribution tax system;(c) taxes imposed in lieu of a generally applicable corporate income tax; and(d) taxes levied by reference to retained earnings and corporate equity, including a tax on multiple components based on income and equity. 4.2.2. Covered taxes does not include any amount of:(a) top-up tax accrued by a parent entity under a qualified IIR;(b) top-up tax accrued by a constituent entity under a qualified domestic minimum top-up tax;(c) taxes attributable to an adjustment made by a constituent entity as a result of the application of a qualified UTPR;(d) a disqualified refundable imputation tax;(e) taxes paid by an insurance company in respect of returns to policyholders.Article 4.3. Allocation of covered taxes from one constituent entity to another constituent entity 4.3.1. Article 4.3.2 applies to the allocation of covered taxes in respect of permanent establishments, tax transparent entities and hybrid entities as well as the allocation of CFC taxes and taxes on distributions from one constituent entity to another. 4.3.2. Covered taxes are allocated from one constituent entity to another constituent entity as follows:(a) the amount of any covered taxes included in the financial accounts of a constituent entity with respect to GloBE income or loss of a permanent establishment is allocated to the permanent establishment;(b) the amount of any covered taxes included in the financial accounts of a tax transparent entity with respect to GloBE income or loss allocated to a constituent entity-owner pursuant to Article 3.5.1(b) is allocated to that constituent entity-owner;(c) in the case of a constituent entity whose constituent entity-owners are subject to a controlled foreign company tax regime, the amount of any covered taxes included in the financial accounts of its direct or indirect constituent entity-owners under a controlled foreign company tax regime on their share of the controlled foreign company’s income are allocated to the constituent entity;(d) in the case of a constituent entity that is a hybrid entity the amount of any covered taxes included in the financial accounts of a constituent entity-owner on income of the hybrid entity is allocated to the hybrid entity; and(e) the amount of any covered taxes accrued in the financial accounts of a constituent entity’s direct constituent entity-owners on distributions from the constituent entity during the fiscal year are allocated to the distributing constituent entity.Notes—1. In relation to Article 4.3.2(c), see the specified OECD GloBE rules guidance in—(a) paragraphs 58.1 to 58.7 of Chapter 4 of the 2023 Commentary;(b) section 2.10 of the Feb-2023 Administrative Guidance; and(c) section 4 of the Dec-2023 Administrative Guidance.2. In relation to Article 4.3.2(e), see the specified OECD GloBE rules guidance in—(a) paragraph 60.1 of Chapter 4 of the 2023 Commentary; and(b) section 2.6 of the Feb-2023 Administrative Guidance. 4.3.3. Covered taxes allocated to a constituent entity pursuant to Article 4.3.2(c) and (d) in respect of passive income are included in such constituent entity’s adjusted covered taxes in an amount equal to the lesser of:(a) the covered taxes allocated in respect of such passive income; or(b) the top-up tax percentage for the constituent entity’s jurisdiction, determined without regard to the taxes to be pushed down to the subsidiary under the controlled foreign company tax regime or fiscal transparency rule, multiplied by the amount of the constituent entity’s passive income includible under any controlled foreign company tax regime or fiscal transparency rule.Any covered taxes of the constituent entity-owner incurred with respect to such passive income that remain after the application of this Article shall not be allocated under Article 4.3.2(c) or (d). 4.3.4. Where the GloBE income of a permanent establishment is treated as GloBE income of the main entity pursuant to Article 3.4.5, any covered taxes arising in the location of the permanent establishment and associated with such income are treated as covered taxes of the main entity up to an amount not exceeding such income multiplied by the highest corporate tax rate on ordinary income in the jurisdiction where the main entity is located.Article 4.4. Mechanism to address temporary differences 4.4.1. The total deferred tax adjustment amount for a constituent entity for the fiscal year is equal to the deferred tax expense accrued in its financial accounts if the applicable tax rate is below the minimum rate or, in any other case, such deferred tax expense recast at the minimum rate, with respect to covered taxes for the fiscal year subject to the adjustments set forth in Articles 4.4.2 and 4.4.3 and the following exclusions:(a) the amount of deferred tax expense with respect to items excluded from the computation of GloBE income or loss under Chapter 3;(b) the amount of deferred tax expense with respect to disallowed accruals and unclaimed accruals;(c) the impact of a valuation adjustment or accounting recognition adjustment with respect to a deferred tax asset;(d) the amount of deferred tax expense arising from a re-measurement with respect to a change in the applicable domestic tax rate; and(e) the amount of deferred tax expense with respect to the generation and use of tax credits.Notes—1. In relation to Article 4.4.1, see the specified OECD GloBE rules guidance in—(a) paragraphs 71.1 to 71.3 of Chapter 4 of the 2023 Commentary; and(b) section 1.3 of the Feb-2023 Administrative Guidance.2. In relation to Article 4.4.1(e), see the specified OECD GloBE rules guidance in—(a) paragraphs 82.1 to 82.4 of Chapter 4 of the 2023 Commentary; and(b) section 2.8 of the Feb-2023 Administrative Guidance. 4.4.2. The total deferred tax adjustment amount is adjusted as follows:(a) increased by the amount of unclaimed accrual paid during the fiscal year;(b) increased by the amount of any recaptured deferred tax liability determined in a preceding fiscal year which has been paid during the fiscal year; and(c) reduced by the amount that would be a reduction to the total deferred tax adjustment amount due to recognition of a loss deferred tax asset for a current year tax loss, where a loss deferred tax asset has not been recognised because the recognition criteria are not met. 4.4.3. A deferred tax asset that has been recorded at a rate lower than the minimum rate may be recast at the minimum rate in the fiscal year such deferred tax asset becomes a GloBE loss, if the taxpayer can demonstrate that the deferred tax asset is attributable to a GloBE loss. The total deferred tax adjustment amount is reduced by the amount that a deferred tax asset is increased due to being recast under this Article. 4.4.4. To the extent a deferred tax liability, that is not a recapture exception accrual, is taken into account under this Article and such amount is not paid within the five subsequent fiscal years, the amount must be recaptured pursuant to this article. The amount of the recaptured deferred tax liability determined for the current fiscal year shall be treated as a reduction to covered taxes in the fifth preceding fiscal year and the effective tax rate and top-up tax of such fiscal year shall be recalculated under the rules of Article 5.4.1. The recaptured deferred tax liability for the current fiscal year is the amount of the increase in a category of deferred tax liability that was included in the total deferred tax adjustment amount in the fifth preceding fiscal year that has not reversed by the end of the last day of the current fiscal year, unless such amount relates to a recapture exception accrual as set forth in Article 4.4.5. 4.4.5. Recapture exception accrual means the tax expense accrued attributable to changes in associated deferred tax liabilities, in respect of:(a) cost recovery allowances on tangible assets;(b) the cost of a licence or similar arrangement from the government for the use of immovable property or exploitation of natural resources that entails significant investment in tangible assets;(c) research and development expenses;(d) de-commissioning and remediation expenses;(e) fair value accounting on unrealised net gains;(f) foreign currency exchange net gains;(g) insurance reserves and insurance policy deferred acquisition costs;(h) gains from the sale of tangible property located in the same jurisdiction as the constituent entity that are reinvested in tangible property in the same jurisdiction; and(i) additional amounts accrued as a result of accounting principle changes with respect to categories (a) through (h). 4.4.6. Disallowed accrual means:(a) any movement in deferred tax expense accrued in the financial accounts of a constituent entity which relates to an uncertain tax position; and(b) any movement in deferred tax expense accrued in the financial accounts of a constituent entity which relates to distributions from a constituent entity. 4.4.7. Unclaimed accrual means any increase in a deferred tax liability recorded in the financial accounts of a constituent entity for a fiscal year that is not expected to be paid within the time period set forth in Article 4.4.4 and for which the filing constituent entity makes an annual election not to include in total deferred tax adjustment amount for such fiscal year.Article 4.5. The GloBE loss election 4.5.1. In lieu of applying the rules set forth in Article 4.4, a filing constituent entity may make a GloBE loss election for a jurisdiction. When a GloBE loss election is made for a jurisdiction, a GloBE loss deferred tax asset is established in each fiscal year in which there is a net GloBE loss for the jurisdiction. The GloBE loss deferred tax asset is equal to the net GloBE loss in a fiscal year for the jurisdiction multiplied by the minimum rate. 4.5.2. The balance of the GloBE loss deferred tax asset is carried forward to subsequent fiscal years, reduced by the amount of GloBE loss deferred tax asset used in a fiscal year. 4.5.3. The GloBE loss deferred tax asset must be used in any subsequent fiscal year in which there is net GloBE income for the jurisdiction in an amount equal to the lower of the net GloBE income multiplied by the minimum rate or the amount of available GloBE loss deferred tax asset. 4.5.4. If the GloBE loss election is subsequently revoked, any remaining GloBE loss deferred tax asset is reduced to zero, effective as of the first day of the first fiscal year in which the GloBE loss election is no longer applicable. Subsequently, the deferred tax assets and liabilities for the jurisdiction, if any, will be taken into account as if they had been calculated under Articles 4.4 and 9.1 for the prior fiscal year. 4.5.5. The GloBE loss election must be filed with the first GloBE information return of the MNE group for the first fiscal year in which the MNE group has a constituent entity located in the jurisdiction for which the election is made. A GloBE loss election cannot be made for a jurisdiction with an eligible distribution tax system as defined in Article 7.3. 4.5.6. A flow-through entity that is a UPE of an MNE group may make a GloBE loss election under this Article. When such an election is made, the GloBE loss deferred tax asset shall be calculated in accordance with Articles 4.5.1 to 4.5.5, however, the GloBE loss deferred tax asset shall be calculated with reference to the GloBE loss of the flow-through entity after reduction in accordance with Article 7.1.2.Article 4.6. Post-filing adjustments and tax rate changes 4.6.1. An adjustment to a constituent entity’s liability for covered taxes for a previous fiscal year recorded in the financial accounts shall be treated as an adjustment to covered taxes in the fiscal year in which the adjustment is made, unless the adjustment relates to a fiscal year in which there is a decrease in covered taxes for the jurisdiction. In the case of a decrease in covered taxes included in the constituent entity’s adjusted covered taxes for a previous fiscal year, the effective tax rate and top-up tax for such fiscal year must be recalculated under Article 5.4.1. In the Article 5.4.1 recalculations, the adjusted covered taxes determined for the fiscal year shall be reduced by the amount of the decrease in covered taxes and GloBE income determined for the fiscal year and any intervening fiscal years shall be adjusted as necessary and appropriate. A filing constituent entity may make an annual election to treat an immaterial decrease in covered taxes as an adjustment to covered taxes in the fiscal year in which the adjustment is made. An immaterial decrease in covered taxes is an aggregate decrease of less than EUR 1 million in the adjusted covered taxes determined for the jurisdiction for a fiscal year.Note—In relation to Article 4.6.1, see the specified OECD GloBE rules guidance in paragraph 124 of Chapter 4 of the 2023 Commentary. 4.6.2. The amount of deferred tax expense resulting from a reduction to the applicable domestic tax rate shall be treated as an adjustment under Article 4.6.1 to a constituent entity’s liability for covered taxes claimed under Article 4.1 for a previous fiscal year when such reduction results in the application of a rate that is less than the minimum rate. 4.6.3. The amount of deferred tax expense, when paid, that has resulted from an increase to the applicable domestic tax rate shall be treated as an adjustment under Article 4.6.1 to a constituent entity’s liability for covered taxes claimed under Article 4.1 for a previous fiscal year when such amount was originally recorded at a rate less than the minimum rate. This adjustment is limited to an amount that is equal to an increase of deferred tax expense up to such deferred tax expense recast at the minimum rate. 4.6.4. If more than EUR 1 million of the amount accrued by a constituent entity as current tax expense and included in adjusted covered taxes for a fiscal year is not paid within three years of the last day of such year, the effective tax rate and top-up tax for the fiscal year in which the unpaid amount was claimed as a covered tax must be recalculated in accordance with Article 5.4.1 by excluding such unpaid amount from adjusted covered taxes.Chapter 5 Computation of Effective Tax Rate and Top-up TaxArticle 5.1. Determination of effective tax rate 5.1.1. The effective tax rate of the MNE group for a jurisdiction with net GloBE income shall be calculated for each fiscal year. The effective tax rate of the MNE group for a jurisdiction is equal to the sum of the adjusted covered taxes of each constituent entity located in the jurisdiction divided by the net GloBE income of the jurisdiction for the fiscal year. For purposes of Chapter 5, each stateless constituent entity shall be treated as a single constituent entity located in a separate jurisdiction.Note—In relation to Article 5.1.1, see the specified OECD GloBE rules guidance in paragraphs 6 and 7 of Chapter 5 of the 2023 Commentary. 5.1.2. The net GloBE income of a jurisdiction for a fiscal year is the positive amount, if any, computed in accordance with the following formula: Net GloBE Income = GloBE Income of all Constituent Entities – GloBE Losses of all Constituent Entities where:(a) the GloBE income of all constituent entities is the sum of the GloBE income of all constituent entities located in the jurisdiction determined in accordance with Chapter 3 for the fiscal year; and(b) the GloBE losses of all constituent entities is the sum of the GloBE losses of all constituent entities located in the jurisdiction determined in accordance with Chapter 3 for the fiscal year. 5.1.3. Adjusted covered taxes and GloBE income or loss of constituent entities that are investment-related entities or minority-owned constituent entities are excluded from the determination of the effective tax rate in Article 5.1.1 and the determination of net GloBE income in Article 5.1.2.Article 5.2. Top-up tax 5.2.1. The top-up tax percentage for a jurisdiction for a fiscal year shall be the positive percentage point difference, if any, computed in accordance with the following formula:Top up tax percentage = minimum rate – effective tax ratewhere the effective tax rate is the effective tax rate determined in accordance with Article 5.1 for the jurisdiction for the fiscal year.Note—In relation to Article 5.2.1, see the specified OECD GloBE rules guidance in—(a) paragraphs 15.1 to 15.5 of Chapter 5 of the 2023 Commentary; and(b) section 2.7 of the Feb-2023 Administrative Guidance. 5.2.2. The excess profit for the jurisdiction for the fiscal year is the positive amount, if any, computed in accordance with the following formula:Excess Profit = Net GloBE Income – Substance Based Income Exclusionwhere:(a) the net GloBE income is the net GloBE income determined under Article 5.1.2 for the jurisdiction for the fiscal year; and(b) the substance-based income exclusion is the substance-based income exclusion determined under Article 5.3 for the jurisdiction for the fiscal year (if any). 5.2.3. The jurisdictional top-up tax for a jurisdiction for a fiscal year is equal to the positive amount, if any, computed in accordance with the following formula:Jurisdictional Top up Tax= (Top up Tax Percentage x Excess Profit) + Additional Current Top up Tax – Domestic Top up Taxwhere:(a) the top-up tax percentage is percentage point difference determined in accordance with Article 5.2.1 for the jurisdiction for the fiscal year;(b) the excess profit is the excess profit determined in accordance with Article 5.2.2 for the jurisdiction for the fiscal year;(c) the additional current top-up tax is the amount determined, or treated as additional current top-up tax, under Article 4.1.5 or Article 5.4.1 for the jurisdiction for the fiscal year; and(d) the domestic top-up tax is the amount payable under a qualified domestic minimum top-up tax of the jurisdiction for the fiscal year. 5.2.4. Except as provided in Article 5.4.3, the top-up tax of a constituent entity shall be determined for each constituent entity of a jurisdiction that has GloBE income determined in accordance with Chapter 3 for the fiscal year included in the computation of net GloBE income of that jurisdiction in accordance with the following formula: Top up Tax of a CE = Jurisdictional Top up Tax x GloBE Income of the CE Aggregate GloBE Income of all CEs where:(a) the jurisdictional top-up tax is the top-up tax determined in accordance with Article 5.2.3 for the jurisdiction for the fiscal year;(b) the GloBE income of the CE is the GloBE income of the constituent entity determined in accordance with Article 3.2 for the jurisdiction for the fiscal year;(c) the aggregate GloBE income of all CEs is the aggregate GloBE income of all constituent entities that have GloBE income for the fiscal year included in the computation of net GloBE income in accordance with Article 5.1.2 for the jurisdiction for the fiscal year. 5.2.5. If the jurisdictional top-up tax is attributable to a recalculation under the Article 5.4.1 and the jurisdiction does not have net GloBE income for the current fiscal year, top-up tax shall be allocated using the formula in Article 5.2.4 based on the GloBE income of the constituent entities in the fiscal years for which the recalculations under Article 5.4.1 were performed.Article 5.3. Substance-based income exclusion 5.3.1. The net GloBE income for the jurisdiction shall be reduced by the substance-based income exclusion for the jurisdiction to determine the excess profit for purposes of computing the top-up tax under Article 5.2. A filing constituent entity of an MNE group may make an annual election not to apply the substance-based income exclusion for a jurisdiction by not computing the exclusion or claiming it in the computation of top-up tax for the jurisdiction in the GloBE information return(s) filed for the fiscal year.Note—In relation to Article 5.3.1, see the specified OECD GloBE rules guidance in—(a) paragraph 29.1 of Chapter 5 of the 2023 Commentary; and(b) section 3 of the Jul-2023 Administrative Guidance. 5.3.2. The substance-based income exclusion amount for a jurisdiction is the sum of the payroll carve-out and the tangible asset carve-out for each constituent entity, except for constituent entities that are investment-related entities, in that jurisdiction. 5.3.3. The payroll carve-out for a constituent entity located in a jurisdiction is equal to 5% of its eligible payroll costs of eligible employees that perform activities for the MNE group in such jurisdiction, except eligible payroll costs that are:(a) capitalised and included in the carrying value of eligible tangible assets;(b) attributable to a constituent entity’s international shipping income and qualified ancillary international shipping income under Article 3.3.5 that is excluded from the computation of GloBE income or loss for the fiscal year.Note—In relation to Article 5.3.3, see—(a) the specified OECD GloBE rules guidance in—(i) paragraph 36.1 of Chapter 5 of the 2023 Commentary; and(ii) section 3 of the Jul-2023 Administrative Guidance; and(b) the specified OECD GloBE rules guidance in—(i) paragraphs 33 and 33.1 of Chapter 5 of the 2023 Commentary; and(ii) section 3 of the Jul-2023 Administrative Guidance. 5.3.4. The tangible asset carve-out for a constituent entity located in a jurisdiction is equal to 5% of the carrying value of eligible tangible assets located in such jurisdiction. Eligible tangible assets means:(a) property, plant, and equipment located in that jurisdiction;(b) natural resources located in that jurisdiction;(c) a lessee’s right of use of tangible assets located in that jurisdiction; and(d) a licence or similar arrangement from the government for the use of immovable property or exploitation of natural resources that entails significant investment in tangible assets.For this purpose, the tangible asset carve-out computation shall not include the carrying value of property (including land or buildings) that is held for sale, lease or investment. The tangible asset carve-out computation shall not include the carrying value of tangible assets used in the generation of a constituent entity’s international shipping income and qualified ancillary international shipping income (i.e. ships and other maritime equipment and infrastructure). The carrying value of tangible assets attributable to a constituent entity’s excess income over the cap for qualified ancillary international shipping income under Article 3.3.4 shall be included in the tangible asset carve-out computation.Note—In relation to Article 5.3.4, see—(a) the specified OECD GloBE rules guidance in—(i) paragraph 48.1 of Chapter 5 of the 2023 Commentary; and(ii) section 3 of the Jul-2023 Administrative Guidance;(b) the specified OECD GloBE rules guidance in—(i) paragraphs 38 and 38.1 of Chapter 5 of the 2023 Commentary; and(ii) section 3 of the Jul-2023 Administrative Guidance; and(c) the specified OECD GloBE rules guidance in—(i) paragraphs 43 to 43.7 of Chapter 5 of the 2023 Commentary; and(ii) section 3 of the Jul-2023 Administrative Guidance. 5.3.5. The computation of carrying value of eligible tangible assets for purposes of Article 5.3.4 shall be based on the average of the carrying value (net of accumulated depreciation, amortisation, impairment losses or depletion and including any amount attributable to capitalisation of payroll expense) at the beginning and ending of the reporting fiscal year as recorded for the purposes of preparing the consolidated financial statements of the ultimate parent entity.Note—In relation to Article 5.3.5, see—(a) the specified OECD GloBE rules guidance in paragraph 52 of Chapter 5 of the 2023 Commentary; and(b) the specified OECD GloBE rules guidance in paragraph 49 of Chapter 5 of the 2023 Commentary. 5.3.6. For purposes of Articles 5.3.3 and 5.3.4, the eligible payroll costs and eligible tangible assets of a constituent entity that is a permanent establishment are those included in its separate financial accounts as determined by Article 3.4.1 and adjusted in accordance with Article 3.4.2, provided that the eligible employees and eligible tangible assets are located in the jurisdiction where the permanent establishment is located. The eligible payroll costs and eligible tangible assets of a permanent establishment are not taken into account for the eligible payroll costs and eligible tangible assets of the main entity. The eligible payroll costs and eligible tangible assets of a permanent establishment whose income has been wholly or partly excluded in accordance with Articles 3.5.3 and 7.1.4 are excluded from the substance-based income exclusion computations of the MNE group in the same proportion. 5.3.7. For purposes of Articles 5.3.3 and 5.3.4, eligible payroll costs and eligible tangible assets of a flow-through entity that are not allocated under Article 5.3.6 are allocated as follows:(a) if the financial accounting net income or loss of the flow-through entity has been allocated to the constituent entity-owner under Article 3.5.1(b), then the entity’s eligible payroll costs and eligible tangible assets are allocated in the same proportion to the constituent entity-owner provided it is located in the jurisdiction where the eligible employees and eligible tangible assets are located;(b) if the flow-through entity is the ultimate parent entity, then eligible payroll costs and eligible tangible assets located in the jurisdiction where the ultimate parent entity is located are allocated to it and reduced in proportion to the income that is excluded under Article 7.1.1; and(c) all other eligible payroll costs and eligible tangible assets of the flow-through entity are excluded from the substance-based income exclusion computations of the MNE group.Article 5.4. Additional current top-up tax 5.4.1. If the effective tax rate and top-up tax for a prior fiscal year is required or permitted to be recalculated pursuant to an ETR adjustment article,(a) the effective tax rate and top-up tax for the prior fiscal year shall be recalculated in accordance with the rules of Article 5.1 through Article 5.3 after taking into account the adjustments to adjusted covered taxes and GloBE income or loss required by the relevant ETR adjustment article; and(b) any amount of incremental top-up tax resulting from such recalculation shall be treated as additional current top-up tax under Article 5.2.3 arising in the current fiscal year. 5.4.2. If there is additional current top-up tax attributable to a recalculation under Article 5.4.1 and the jurisdiction does not have net GloBE income for the current fiscal year, the GloBE income of each constituent entity located in the jurisdiction for purposes of Article 2.2.2 shall be equal to the result of the top-up tax allocated to such entity under Articles 5.2.4 and 5.2.5 divided by the minimum rate. 5.4.3.

If there is additional current top-up tax attributable to the operation of Article 4.1.5, the GloBE income of each constituent entity located in the jurisdiction for purposes of Article 2.2.2 shall be equal to the result of the top-up tax allocated to such entity under this Article divided by the minimum rate. The amount of additional current top-up tax allocated to each constituent entity for purposes of this Article shall be allocated only to constituent entities that record an adjusted covered taxes amount that is less than zero and less than the GloBE income or loss of such constituent entity multiplied by the minimum rate. The allocation shall be made pro-rata based upon the following amount for each of those constituent entities:(GloBE Income or Loss x Minimum Rate) – Adjusted Covered Taxes 5.4.4. If a constituent entity is allocated additional current top-up tax pursuant to this Article and Article 5.2.4 such constituent entity shall be treated as a low-taxed constituent entity for the purposes of Chapter 2.Article 5.5. De minimis exclusion 5.5.1. At the election of the filing constituent entity, and notwithstanding the requirements otherwise provided in Chapter 5, the top-up tax for the constituent entities located in a jurisdiction shall be deemed to be zero for a fiscal year if, for such fiscal year:(a) the average GloBE revenue of such jurisdiction is less than EUR 10 million; and(b) the average GloBE income or loss of such jurisdiction is a loss or is less than EUR 1 million.The election under this Article is an annual election.Note—In relation to Article 5.5.1(a), see the specified OECD GloBE rules guidance in—(a) paragraph 83 of Chapter 5 of the 2023 Commentary; and(b) section 1 of the Jul-2023 Administrative Guidance. 5.5.2. For purposes of Article 5.5.1, the average GloBE revenue (or GloBE income or loss) of a jurisdiction is the average of the GloBE revenue (or GloBE income or loss) of the jurisdiction for the current and the two preceding fiscal years. If there were no constituent entities with GloBE revenue or GloBE losses that were located in the jurisdiction in the first or second preceding fiscal year, such year or years shall be excluded from the calculation of the average GloBE revenue and the average GloBE income or loss of the relevant jurisdiction. 5.5.3. For purposes of Article 5.5.2:(a) the GloBE revenue of a jurisdiction for a fiscal year is the sum of the revenue of all constituent entities located in the jurisdiction for such fiscal year, taking into account the adjustments calculated in accordance with Chapter 3; and(b) the GloBE income or loss of a jurisdiction for a fiscal year is the net GloBE income of that jurisdiction, if any, or the net GloBE loss of that jurisdiction.Note—In relation to Article 5.5.3, see—(a) the specified OECD GloBE rules guidance in paragraph 92 of Chapter 5 of the 2023 Commentary; and(b) the specified OECD GloBE rules guidance in paragraph 82 of Chapter 5 of the 2023 Commentary. 5.5.4. An election under Article 5.5 shall not apply to a constituent entity that is a stateless constituent entity or an investment-related entity and the revenue and GloBE income or loss of a stateless constituent entity and an investment-related entity shall be excluded from the computations in Article 5.5.3.Article 5.6. Minority-owned constituent entities 5.6.1. The computation of the effective tax rate and top-up tax for a jurisdiction in accordance with Chapters 3 to 7, and Article 8.2 with respect to members of a minority-owned subgroup shall apply as if they were a separate MNE group. The adjusted covered taxes and GloBE income or loss of members of a minority-owned subgroup are excluded from the determination of the remainder of the MNE group’s effective tax rate in Article 5.1.1 and net GloBE income in Article 5.1.2. 5.6.2. The effective tax rate and top-up tax of a minority-owned constituent entity that is not a member of a minority-owned subgroup is computed on an entity basis in accordance with Chapters 3 to 7, and Article 8.2. The adjusted covered taxes and GloBE income or loss of the minority-owned constituent entity are excluded from the determination of the remainder of the MNE group’s effective tax rate in Article 5.1.1 and net GloBE income in Article 5.1.2. This provision does not apply if the minority-owned constituent entity is an investment-related entity.Chapter 6 Corporate Restructurings and Holding StructuresArticle 6.1. Application of consolidated revenue threshold to group mergers and demergers 6.1.1. For the purposes of Article 1.1(a) If two or more groups merge to form a single group in any of the four fiscal years prior to the tested fiscal year, then the consolidated revenue threshold of the MNE group for any fiscal year prior to the merger is deemed to be met for that year if the sum of the revenue included in each of their consolidated financial statements for that year is equal to or greater than EUR 750 million.(b) Where an entity that is not a member of any group (acquirer) acquires or merges with an entity or group (target) in the tested fiscal year and the target or acquirer does not have consolidated financial statements in any of the four fiscal years prior to the tested fiscal year because it was not a member of any group in that year, the consolidated revenue threshold of the MNE group is deemed to be met for that year if the sum of the revenue included in each of their Financial Statements or consolidated financial statements for that year is equal to or greater than EUR 750 million.(c) Where a single MNE group within the scope of the GloBE rules demerges into two or more groups (each a demerged group), the consolidated revenue threshold is deemed to be met by a demerged group:i. with respect to the first tested fiscal year ending after the demerger, if the demerged group has annual revenues of EUR 750 million or more in that year;ii. with respect to the second to fourth tested fiscal years ending after the demerger, if the demerged group has annual revenues of EUR 750 million or more in at least two of the fiscal years following the year of the demerger. 6.1.2. For the purposes of Article 6.1.1 a merger is any arrangement where:(a) all or substantially all of the group entities of two or more separate groups are brought under common control such that they constitute group entities of a combined group; or(b) an entity that is not a member of any group is brought under common control with another entity or group such that they constitute group entities of a combined group. 6.1.3. For the purposes of Article 6.1.1 a demerger is any arrangement where the group entities of a single group are separated into two or more groups that are no longer consolidated by the same ultimate parent entity.Article 6.2. Constituent entities joining and leaving an MNE group 6.2.1 Except to the extent provided in Article 6.2.2, the following provisions apply where an entity (the target) becomes or ceases to be a constituent entity of an MNE group as a result of a transfer of direct or indirect ownership interests in such entity during the fiscal year (the acquisition year):(a) where the target joins or leaves a group or the target becomes the ultimate parent entity of a new group, the target will be treated as a member of the group for the purposes of the GloBE rules if any portion of its assets, liabilities, income, expenses or cash flows are included on a line-by-line basis in the consolidated financial statements of the ultimate parent entity in the acquisition year;(b) in the acquisition year, an MNE group shall take into account only the financial accounting net income or loss and adjusted covered taxes of the target that are taken into account in the consolidated financial statements of the ultimate parent entity for purposes of applying the GloBE rules;(c) in the acquisition year and each succeeding year, the target shall determine its GloBE income or loss and adjusted covered taxes using its historical carrying value of the assets and liabilities;(d) the computation of the target’s eligible payroll costs under Article 5.3.3 shall take into account only those costs reflected in the consolidated financial statements of the ultimate parent entity;(e) the computation of carrying value of the target’s eligible tangible assets for purposes of Article 5.3.4 shall be adjusted proportionally to correspond with the length of the relevant fiscal year that the target was a member of the MNE group;(f) with the exception of the GloBE loss deferred tax asset, the deferred tax assets and deferred tax liabilities of a constituent entity that are transferred between MNE groups shall be taken into account under the GloBE rules by the acquiring MNE group in the same manner and to the same extent as if the acquiring MNE group controlled the constituent entity when such assets and liabilities arose;(g) deferred tax liabilities of a target that have previously been included in its total deferred tax adjustment amount shall be treated as reversed for purposes of applying Article 4.4.4 by the disposing MNE group and treated as arising in the acquisition year for purposes of applying Article 4.4.4 by the acquiring MNE group, except that in such cases any subsequent reduction to covered taxes under Article 4.4.4 shall have effect in the year in which the amount is recaptured; and(h) if the target is a parent entity and it is a group entity of two or more MNE groups during the acquisition year, it shall apply separately the provisions of the IIR to its allocable shares of the top-up tax of low-taxed constituent entities determined for each MNE group. 6.2.2. For purposes of the GloBE rules, the acquisition or disposal of a controlling interest in a constituent entity will be treated as an acquisition or disposal of the assets and liabilities if the jurisdiction in which the target constituent entity is located, or in the case of a tax transparent entity, the jurisdiction in which the assets are located, treats the acquisition or disposal of that controlling interest in the same or similar manner as an acquisition or disposition of the assets and liabilities and imposes a covered tax on the seller based on the difference between their tax basis and the consideration paid in exchange for the controlling interest or the fair value of the assets and liabilities.Article 6.3. Transfer of assets and liabilities 6.3.1. In the case of a disposition or acquisition of assets and liabilities, a disposing constituent entity will include the gain or loss on disposition in the computation of its GloBE income or loss and an acquiring constituent entity will determine its GloBE income or loss using the acquiring constituent entity’s carrying value of the acquired assets and liabilities determined under the accounting standard used in preparing consolidated financial statements of the ultimate parent entity.Note—In relation to Article 6.3.1, see the specified OECD GloBE rules guidance in—(a) paragraph 73.1 of Chapter 6 of the 2023 Commentary; and(b) section 2.1 of the Feb-2023 Administrative Guidance. 6.3.2 If the disposition or acquisition of assets and liabilities is part of a GloBE reorganisation Article 6.3.1 shall not apply and:(a) a disposing constituent entity will exclude any gain or loss on the disposition from the computation of its GloBE income or loss; and(b) an acquiring constituent entity will determine its GloBE income or loss after the acquisition using the disposing entity’s carrying values of the acquired assets and liabilities upon disposition. 6.3.3 If a disposition or acquisition of assets and liabilities is part of a GloBE reorganisation in which a disposing constituent entity recognises non-qualifying gain or loss, Articles 6.3.1 and 6.3.2 shall not apply and:(a) the disposing constituent entity will include gain or loss on the disposition in its GloBE income or loss computation to the extent of the non-qualifying gain or loss; and(b) an acquiring constituent entity will determine its GloBE income or loss after the acquisition using the disposing entity’s carrying value of the acquired assets and liabilities upon disposition adjusted consistent with local tax rules to account for the non-qualifying gain or loss. 6.3.4. At the election of the filing constituent entity, a constituent entity of an MNE group that is required or permitted to adjust the basis of its assets and the amount of its liabilities to fair value for tax purposes in the jurisdiction in which it is located, shall:(a) include in the computation of its GloBE income or loss an amount of gain or loss in respect of each of its assets and liabilities that is equal to:i. the difference between the carrying value for financial accounting purposes of the asset or liability immediately before and the fair value of the asset or liability immediately after the date of the event that triggered the tax adjustment (the triggering event);ii. decreased (or increased) by the non-qualifying gain (or loss), if any, arising in connection with the triggering event;(b) use the fair value for financial accounting purposes of the asset or liability immediately after the triggering event to determine GloBE income or loss in fiscal years ending after the triggering event; and(c) include the net total of the amounts determined in Article 6.3.4(a) in the constituent entity’s GloBE income or loss in one of the following ways:i. the net total of the amounts is included in the fiscal year in which the triggering event occurs; orii. an amount equal to the net total of the amounts divided by five is included in the fiscal year in which the triggering event occurs and in each of the immediate four subsequent fiscal years, unless the constituent entity leaves the MNE group in a fiscal year within this period, in which case the remaining amount will be wholly included in that fiscal year.Article 6.4. Joint ventures 6.4.1. The GloBE rules shall apply to a joint venture and its JV subsidiaries as follows for each fiscal year:(a) Chapters 3 to 7, and Article 8.2 shall apply for purposes of computing any top-up tax of the joint venture and its JV subsidiaries as if they were constituent entities of a separate MNE group and as if the joint venture was the ultimate parent entity of that group;(b) a parent entity that holds directly or indirectly ownership interests in the joint venture or a JV subsidiary shall apply the IIR with respect to its allocable share of the top-up tax of a member of the JV group in accordance with Article 2.1 to Article 2.3; and(c) the JV group top-up tax shall be reduced by each parent entity’s allocable share of the top-up tax of each member of the JV group that is brought into charge under a qualified IIR under paragraph (b), and any remaining amount shall be added to the total UTPR top-up tax amount taken into account under Article 2.5.1.Article 6.5. Multi-parented MNE groups 6.5.1. The following provisions apply to multi-parented MNE groups:(a) the entities and constituent entities of each group are treated as members of a single MNE group for purposes of the GloBE rules (the multi-parented MNE group);(b) an entity (other than an excluded entity) shall be treated as a constituent entity if it is consolidated on a line-by-line basis by the multi-parented MNE group or its controlling interests are held by entities in the multi-parented MNE group;(c) the consolidated financial statements of the multi-parented MNE group shall be the consolidated financial statements referred to in the definition of stapled structure or dual-listed arrangement (as relevant) prepared under an acceptable financial accounting standard, which is deemed to be the accounting standard of the ultimate parent entity;(d) the ultimate parent entities of the separate groups that comprise the multi-parented MNE group shall be the ultimate parent entities of the multi-parented MNE group (when applying the GloBE rules in respect of a multi-parented MNE group, a reference to an ultimate parent entity shall apply, as required, as if they were a reference to multiple ultimate parent entities);(e) the parent entities of the multi-parented MNE group (including each ultimate parent entity) located in Hong Kong shall apply the IIR in accordance with Article 2.1 to Article 2.3 with respect to their allocable share of the top-up tax of the low-taxed constituent entity;(f) all of the constituent entities of the multi-parented MNE group located in Hong Kong shall apply the UTPR in accordance with Article 2.4 to Article 2.6, taking into account the top-up tax of each low-taxed constituent entity of the multi-parented MNE group; and(g) the ultimate parent entities are required to submit the GloBE information return in accordance with Article 8.1 unless they appoint a single designated filing entity and that return shall include the information concerning each of the groups that comprise the multi-parented MNE group.Notes—1. The reference in Article 6.5.1(f) to “Article 2.4 to Article 2.6” is to be read as “Article 2.4 to Article 2.6, read with Part 2 of this Schedule”, because of Part 2 of this Schedule.2. Similarly, the reference in Article 6.5.1(g) to “Article 8.1” is to be read as “Part 2 of Schedule 63”, because of Part 2 of this Schedule.Chapter 7 Tax Neutrality and Distribution RegimesArticle 7.1. Ultimate parent entity that is a flow-through entity 7.1.1. The GloBE income for a fiscal year of a flow-through entity that is the ultimate parent entity of an MNE group shall be reduced by the amount of GloBE income attributable to each ownership interest if:(a) the holder of the ownership interest is subject to tax on such income for a taxable period that ends within 12 months of the end of the MNE group’s fiscal year and:(i) the holder of the ownership interest is subject to tax on the full amount of such income at a nominal rate that equals or exceeds the minimum rate; or(ii) it can be reasonably expected that the aggregate amount of covered taxes paid by the ultimate parent entity and other entities that are part of the tax transparent structure and taxes of the holder of the ownership interest on such income equals or exceeds the amount that results from multiplying the full amount of such income by the minimum rate; or(b) the holder is a natural person that:(i) is a tax resident in the UPE jurisdiction; and(ii) holds ownership interests that, in the aggregate, are a right to 5% or less of the profits and assets of the ultimate parent entity; or(c) the holder is a governmental entity, an international organisation, a non-profit organisation, or a pension fund that:(i) is resident in the UPE jurisdiction; and(ii) holds ownership interests that, in the aggregate, are a right to 5% or less of the profits and assets of the ultimate parent entity.Notes—1. In relation to Article 7.1.1(a)(i), see the specified OECD GloBE rules guidance in paragraph 12 of Chapter 7 of the 2023 Commentary.2. In relation to Article 7.1.1(b)(ii), see the specified OECD GloBE rules guidance in paragraph 18 of Chapter 7 of the 2023 Commentary. 7.1.2. In computing its GloBE loss for a fiscal year, a flow-through entity that is the ultimate parent entity of an MNE group shall reduce its GloBE loss for such fiscal year by the amount of GloBE loss attributable to each ownership interest, except to the extent that the holders of ownership interests are not allowed to use the loss in computing their separate taxable income. 7.1.3. A flow-through entity that reduces its GloBE income pursuant to Article 7.1.1 shall reduce its covered taxes proportionally. 7.1.4. Articles 7.1.1 through 7.1.3 shall apply to a permanent establishment:(a) through which a flow-through entity that is the ultimate parent entity of an MNE group wholly or partly carries out its business; or(b) through which the business of a tax transparent entity is wholly or partly carried out if the ultimate parent entity’s ownership interest in that tax transparent entity is held directly or through a tax transparent structure.Article 7.2. Ultimate parent entity subject to deductible dividend regime 7.2.1. For purposes of computing its GloBE income or loss for a fiscal year, an ultimate parent entity that is subject to a deductible dividend regime shall reduce (but not below zero) its GloBE income for such fiscal year by the amount that is distributed as a deductible dividend within 12 months of the end of the fiscal year if:(a) the dividend is subject to tax in the hands of the dividend recipient for a taxable period that ends within 12 months of the end of the ultimate parent entity’s fiscal year, and:(i) the dividend recipient is subject to tax on such dividend at a nominal rate that equals or exceeds the minimum rate;(ii) it can be reasonably expected that the aggregate amount of covered taxes paid by the ultimate parent entity and taxes paid by the dividend recipient on the dividend income equals or exceeds the amount that results from multiplying the full amount of such income by the minimum rate; or(iii) the dividend recipient is a natural person and the dividend is a patronage dividend from a supply cooperative; or(b) the dividend recipient is a natural person that:(i) is a tax resident in the UPE jurisdiction; and(ii) holds ownership interests that, in the aggregate, are a right to 5% or less of the profits and assets of the ultimate parent entity.(c) the dividend recipient is resident in the UPE jurisdiction and is:(i) a governmental entity,(ii) an international organisation,(iii) a non-profit organisation or(iv) a pension fund that is not a pension services entity. 7.2.2. An ultimate parent entity that reduces its GloBE income pursuant to Article 7.2.1 shall reduce its covered taxes (other than the taxes for which the dividend deduction was allowed) proportionally and shall reduce its GloBE income by the same amount.Note—In relation to Article 7.2.2, see the specified OECD GloBE rules guidance in paragraph 46 of Chapter 7 of the 2023 Commentary. 7.2.3. If the ultimate parent entity holds an ownership interest in another constituent entity subject to the deductible dividend regime (directly or through a chain of such constituent entities), Articles 7.2.1 and 7.2.2 shall apply to each other constituent entity in the UPE jurisdiction that is subject to the deductible dividend regime to the extent that its GloBE income is further distributed by the ultimate parent entity to recipients that meet the requirements of Article 7.2.1. 7.2.4. Patronage dividends from a supply cooperative are subject to tax to the extent they reduce an expense or cost that is deductible in the computation of the recipient’s taxable income.Note—In relation to Article 7.2.4, see the specified OECD GloBE rules guidance in paragraph 50 of Chapter 7 of the 2023 Commentary.Article 7.3. Eligible distribution tax systems 7.3.1. A filing constituent entity may make an annual election with respect to a constituent entity that is subject to an eligible distribution tax system to add the amount of deemed distribution tax determined under Article 7.3.2 to adjusted covered taxes for the fiscal year. An election under this Article shall apply to all constituent entities located in the jurisdiction. 7.3.2. The amount of deemed distribution tax is the lesser of:(a) the amount necessary to increase the effective tax rate computed under Article 5.2.1 for the jurisdiction for the fiscal year to the minimum rate; or(b) the amount of distribution tax that would have been due if the constituent entities located in the jurisdiction had distributed all of their income that is subject to the eligible distribution tax regime during such year. 7.3.3. An annual deemed distribution tax recapture account is established for each fiscal year in which the election in Article 7.3.1 applies. A deemed distribution tax recapture account is increased by the amount of the deemed distribution tax determined under Article 7.3.2 for the jurisdiction for the fiscal year for which it was established. At the end of each succeeding fiscal year, the outstanding balances of deemed distribution tax recapture accounts established for prior fiscal years are reduced in chronological order and to the extent thereof, but not below zero:(a) first by taxes paid by the constituent entities during the fiscal year in relation to actual or deemed distributions;(b) then by the amount of any net GloBE loss of the jurisdiction multiplied by the minimum rate; and(c) then by any amount of recapture account loss carry-forward applied to the current fiscal year pursuant to Article 7.3.4. 7.3.4. A recapture account loss carry-forward shall be established for the jurisdiction when the amount described in Article 7.3.3(b) exceeds the outstanding balance of the deemed distribution tax recapture accounts. The recapture account loss carry-forward shall be in an amount equal to such excess and shall be taken into account in subsequent fiscal years as a reduction to deemed distribution tax recapture accounts in such fiscal years. When such amount is taken into account in a subsequent fiscal year, the recapture account loss carry-forward must be reduced by that amount. 7.3.5. If there is an outstanding balance of a deemed distribution tax recapture account (maintained in accordance with Article 7.3.3) on the last day of the fourth fiscal year after the fiscal year for which such account was established, the effective tax rate and top-up tax for the fiscal year for which the account was established must be recalculated under Article 5.4.1 by treating the balance of the deemed distribution tax recapture account as a reduction to the adjusted covered taxes previously determined for such year. 7.3.6. Taxes paid during the fiscal year in relation to actual or deemed distributions are not included in adjusted covered taxes to the extent they reduce a deemed distribution tax recapture account under Article 7.3.3. 7.3.7. In the fiscal year that a departing constituent entity leaves the MNE group or transfers substantially all of its assets outside the MNE group or outside the jurisdiction,(a) the effective tax rate and top-up tax for each preceding year for which a deemed distribution tax recapture account is outstanding is re-calculated in accordance with the principles of Article 5.4.1. by treating the balance of the deemed distribution tax recapture account as a reduction to the adjusted covered taxes previously determined for such year; and(b) any amount of incremental top-up tax resulting from such recalculation shall be multiplied by the disposition recapture ratio to determine the additional current top-up tax for purposes of Article 5.2.3.Note—In relation to Article 7.3.7(b), see the specified OECD GloBE rules guidance in paragraph 71 of Chapter 7 of the 2023 Commentary. 7.3.8. The disposition recapture ratio is determined for each departing constituent entity using the following formula: GloBE income of the CE Net income of the jurisdiction where:(a) GloBE income of the CE is the sum of GloBE income of the departing constituent entity determined in accordance with Chapter 3 for each fiscal year corresponding to the deemed distribution tax recapture accounts for the jurisdiction; and(b) net Income of the jurisdiction is the sum of the net GloBE income of the jurisdiction determined in accordance with Article 5.1.2 for each fiscal year corresponding to the deemed distribution tax recapture accounts for the jurisdiction.Article 7.4. Effective tax rate computation for investment-related entities 7.4.1. The rules of Article 7.4 apply to constituent entities that meet the definition of an investment-related entity, except investment-related entities that are tax transparent entities or subject to an election under Article 7.5 or Article 7.6. 7.4.2. The effective tax rate for an investment-related entity that is a constituent entity shall be calculated separately from the effective tax rate of the jurisdiction in which it is located. The effective tax rate for each such investment-related entity is equal to the investment-related entity’s adjusted covered taxes divided by the MNE group’s allocable share of the investment-related entity’s GloBE income determined under Chapter 3. If there is more than one investment-related entity located in the jurisdiction, the adjusted covered taxes and the MNE group’s allocable share of each investment-related entity’s GloBE income or loss determined for each such investment-related entity are combined to compute the effective tax rate of all such investment-related entities. 7.4.3. An investment-related entity’s adjusted covered taxes is the sum of the adjusted covered taxes determined for the investment-related entity under Article 4.1 attributable to the MNE group’s allocable share of the investment-related entity’s GloBE income and the covered taxes allocated to the investment-related entity under Article 4.3. The investment-related entity’s adjusted covered taxes does not include any covered taxes accrued by the investment-related entity attributable to income that is not part of the MNE group’s allocable share of the investment-related entity’s GloBE income. 7.4.4. The MNE group’s allocable share of the investment-related entity’s GloBE income is equal to the allocable share of the investment-related entity’s GloBE income or loss that would be determined for the ultimate parent entity in accordance with the rules of Article 2.2.2 taking into account only interests that are not subject to an election under Article 7.5 or Article 7.6. 7.4.5. The top-up tax of a constituent entity that is an investment-related entity shall be an amount equal to the top-up tax percentage for the investment-related entity multiplied by the investment-related entity’s GloBE income over the substance-based income exclusion for the investment-related entity. The top-up tax percentage for an investment-related entity shall be the percentage point excess, if any, of the minimum rate over the effective tax rate of the investment-related entity. If there is more than one investment-related entity located in the jurisdiction, the investment-related entity’s GloBE income and the substance-based income exclusion determined for each such investment-related entity are combined to compute the top-up tax percentage of all such investment-related entities. 7.4.6. The substance-based income exclusion for an investment-related entity shall be determined in accordance with the principles in Article 5.3 without regard to the exception in Article 5.3.2, and by taking into account only eligible tangible assets and eligible payroll costs of eligible employees of the investment-related entities.Article 7.5. Investment-related entity tax transparency election 7.5.1. A filing constituent entity may elect to treat a constituent entity that is an investment-related entity as a tax transparent entity if the constituent entity-owner is subject to tax in its location under a mark-to-market or similar regime based on the annual changes in the fair value of its ownership interest in the entity and the tax rate applicable to the constituent entity-owner with respect to such income equals or exceeds the minimum rate. For this purpose, a constituent entity that indirectly owns an ownership interest in an investment-related entity through a direct ownership interest in another investment-related entity is considered to be subject to tax under a mark-to-market or similar regime with respect to the indirect ownership interest in the first-mentioned entity if it is subject to a mark-to-market or similar regime with respect to the direct ownership interest in the second-mentioned entity.Note—In relation to Article 7.5.1, see the specified OECD GloBE rules guidance in—(a) paragraphs 91 and 91.1 of Chapter 7 of the 2023 Commentary; and(b) section 3.6 of the Feb-2023 Administrative Guidance. 7.5.2. The election under this Article is a five-year election. If the election is revoked, gain or loss from the disposition of an asset or liability held by the investment-related entity shall be determined based on the fair value of the assets or liabilities on the first day of the revocation year.Article 7.6. Taxable distribution method election 7.6.1. At the election of the filing constituent entity, a constituent entity-owner that is not an investment-related entity may apply the taxable distribution method with respect to its ownership interest in a constituent entity that is an investment-related entity if the constituent entity-owner can be reasonably expected to be subject to tax on distributions from the investment-related entity at a tax rate that equals or exceeds the minimum rate. 7.6.2. Under the taxable distribution method:(a) distributions and deemed distributions of the investment-related entity’s GloBE income are included in the GloBE income of the constituent entity-owner (other than an investment-related entity) that received the distribution;(b) the local creditable tax gross-up is included in the GloBE income and adjusted covered taxes of the constituent entity-owner (other than an investment-related entity) that received the distribution;(c) the constituent entity-owner’s proportionate share of the investment-related entity’s undistributed net GloBE income for the tested year is treated as GloBE income of the investment-related entity for the reporting fiscal year and the result of multiplying the minimum rate by such GloBE income is treated as top-up tax of a low-tax constituent entity in the fiscal year for purposes of Chapter 2; and(d) the investment-related entity’s GloBE income or loss for the fiscal year and any adjusted covered taxes attributable to such income are excluded from all effective tax rate computations under Chapter 5 and Articles 7.4.2 to 7.4.5, except as provided in paragraph (b). 7.6.3. The undistributed net GloBE income for a fiscal year is the amount of the investment-related entity’s GloBE income, if any, for the tested year reduced (but not below zero) by:(a) any covered taxes of the investment-related entity;(b) distributions and deemed distributions to shareholders other than constituent entities that are investment-related entities in the testing period;(c) GloBE losses arising in the testing period; and(d) investment loss carry-forwards. 7.6.4. Undistributed net GloBE income for the tested year cannot be reduced by distributions or deemed distributions to the extent that such distributions were treated as a reduction to undistributed net GloBE income of a previous tested year. For purposes of computing undistributed net GloBE income, a GloBE loss is reduced to the extent it reduced undistributed net GloBE income at the end of a previous fiscal year. If a GloBE loss for a fiscal year is not reduced to zero before the end of the last tested period that includes such fiscal year, the remainder becomes an investment loss carry-forward and is reduced in the same manner as a GloBE loss in subsequent fiscal years. 7.6.5. For purposes of Article 7.6,(a) the tested year is the third year preceding the reporting fiscal year;(b) the testing period is the period beginning with the first day of the tested year and ending with the last day of the reporting fiscal year that the ownership interest was held by a group entity;(c) a deemed distribution arises when a direct or indirect ownership interest in the investment-related entity is transferred to a non-group entity and is equal to the proportionate share of the undistributed net GloBE income attributable to such ownership interest on the date of such transfer (determined without regard to the deemed distribution); and(d) the local creditable tax gross-up is the amount of covered taxes incurred by the investment-related entity that is allowed as a credit against the constituent entity-owner’s tax liability arising in connection with a distribution from the investment-related entity. 7.6.6. The election under this Article is a five-year election. If the election is revoked, constituent entity-owner’s proportionate share of the investment-related entity’s undistributed net GloBE income for the tested year at the end of the fiscal year preceding the revocation year is treated as GloBE income of the investment-related entity for the revocation year and the result of multiplying the minimum rate by such GloBE income is treated as top-up tax of a low-tax constituent entity in the revocation year for purposes of Chapter 2.Chapter 8 AdministrationArticle 8.1. Filing obligation[Article 8.1 of the OECD GloBE model rules is omitted. See, instead, Part 2 of Schedule 63 for provisions on filing obligations.]Article 8.2. Safe harbours Note—Article 8.2 is to be read together with Part 3 of this Schedule. 8.2.1. At the election of the filing constituent entity, and notwithstanding Chapter 5, the top-up tax for a jurisdiction (the safe harbour jurisdiction) shall be deemed to be zero for a fiscal year when the constituent entities located in this jurisdiction are eligible for a GloBE safe harbour, pursuant to the conditions provided under the GloBE implementation framework and applicable for that fiscal year. 8.2.2. An election made for a jurisdiction under Article 8.2.1 shall not apply in circumstances where:(a) Hong Kong could be allocated top-up tax under the GloBE rules if the effective tax rate for the safe harbour jurisdiction computed in accordance with Chapter 5 was below the minimum rate; and(b) the tax administration of Hong Kong notifies the liable constituent entity (or entities) within 36 months after the filing of the GloBE information return of specific facts and circumstances that may have materially affected the eligibility of the constituent entities located in the safe harbour jurisdiction for the relevant safe harbour and invites the liable constituent entity (or entities) to clarify within six months the effect of those facts and circumstances on the eligibility of those constituent entities for that safe harbour; and(c) the liable constituent entity (or entities) fail(s) to demonstrate within the response period that those facts and circumstances did not materially affect the eligibility of the constituent entities for the relevant safe harbour.Article 8.3. Administrative guidance[Article 8.3 of the OECD GloBE model rules is omitted. See, instead, section 26AF for provisions on administrative guidance.]Chapter 9 Transition RulesArticle 9.1. Tax attributes upon transition 9.1.1. When determining the effective tax rate for a jurisdiction in a transition year, and for each subsequent year, the MNE group shall take into account all of the deferred tax assets and deferred tax liabilities reflected or disclosed in the financial accounts of all of the constituent entities in a jurisdiction for the transition year. Such deferred tax assets and liabilities must be taken into account at the lower of the minimum rate or the applicable domestic tax rate. A deferred tax asset that has been recorded at a rate lower than the minimum rate may be taken into account at the minimum rate if the taxpayer can demonstrate that the deferred tax asset is attributable to a GloBE loss. For purposes of applying this Article, the impact of any valuation adjustment, or accounting recognition adjustment with respect to a deferred tax asset is disregarded.Note—In relation to Article 9.1.1, see—(a) the specified OECD GloBE rules guidance in—(i) paragraph 6.4 of Chapter 9 of the 2023 Commentary; and(ii) section 4.1 of the Feb-2023 Administrative Guidance; and(b) the specified OECD GloBE rules guidance in—(i) paragraph 6.1 of Chapter 9 of the 2023 Commentary; and(ii) section 4.1 of the Feb-2023 Administrative Guidance. 9.1.2. Deferred tax assets arising from items excluded from the computation of GloBE income or loss under Chapter 3 must be excluded from the Article 9.1.1 computation when such deferred tax assets are generated in a transaction that takes place after 30 November 2021.Note—In relation to Article 9.1.2, see the specified OECD GloBE rules guidance in paragraphs 8 and 9 of Chapter 9 of the 2023 Commentary. 9.1.3. In the case of a transfer of assets between constituent entities after 30 November 2021 and before the commencement of a transition year, the basis in the acquired assets (other than inventory) shall be based upon the disposing entity’s carrying value of the transferred assets upon disposition with the deferred tax assets and liabilities brought into GloBE determined on that basis.Note—In relation to Article 9.1.3, see—(a) the specified OECD GloBE rules guidance in—(i) paragraphs 10.2 to 10.6 of Chapter 9 of the 2023 Commentary; and(ii) sections 4.2 and 4.3 of the Feb-2023 Administrative Guidance;(b) the specified OECD GloBE rules guidance in—(i) paragraph 10.1.1 of Chapter 9 of the 2023 Commentary; and(ii) section 4 of the Jul-2023 Administrative Guidance;(c) the specified OECD GloBE rules guidance in—(i) paragraph 10 of Chapter 9 of the 2023 Commentary; and(ii) section 4.3 of the Feb-2023 Administrative Guidance;(d) the specified OECD GloBE rules guidance in—(i) paragraph 10.9 of Chapter 9 of the 2023 Commentary; and(ii) section 4.3 of the Feb-2023 Administrative Guidance; and(e) the specified OECD GloBE rules guidance in—(i) paragraph 10.8 of Chapter 9 of the 2023 Commentary; and(ii) section 4.3 of the Feb-2023 Administrative Guidance.Article 9.2. Transitional relief for the substance-based income exclusion 9.2.1. For the purposes of applying Article 5.3.3, the value of 5% shall be replaced with the value set out in the table set out below for each fiscal year beginning in each of the following calendar years: Fiscal Year Beginning In Article 5.3.3 Rate 2023 10% 2024 9.8% 2025 9.6% 2026 9.4% 2027 9.2% 2028 9.0% 2029 8.2% 2030 7.4% 2031 6.6% 2032 5.8% 9.2.2. For the purposes of applying Article 5.3.4, the value of 5% shall be replaced with the value set out in the table set out below for each fiscal year beginning in each of the following calendar years: Fiscal Year Beginning In Article 5.3.4 Rate 2023 8.0% 2024 7.8% 2025 7.6% 2026 7.4% 2027 7.2% 2028 7.0% 2029 6.6% 2030 6.2% 2031 5.8% 2032 5.4% Article 9.3. Exclusion from the UTPR of MNE groups in the initial phase of their international activity 9.3.1. Subject to Article 9.3.4 the top-up tax that would otherwise be taken into account under Article 2.5.1 shall be reduced to zero during the initial phase of an MNE group’s international activity, notwithstanding the requirements otherwise provided in Chapter 5. 9.3.2. For the purposes of Article 9.3, an MNE group is in its initial phase of its international activity if, for a fiscal year:(a) it has constituent entities in no more than six jurisdictions; and(b) the sum of the net book values of tangible assets of all constituent entities located in all jurisdictions other than the reference jurisdiction does not exceed EUR 50 million. 9.3.3. For the purposes of Article 9.3.2, the reference jurisdiction of an MNE group is the jurisdiction where the MNE group has the highest total value of tangible assets for the fiscal year in which the MNE group originally comes within the scope of the GloBE rules. The total value of tangible assets in a jurisdiction is the sum of the net book values of all tangible assets of all the constituent entities of the MNE group that are located in that jurisdiction. 9.3.4. This Article 9.3 shall not apply for any fiscal year that starts later than five years after the first day of the first fiscal year when the MNE group originally came within the scope of the GloBE rules. For MNE groups that are in scope of the GloBE rules when they come into effect, the period of five years will start at the time the UTPR rules come into effect. 9.3.5. If Hong Kong is the reference jurisdiction of the MNE group pursuant to Article 9.3.3, then Article 9.3.1 shall not apply during the initial phase of that MNE group’s international activity and, during that initial phase:(a) the top-up tax calculated for a low-taxed constituent entity that would be taken into account under Article 2.5.1 shall be reduced to zero if that low-taxed constituent entity is located in the reference jurisdiction, notwithstanding the requirements otherwise provided in Chapter 5; and(b) the UTPR percentage of the jurisdictions other than the reference jurisdiction is deemed to be zero.Article 9.4. Transitional relief for filing obligations[Article 9.4 of the OECD GloBE model rules is omitted. See, instead, Part 2 of Schedule 63 for provisions on transitional relief for filing obligations.]Chapter 10 DefinitionsArticle 10.1. Defined terms 10.1.1. The terms set out below have the following definitions:Acceptable financial accounting standard (可接受的財務會計準則) means International Financial Reporting Standards (IFRS) and the generally accepted accounting principles of Australia, Brazil, Canada, Member States of the European Union, Member States of the European Economic Area, Hong Kong (China), Japan, Mexico, New Zealand, the People’s Republic of China, the Republic of India, the Republic of Korea, Russia, Singapore, Switzerland, the United Kingdom, and the United States of America.Accrued pension expense (累算退休金開支) means the difference between the amount of pension liability expense included in the financial accounting net income or loss and the amount contributed to a pension fund for the fiscal year.Additional current top-up tax (額外當期補足稅) is the amount of tax determined in Article 5.4 and any amount treated as additional current top-up tax determined under Article 5.4, such as the amount determined under Article 4.1.5 or Article 7.3.Additional tier one capital (額外一級資本) means an instrument issued by a constituent entity pursuant to prudential regulatory requirements applicable to the banking sector that is convertible to equity or written down if a pre-specified trigger event occurs and that has other features which are designed to aid loss absorbency in the event of a financial crisis.Additions to covered taxes (涵蓋稅增加額) is defined in Article 4.1.2.Adjusted asset gain (經調整資產收益) in respect of aggregate asset gain that is subject to an election under Article 3.2.6 means an amount equal to the aggregate asset gain in the election year, reduced by any amount of such gain that has been applied against the net asset loss in a prior loss year under Article 3.2.6(b) or (c).Adjusted covered taxes (經調整涵蓋稅) is defined in Article 4.1.1.Aggregate asset gain (總資產收益) in respect of an election under Article 3.2.6, means the net gain in the election year from the disposition of local tangible assets by all constituent entities located in the jurisdiction excluding the gain or loss on a transfer of assets between group members.Agreed administrative guidance (《協定行政指引》) means guidance on the interpretation or administration of the GloBE rules issued by the Inclusive Framework.Allocable share of the top-up tax (補足稅中的可分配份額) is defined in Article 2.2.1.Annual election (年度選擇) means an election made by a filing constituent entity and that applies only for the fiscal year for which the election is made.Allocated asset gain (獲分配資產收益) in respect of an election under Article 3.2.6, means the adjusted asset gain that is allocated to a fiscal year in the lookback period under Article 3.2.6(d).Arm’s length principle (獨立交易原則) means the principle under which transactions between constituent entities must be recorded by reference to the conditions that would have been obtained between independent enterprises in comparable transactions and under comparable circumstances. Asymmetric foreign currency gains or losses (非對稱匯兌損益) means foreign currency gains or losses of an entity whose accounting and tax functional currencies are different and that are:

(a) included in the computation of a constituent entity’s taxable income or loss and attributable to fluctuations in the exchange rate between its accounting functional currency and its tax functional currency; (b) included in the computation of a constituent entity’s financial accounting net income or loss and attributable to fluctuations in the exchange rate between its tax functional currency and its accounting functional currency; (c) included in the computation of a constituent entity’s financial accounting net income or loss and attributable to fluctuations in the exchange rate between a third foreign currency and its accounting functional currency; and (d) attributable to fluctuations in the exchange rate between a third foreign currency and its tax functional currency, whether or not such foreign currency gain or loss is included in taxable income. The tax functional currency is the functional currency used to determine the constituent entity’s taxable income or loss for a covered tax in the jurisdiction in which it is located. The accounting functional currency is the functional currency used to determine the constituent entity’s financial accounting net income or loss. A third foreign currency is a currency that is not the constituent entity’s tax functional currency or accounting functional currency. Authorised accounting body (獲認可會計團體) is the body with legal authority in a jurisdiction to prescribe, establish, or accept accounting standards for financial reporting purposes.Authorised financial accounting standard (獲認可財務會計準則), in respect of any entity, means a set of generally acceptable accounting principles permitted by an authorised accounting body in the jurisdiction where that entity is located.Average GloBE income or loss (全球反侵蝕稅基平均收入或虧損) is defined in Article 5.5.2.Average GloBE revenue (全球反侵蝕稅基平均總收入) is defined in Article 5.5.2.Commentary (《評註》) means the Commentary to the GloBE rules as developed by the OECD/G20 Inclusive Framework on Base Erosion and Profit Shifting. Consolidated financial statements (綜合財務報表) means: (a) the financial statements prepared by an entity in accordance with an acceptable financial accounting standard, in which the assets, liabilities, income, expenses and cash flows of that entity and the entities in which it has a controlling interest are presented as those of a single economic unit; (b) where an entity meets the definition of a group under Article 1.2.3, the financial statements of the entity that are prepared in accordance with an acceptable financial accounting standard; (c) where the ultimate parent entity has financial statements described in paragraph (a) or (b) that are not prepared in accordance with an acceptable financial accounting standard, the financial statements are those that have been prepared subject to adjustments to prevent any material competitive distortions; and (d) where the ultimate parent entity does not prepare financial statements described in the paragraphs above, the consolidated financial statements of the ultimate parent entity are those that would have been prepared if such entity were required to prepare such statements in accordance with an authorised financial accounting standard that is either an acceptable financial accounting standard or another financial accounting standard that is adjusted to prevent any material competitive distortions. Note—In relation to Article 10.1.1 (definition of consolidated financial statement), see the specified OECD GloBE rules guidance in—(a) paragraphs 8.1 to 8.4 of Chapter 10 of the 2023 Commentary; and(b) section 1.2 of the Feb-2023 Administrative Guidance.Constituent entity (CE) (成員實體) is defined in Article 1.3.1.Constituent entity-owner (成員實體暨擁有人) means a constituent entity that directly or indirectly owns an ownership interest in another constituent entity of the same MNE group.Controlled foreign company tax regime (受控外國公司稅制) means a set of tax rules (other than an IIR) under which a direct or indirect shareholder of a foreign entity (the controlled foreign company or CFC) is subject to current taxation on its share of part or all of the income earned by the CFC, irrespective of whether that income is distributed currently to the shareholder. Controlling interest (控制權益) means an ownership interest in an entity such that the interest holder: (a) is required to consolidate the assets, liabilities, income, expenses and cash flows of the entity on a line-by-line basis in accordance with an acceptable financial accounting standard; or (b) would have been required to consolidate the assets, liabilities, income, expenses and cash flows of the entity on a line-by-line basis if the interest holder had prepared consolidated financial statements. A main entity is deemed to have the controlling interests of its permanent establishments. Note—In relation to Article 10.1.1 (definition of controlling interest), see the specified OECD GloBE rules guidance in—(a) paragraph 8.5 of Chapter 10 of the 2023 Commentary;(b) Example 10.1-4 of the Apr-2024 Illustrative Examples; and(c) section 1.2 of the Feb-2023 Administrative Guidance.Cooperative (合作社) means an entity that collectively markets or acquires goods or services on behalf of its members and that is subject to a tax regime in the jurisdiction in which it is located that is designed to ensure tax neutrality in respect of members’ property or services sold through the cooperative and property or services acquired by members through the cooperative.Covered taxes (涵蓋稅) is defined in Article 4.2. Deductible dividend (可扣除股息) means, with respect to a constituent entity that is subject to a deductible dividend regime, (a) a distribution of profits to the holder of an ownership interest that is deductible from taxable income of the constituent entity under the laws of the jurisdiction in which it is located; or (b) a patronage dividend to a member of a cooperative. Deductible dividend regime (可扣除股息制度) means a tax regime designed to yield a single level of taxation on the owners of an entity through a deduction from the income of the entity for distributions of profits to the owners. For this purpose, patronage dividends of a cooperative are treated as distributions to owners. A deductible dividend regime also includes a regime applicable to cooperatives that exempts the cooperative from taxation.Deemed distribution tax (視同分派稅) is defined in Article 7.3.2.Deemed distribution tax recapture account (視同分派稅轉回帳目) means an account maintained in accordance with Article 7.3.3.Departing constituent entity (退出成員實體) means a constituent entity that is subject to an election under Article 7.3.1 and that leaves the MNE group or transfers substantially all of its assets to a person that is not a constituent entity of the same MNE group located in the same jurisdiction.Designated filing entity (指定交表實體) means the constituent entity, other the ultimate parent entity, that has been appointed by the MNE group to file the GloBE information return on behalf of the MNE group.Note—As provided in Part 2 of this Schedule, the definition of designated filing entity is to be read to the effect that the expression has the meaning given by section 2 of Schedule 63.Designated local entity (指定本地實體) means the constituent entity of an MNE group that is located in Hong Kong and that has been appointed by the other constituent entities located in Hong Kong of the MNE group to file the GloBE information return, or to submit the notifications under Article 8.1.3.Note—As provided in Part 2 of this Schedule, the definition of designated local entity is to be read to the effect that the expression has the meaning given by section 2 of Schedule 63.Disallowed accrual (不容許的累算) is defined in Article 4.4.6.Disposition recapture ratio (處置轉回比率) is defined in Article 7.3.8. Disqualified refundable imputation tax (不合資格可退還歸集稅) means any amount of tax, other than a qualified imputation tax, accrued or paid by a constituent entity that is: (a) refundable to the beneficial owner of a dividend distributed by such constituent entity in respect of that dividend or creditable by the beneficial owner against a tax liability other than a tax liability in respect of such dividend; or (b) refundable to the distributing corporation upon distribution of a dividend. Note—In relation to Article 10.1.1 (definition of disqualified refundable imputation tax), see the specified OECD GloBE rules guidance in paragraph 11 of Chapter 10 of the 2023 Commentary. Dual-listed arrangement (雙重上市安排) means an arrangement entered into by two or more ultimate parent entities of separate groups, under which: (a) the ultimate parent entities agree to combine their business by contract alone; (b) pursuant to contractual arrangements the ultimate parent entities will make distributions (with respect to dividends and in liquidation) to their shareholders based on a fixed ratio; (c) their activities are managed as a single economic entity under contractual arrangements while retaining their separate legal identities; (d) the ownership interests in the ultimate parent entities comprising the agreement are quoted, traded or transferred independently in different capital markets; and (e) the ultimate parent entities prepare consolidated financial statements in which the assets, liabilities, income, expenses and cash flows of all the entities of the groups are presented together as those of a single economic unit and that are required by a regulatory regime to be externally audited. Effective tax rate (ETR) (有效稅率) is defined in Article 5.1.1.Election year (選擇年度) in respect of an annual election means the year for which the election is made. Eligible distribution tax system (具資格分派稅制度) means a corporate income tax system that: (a) imposes an income tax on the corporation with the tax generally payable only when the corporation distributes profits to shareholders, is deemed to distribute profits to shareholders, or incurs certain non-business expenses; (b) imposes tax at a rate equal to or in excess of the minimum rate; and (c) was in force on or before 1 July 2021. Note—In relation to Article 10.1.1 (definition of eligible distribution tax system), see—(a) the specified OECD GloBE rules guidance in paragraph 14 of Chapter 10 of the 2023 Commentary; and(b) the specified OECD GloBE rules guidance in paragraph 16 of Chapter 10 of the 2023 Commentary.Eligible employees (具資格僱員) means employees, including part-time employees, of a constituent entity that is a member of the MNE group and independent contractors participating in the ordinary operating activities of the MNE group under the direction and control of the MNE group.Eligible payroll costs (具資格薪金成本) means employee compensation expenditures (including salaries, wages, and other expenditures that provide a direct and separate personal benefit to the employee, such as health insurance and pension contributions), payroll and employment taxes, and employer social security contributions.Eligible tangible assets (具資格有形資產) is defined in Article 5.3.4. Entity (實體) means: (a) any legal person (other than a natural person); or (b) an arrangement that prepares separate financial accounts, such as a partnership or trust. Note—In relation to Article 10.1.1 (definition of entity), see the specified OECD GloBE rules guidance in—(a) paragraph 17.1 of Chapter 10 of the 2023 Commentary; and(b) section 1.2 of the Feb-2023 Administrative Guidance.ETR adjustment article (有效稅率調整條文) means Article 3.2.6, Article 4.4.4, Article 4.6.1, Article 4.6.4, and Article 7.3.Excess profit (超額利潤) is defined in Article 5.2.2. Excluded dividends (被豁除股息) means dividends or other distributions received or accrued in respect of an ownership interest, except for: (a) a short-term portfolio shareholding, and (b) an ownership interest in an investment-related entity that is subject to an election under Article 7.6. Excluded entity (被豁除實體) is defined in Article 1.5.1 and Article 1.5.2. Excluded equity gain or loss (被豁除股權損益) means the gain, profit or loss included in the financial accounting net income or loss of the constituent entity arising from: (a) gains and losses from changes in fair value of an ownership interest, except for a portfolio shareholding; (b) profit or loss in respect of an ownership interest included under the equity method of accounting; and (c) gains and losses from disposition of an ownership interest, except for a disposition of a portfolio shareholding. Filing constituent entity (交表成員實體) is an entity filing the GloBE information return in accordance with Article 8.1.Note—The reference in the definition of filing constituent entity to “Article 8.1” is to be read as “Part 2 of Schedule 63”, because of Part 2 of this Schedule.Financial accounting net income or loss (財務會計淨收入或虧損) is defined in Article 3.1.2.Fiscal year (財政年度) means an accounting period with respect to which the ultimate parent entity of the MNE group prepares its consolidated financial statements. In the case of consolidated financial statements as defined in paragraph (d) of its definition, fiscal year means the calendar year.Five-year election (五年度選擇) means an election made by a filing constituent entity with respect to a fiscal year (the election year) that cannot be revoked with respect to the election year or the four succeeding fiscal years. If a five-year election is revoked with respect to a fiscal year (the revocation year), a new election cannot be made with respect to the four fiscal years succeeding the revocation year.General government (一般政府) means the central administration, agencies whose operations are under its effective control, state and local governments and their administrations.GloBE implementation framework (全球反侵蝕稅基實施框架) means the procedures to be developed by the Inclusive Framework on BEPS in order to develop administrative rules, guidance, and procedures that will facilitate the co-ordinated implementation of the GloBE rules.GloBE income of all constituent entities (所有成員實體的全球反侵蝕稅基收入) is defined in Article 5.1.2(a).GloBE income or loss of a constituent entity (成員實體的全球反侵蝕稅基收入或虧損) is defined in Article 3.1.1.GloBE information return (全球反侵蝕稅基資料報表) means that standardized return to be developed in accordance with the GloBE implementation framework that contains the information described in Article 8.1.4.Note—The reference in the definition of GloBE information return to “Article 8.1.4” is to be read as “section 10 of Schedule 63”, because of Part 2 of this Schedule.GloBE loss deferred tax asset (全球反侵蝕稅基虧損遞延稅項資產) is defined in Article 4.5.GloBE loss election (全球反侵蝕稅基虧損選擇) is defined in Article 4.5.1.GloBE losses of all constituent entities (所有成員實體的全球反侵蝕稅基虧損) is defined in Article 5.1.2(b). GloBE reorganisation (全球反侵蝕稅基重組) means a transformation or transfer of assets and liabilities such as in a merger, demerger, liquidation, or similar transaction where: (a) the consideration for the transfer is, in whole or in significant part, equity interests issued by the acquiring constituent entity or by a person connected with the acquiring constituent entity, or, in the case of a liquidation, equity interests of the target (or, when no consideration is provided, where the issuance of an equity interest would have no economic significance); (b) the disposing constituent entity’s gain or loss on those assets is not subject to tax, in whole or in part; and (c) the tax laws of the jurisdiction in which the acquiring constituent entity is located require the acquiring constituent entity to compute taxable income after the disposition or acquisition using the disposing constituent entity’s tax basis in the assets, adjusted for any non-qualifying gain or loss on the disposition or acquisition. Note—In relation to Article 10.1.1 (definition of GloBE reorganisation), see the specified OECD GloBE rules guidance in paragraph 22 of Chapter 10 of the 2023 Commentary. GloBE revenue (全球反侵蝕稅基總收入) is defined in Article 5.5.3(a) for the purposes of Article 5.5.2.GloBE rules (《全球反侵蝕稅基規則》) means this set of rules as developed by the OECD/G20 Inclusive Framework on Base Erosion and Profit Shifting.GloBE safe harbour (全球反侵蝕稅基安全港) means the exception provided in Article 8.2.1 to facilitate compliance by MNEs and administration by tax authorities. The conditions under which the constituent entities of an MNE group located in a jurisdiction are eligible to the GloBE safe harbour will be established in accordance with a common and agreed process to be defined as part of the work undertaken by the Inclusive Framework on BEPS to develop the GloBE implementation framework. Governmental entity (政府實體) means an entity that meets all of the following criteria set out in paragraphs (a) to (d) below: (a) it is part of or wholly-owned by a government (including any political subdivision or local authority thereof); (b) it has the principal purpose of:(i) fulfilling a government function; or(ii) managing or investing that government’s or jurisdiction’s assets through the making and holding of investments, asset management, and related investment activities for the government’s or jurisdiction’s assets;and does not carry on a trade or business; (c) it is accountable to the government on its overall performance, and provides annual information reporting to the government; and (d) its assets vest in such government upon dissolution and to the extent it distributes net earnings, such net earnings are distributed solely to such government with no portion of its net earnings inuring to the benefit of any private person. Group (集團) is defined in Article 1.2.2 and 1.2.3.Group entity (集團實體), in respect of any entity or group, means an entity that is a member of the same group.High-tax counterparty (高稅對手方) means a constituent entity that is located in a jurisdiction that is not a low-tax jurisdiction or that is located in a jurisdiction that would not be a low-tax jurisdiction if its ETR were determined without regard to any income or expense accrued by that entity in respect of an intragroup financing arrangement.IFRS means the International Financial Reporting Standards.IIR (收入納入規則) means the rules set out in Article 2.1 to Article 2.3. Included revaluation method gain or loss (列入重估方法的損益) means the net gain or loss, increased or decreased by any associated covered taxes, for the fiscal year in respect of all property, plant and equipment that arises under an accounting method or practice that: (a) periodically adjusts the carrying value of such property to its fair value; (b) records the changes in value in other comprehensive income; and (c) does not subsequently report the gains or losses recorded in other comprehensive income through profit and loss. Insurance investment entity (保險投資實體) means an entity that would meet the definition of an investment fund or a real estate investment vehicle except that it is established in relation to liabilities under an insurance or annuity contract and is wholly-owned by an entity that is subject to regulation in its location as an insurance company.Note—In relation to Article 10.1.1 (definition of insurance investment entity), see the specified OECD GloBE rules guidance in paragraph 90 of Chapter 7 of the 2023 Commentary.Intermediate parent entity (中間母實體) means a constituent entity (other than a ultimate parent entity, partially-owned parent entity, permanent establishment or investment-related entity) that owns (directly or indirectly) an ownership interest in another constituent entity in the same MNE group. International organisation (國際組織) means any intergovernmental organisation (including a supranational organisation) or wholly-owned agency or instrumentality thereof that meets all of the criteria set out in paragraphs (a) to (c) below: (a) it is comprised primarily of governments; (b) it has in effect a headquarters or substantially similar agreement (for example, arrangements that entitle the organisation’s offices or establishments in the jurisdiction (e.g. a subdivision, or a local, or regional office) to privileges and immunities) with the jurisdiction in which it is established; and (c) law or its governing documents prevent its income inuring to the benefit of private persons. International shipping income (國際海運收入) is defined in Article 3.3.2.Intragroup financing arrangement (集團內部融資安排) means any arrangement entered into between two or more members of the MNE group whereby a high tax counterparty directly or indirectly provides credit or otherwise makes an investment in a Low tax entity. Investment entity (投資實體) means: (a) an investment fund or a real estate investment vehicle; (b) an entity that is at least 95% owned directly by an entity described in paragraph (a) or through a chain of such entities and that operates exclusively or almost exclusively to hold assets or invest funds for the benefit of such investment entities; and (c) an entity where at least 85% of the value of the entity is owned by an entity referred to in paragraph (a) provided that substantially all of the entity’s income is excluded dividends or excluded equity gain or loss that is excluded from the computation of GloBE income or loss in accordance with Articles 3.2.1 (b) or (c). Investment fund (投資基金) means an entity that meets all of the criteria set out in paragraphs (a) to (g) below: (a) it is designed to pool assets (which may be financial and non-financial) from a number of investors (some of which are not connected); (b) it invests in accordance with a defined investment policy; (c) it allows investors to reduce transaction, research, and analytical costs, or to spread risk collectively; (d) it is primarily designed to generate investment income or gains, or protection against a particular or general event or outcome; (e) investors have a right to return from the assets of the fund or income earned on those assets, based on the contributions made by those investors; (f) the entity or its management is subject to a regulatory regime in the jurisdiction in which it is established or managed (including appropriate anti-money laundering and investor protection regulation); and (g) it is managed by investment fund management professionals on behalf of the investors. Investment-related entity (投資相關實體) means an investment entity or an insurance investment entity. Joint venture (JV) (合資企業) means an entity whose financial results are reported under the equity method in the consolidated financial statements of the ultimate parent entity provided that the ultimate parent entity holds directly or indirectly at least 50% of its ownership interests. A joint venture does not include: (a) an ultimate parent entity of an MNE group that is subject to the GloBE rules; (b) an excluded entity as defined by Article 1.5.1; (c) an entity whose ownership interest held by the MNE group are held directly through an excluded entity referred in Article 1.5.1 and the entity:(i) operates exclusively or almost exclusively to hold assets or invest funds for the benefit of its investors;(ii) carries out activities that are ancillary to those carried out by the excluded entity; or(iii) substantially all of its income is excluded from the computation of GloBE income or loss in accordance with Articles 3.2.1(b) and (c). (d) an entity that is held by an MNE group composed exclusively of excluded entities; or (e) a JV subsidiary. JV group (合資企業集團) means a joint venture and its JV subsidiaries.JV group top-up tax (合資企業集團補足稅) means the ultimate parent entity’s allocable share of the top-up tax of all members of the JV group.JV subsidiary (合資企業附屬公司) means an entity whose assets, liabilities, income, expenses and cash flows are consolidated by a joint venture under an acceptable financial accounting standard (or would have been consolidated had it been required to consolidate such items in accordance with an acceptable financial accounting standard). A permanent establishment whose main entity is the joint venture or a JV subsidiary shall be treated as a separate JV subsidiary.Liable constituent entity (or entities) (應課稅成員實體) means one or several constituent entities located in Hong Kong that could be liable for top-up tax or subject to an adjustment under Chapter 2 if the GloBE safe harbour in Article 8.2.1 did not apply.Local tangible asset (本地有形資產) means immovable property located in the same jurisdiction as the constituent entity.Look-back period (回溯期) in respect of an election under Article 3.2.6, means the election year and the four prior fiscal years.Loss year (虧損年度) in respect of jurisdiction for which the filing constituent entity has made an election under Article 3.2.6, means a fiscal year in the Lookback Period for which there is a net asset loss for a constituent entity located in that jurisdiction and the total amount of net asset loss of all such constituent entities exceeds the total amount of their net asset gain.Low-taxed constituent entity (低稅成員實體) means a constituent entity of the MNE group that is located in a low-tax jurisdiction or a stateless constituent entity that, in respect of a fiscal year, has GloBE income and is subject to an effective tax rate (as determined under Chapter 5) in that fiscal year is lower than the minimum rate.Low-tax entity (低稅實體) means a constituent entity located in a Low tax jurisdiction or a jurisdiction that would be a low-tax jurisdiction if the effective tax rate for the jurisdiction were determined without regard to any income or expense accrued by that entity in respect of an intragroup financing arrangement.Low-tax jurisdiction (低稅轄區), in respect of an MNE group in any fiscal year, means a jurisdiction where the MNE group has net GloBE income and is subject to an effective tax rate (as determined under Chapter 5) in that period that is lower than the minimum rate.Main entity (主實體), in respect of a permanent establishment, is the entity that includes the financial accounting net income or loss of the permanent establishment in its financial statements. Marketable transferable tax credit (可出售和轉讓的稅收抵免) means a tax credit that can be used by the holder of the credit to reduce its liability for a covered tax in the jurisdiction that issued the tax credit and that meets (a) the legal transferability standard and (b) the marketability standard in the hands of the holder. (a) The legal transferability standard is met for the originator of a tax credit if the tax credit regime is designed in a way that the originator can transfer the credit to an unrelated party in the fiscal year in which it satisfies the eligibility criteria for the credit (origination year) or within 15 months of the end of the origination year. The legal transferability standard is met for a purchaser of a tax credit if the tax credit regime is designed in a way that the purchaser can transfer the credit to an unrelated party in the fiscal year in which it purchased the tax credit. If under the legal framework that applies to the credit, a purchaser of the tax credit cannot legally transfer the tax credit to an unrelated party or is subject to more stringent legal restrictions on transfer of the credit than the originator, the tax credit does not meet the legal transferability standard in the hands of the purchaser. (b) The marketability standard is met for the originator of a tax credit if it is transferred to an unrelated party within 15 months of the end of the origination year (or, if not transferred or transferred between related parties, similar tax credits trade between unrelated parties within 15 months of the end of the origination year) at a price that equals or exceeds the marketable price floor. The marketability standard is met for a purchaser if that purchaser acquired the credit from an unrelated party at a price that equals or exceeds the marketable price floor. Marketable price floor means 80% of the net present value (NPV) of the tax credit, where the NPV is determined based on the yield to maturity on a debt instrument issued by the government that issued the tax credit with equal or similar maturity (and up to 5-year maturity) issued in the same fiscal year as the tax credit is transferred (or if not transferred, the origination year). For this purpose, the tax credit is the face value of the credit or the remaining creditable amount in relation to the tax credit. For this purpose, the cash flow projection to be factored in the NPV calculation shall be based on the maximum amount that can be used each year under the legal design of the credit. An originator and purchaser are considered related parties if one owns, directly or indirectly, at least 50% of the beneficial interest in the other (or, in the case of a company, at least 50% of the aggregate vote and value of the company’s shares) or another person owns, directly or indirectly, at least 50% of the beneficial interest (or, in the case of a company, at least 50% of the aggregate vote and value of the company’s shares) in each of the originator and purchaser. In any case, an originator and purchaser are considered related parties if, based on all the relevant facts and circumstances, one has control of the other or both are under the control of the same person or persons. Material competitive distortion (重大競爭扭曲) in respect of the application of a specific principle or procedure under a set of generally accepted accounting principles means an application that results in an aggregate variation greater than EUR 75 million in a fiscal year as compared to the amount that would have been determined by applying the corresponding IFRS principle or procedure. Where the application of a specific principle or procedure results in a material competitive distortion, the accounting treatment of any item or transaction subject to that principle or procedure must be adjusted to conform to the treatment required for the item or transaction under IFRS in accordance with any agreed administrative guidance.Minimum rate (最低稅率) means fifteen percent (15%).Minority-owned constituent entity (被少數持股成員實體) means a constituent entity where the ultimate parent entity has a direct or indirect ownership interest in that entity of 30% or less.Minority-owned parent entity (被少數持股母實體) means a minority-owned constituent entity that holds, directly or indirectly, the controlling interests of another minority-owned constituent entity, except where the controlling interests of the first-mentioned entity are held, directly or indirectly, by another minority-owned constituent entity.Minority-owned subgroup (被少數持股子集團) means a minority-owned parent entity and its minority-owned subsidiaries.Minority-owned subsidiary (被少數持股附屬公司) means a minority-owned constituent entity whose controlling interests are held, directly or indirectly, by a minority-owned parent entity.MNE group (跨國企業集團) is defined in Articles 1.2.1.MNE group’s allocable share of the investment-related entity’s GloBE income (跨國企業集團在投資相關實體的全球反侵蝕稅基收入中的可分配份額) is defined in Article 7.4.4. Multi-parented MNE group (多母實體跨國企業集團) means two or more groups where: (a) the ultimate parent entities of those groups enter into an arrangement that is a stapled structure or a dual-listed arrangement; and (b) at least one entity or permanent establishment of the combined group is located in a different jurisdiction with respect to the location of the other entities of the combined group. Net asset gain (淨資產收益) in respect of an election under Article 3.2.6, means the net gain from the disposition of local tangible assets by a constituent entity located in the jurisdiction for which the election was made excluding the gain or loss on a transfer of assets to another group member.Net asset loss (淨資產虧損) in respect of a constituent entity and a fiscal year, means the net loss from the disposition of local tangible assets by that constituent entity in that year excluding the gain or loss on a transfer of assets to another group member. The amount of net asset loss shall be reduced by the amount of net asset gain or adjusted asset gain which is set-off against such loss pursuant to the application of Article 3.2.6(b) or (c) as a result of a previous election made under Article 3.2.6.Net book value of tangible assets (有形資產帳面淨值) means the average of the beginning and end values of tangible assets after taking into account accumulated depreciation, depletion, and impairment, as recorded in the financial statements.Net GloBE income of a jurisdiction (司法管轄區的全球反侵蝕稅基淨收入) is defined in Article 5.1.2. Net GloBE loss of a jurisdiction (司法管轄區的全球反侵蝕稅基淨虧損) is the nil or negative amount, if any, computed in accordance with the following formula: Net GloBE Loss = GloBE Income of all Constituent Entities – GloBE Losses of all Constituent Entities where: (a) the GloBE income of all constituent entities is the sum of the GloBE income of all constituent entities located in the jurisdiction determined in accordance with Chapter 3 for the fiscal year; and (b) the GloBE losses of all constituent entities is the sum of the GloBE losses of all constituent entities located in the jurisdiction determined in accordance with Chapter 3 for the fiscal year. Net taxes expense (淨稅項開支) means the net amount of: (a) any covered taxes accrued as an expense and any current and deferred covered taxes included in the income tax expense, including covered taxes on income that is excluded from the GloBE income or loss computation; (b) any deferred tax asset attributable to a loss for the fiscal year; (c) any qualified domestic minimum top-up tax accrued as an expense; (d) any taxes arising pursuant to the GloBE rules accrued as an expense; (e) any disqualified refundable imputation tax accrued as an expense; and (f) taxes accrued by an insurance company in respect of returns to policyholders to the extent that Article 3.2.9 applies in relation to those taxes. Non-profit organisation (非牟利組織) means an entity that meets all of the following criteria: (a) it is established and operated in its jurisdiction of residence:(i) exclusively for religious, charitable, scientific, artistic, cultural, athletic, educational, or other similar purposes; or(ii) as a professional organisation, business league, chamber of commerce, labour organisation, agricultural or horticultural organisation, civic league or an organisation operated exclusively for the promotion of social welfare; (b) substantially all of the income from the activities mentioned in paragraph (a) is exempt from income tax in its jurisdiction of residence; (c) it has no shareholders or members who have a proprietary or beneficial interest in its income or assets; (d) the income or assets of the entity may not be distributed to, or applied for the benefit of, a private person or non-charitable entity other than:(i) pursuant to the conduct of the entity’s charitable activities;(ii) as payment of reasonable compensation for services rendered or for the use of property or capital; or(iii) as payment representing the fair market value of property which the entity has purchased, and (e) upon termination, liquidation or dissolution of the entity, all of its assets must be distributed or revert to a non-profit organisation or to the government (including any governmental entity) of the entity’s jurisdiction of residence or any political subdivision thereof; but does not include any entity carrying on a trade or business that is not directly related to the purposes for which it was established. Non-qualified refundable tax credit (不合資格可退還稅收抵免) means a tax credit that is not a qualified refundable tax credit but that is refundable in whole or in part.Non-qualifying gain or loss (不合資格的損益) means the lesser of the gain or loss of the disposing constituent entity arising in connection with a GloBE reorganisation that is subject to tax in the disposing constituent entity’s location and the financial accounting gain or loss arising in connection with the GloBE reorganisation.Number of employees (僱員人數), for the purposes of the UTPR percentage, means the total number of employees on a full-time equivalent (FTE) basis of all the constituent entities resident for tax purposes in the relevant tax jurisdiction. For this purpose, independent contractors participating in the ordinary operating activities of the constituent entity are reported as employees. With regard to permanent establishments, employees should be allocated to the tax jurisdiction in which the permanent establishment is located when the payroll costs of such employees are included in the separate financial accounts of that permanent establishment as determined by Article 3.4.1 and adjusted in accordance with 3.4.2. The number of employees attributed to the tax jurisdiction of a permanent establishment shall not be taken into account for the number of employees of the tax jurisdiction of the main entity.OECD Model Tax Convention (《經合組織稅收協定範本》) means the OECD (2017), Model Tax Convention on Income and on Capital: Condensed Version 2017, OECD Publishing, Paris, https://doi.org/10.1787/mtc_cond-2017-en.Other comprehensive income (其他綜合收入) means items of income and expense that are not recognised in profit or loss as required or permitted by the authorised financial accounting standard used in the consolidated financial statements. Other comprehensive income is usually reported as an adjustment to equity in the statement of financial position (balance sheet).Ownership interest (擁有權權益) means any equity interest that carries rights to the profits, capital or reserves of an entity, including the profits, capital or reserves of a main entity’s permanent establishment(s).Note—In relation to Article 10.1.1 (definition of ownership interest), see—(a) the specified OECD GloBE rules guidance in paragraph 85 of Chapter 10 of the 2023 Commentary;(b) the specified OECD GloBE rules guidance in paragraph 81 of Chapter 10 of the 2023 Commentary; and(c) the specified OECD GloBE rules guidance in paragraph 83 of Chapter 10 of the 2023 Commentary.Parent entity (母實體) means an ultimate parent entity that is not an excluded entity, an intermediate parent entity, or a partially-owned parent entity.Parent entity’s inclusion ratio (母實體的納入比率) is defined in Article 2.2.2.Partially-owned parent entity (被局部持股母實體) means a constituent entity (other than a ultimate parent entity, permanent establishment or investment-related entity) that:(a) owns (directly or indirectly) an ownership interest in another constituent entity of the same MNE group; and(b) has more than 20% of the ownership interests in its profits held directly or indirectly by persons that are not constituent entities of the MNE group. Passive income (被動收入) means income included in GloBE income that is: (a) a dividend or dividend equivalents; (b) interest or interest equivalent; (c) rent; (d) royalty; (e) annuity; or (f) net gains from property of a type that produces income described in paragraphs (a) to (e), but only to the extent a constituent entity-owner is subject to tax on such income under a controlled foreign company tax regime or as a result of an ownership interest in a hybrid entity. Pension fund (退休基金) means: (a) an entity that is established and operated in a jurisdiction exclusively or almost exclusively to administer or provide retirement benefits and ancillary or incidental benefits to individuals:i. regulated as such by that jurisdiction or one of its political subdivisions or local authorities; orii. those benefits are secured or otherwise protected by national regulations and funded by a pool of assets held through a fiduciary arrangement or trustor to secure the fulfilment of the corresponding pension obligations against a case of insolvency of the MNE group; and (b) a pension services entity. Pension services entity (退休金服務實體) means an entity that is established and operated exclusively or almost exclusively: (a) to invest funds for the benefit of entities referred to in paragraph (a) of the definition of pension fund; or (b) to carry out activities that are ancillary to those regulated activities carried out by the entities referred to in paragraph (a) of the definition of pension fund provided that they are members of the same group. Permanent establishment (常設機構) means: (a) a place of business (including a deemed place of business) situated in a jurisdiction and treated as a permanent establishment in accordance with an applicable tax treaty in force provided that such jurisdiction taxes the income attributable to it in accordance with a provision similar to Article 7 of the OECD Model Tax Convention on Income and on Capital; (b) if there is no applicable tax treaty in force, a place of business (including a deemed place of business) in respect of which a jurisdiction taxes under its domestic law the income attributable to such place of business on a net basis similar to the manner in which it taxes its own tax residents; (c) if a jurisdiction has no corporate income tax system, a place of business (including a deemed place of business) situated in that jurisdiction that would be treated as a permanent establishment in accordance with the OECD Model Tax Convention on Income and on Capital provided that such jurisdiction would have had the right to tax the income attributable to it in accordance with Article 7 of that model; or (d) a place of business (or a deemed place of business) that is not already described in paragraphs (a) to (c) through which operations are conducted outside the jurisdiction where the entity is located provided that such jurisdiction exempts the income attributable to such operations. Policy disallowed expenses (政策不容許的開支) means: (a) expenses accrued by the constituent entity for illegal payments, including bribes and kickbacks; and (b) expenses accrued by the constituent entity for fines and penalties that equal or exceed EUR 50 000 (or an equivalent in the functional currency in which the constituent entity’s financial accounting net income or loss was calculated). Portfolio shareholding (投資組合股權) means ownership interests in an entity that are held by the MNE group and that carry rights to less than 10% of the profits, capital, reserves, or voting rights of that entity at the vesting date of the distribution or the date of disposition. In the case of an excluded equity gain or loss as defined by paragraph (a) of the definition in Article 10.1.1, the 10% threshold is tested at the end of the fiscal year. The vesting date of a distribution is the earlier of— (a) the date of distribution; and (b) the date on which the constituent entity becomes entitled to the distribution. Prior period errors and changes in accounting principles (前期錯誤及會計原則的變動) means all changes in the opening equity at the beginning of the fiscal year of a constituent entity attributable to: (a) a correction of an error in the determination of financial accounting net income in a previous fiscal year that affected the income or expenses includible in the computation of GloBE income or loss for such fiscal year, except to the extent such error correction resulted in a material decrease to a liability for covered taxes subject to Article 4.6; or (b) a change in accounting principle or policy that affects income or expenses includible in the computation of GloBE income or loss. Qualified ancillary international shipping income (合資格附帶國際海運收入) is defined in Article 3.3.3. Qualified domestic minimum top-up tax (合資格當地最低補足稅) means a minimum tax that is included in the domestic law of a jurisdiction and that: (a) determines the excess profits of the constituent entities located in the jurisdiction (domestic excess profits) in a manner that is equivalent to the GloBE rules; (b) operates to increase domestic tax liability with respect to domestic excess profits to the minimum rate for the jurisdiction and constituent entities for a fiscal year; (c) is implemented and administered in a way that is consistent with the outcomes provided for under the GloBE rules and the Commentary, provided that such jurisdiction does not provide any benefits that are related to such rules; and (d) has the status of a qualified domestic minimum top-up tax (including transitional qualified status) for the fiscal year as determined by the Inclusive Framework. A qualified domestic minimum top-up tax may compute domestic excess profits based on an acceptable financial accounting standard permitted by the authorised accounting body or an authorised financial accounting standard adjusted to prevent any material competitive distortions, rather than the financial accounting standard used in the consolidated financial statements. Qualified IIR (合資格收入納入規則) means a set of rules equivalent to Article 2.1 to Article 2.3 of the GloBE rules (including any provisions of the GloBE rules associated with those articles) that are included in the domestic law of a jurisdiction and that are implemented and administered in a way that is consistent with the outcomes provided for under the GloBE rules and the Commentary provided that such jurisdiction does not provide any benefits that are related to such rules, and the rules have qualified status (including transitional qualified status) for the fiscal year as determined by the Inclusive Framework. Qualified imputation tax (合資格歸集稅) means a covered tax accrued or paid by a constituent entity that is refundable or creditable to the beneficial owner of a dividend distributed by such constituent entity (or, in the case of a covered tax accrued or paid by a permanent establishment, a dividend distributed by the main entity) to the extent that the refund is payable, or the credit is provided: (a) by a jurisdiction other than the jurisdiction which imposed the covered taxes under a foreign tax credit regime; (b) to a beneficial owner of the dividend that is subject to tax at a nominal rate that equals or exceeds the minimum rate on the dividend on a current basis under the domestic law of the jurisdiction which imposed the covered taxes on the constituent entity; (c) to an individual beneficial owner of the dividend who is tax resident in the jurisdiction which imposed the covered taxes on the constituent entity and who is subject to tax on the dividends as ordinary income; or (d) to a governmental entity, an international organisation, a resident non-profit organisation, a resident pension fund, a resident investment entity that is not a group entity, or a resident life insurance company to the extent that the dividends are received in connection with a pension fund business and subject to tax in a similar manner as a dividend received by pension fund. For purposes of paragraph (d), a non-profit organisation or pension fund is resident in a jurisdiction if it is created and managed in that jurisdiction, and an investment entity is resident in a jurisdiction if it is created and regulated in the jurisdiction. A life insurance company is resident in the jurisdiction in which it is located. Qualified refundable tax credit (合資格可退還稅收抵免) means a refundable tax credit designed in a way such that it must be paid as cash or available as cash equivalents within four years from when a constituent entity satisfies the conditions for receiving the credit under the laws of the jurisdiction granting the credit. A tax credit that is refundable in part is a qualified refundable tax credit to the extent it must be paid as cash or available as cash equivalents within four years from when a constituent entity satisfies the conditions for receiving the credit under the laws of the jurisdiction granting the credit.

A qualified refundable tax credit does not include any amount of tax creditable or refundable pursuant to a qualified imputation tax or a disqualified refundable imputation tax.Qualified UTPR (合資格低稅利潤規則) means a set of rules equivalent to Article 2.4 to Article 2.6 of the GloBE rules (including any provisions of the GloBE rules associated with those articles) that are included in the domestic law of a jurisdiction and that are implemented and administered in a way that is consistent with the outcomes provided for under the GloBE rules and the Commentary provided that such jurisdiction does not provide any benefits that are related to such rules, and the rules have qualified status (including transitional qualified status) for the fiscal year as determined by the Inclusive Framework.Qualifying competent authority agreement (合資格主管當局協議) means a bilateral or multilateral agreement or arrangement between competent authorities that provides for the automatic exchange of annual GloBE information returns.Real estate investment vehicle (房地產投資工具) means an entity the taxation of which achieves a single level of taxation either in its hands or the hands of its interest holders (with at most one year of deferral), provided that that person holds predominantly immovable property and is itself widely held.Note—In relation to Article 10.1.1 (definition of real estate investment vehicle), see the specified OECD GloBE rules guidance in paragraph 147 of Chapter 10 of the 2023 Commentary.Recaptured deferred tax liability (轉回遞延稅項負債) is defined in Article 4.4.4.Recapture exception accrual (轉回例外累算) is defined in Article 4.4.5.Reductions to covered taxes (涵蓋稅扣減額) is defined in Article 4.1.3.Reference jurisdiction (參照轄區) is defined in Article 9.3.3.Reporting fiscal year (申報財政年度) means the fiscal year that is the subject of the GloBE information return.Restricted Tier One Capital (受限制一級資本) means an instrument issued by a constituent entity pursuant to prudential regulatory requirements applicable to the insurance sector that is convertible to equity or written down if a pre-specified trigger event occurs and that has other features which are designed to aid loss absorbency in the event of a financial crisis.Short-term portfolio shareholding (短期投資組合股權) means a portfolio shareholding that has been economically held by the constituent entity that receives or accrues the dividends or other distributions for less than one year at the vesting date of the distribution. Stapled structure (合訂結構) means an arrangement entered into by two or more ultimate parent entities of separate groups, under which: (a) 50% or more of the ownership interests in the ultimate parent entities of the separate groups are by reason of form of ownership, restrictions on transfer, or other terms or conditions combined with each other, and cannot be transferred or traded independently. If the combined ownership interests are listed, they are quoted at a single price; and (b) one of those ultimate parent entities prepares consolidated financial statements in which the assets, liabilities, income, expenses and cash flows of all the entities of the groups are presented together as those of a single economic unit and that are required by a regulatory regime to be externally audited. Stateless constituent entity (無國籍成員實體) means a constituent entity described in Article 10.3.2(b) and Article 10.3.3(d).Substance-based income exclusion (實質收入豁除額) is defined in Article 5.3.Tangible assets (有形資產), for the purposes of the UTPR percentage and for Article 9.3, means the tangible assets of all the constituent entities resident for tax purposes in the relevant tax jurisdiction. Tangible assets do not include cash or cash equivalents, intangibles, or financial assets. With regard to permanent establishments, tangible assets should be allocated to the tax jurisdiction in which the permanent establishment is located provided those tangible assets are included in the separate financial accounts of that permanent establishment as determined by Article 3.4.1 and adjusted in accordance with Article 3.4.2. The tangible assets allocated to the tax jurisdiction of a permanent establishment shall not be taken into account for the tangible assets of the tax jurisdiction of the main entity.Tax (稅收) means a compulsory unrequited payment to general government.Taxable distribution method (應課稅分派方法) is defined in Article 7.6.2.Tax treaty (稅收協定) means an agreement for the avoidance of double taxation with respect to taxes on income and on capital.Tested year (測試年度) is defined in Article 7.6.5.Testing period (測試期) is defined in Article 7.6.5.Top-up tax (補足稅) means the top-up tax computed for the jurisdiction or constituent entity pursuant to Article 5.2.Top-up tax percentage (補足稅百分率) is defined in Article 5.2.1.Total deferred tax adjustment amount (遞延稅項調整總額) is defined in Article 4.4.1.Total UTPR top-up tax amount (低稅利潤規則補足稅總額) means the total amount of top-up tax that is allocable under the UTPR as defined in Article 2.4.1.Transition year (過渡年度), for a jurisdiction, means the first fiscal year that the MNE group comes within the scope of the GloBE rules in respect of that jurisdiction.Ultimate parent entity (UPE) (最終母實體) is defined in Article 1.4.Undistributed net GloBE income (未分派全球反侵蝕稅基淨收入) is defined in Article 7.6.3.UPE jurisdiction (最終母實體轄區) means the jurisdiction where the ultimate parent entity is located.UTPR (低稅利潤規則) means the rules set out in Article 2.4 to Article 2.6.Note—The reference in the definition of UTPR to “Article 2.4 to Article 2.6” is to be read as “Article 2.4 to Article 2.6, read with Part 2 of this Schedule”, because of Part 2 of this Schedule.UTPR jurisdiction (低稅利潤規則轄區) means a jurisdiction that has a qualified UTPR in force.UTPR percentage (低稅利潤規則百分率) means the percentage of total UTPR top-up tax amount that is allocated to a UTPR jurisdiction in accordance with the formula provided in 2.6.1.UTPR top-up tax amount (低稅利潤規則補足稅額) means the amount of top-up tax allocated to a UTPR jurisdiction under the UTPR.Article 10.2. Definitions of flow-through entity, tax transparent entity, reverse hybrid entity, and hybrid entity 10.2.1. An entity is a flow-through entity to the extent it is fiscally transparent with respect to its income, expenditure, profit or loss in the jurisdiction where it was created unless it is tax resident and subject to a covered tax on its income or profit in another jurisdiction.(a) A flow-through entity is a tax transparent entity with respect to its income, expenditure, profit or loss to the extent that it is fiscally transparent in the jurisdiction in which its owner is located.(b) A flow-through entity is a reverse hybrid entity with respect to its income, expenditure, profit or loss to the extent that it is not fiscally transparent in the jurisdiction in which the owner is located. 10.2.2. An entity is treated as fiscally transparent under the laws of a jurisdiction, if that jurisdiction treats the income, expenditure, profit or loss of that entity as if it were derived or incurred by the direct owner of that entity in proportion to its interest in that entity. 10.2.3. An ownership interest in an entity or a permanent establishment that is a constituent entity shall be treated as held through a tax transparent structure if that ownership interest is held indirectly through a chain of tax transparent entities. 10.2.4. A constituent entity that is not a tax resident and not subject to a covered tax or a qualified domestic minimum top-up tax based on its place of management, place of creation, or similar criteria shall be treated as a flow-through entity and a tax transparent entity in respect of its income, expenditure, profit or loss to the extent that:(a) its owners are located in a jurisdiction that treats the entity as fiscally transparent;(b) it does not have a place of business in the jurisdiction where it was created; and(c) the income, expenditure, profit or loss is not attributable to a permanent establishment. 10.2.5. An entity that is treated as a separate taxable person for income tax purposes in the jurisdiction where it is located is a hybrid entity with respect to its income, expenditure, profit or loss to the extent that it is fiscally transparent in the jurisdiction in which its owner is located.Article 10.3. Location of an entity and a permanent establishment 10.3.1. The location of an entity that is not a flow-through entity is determined as follows:(a) if it is a tax resident in a jurisdiction based on its place of management, place of creation or similar criteria, it is located in that jurisdiction; and(b) in other cases, it is located in the jurisdiction in which it was created.Note—Section 2(11) is relevant in determining whether an entity is a tax resident in Hong Kong. 10.3.2. The location of an entity that is a flow-through entity is determined as follows:(a) if it is the ultimate parent entity of the MNE group or it is required to apply an IIR in accordance with Article 2.1, it is located in the jurisdiction where it was created; and(b) in other cases, it shall be treated as a stateless entity. 10.3.3. The location of a permanent establishment is determined as follows:(a) if it is described in paragraph (a) of the definition in Article 10.1, is located in the jurisdiction where it is treated as a permanent establishment and is taxed under the applicable tax treaty in force;(b) if it is described in paragraph (b) of the definition in Article 10.1, is located in the jurisdiction where it is subject to net basis taxation based on its business presence;(c) if it is described in paragraph (c) of the definition in Article 10.1, is located in the jurisdiction where it is situated; and(d) if it is described in paragraph (d) of the definition in Article 10.1, is considered as a stateless permanent establishment. 10.3.4. Where by reason of Article 10.3.1, a constituent entity is located in more than one jurisdiction (a dual-located entity), then its status for purposes of the GloBE rules shall be determined as follows:(a) if it is located in two jurisdictions that have an applicable tax treaty in force:(i) it shall be located in the jurisdiction where it is considered as a deemed resident for purposes of the tax treaty;(ii) if the tax treaty requires the competent authorities to reach a mutual agreement on the deemed residence of the constituent entity for purposes of the tax treaty and no agreement exists, then paragraph (b) shall apply;(iii) if the tax treaty does not provide relief or exemption from tax because the constituent entity is a tax resident of both contracting parties, then paragraph (b) shall apply;(b) if no tax treaty applies, then its location shall be determined as follows:(i) it shall be located in the jurisdiction where it paid the greater amount of covered taxes for the fiscal year, without considering the ones paid in accordance with a controlled foreign company tax regime;(ii) if the amount of covered taxes paid in both jurisdiction is the same or zero, it shall be located in the jurisdiction where it has the greater amount of substance-based income exclusion computed on an entity basis in accordance with Article 5.3;(iii) if the amount of the substance-based income exclusion in both jurisdictions is the same or zero, then it is considered a stateless constituent entity unless it is the ultimate parent entity of the MNE group in which case it shall be located in the jurisdiction where it was created.Note—In relation to Article 10.3.4, see the specified OECD GloBE rules guidance in paragraphs 198 and 207 of Chapter 10 of the 2023 Commentary. 10.3.5. Where, under Article 10.3.4, a dual-located entity that is a parent entity is located in a jurisdiction where it is not subject to a qualified IIR, then the other jurisdiction can require such entity to apply its qualified IIR unless it is restricted by an applicable tax treaty in force. 10.3.6. Where an entity has changed its location during the fiscal year, it shall be located in the jurisdiction where it was located at the beginning of that year. Part 2 Modifications to Rules in Part 1 of this Schedule 1. The rules in Part 1 of this Schedule are modified as specified in this Part. 2. Article 2.4.1 in Part 1 of this Schedule is to be read as— “2.4.1. Constituent entities of an MNE group located in Hong Kong (HK constituent entities) are subject to an adjustment that is equivalent to a denial of a deduction in an amount resulting in those constituent entities having an additional cash tax expense equal to the UTPR top-up tax amount allocated to Hong Kong for the fiscal year.The adjustment must be made in the form of an additional tax imposed for the fiscal year directly on the HK constituent entities of the MNE group in an amount equal to the UTPR top-up tax amount allocated to Hong Kong for the fiscal year.”. 3. The UTPR top-up tax amount for an MNE group allocated to a HK constituent entity, to which Article 2.4.1 in Part 1 of this Schedule (as modified by section 2 of this Part) applies (specified HK constituent entity), of the MNE group must be determined for a fiscal year by multiplying—(a) the UTPR top-up tax amount for the MNE group allocated to Hong Kong, under Article 2.6.1 in Part 1 of this Schedule, for the fiscal year; by(b) the specified HK constituent entity’s UTPR percentage for the group for the fiscal year.The UTPR percentage of a specified HK constituent entity (CE1) for an MNE group must be determined for each fiscal year as follows— 50% x Number of employees of CE1 + 50% x Total value of tangible assets of CE1 Number of employees of all specified HK constituent entities of the MNE group Total value of tangible assets of all specified HK constituent entities of the MNE group 4. In Article 6.5.1(f) in Part 1 of this Schedule, “Article 2.4 to Article 2.6” is to be read as “Article 2.4 to Article 2.6, read with Part 2 of this Schedule”. 5. In Article 6.5.1(g) in Part 1 of this Schedule, “Article 8.1” is to be read as “Part 2 of Schedule 63”. 6. In Article 10.1.1 in Part 1 of this Schedule, the definitions of designated filing entity and designated local entity are to be read as—“Designated filing entity (指定交表實體) has the meaning given by section 2 of Schedule 63.Designated local entity (指定本地實體) has the meaning given by section 2 of Schedule 63.”. 7. In Article 10.1.1 in Part 1 of this Schedule, in the definition of filing constituent entity, “Article 8.1” is to be read as “Part 2 of Schedule 63”. 8. In Article 10.1.1 in Part 1 of this Schedule, in the definition of GloBE information return, “Article 8.1.4” is to be read as “section 10 of Schedule 63”. 9. In Article 10.1.1 in Part 1 of this Schedule, in the definition of UTPR, “Article 2.4 to Article 2.6” is to be read as “Article 2.4 to Article 2.6, read with Part 2 of this Schedule”. Part 3 Safe Harbours for Top-up Taxes under GloBE Rules Division 1 Preliminary 1. Interpretation of Part 3 of Schedule 61 (1) In this Part—country-by-country report (國別報告) has the meaning given by section 58B(2);standalone JV (獨立合資企業) means a joint venture that has no JV subsidiary.(2) Unless the contrary intention appears, an expression used in this Part, and defined or otherwise explained in any provision of Part 4AA or Part 1 of this Schedule (definition provision), has the same meaning as in the definition provision.(3) In this Part—(a) a reference to a joint venture of an MNE group is a reference to an entity that falls within the definition of joint venture in Article 10.1.1 of the GloBE rules, with the UPE of the MNE group as the UPE referred to in the definition;(b) if a joint venture of an MNE group has no JV subsidiary, the joint venture is a standalone JV of the MNE group; and(c) if a joint venture of an MNE group has one or more JV subsidiaries, the joint venture and the JV subsidiaries are collectively a JV group of the MNE group and are members of the JV group.(4) A reference in this Part to a paragraph of the Commentary to Article 9.1.2 (Jan-2025 AG version) is a reference to that paragraph stipulated, in paragraph 11 of the Third Jan-2025 Administrative Guidance, to be incorporated into the Commentary to that Article of the OECD GloBE model rules.(5) A reference in this Part to a paragraph of the Commentary to Article 10.1 (Jun-2024 AG version) is a reference to that paragraph stipulated, in paragraph 24 of Chapter 6 of the Jun-2024 Administrative Guidance, to be incorporated into the Commentary to that Article of the OECD GloBE model rules. Division 2 Transitional CbCR Safe Harbour Subdivision 1 Preliminary 2. Interpretation of Division 2 of Part 3 of Schedule 61 (1) In this Division—profit or loss before income tax (扣除入息稅前利潤或虧損), in relation to an MNE group for a jurisdiction for a fiscal year, means the profit or loss of the MNE group before income tax for the jurisdiction for the fiscal year as reported in the group’s qualified CbC report for the fiscal year;qualified CbC report (合資格國別報告) means, subject to subsection (3), a country-by-country report prepared and filed using qualified financial statements;qualified financial statements (合資格財務報表)—see section 3 of this Part;simplified ETR (簡化有效稅率)—see section 7(2) of this Part;total revenue (總收入), in relation to an MNE group in a jurisdiction for a fiscal year, means the MNE group’s total revenue for the jurisdiction as reported in the group’s qualified CbC report for the fiscal year;transition period (過渡期) means a period that covers all the fiscal years beginning on or before 31 December 2026 but does not include a fiscal year ending after 30 June 2028;transitional CbCR safe harbour (過渡性國別報告安全港) means the treatment of an MNE group for a jurisdiction for a fiscal year in accordance with section 4 of this Part.(2) Subsection (3) applies if—(a) an MNE group is in the scope of the GloBE rules but is not required to file a country-by-country report; and(b) the MNE group completes section 2.2.1.3(a) of the GloBE information return, using the data from qualified financial statements that would have been reported as total revenue, and profit or loss before income tax, in a qualified CbC report had the MNE group been required to file a country-by-country report.(3) In relation to an MNE group referred to in subsection (2)—(a) a reference in this Division to an amount as reported in a qualified CbC report is to be read as including—(i) the amounts that would have been reported in a qualified CbC report if the MNE group were required to file a country-by-country report in accordance with the CbC requirements in the UPE jurisdiction; or(ii) if the UPE jurisdiction does not have CbC requirements, the amounts that would have been reported in accordance with the CbCR documents (as defined by section 58B(2));(b) a reference in this Division to having submitted a qualified CbC report is to be read as a reference to having prepared qualified financial statements containing the data that would have been reported as mentioned in subsection (2)(b); and(c) a reference in this Division to a qualified CbC report is to be read as a reference to the qualified financial statements referred to in paragraph (b). 3. Meaning of qualified financial statements (1) In this Division— qualified financial statements (合資格財務報表), in relation to an MNE group, means— (a) the accounts used to prepare the consolidated financial statements of the UPE of the MNE group (reporting package); (b) separate financial statements of each constituent entity of the MNE group if—(i) they are prepared in accordance with either an acceptable financial accounting standard or an authorised financial accounting standard; and(ii) the information contained in such statements is maintained based on that accounting standard and is reliable; (c) in the case of a constituent entity of the MNE group that is not included in the MNE group’s consolidated financial statements on a line-by-line basis solely due to size or materiality grounds—the financial accounts of the constituent entity that are used for preparation of the MNE group’s country-by-country report; or (d) in the case of a constituent entity of the MNE group that is a permanent establishment having neither separate financial accounts described in paragraph (a), nor separate financial statements described in paragraph (b)—the separate financial statements prepared by the main entity of the permanent establishment for financial reporting, regulatory, tax reporting or internal management control purposes. (2) However, a constituent entity’s reporting package, or any separate financial statements described in paragraph (b) of the definition of qualified financial statements in subsection (1), incorporating the purchase price accounting adjustment allocated by the MNE group, are not qualified financial statements, unless the consistent reporting condition is met, and the goodwill impairment adjustment is made.(3) The consistent reporting condition is met if—(a) the MNE group has not submitted a country-by-country report, for a fiscal year beginning after 31 December 2022, that was based on the constituent entity’s reporting package, or separate financial statements, without the purchase price accounting adjustment; or(b) the constituent entity was required by law or regulation to change its reporting package, or separate financial statements, to incorporate the purchase price accounting adjustment.(4) The goodwill impairment adjustment is made if any reduction to the constituent entity’s income attributable to an impairment of goodwill related to transactions entered into after 30 November 2021 is added back to the MNE group’s profit or loss before income tax for the jurisdiction for the fiscal year—(a) for applying the routine profit test under section 8 of this Part; and(b) for applying the simplified ETR test under section 7 of this Part, but only if the financial accounts do not also have a reversal of deferred tax liability, or recognition or increase of deferred tax asset, in respect of the impairment of goodwill. Subdivision 2 Application to Constituent Entities 4. Transitional CbCR safe harbour Subject to sections 9, 10, 11, 12 and 13 of this Part, an MNE group’s jurisdictional top-up tax under the GloBE rules for a jurisdiction for a fiscal year in the transition period, for constituent entities located in the jurisdiction, is taken to be zero if—(a) either—(i) a qualified CbC report for the MNE group has been filed for the jurisdiction for the fiscal year; or(ii) if the MNE group is not required to file a country-by-country report, the filing constituent entity—(A) has filed a GloBE information return for the MNE group for the fiscal year, and has completed section 2.2.1.3(a) of the return for the jurisdiction for the fiscal year; and(B) for the purposes of sub-subparagraph (A), has used the data from qualified financial statements that would have been reported as total revenue, and profit or loss before income tax, in a qualified CbC report had the MNE group been required to file a country-by-country report;(b) the filing constituent entity has made an election under section 5 of this Part for the jurisdiction and the fiscal year;(c) the MNE group meets one of the following tests for the jurisdiction for the fiscal year—(i) the de minimis test under section 6 of this Part;(ii) the simplified ETR test under section 7 of this Part;(iii) the routine profits test under section 8 of this Part; and(d) all of the data used to perform the computations under sections 6, 7 and 8 of this Part for all of the constituent entities of the MNE group that are located in the jurisdiction for the particular fiscal year (other than any non-material constituent entities (as defined by section 37 of this Schedule) or permanent establishments) comes from either of the following only—(i) qualified financial statements described in paragraph (a) of the definition of qualified financial statements in section 3(1) of this Part;(ii) qualified financial statements described in paragraph (b) of that definition. 5. Election for transitional CbCR safe harbour (1) A filing constituent entity of an MNE group may make an election for transitional CbCR safe harbour for the MNE group for a jurisdiction for a fiscal year.(2) An election under subsection (1) is an annual election.(3) A filing constituent entity may not make an election for transitional CbCR safe harbour for a jurisdiction for a fiscal year if it has made an election for transitional UTPR safe harbour, under section 18 of this Part, for the jurisdiction for the fiscal year. 6. De minimis test (1) An MNE group meets the de minimis test for a jurisdiction for a fiscal year if—(a) the MNE group’s total revenue for the jurisdiction for the fiscal year is less than EUR 10 million; and(b) the MNE group’s profit before income tax for the jurisdiction for the fiscal year is less than EUR 1 million or the MNE group has a loss for the jurisdiction for the fiscal year.(2) For the purposes of subsection (1)(a), if a constituent entity of the MNE group is held for sale and its revenue are not already included in the total revenue, the revenue of the entity must be added back to the total revenue. 7. Simplified ETR test (1) An MNE group meets the simplified ETR test for a jurisdiction for a fiscal year if the MNE group’s simplified ETR for the jurisdiction for the fiscal year is equal to or greater than—(a) if the fiscal year starts in the 2025 calendar year—16%; or(b) if the fiscal year starts in the 2026 calendar year—17%.(2) In this section— simplified ETR (簡化有效稅率), for a jurisdiction for a fiscal year, is the amount equal to— A/B x 100% where: A means the MNE group’s simplified covered taxes for the jurisdiction for the fiscal year; B means the MNE group’s profit or loss before income tax for the jurisdiction for the fiscal year. (3) In this section— excluded deferred tax expenses (被豁除遞延稅項開支)— (a) means any deferred tax expenses attributable to the reversal of deferred tax assets and deferred tax liabilities described in subparagraph (a), (b) or (c) of paragraph 8.5 of the Commentary to Article 9.1.2 (Jan-2025 AG version) in a tested fiscal year; but (b) for determining the simplified covered taxes within the grace period, described in paragraph 8.8 of the Commentary to Article 9.1.2 (Jan-2025 AG version), may exclude the deferred tax expenses attributable to the reversal of such deferred tax assets up to the maximum amount allowed under paragraphs 8.9, 8.10 and 8.11 of the Commentary to Article 9.1.2 (Jan-2025 AG version); simplified covered taxes (簡化涵蓋稅), in relation to an MNE group for a jurisdiction for a fiscal year, means the income tax expense for the jurisdiction for the fiscal year as reported in its qualified financial statements for the fiscal year, excluding— (a) any tax that is not a covered tax because of Article 4.2.2 of the GloBE rules; (b) uncertain tax positions reported in the MNE group’s qualified financial statements; and (c) excluded deferred tax expenses. 8. Routine profits test (1) An MNE group meets the routine profits test for a jurisdiction for a fiscal year if the MNE group’s profit or loss before income tax for the jurisdiction for the fiscal year is equal to or less than the MNE group’s substance-based income exclusion amount for the jurisdiction for the fiscal year computed in accordance with the GloBE rules, as read with subsections (2) and (3).(2) In computing the substance-based income exclusion amount of an MNE group, the payroll costs and tangible assets of a constituent entity of the MNE group may only be taken into account if the constituent entity—(a) is recorded as a resident of the jurisdiction in the qualified CbC report of the MNE group; and(b) is located in the jurisdiction under Article 10.3 of the GloBE rules.(3) To avoid doubt, in computing the substance-based income exclusion amount of an MNE group, the transitional relief for the substance-based income exclusion amount provided in Article 9.2 of the GloBE rules applies.(4) For the purposes of subsection (1), an MNE group is taken to have met the routine profits test for a jurisdiction for a fiscal year if the MNE group’s profit or loss before income tax for the jurisdiction for the fiscal year is zero or less than zero. 9. Special rule for UPE jurisdiction if UPE is flow-through entity (1) Subject to subsection (2), section 4 of this Part (transitional CbCR safe harbour) does not apply in relation to an FT-UPE group for the FT-UPE jurisdiction.(2) If, for a fiscal year, all ownership interests in the FT-UPE of an FT-UPE group are held by qualified holders—(a) section 4 of this Part applies in relation to the group for the FT-UPE jurisdiction for the fiscal year; but(b) in computing for the purposes of section 4 of this Part the group’s profit or loss before income tax (and any associated tax) for the FT-UPE jurisdiction for the fiscal year, an amount to the extent to which it is attributable to, or distributed as a result of, an ownership interest in the FT-UPE held by a qualified holder is to be excluded.(3) For the purposes of this section—(a) an MNE group is an FT-UPE group if the UPE of the group is a flow-through entity;(b) the UPE of an FT-UPE group, and the jurisdiction in which the entity is located, are FT-UPE and FT-UPE jurisdiction respectively; and(c) a qualified holder means a holder described in Article 7.1.1(a), (b) or (c) of the GloBE rules. 10. Special rules for UPE jurisdiction subject to deductible dividend regime (1) This section applies, subject to section 9 of this Part, in relation to a DD-UPE group if the DD-UPE is also a flow-through entity.(2) Section 4 of this Part (transitional CbCR safe harbour) applies, in relation to a DD-UPE group for the DD-UPE jurisdiction for a fiscal year.(3) However, in computing for the purposes of section 4 of this Part the DD-UPE group’s profit or loss before income tax (and any associated tax) for the DD-UPE jurisdiction for the fiscal year, an amount to the extent to which it is attributable to, or distributed as a result of, an ownership interest in the DD-UPE held by a recipient described in Article 7.2.1(a), (b) or (c) of the GloBE rules is to be excluded.(4) For the purposes of this section—(a) an MNE group is a DD-UPE group if the UPE of the group is located in a jurisdiction where it is subject to a deductible dividend regime; and(b) the UPE of a DD-UPE group, and the jurisdiction in which the entity is located, are DD-UPE and DD-UPE jurisdiction respectively. 11. Special rules for investment-related entities and their constituent entity-owners (1) Unless subsection (3) applies to an MNE group for a fiscal year for a jurisdiction in which an investment-related entity of the group is located (investment-related entity jurisdiction)—(a) the investment-related entity’s top-up tax amount for the fiscal year is to be computed separately under Articles 7.4, 7.5 and 7.6 of the GloBE rules, without regard to section 4 of this Part; and(b) in computing for the purposes of section 4 of this Part the MNE group’s profit or loss before income tax (and any associated taxes) for the investment-related entity jurisdiction for the fiscal year, an amount to the extent to which it is attributable to the investment-related entity is to be excluded.(2) Subsection (3) applies to an MNE group for an investment-related entity jurisdiction for a fiscal year if—(a) all constituent entities of the MNE group that hold direct ownership interests in the investment-related entity (direct constituent entity-owners) are located in the investment-related entity jurisdiction (common jurisdiction); and(b) no election has been made under Article 7.5 or 7.6 of the GloBE rules for the investment-related entity for the fiscal year.(3) For the purposes of section 4 of this Part—(a) the profit or loss before income tax and total revenue of the investment-related entity (and any associated taxes) are to be reflected only in the common jurisdiction in proportion to its direct constituent entity-owners’ ownership interest in the investment-related entity; and(b) if a portion of the ownership interest in the investment-related entity is held by owners that are not members of the MNE group, the profit or loss before income tax attributable to such owners is to be excluded.(4) For the purposes of this section, a constituent entity of an MNE group is to be regarded as being located in the jurisdiction where it is resident for the purposes of the MNE group’s qualified CbC report. 12. Special rule for net unrealised fair value loss (1) For the purposes of section 4 of this Part, in computing an MNE group’s profit or loss before income tax for a jurisdiction for a fiscal year, the MNE group’s net unrealised fair value loss for the jurisdiction for the fiscal year is to be disregarded if that net unrealised fair value loss exceeds EUR 50 million.(2) In subsection (1), a reference to a net unrealised fair value loss for a jurisdiction for a fiscal year, in relation to an MNE group, means the sum of all losses, as reduced by any gains, that—(a) arise from changes in fair value of ownership interest (except for portfolio shareholdings); and(b) are included in the MNE group’s profit or loss before income tax for the jurisdiction for the fiscal year as reported in its qualified CbC report. 13. Special rules for hybrid arbitrage arrangements (1) This section provides for the treatment of the following (each a hybrid arbitrage arrangement)—(a) a deduction/non-inclusion arrangement;(b) a duplicate loss arrangement;(c) a duplicate tax recognition arrangement.(2) For the purpose of applying sections 6, 7 and 8 of this Part to an MNE group for a jurisdiction for a fiscal year—(a) the profit or loss before income tax of the MNE group for the jurisdiction for the fiscal year is to exclude any expense or loss as a result of—(i) a deduction/non-inclusion arrangement; or(ii) a duplicate loss arrangement; and(b) the simplified covered taxes of a constituent entity of the MNE group that is located in the jurisdiction for the fiscal year are to exclude any income tax expense arising as a result of a duplicate tax recognition arrangement.(3) An adjustment under subsection (2)(a) does not need to be made with respect to the expense or loss in the financial statements of one of the constituent entities if—(a) the duplicate loss arrangement is such arrangement because of paragraph (a) of the definition of duplicate loss arrangement in subsection (6); and(b) all constituent entities including the relevant expense or loss in their financial statements are located in the same jurisdiction.(4) In this section—(a) deduction/non-inclusion arrangement (扣除/不計入安排) means an arrangement entered into after 15 December 2022 under which one constituent entity of an MNE group directly or indirectly provides credit to, or otherwise makes an investment in, another constituent entity of the MNE group that results in an expense or loss in the financial statements of any constituent entity of the MNE group to the extent that—(i) there is no commensurate increase in the revenue or gain in the financial statements of the constituent entity counterparty; or(ii) the constituent entity counterparty is not reasonably expected over the life of the arrangement to have a commensurate increase in its taxable income; but(b) an arrangement is not a deduction/non-inclusion arrangement to the extent that the expenses or loss is solely with respect to additional tier one capital.(5) For the purposes of subsection (4), a constituent entity is not to be regarded to have a commensurate increase in its taxable income to the extent that—(a) the amount included in taxable income is offset by a tax attribute, such as a loss carryforward or an unused interest carryforward, with respect to which a valuation adjustment or accounting recognition adjustment has been made or would have been made if the adjustment determination were made without regard to the ability of a constituent entity to use the tax attribute with respect to any hybrid arbitrage arrangement entered into after 15 December 2022; or(b) the payment that gives rise to the expense or loss also gives rise to a taxable deduction or loss of a constituent entity that is located in the same jurisdiction as the constituent entity counterparty (counterparty jurisdiction), without being included as an expense or loss in determining the profit or loss before income tax for the counterparty jurisdiction, including as a result of being an expense or loss in the financial statements of a flow-through entity that is owned by a constituent entity in the counterparty jurisdiction.(6) In this section— duplicate loss arrangement (重複虧損安排) means an arrangement entered into after 15 December 2022 that results in an expense or loss being included in the financial statements of a constituent entity of an MNE group— (a) subject to subsection (7)(a), to the extent that the expense or loss is also being included as an expense or loss in the financial statements of another constituent entity of the MNE group; or (b) subject to subsection (7)(b), to the extent that the arrangement also gives rise to a duplicate amount that is deductible for determining the taxable income of another constituent entity of the MNE group in another jurisdiction. (7) However, an arrangement is not to be regarded as a duplicate loss arrangement under subsection (6) to the extent that—(a) in the case of paragraph (a) of the definition of duplicate loss arrangement in that subsection—the amount of the relevant expense or loss is offset against the revenue that is included in the financial statements of both constituent entities; or(b) in the case of paragraph (b) of the definition of duplicate loss arrangement in that subsection—the amount of the relevant expense or loss is offset against the revenue or income that is included in both—(i) the financial statements of the constituent entity including the relevant expense or loss in the financial statements; and(ii) the taxable income of the constituent entity claiming the deduction for the relevant expense or loss.(8) In this section—duplicate tax recognition arrangement (重複稅項確認安排) means an arrangement entered into after 15 December 2022 that results in each of 2 or more constituent entities of an MNE group including part or all of the same income tax expense in—(a) its adjusted covered taxes; or(b) its simplified ETR for the purpose of applying the transitional CbCR safe harbour,but does not include an arrangement that also results in the income subject to tax being included in the relevant financial statements of each such constituent entity.(9) Despite subsection (8), an arrangement is not a duplicate tax recognition arrangement if it arises solely because the simplified ETR of a constituent entity of the MNE group (first constituent entity) does not require adjustments for income tax expenses that would otherwise be allocated to another constituent entity of the MNE group in determining the first constituent entity’s adjusted covered taxes.(10) For the purposes of this section—(a) a reference to a constituent entity of an MNE group includes—(i) any entity treated as a constituent entity of the group under the GloBE rules, such as a joint venture of the group; and(ii) any entity with its qualified financial statements taken into account for the purposes of section 6, 7 or 8 of this Part,regardless of whether such entities are in the same jurisdiction;(b) a reference to financial statements of a constituent entity means the financial statements used to calculate that constituent entity’s GloBE income or the qualified financial statements taken into account for the purposes of section 6, 7 or 8 of this Part;(c) a constituent entity is to be regarded as having entered into a hybrid arbitrage arrangement after 15 December 2022 if after that date—(i) the arrangement is amended or transferred;(ii) the performance of any rights or obligations under the arrangement differs from the performance of such rights or obligations prior to 15 December 2022 (including where payments are reduced or cease with the effect of increasing the balance of a liability); or(iii) there is a change in the accounting treatment with respect to the arrangement; and(d) an expense or loss is not to be regarded as being in the financial statement of a tax transparent entity to the extent that the expense or loss is included in the financial statements of its constituent entity-owners. 14. Exclusions (1) The transitional CbCR safe harbour does not apply to a stateless constituent entity.(2) The transitional CbCR safe harbour does not apply to a multi-parented MNE group if there is no single qualified CbC report that includes the information of the combined groups.(3) The transitional CbCR safe harbour does not apply to an MNE group for a jurisdiction for a fiscal year if an election under Article 7.3.1 of the GloBE rules has been made by the filing constituent entity of the MNE group for the jurisdiction for the fiscal year.(4) The transitional CbCR safe harbour does not apply to an MNE group for a jurisdiction for a fiscal year if—(a) the transitional CbCR safe harbour did not apply to the MNE group for the jurisdiction for a previous fiscal year; and(b) there was a constituent entity of the MNE group located in that jurisdiction in the previous fiscal year. Subdivision 3 Application to Standalone JV and JV Group Member 15. Application to standalone JV and JV group member (1) Subdivision 2 applies to a standalone JV of an MNE group in the same way as it applies to a constituent entity of an MNE group, subject to subsections (2) and (5).(2) For the purposes of subsection (1), tests under sections 6, 7 and 8 of this Part are to be applied to each standalone JV of an MNE group separately.(3) Subdivision 2 applies to a member of a JV group of an MNE group in the same way as it applies to constituent entities of an MNE group, subject to subsections (4) and (5).(4) For the purposes of subsection (3), tests under sections 6, 7 and 8 of this Part are to be applied to each JV group of an MNE group separately.(5) For the purposes of subsections (1) and (3)—(a) section 4 of this Part is to be read as if its paragraph (a) were omitted; and(b) a reference to the MNE group’s qualified CbC report is a reference to the qualified financial statements of the standalone JV or the JV group concerned (as the case requires). Division 3 Transitional UTPR Safe Harbour 16. Interpretation of Division 3 of Part 3 of Schedule 61 In this Division—corporate income tax rate (公司入息稅稅率), in relation to a jurisdiction, means the nominal rate of corporate income tax (including any sub-national corporate income taxes) generally imposed on income in the jurisdiction;transition period fiscal year (過渡期財政年度) means a fiscal year not exceeding 12 months that begins on or before 31 December 2025 and ends before 31 December 2026;transitional UTPR safe harbour (過渡性低稅利潤規則安全港) means the treatment of an MNE group for a jurisdiction for a fiscal year in accordance with section 17 of this Part. 17. Transitional UTPR safe harbour for UPE jurisdiction For a transition period fiscal year, an MNE group’s UTPR top-up tax amount calculated for the purposes of Article 2.5 of the GloBE rules for the UPE jurisdiction is taken to be zero if—(a) the jurisdiction has a corporate income tax rate that is equal to, or greater than, 20%; and(b) the filing constituent entity of the MNE group has made an election under section 18 of this Part for the jurisdiction for the fiscal year. 18. Election for transitional UTPR safe harbour (1) A filing constituent entity of an MNE group may make an election for transitional UTPR safe harbour for the MNE group—(a) for a transition period fiscal year; and(b) for a jurisdiction.(2) An election under subsection (1) is an annual election.(3) A filing constituent entity may not make an election for transitional UTPR safe harbour for a jurisdiction for a transition period fiscal year if it has made an election for transitional CbCR safe harbour under section 5 of this Part for the jurisdiction for the fiscal year. Division 4 QDMTT Safe Harbour Subdivision 1 Preliminary 19. Interpretation of Division 4 of Part 3 of Schedule 61 In this Division—OECD peer review process (經合組織成員互評程序) means the review process developed, and undertaken, under the OECD/G20 Inclusive Framework on Base Erosion and Profit Shifting, in respect of the domestic minimum top-up tax of a jurisdiction;QDMTT safe harbour (合資格當地最低補足稅安全港) means the treatment of an MNE group for a jurisdiction for a fiscal year in accordance with section 20 of this Part;QDMTT safe harbour standards (合資格當地最低補足稅安全港準則) means the standards referred to as “standards for a QDMTT safe harbour” set out in the document referred to in item 3 of Part 1 of Schedule 64. Subdivision 2 Application to Constituent Entities 20. QDMTT safe harbour An MNE group’s jurisdictional top-up tax under the GloBE rules for a jurisdiction for a fiscal year, for constituent entities located in the jurisdiction, is taken to be zero if—(a) the MNE group is subject to a qualified domestic minimum top-up tax of the jurisdiction for the fiscal year;(b) that jurisdiction is determined to have met the QDMTT safe harbour standards under an OECD peer review process for that fiscal year;(c) a filing constituent entity of the MNE group has made an election under section 21 of this Part for the jurisdiction for the fiscal year; and(d) none of the disqualifying conditions provided in section 22, 23, 24, 25 or 26 of this Part applies. 21. Election for QDMTT safe harbour (1) A filing constituent entity of an MNE group may make an election for QDMTT safe harbour for the MNE group for a jurisdiction for a fiscal year.(2) An election under subsection (1) is an annual election.(3) This section applies subject to section 30 of this Part. 22. Disqualifying conditions—jurisdiction where flow-through entity parent not subject to QDMTT (1) The QDMTT safe harbour does not apply to an MNE group’s jurisdictional top-up tax under the GloBE rules for a fiscal year, for constituent entities of the group located in the UPE jurisdiction, if—(a) the UPE of the group is a flow-through entity; and(b) the qualified domestic minimum top-up tax of the jurisdiction does not impose a charge in any circumstances on a UPE that is a flow-through entity.(2) The QDMTT safe harbour does not apply to an MNE group’s jurisdictional top-up tax under the GloBE rules for a fiscal year, for constituent entities of the group located in a jurisdiction in which an IIR applying entity of the group is located, if—(a) the IIR applying entity is a flow-through entity; and(b) the qualified domestic minimum top-up tax of the jurisdiction does not impose a charge in any circumstances on an IIR applying entity that is a flow-through entity.(3) In subsection (2)—IIR applying entity (應用收入納入規則實體), in relation to an MNE group, means a parent entity of the group that is required under the GloBE rules to apply a qualified IIR to any constituent entity of the group. 23. Disqualifying condition—jurisdiction adopting Article 9.3 of GloBE rules without limitation The QDMTT safe harbour does not apply to an MNE group’s jurisdictional top-up tax under the GloBE rules for a fiscal year, for constituent entities of the group located in a jurisdiction, if—(a) a qualified domestic minimum top-up tax of the jurisdiction adopts a transitional exclusion that is consistent with Article 9.3 of the GloBE rules; and(b) that exclusion is not limited to the case where a qualified IIR does not apply in respect of the constituent entities located in the jurisdiction. 24.

Disqualifying condition—qualified domestic minimum top-up tax challenged The QDMTT safe harbour does not apply to an MNE group’s jurisdictional top-up tax under the GloBE rules for a fiscal year, for constituent entities of the group located in a jurisdiction, if a qualified domestic minimum top-up tax—(a) is subject, directly or indirectly, to a challenge by the MNE group in judicial or administrative proceedings; or(b) has been determined as not assessable or collectible by the tax authority of the jurisdiction administering the qualified domestic minimum top-up tax, based on—(i) constitutional law;(ii) other superior law; or(iii) a specific agreement with the government of the jurisdiction limiting the MNE group’s tax liability. 25. Disqualifying condition—no charge for securitization entity (1) The QDMTT safe harbour does not apply to an MNE group’s jurisdictional top-up tax under the GloBE rules for a fiscal year, for constituent entities of the group located in a jurisdiction, if—(a) a member of the MNE group is a securitization entity participating in a securitization arrangement and is located in the jurisdiction; and(b) the qualified domestic minimum top-up tax of the jurisdiction does not impose a charge in any circumstances on a securitization entity.(2) In subsection (1)—securitization arrangement (證券化安排) has the meaning given by paragraph 148.4 of the Commentary to Article 10.1 (Jun-2024 AG version);securitization entity (證券化實體) has the meaning given by paragraphs 148.2 and 148.3 of the Commentary to Article 10.1 (Jun-2024 AG version). 26. Disqualifying condition—non-exclusion of tax attributes from total deferred tax adjustment amount or from simplified covered taxes The QDMTT safe harbour does not apply to an MNE group’s jurisdictional top-up tax under the GloBE rules for a fiscal year, for constituent entities of the group located in a jurisdiction, if—(a) the general government of the jurisdiction provided the tax attributes described in paragraph 8.5 of the Commentary to Article 9.1.2 (Jan-2025 AG version); and(b) the jurisdiction does not exclude those tax attributes from its Article 9.1.1 computations in determining the total deferred tax adjustment amount or from the simplified covered taxes under its transitional CbCR safe harbour. Subdivision 3 Application to Other Entities and Permanent Establishments 27. Application to standalone JV and members of JV group (1) Sections 20, 21, 23, 24, 25 and 26 of this Part apply to a standalone JV of an MNE group, or a member of a JV group of an MNE group, that is located in a jurisdiction or otherwise subject to a qualified domestic minimum top-up tax of the jurisdiction as those sections apply to a constituent entity of the MNE group located in the jurisdiction.(2) The QDMTT safe harbour does not apply to an MNE group’s jurisdictional top-up tax under the GloBE rules for a fiscal year for—(a) a standalone JV of an MNE group; or(b) a member of a JV group of an MNE group,if the qualified domestic minimum top-up tax of the jurisdiction does not impose a charge in any circumstances on a standalone JV or a member referred to in paragraph (a) or (b) (as the case requires). 28. Application to investment-related entities (1) Sections 20, 21, 22(1), 23, 24, 25 and 26 of this Part apply to an investment-related entity of an MNE group located in a jurisdiction as those sections apply to a constituent entity of the MNE group located in the jurisdiction.(2) The QDMTT safe harbour does not apply to an MNE group’s jurisdictional top-up tax under the GloBE rules for a fiscal year, for an investment-related entity, if the qualified domestic minimum top-up tax of the jurisdiction does not impose a charge in any circumstances on an investment-related entity. 29. Application to stateless constituent entities Sections 20, 21, 22(1), 23, 24, 25 and 26 of this Part apply to a stateless constituent entity of an MNE group that is subject to a qualified domestic minimum top-up tax of a jurisdiction as those sections apply to a constituent entity of the MNE group located in the jurisdiction. Subdivision 4 Miscellaneous 30. Separate elections to be made An election made under section 21 of this Part may relate to entities or permanent establishments of an MNE group referred to in one of the following paragraphs only—(a) the constituent entities (other than those that are investment-related entities, minority-owned constituent entities or stateless constituent entities) of the MNE group;(b) a single standalone JV of the MNE group;(c) members of a single JV group of the MNE group;(d) the investment-related entities of the MNE group;(e) a single minority-owned constituent entity (not of a minority-owned subgroup) of the MNE group;(f) minority-owned constituent entities of a single minority-owned subgroup of the MNE group;(g) a single stateless constituent entity of the MNE group. Division 5 Simplified Calculations Safe Harbour Subdivision 1 Preliminary 31. Interpretation of Division 5 of Part 3 of Schedule 61 In this Division—simplified calculations safe harbour (簡化計算安全港) means the treatment of an MNE group for a jurisdiction for a fiscal year in accordance with section 32 of this Part. Subdivision 2 Framework 32. Simplified calculations safe harbour An MNE group’s top-up tax (other than additional current top-up tax) under the GloBE rules for a jurisdiction for a fiscal year is taken to be zero if—(a) an election is made under section 33 of this Part for the jurisdiction for the fiscal year; and(b) the MNE group meets any of the following tests for the jurisdiction for the fiscal year—(i) the SC de minimis test under section 34 of this Part;(ii) the SC ETR test under section 35 of this Part;(iii) the SC routine profit test under section 36 of this Part. 33. Election for simplified calculations safe harbour (1) A filing constituent entity of an MNE group may make an election for simplified calculations safe harbour for the MNE group for a jurisdiction for a fiscal year.(2) An election under subsection (1) is an annual election. 34. SC de minimis test An MNE group meets the SC de minimis test for a jurisdiction for a fiscal year if—(a) the MNE group’s average GloBE revenue for the jurisdiction, as determined under the simplified income calculation in accordance with Article 5.5 of the GloBE rules, is less than EUR 10 million; and(b) the MNE group’s average GloBE income for the jurisdiction, as determined under the simplified income calculation in accordance with Article 5.5 of the GloBE rules, is less than EUR 1 million or the MNE group has a loss for the jurisdiction. 35. SC ETR test An MNE group meets the SC ETR test for a jurisdiction for a fiscal year if the MNE group’s effective tax rate for the jurisdiction for the fiscal year, as determined under the simplified income calculation and the simplified tax calculation, is at least 15% as determined in accordance with Article 5.1.1 of the GloBE rules. 36. SC routine profit test An MNE group meets the SC routine profit test for a jurisdiction for a fiscal year if the MNE group’s GloBE income for the jurisdiction for the fiscal year, as determined under the simplified income calculation, is equal to or less than the MNE group’s substance-based income exclusion amount for the jurisdiction for the fiscal year determined in accordance with Article 5.3 of the GloBE rules. Subdivision 3 Non-material Constituent Entity 37. Interpretation of Subdivision 3 of Division 5 of Part 3 of Schedule 61 In this Subdivision—NMCE means a non-material constituent entity; non-material constituent entity (非重大成員實體) means a constituent entity of an MNE group for a fiscal year if— (a) where it is not a permanent establishment—(i) the constituent entity is not consolidated on a line-by-line basis in the consolidated financial statements of the UPE of the MNE group for the fiscal year solely on size or materiality grounds;(ii) those consolidated financial statements falls within paragraphs (a) or (c) of the definition of consolidated financial statements in Article 10.1.1 of the GloBE rules and those consolidated financial statements are externally audited; and(iii) if the constituent entity’s total revenue for the fiscal year exceeds EUR 50 million—its financial accounts that are used to complete the country-by-country report are prepared in accordance with an acceptable financial accounting standard or an authorised financial accounting standard; (b) where it is a permanent establishment—the main entity of the permanent establishment is an NMCE for the fiscal year under paragraph (a); relevant CbC regulations (相關國別規例) means— (a) the country-by-country reporting regulations—(i) of the UPE jurisdiction; or(ii) of the surrogate parent entity jurisdiction if a country-by-country report is not filed in the UPE jurisdiction; or (b) if the UPE jurisdiction does not have country-by-country reporting requirements, and an MNE group is not required to file a country-by-country report in any jurisdiction—the CbCR documents as defined by section 58B(2); total revenue (總收入), in relation to a fiscal year, means the constituent entity’s total revenue for the fiscal year as determined in accordance with the MNE group’s relevant CbC regulations. 38. NMCE simplified calculations (1) This section applies to any NMCEs (SC NMCEs) of an MNE group located in a jurisdiction (jurisdiction) for a fiscal year (year) if an election under section 39 of this Part is made for the NMCEs for the jurisdiction for the year.(2) For the purpose of determining whether an MNE group meets the tests under sections 34, 35 and 36 of this Part for the SC NMCEs for the jurisdiction for the year, the simplified income calculation, the simplified revenue calculation and the simplified tax calculation, as described in subsections (3), (4) and (5) respectively, apply.(3) Under the simplified income calculation, the GloBE income or loss of the SC NMCEs of the MNE group for the jurisdiction for the year is equal to the total revenue of the SC NMCEs for the jurisdiction for the year as determined in accordance with the relevant CbC regulations.(4) Under the simplified revenue calculation, the GloBE revenue of the SC NMCEs of the MNE group for the jurisdiction for the year is equal to the total revenue of the SC NMCEs for the jurisdiction for the year as determined in accordance with the relevant CbC regulations.(5) Under the simplified tax calculation, the adjusted covered taxes of the SC NMCEs of the MNE group for the jurisdiction for the year is equal to the income tax accrued (current year) of the SC NMCEs for the jurisdiction for the year as determined in accordance with the relevant CbC regulations. 39. Election for NMCE simplified calculations (1) A filing constituent entity of an MNE group that makes an election for simplified calculations safe harbour for a jurisdiction for a fiscal year, may make an election for NMCE simplified calculations—(a) for any NMCE or NMCEs for the fiscal year that is or are located in that jurisdiction; and(b) for the jurisdiction for the fiscal year.(2) An election under this section is an annual election. Schedule 62 [ss. 26AD, 26AE, 26AF, 26AG & 79A & Sch. 63]HKMTT (Schedule 62 added 21 of 2025 s. 31) Part 1 Preliminary 1. Purpose of Schedule 62 (1) The purpose of this Schedule is to make provision for a qualified domestic minimum top-up tax that has qualified domestic minimum top-up tax safe harbour status (including transitional qualified status).(2) The tax is to be known as the Hong Kong minimum top-up tax (HKMTT). 2. Interpretation, and application, of Schedule 62 (1) In this Schedule—HK constituent entity (香港成員實體), in relation to an MNE group, means a constituent entity of the MNE group that is located in Hong Kong; HK member (香港成員), in relation to a JV group of an MNE group, means the joint venture or another member of the JV group that— (a) is located in Hong Kong; or (b) would have been a Part 4AA stateless constituent entity, had it been a constituent entity; HK standalone JV (香港獨立合資企業) means a standalone JV that— (a) is located in Hong Kong; or (b) would have been a Part 4AA stateless constituent entity, had it been a constituent entity; in-scope MNE group (受涵蓋跨國企業集團), in relation to a fiscal year, means an MNE group that meets the consolidated revenue threshold in at least 2 of the 4 fiscal years immediately preceding the fiscal year under Article 1.1 of the GloBE rules (as modified by Article 6.1 of those rules, if applicable); Part 4AA stateless constituent entity (第4AA部無國籍成員實體), in relation to an MNE group, means a stateless constituent entity of the MNE group— (a) that is created in Hong Kong; or (b) that is a place of business in Hong Kong, and is a permanent establishment in accordance with paragraph (d) of the definition of permanent establishment in Article 10.1.1 of the GloBE rules; specified GloBE rules provisions (指明《全球反侵蝕稅基規則》條文)—see section 4(1) of this Schedule;standalone JV (獨立合資企業) means a joint venture that has no JV subsidiary.(2) Unless the contrary intention appears, an expression used in this Schedule, and defined or otherwise explained in any provision of Part 4AA or Part 1 of Schedule 61 (definition provision), has the same meaning as in the definition provision.(3) In this Schedule—(a) a reference to a joint venture of an MNE group is a reference to an entity that falls within the definition of joint venture in Article 10.1.1 of the GloBE rules, with the UPE of the MNE group as the UPE referred to in the definition;(b) if a joint venture of an MNE group has no JV subsidiary, the joint venture is a standalone JV of the MNE group; and(c) if a joint venture of an MNE group has one or more JV subsidiaries, the joint venture and the JV subsidiaries are collectively a JV group of the MNE group and are members of the JV group.(4) This Schedule applies to an MNE group that is an in-scope MNE group. Part 2 HKMTT on HK Constituent Entity 3. Charge on HK constituent entity of MNE group (1) A HK constituent entity of an MNE group is chargeable to HKMTT for a fiscal year in an amount determined in accordance with section 4 of this Schedule for the fiscal year.(2) Subsection (1) does not apply to a HK constituent entity that is an investment-related entity subject to Articles 7.4, 7.5 and 7.6 of the GloBE rules. 4. Specified GloBE rules provisions apply for determining HKMTT (1) The HKMTT to which a HK constituent entity of an MNE group is chargeable for a fiscal year is in the amount that would, by applying the GloBE rules (Chapter 2 excepted) (specified GloBE rules provisions) as modified by subsection (2), be determined as the top-up tax chargeable for the fiscal year on the HK constituent entity as a low-taxed constituent entity under Article 5.2.4 of the GloBE rules.(2) For the purpose of their application under subsection (1), the specified GloBE rules provisions are modified as specified in—(a) section 5 of this Schedule (which provides for the use of local accounting standard);(b) section 6 of this Schedule (which provides for miscellaneous modifications);(c) section 7 of this Schedule (which relates to Article 9.3 of the GloBE rules);(d) section 8 of this Schedule (which requires tax attributes to be re-set for HKMTT if the MNE group becomes subject to qualified IIR or qualified UTPR);(e) section 9 of this Schedule (which relates to elections); and(f) section 10 of this Schedule (which relates to the currency for computations if a local accounting standard is required to be used). 5. Modifications—use of local accounting standard (1) For determining, under section 4 of this Schedule, the HKMTT to which a HK constituent entity of an MNE group is chargeable for a fiscal year—(a) Articles 3.1.2 and 3.1.3 of the GloBE rules are to be read subject to subsections (2), (3) and (4); and(b) the definition of financial accounting net income or loss in Article 10.1.1 of the GloBE rules is to be construed in accordance with Article 3.1.2 of those rules so read.(2) The financial accounting net income or loss of a HK constituent entity of an MNE group for a fiscal year must be determined in accordance with a local accounting standard if—(a) each HK constituent entity of the MNE group has financial accounts (each entity’s accounts) prepared in accordance with the local accounting standard;(b) the accounting period of each entity’s accounts is the same as the fiscal year of the consolidated financial statements of the UPE of the MNE group; and(c) for the fiscal year—(i) each HK constituent entity of the MNE group is required to prepare or use the entity’s accounts for determining its liability to tax in Hong Kong or to comply with any other law of Hong Kong; or(ii) each entity’s accounts are subject to external financial audit.(3) For the purposes of subsection (2), a permanent establishment of a main entity is to be treated as having the financial accounts of the main entity for a fiscal year if—(a) the financial accounts for the fiscal year contain the information required for computing the HKMTT to which the permanent establishment is chargeable for the fiscal year; and(b) the permanent establishment does not have separate financial accounts for the fiscal year.(4) In relation to a HK constituent entity of an MNE group to which subsection (2) applies for a fiscal year, a reference to the financial accounting net income or loss for the fiscal year means the financial accounting net income or loss determined for the HK constituent entity, in preparing accounts for the fiscal year in accordance with a local accounting standard used under subsection (2).(5) In this section— local accounting standard (本地會計準則) means— (a) the International Financial Reporting Standards; or (b) accounting standards as defined by section 357(1) of the Companies Ordinance (Cap. 622). 6. Modifications—specified GloBE rules provisions For determining, under section 4 of this Schedule, the HKMTT to which a HK constituent entity of an MNE group is chargeable—(a) Articles 4.2.1(b) and 7.3 of the GloBE rules are to be disregarded;(b) any covered tax of a main entity that is allocable to a permanent establishment under Article 4.3.2(a) of the GloBE rules is not to be allocated to the permanent establishment if it is such a HK constituent entity;(c) subject to paragraph (d), Articles 4.3.2(c) and (d) and 4.3.3 of the GloBE rules are to be disregarded;(d) if the HK constituent entity is a hybrid entity or reverse hybrid entity, covered taxes accrued in the financial accounts of a constituent entity-owner of the HK constituent entity are to be included in the adjusted covered taxes of the HK constituent entity if the taxes—(i) are allocated to the HK constituent entity under Article 4.3.2(d) of the GloBE rules;(ii) are imposed by the jurisdiction of the HK constituent entity; and(iii) relate to the income of the HK constituent entity;(e) a reference in Article 4.3.2(e) of the GloBE rules to covered taxes is to be read as including only withholding taxes imposed in Hong Kong;(f) the references in the formula in Article 5.2.3 of the GloBE rules to domestic top-up tax is to be disregarded;(g) Article 6.4.1(b) and (c) of the GloBE rules is to be disregarded; and(h) Article 6.5.1(e), (f) and (g) of the GloBE rules is to be disregarded. 7. Modifications—Article 9.3 of the GloBE rules (1) This section applies for determining, under section 4 of this Schedule, the HKMTT to which a HK constituent entity of an MNE group is chargeable for a fiscal year.(2) Article 9.3 of the GloBE rules only applies to an MNE group for a fiscal year if none of the ownership interests in a HK constituent entity of the group is held, directly or indirectly, by a parent entity subject to a qualified IIR for the fiscal year.(3) Article 9.3 of the GloBE rules has effect as if—(a) its Article 9.3.1 read—“9.3.1. Subject to Article 9.3.4 the top-up tax for each constituent entity of an MNE group shall be reduced to zero during the initial phase of the MNE group’s international activity, notwithstanding the requirements otherwise provided in Chapter 5.”; and(b) its Article 9.3.5 were omitted. 8. Modifications—tax attributes to be re-set for HKMTT if MNE group becomes subject to qualified IIR or qualified UTPR (1) This section applies in relation to a HK constituent entity of an MNE group for a fiscal year if—(a) the fiscal year is the earliest one for which a qualified IIR or qualified UTPR administered by a jurisdiction outside Hong Kong becomes applicable to the HK constituent entity (GloBE transition year); and(b) for a fiscal year prior to the GloBE transition year, HKMTT became applicable to the HK constituent entity.(2) For determining, under section 4 of this Schedule, the HKMTT to which the HK constituent entity is chargeable for the fiscal year—(a) any excess negative tax expense carry-forward under Article 4.1.5 or 5.2.1 of the GloBE rules must be eliminated at the beginning of the GloBE transition year;(b) Article 4.4.4 of the GloBE rules does not apply to any deferred tax liability if the liability—(i) was taken into account in calculating the effective tax rate for determining the HKMTT to which the HK constituent entity is chargeable for a fiscal year prior to the GloBE transition year; but(ii) was not recaptured prior to the GloBE transition year;(c) Article 4.4.4 of the GloBE rules applies to a deferred tax liability that is taken into account in, or after, the GloBE transition year;(d) any GloBE loss deferred tax asset under Article 4.5 of the GloBE rules in respect of a fiscal year prior to the GloBE transition year must be eliminated, and the filing constituent entity may make a new election in accordance with Article 4.5 of the GloBE rules in the GloBE transition year;(e) the deferred tax assets and deferred tax liabilities taken into account in determining the effective tax rate for a jurisdiction in accordance with Article 9.1.1 of the GloBE rules must be eliminated, and that Article must be applied at the beginning of the GloBE transition year;(f) subject to paragraph (g), Article 9.1.2 of the GloBE rules applies to transactions occurring after 30 November 2021 and before the beginning of the GloBE transition year; and(g) for the purposes of paragraph (f), if HKMTT was chargeable due to the application of Article 4.1.5 of the GloBE rules in respect of a deferred tax asset attributable to a tax loss, such deferred tax asset must not be treated as arising from items excluded from the computation of GloBE income or loss under Chapter 3 of the GloBE rules. 9. Modifications—elections (1) This section applies for the purpose of determining, under section 4 of this Schedule, the HKMTT to which a HK constituent entity of an MNE group is chargeable.(2) Where the GloBE rules provides that an election may be made, that election may be made for a HK constituent entity of an MNE group for HKMTT purposes to the extent that such an election would affect the calculation of HKMTT to which the HK constituent entity is chargeable.(3) For the purposes of subsection (2), an election made for a HK constituent entity of an MNE group, for the purposes of a qualified IIR or qualified UTPR of a jurisdiction outside Hong Kong (non-HK jurisdiction), is taken to have been made in respect of that entity for HKMTT purposes if—(a) the election is contained in a GloBE information return submitted to a tax authority in the non-HK jurisdiction (non-HK return); and(b) any of the following applies—(i) information in the non-HK return about the election has been provided to the Commissioner under a qualifying competent authority agreement;(ii) the non-HK return has been provided to the Commissioner. 10. Modifications—currency for computations if local accounting standard required to be used (1) This section applies for the purpose of determining, under section 4 of this Schedule, the HKMTT to which a HK constituent entity of an MNE group is chargeable if the financial accounting net income or loss of the entity for the fiscal year is required under section 5 of this Schedule to be determined in accordance with a local accounting standard.(2) An amount relevant to the computation of the HKMTT to which the HK constituent entity is chargeable for the fiscal year must be computed using the following currency—(a) unless paragraph (b) applies—Hong Kong currency;(b) if an election under subsection (3) applies to the MNE group and the fiscal year—the currency specified in the election.(3) If there are one or more HK constituent entities of the MNE group that do not use Hong Kong currency as their functional currency, a filing constituent entity of the MNE group may make an election that applies to—(a) a specified fiscal year; and(b) the following 4 fiscal years.(4) The election must specify either—(a) Hong Kong currency; or(b) the presentation currency of the consolidated financial statements of the UPE of the MNE group.(5) An election under subsection (3) is a five-year election. Part 3 HKMTT on HK Standalone JV, HK Member of JV Group, etc. 11. Application to HK standalone JV and HK member of JV group (1) This Schedule applies to a HK standalone JV of an MNE group in the same way as it applies to a HK constituent entity of an MNE group.(2) This Schedule applies to a HK member of a JV group of an MNE group in the same way as it applies to HK constituent entities of an MNE group.(3) The HKMTT chargeable under subsection (1) or (2) on an entity (entity A) that is a HK standalone JV of an MNE group or a HK member of a JV group of an MNE group may—(a) be charged on entity A directly; or(b) on entity A’s election and with the consent of a HK constituent entity of the MNE group, be charged on the HK constituent entity.(4) The HKMTT charged on the HK constituent entity under subsection (3)(b) is to be recoverable by all means provided in this Ordinance from entity A or the HK constituent entity. 12. Relief against double HKMTT for joint venture (1) Subsection (2) applies if for a fiscal year—(a) an entity (entity A) is a HK standalone JV of an MNE group or a HK member of a JV group of an MNE group;(b) entity A is also—(i) a HK standalone JV of another MNE group; or(ii) a HK member of a JV group of another MNE group; and(c) HKMTT is chargeable on entity A in respect of both MNE groups.(2) To avoid double taxation, the HKMTT chargeable for the fiscal year on entity A, in respect of each of the MNE groups, is to be reduced by 50%.(3) Subsection (4) applies if for a fiscal year—(a) an entity (entity B) is a HK standalone JV of an MNE group or a HK member of a JV group of an MNE group;(b) entity B is also a HK constituent entity of another MNE group; and(c) HKMTT is chargeable on entity B in respect of both MNE groups.(4) To avoid double taxation, the Commissioner may provide a relief for the HKMTT chargeable for the fiscal year on entity B in respect of each of the MNE groups in a manner that is reasonable in the circumstances. 13. Application to Part 4AA stateless constituent entity This Schedule applies to a Part 4AA stateless constituent entity of an MNE group in the same way as it applies to a HK constituent entity of an MNE group. Schedule 63 [ss. 2, 26AD, 26AE, 26AF, 26AG, 79A, 80O, 80P, 82 & 82A & Schs. 61 & 65]Administration of Top-up Taxes (Schedule 63 added 21 of 2025 s. 31) Part 1 Preliminary 1. Interpretation, and application, of Schedule 63 (1) In this Schedule—HK constituent entity (香港成員實體), in relation to an MNE group, means a constituent entity of the MNE group that is located in Hong Kong; HK member (香港成員), in relation to a JV group of an MNE group, means the joint venture or another member of the JV group that— (a) is located in Hong Kong; or (b) would have been a Part 4AA stateless constituent entity, had it been a constituent entity; HK standalone JV (香港獨立合資企業) means a standalone JV that— (a) is located in Hong Kong; or (b) would have been a Part 4AA stateless constituent entity, had it been a constituent entity; in-scope MNE group (受涵蓋跨國企業集團), in relation to a fiscal year, means an MNE group that meets the consolidated revenue threshold in at least 2 of the 4 fiscal years immediately preceding the fiscal year under Article 1.1 of the GloBE rules (as modified by Article 6.1 of those rules, if applicable); Part 4AA entity (第4AA部實體), in relation to an MNE group, means— (a) a HK constituent entity of the MNE group; (b) a HK standalone JV of the MNE group; (c) a HK member of a JV group of the MNE group; or (d) a Part 4AA stateless constituent entity of the MNE group; Part 4AA stateless constituent entity (第4AA部無國籍成員實體), in relation to an MNE group, means a stateless constituent entity of the MNE group— (a) that is created in Hong Kong; or (b) that is a place of business in Hong Kong, and is a permanent establishment in accordance with paragraph (d) of the definition of permanent establishment in Article 10.1.1 of the GloBE rules; standalone JV (獨立合資企業) means a joint venture that has no JV subsidiary;top-up tax return (補足稅報稅表), in relation to a Part 4AA entity of an MNE group, means a return for top-up taxes for the Part 4AA entity for a fiscal year.(2) Unless the contrary intention appears, an expression used in this Schedule, and defined or otherwise explained in any provision of Part 4AA or Part 1 of Schedule 61 (definition provision), has the same meaning as in the definition provision.(3) In this Schedule—(a) a reference to a joint venture of an MNE group is a reference to an entity that falls within the definition of joint venture in Article 10.1.1 of the GloBE rules, with the UPE of the MNE group as the UPE referred to in the definition;(b) if a joint venture of an MNE group has no JV subsidiary, the joint venture is a standalone JV of the MNE group; and(c) if a joint venture of an MNE group has one or more JV subsidiaries, the joint venture and the JV subsidiaries are collectively a JV group of the MNE group and are members of the JV group.(4) Subject to section 4(3) of this Schedule, this Schedule applies to an MNE group that is an in-scope MNE group. Part 2 HK Constituent Entity’s Obligations to File Top-up Tax Return and Notice 2. Interpretation of Part 2 of Schedule 63 In this Part—designated filing entity (指定交表實體)—see section 6(4) of this Schedule;designated local entity (指定本地實體)—see section 8(3) of this Schedule;filing deadline (提交期限) has the meaning given by section 9 of this Schedule; GloBE jurisdiction (全球反侵蝕稅基轄區) means— (a) Hong Kong; or (b) another jurisdiction with a qualified IIR, qualified UTPR or qualified domestic minimum top-up tax; service provider (服務提供者) means a service provider engaged for or on behalf of a HK constituent entity of an MNE group as referred to in section 13(1) of this Schedule. 3. HK constituent entity must file top-up tax return for fiscal year (1) Each HK constituent entity of an MNE group must file a top-up tax return for each fiscal year with the Commissioner by the filing deadline where the top-up tax return—(a) must contain a GloBE information return that complies with section 10 of this Schedule; and(b) must comply with section 11 of this Schedule.(2) Subsection (1) does not apply to a HK constituent entity of an MNE group for a fiscal year if—(a) group GloBE filing has been effected in Hong Kong within the meaning of section 6 of this Schedule for the MNE group for the fiscal year; or(b) group local filing has been effected within the meaning of section 8 of this Schedule for the MNE group for the fiscal year.(3) Subsection (1)(a) does not apply to a HK constituent entity of an MNE group in respect of a fiscal year if group GloBE filing has been effected outside Hong Kong within the meaning of section 6 of this Schedule for the MNE group for the fiscal year.(4) Despite subsection (1)(b), a HK constituent entity of an MNE group is not required to comply with section 11(1)(a) and (2) of this Schedule for a fiscal year if—(a) the HK constituent entity is neither the UPE, nor the designated filing entity, nor the designated local entity, of the MNE group; and(b) both of the following apply—(i) another HK constituent entity of the MNE group has complied with this section for the fiscal year, including complying with section 11(1)(a) and (2) of this Schedule;(ii) that other HK constituent entity’s top-up tax return for the fiscal year contains a statement, for the purposes of section 11(2) of this Schedule, that the assessment triggering information concerned is provided in the return with the consent of all HK constituent entities, or the UPE, of the MNE group. 4. Assessor may require constituent entity to file top-up tax return (1) An assessor may, by a notice in writing to any entity or permanent establishment (subject entity) that forms part of an MNE group, require the subject entity to file with the Commissioner a top-up tax return for a fiscal year specified in the notice (specified year) by the filing deadline where the top-up tax return—(a) must contain a GloBE information return that complies with section 10 of this Schedule; and(b) must comply with section 11 of this Schedule.(2) The subject entity is not required to comply with the notice if the subject entity satisfies the assessor that any of the following conditions is met—(a) the subject entity is not a HK constituent entity of an in-scope MNE group, whether or not because—(i) the subject entity is an excluded entity; or(ii) the subject entity is a HK constituent entity of an MNE group that is not an in-scope MNE group for the specified year;(b) by the filing deadline—(i) group GloBE filing has been effected in Hong Kong within the meaning of section 6 of this Schedule for the MNE group for the specified year; or(ii) group local filing has been effected within the meaning of section 8 of this Schedule for the MNE group for the specified year.(3) This section applies in relation to an MNE group, regardless of whether it is an in-scope MNE group. 5. HK constituent entity must file notice (1) Each HK constituent entity of an MNE group must file a written notice with the Commissioner by the notification deadline, informing the Commissioner of the following in respect of a fiscal year beginning on or after 1 January 2025—(a) the name, address and business registration number of each of the group’s HK constituent entities, identifying among them (as applicable)—(i) the group’s UPE;(ii) the group’s designated filing entity;(iii) the group’s designated local entity; and(iv) a HK constituent entity that does not fall within subparagraph (i), (ii) or (iii);(b) if the group’s UPE is located in a jurisdiction other than Hong Kong—(i) the jurisdiction in which the UPE is located; and(ii) the name, address and business registration number (or equivalent particulars) of the UPE;(c) whether group GloBE filing is intended to be effected in Hong Kong, within the meaning of section 6 of this Schedule, for the fiscal year and, if so, the name, address and business registration number (or equivalent particulars) of the designated filing entity located in Hong Kong;(d) whether group GloBE filing is intended to be effected outside Hong Kong, within the meaning of section 6 of this Schedule, for the fiscal year and, if so—(i) the GloBE jurisdiction in which the GloBE information return is to be filed (non-HK jurisdiction); and(ii) the name, address and business registration number (or equivalent particulars) of the designated filing entity located in the non-HK jurisdiction;(e) unless group GloBE filing is intended to be effected in Hong Kong—whether group local filing is intended to be effected within the meaning of section 8 of this Schedule for the fiscal year and, if so, the name, address and business registration number (or equivalent particulars) of the designated local entity;(f) any other information relevant for determining a HK constituent entity’s obligation to file a top-up tax return under this Part.(2) A HK constituent entity of an MNE group (subject entity) is not required to comply with subsection (1) if, by the notification deadline, another HK constituent entity of the group (notifying entity) has filed a notice in accordance with subsection (1) which—(a) identifies the notifying entity as—(i) the UPE of the group;(ii) the designated filing entity of the group; or(iii) the designated local entity of the group; and(b) states that the notifying entity is to file the top-up tax return, with the Commissioner, on behalf of the subject entity and all other HK constituent entities of the group.(3) In this section—notification deadline (通知期限), in relation to a notice for a fiscal year, means the time of expiry of 6 months after the end of the fiscal year. 6. Group GloBE filing (1) In relation to a requirement under section 3(1) of this Schedule for a HK constituent entity (subject entity) of an MNE group to file a top-up tax return for a fiscal year—(a) group GloBE filing is effected in Hong Kong for the MNE group for the fiscal year if the top-up tax return is filed within the meaning of subsection (2); or(b) group GloBE filing is effected outside Hong Kong for the MNE group for the fiscal year if—(i) the GloBE information return for the group for the fiscal year is filed within the meaning of subsection (3); and(ii) exchange mechanisms are in place within the meaning of subsection (5).A reference to group GloBE filing to be, intended to be or having been effected in Hong Kong, or outside Hong Kong, for an MNE group for a fiscal year is to be construed accordingly.(2) For the purposes of subsection (1)(a), a top-up tax return for a fiscal year is filed if the UPE, or designated filing entity, located in Hong Kong has filed, for the MNE group for the fiscal year, a top-up tax return in accordance with subsection (1) of section 3 of this Schedule, without relying on subsection (3) of that section.(3) For the purposes of subsection (1)(b), the GloBE information return for the MNE group for a fiscal year is filed if the UPE, or designated filing entity, located in a GloBE jurisdiction other than Hong Kong (non-HK jurisdiction)—(a) has filed with the tax authority of that jurisdiction a GloBE information return for the MNE group for the fiscal year that complies with section 10 of this Schedule; and(b) has done so by the filing deadline of the top-up tax return for the fiscal year and in accordance with the laws or regulations of that jurisdiction.(4) In relation to an MNE group and a fiscal year, a constituent entity (entity A) of the group (other than the UPE) is the designated filing entity of the group if—(a) entity A—(i) is appointed by the group to file, on behalf of the group, the top-up tax return in accordance with subsection (2) for the fiscal year; and(ii) is located in Hong Kong; or(b) entity A—(i) is appointed by the group to file the GloBE information return on behalf of the group in accordance with subsection (3) for the fiscal year; and(ii) is located in a non-HK jurisdiction.(5) For the purposes of subsection (1)(b)(ii), exchange mechanisms are in place if—(a) the non-HK jurisdiction has entered into an international agreement;(b) by the filing deadline of the top-up tax return for the fiscal year concerned, the non-HK jurisdiction has exchange arrangements in effect with Hong Kong; and(c) the Commissioner has not notified the subject entity that the non-HK jurisdiction—(i) has suspended automatic exchange of GloBE information returns (for reasons other than those that are in accordance with the terms of those arrangements); or(ii) has otherwise persistently failed to automatically provide, to Hong Kong, GloBE information returns of MNE groups having HK constituent entities that are in the possession of the competent authority of the non-HK jurisdiction.(6) In this section and section 7 of this Schedule—competent authority (主管當局) has the meaning given by the international agreement concerned; exchange arrangements (交換安排) means arrangements that— (a) are between the authorized representatives or competent authorities of the jurisdictions to which an international agreement applies; and (b) require the automatic exchange of GloBE information returns between the jurisdictions; international agreement (國際協議) means— (a) the Convention on Mutual Administrative Assistance in Tax Matters; or (b) any other arrangement or arrangements that—(i) has or have effect under section 49(1) or (1A); and(ii) by its or their terms, provides or provide legal authority for the exchange of tax information between Hong Kong and the other jurisdiction or jurisdictions to which the arrangement or arrangements applies or apply, including automatic exchange of the information. 7. Requirement for filing GloBE information return if exchange mechanisms fail (1) If—(a) notice has been filed under section 5 of this Schedule for an MNE group for a fiscal year that—(i) group GloBE filing is intended to be effected outside Hong Kong within the meaning of section 6 of this Schedule; and(ii) a GloBE information return is to be filed in a GloBE jurisdiction other than Hong Kong (non-HK jurisdiction); but(b) by the return exchange date for the fiscal year, the competent authority of the non-HK jurisdiction has failed to provide to the Commissioner the GloBE information return,the Commissioner may, by notice (Commissioner’s notice) to one or more than one HK constituent entity of the MNE group, require each of them to file with the Commissioner, by the specified deadline, a GloBE information return for the MNE group for the fiscal year that complies with section 10 of this Schedule.(2) Each HK constituent entity of an MNE group to whom a Commissioner’s notice is sent must comply with the notice.(3) A HK constituent entity of an MNE group (subject entity) is not required to comply with a Commissioner’s notice if, by the specified deadline, another HK constituent entity of the group (specified entity)—(a) has complied with the Commissioner’s notice; and(b) has informed the Commissioner in writing that the specified entity—(i) is the UPE or designated local entity of the group; and(ii) has complied with the Commissioner’s notice on behalf of the subject entity and all other HK constituent entities of the group.(4) In this section—return exchange date (報表交換日期), in relation to a fiscal year, means the date on which exchanges of GloBE information returns for the fiscal year are due to occur under the exchange arrangements requiring the automatic exchange of GloBE information returns between Hong Kong and the non-HK jurisdiction concerned; specified deadline (指明期限) means the later of the following— (a) the expiry of 60 days after the date of the Commissioner’s notice under subsection (1); (b) a date specified in the Commissioner’s notice. 8. Group local filing (1) In relation to a requirement under section 3(1) of this Schedule for a HK constituent entity of an MNE group to file a top-up tax return for a fiscal year, group local filing is effected for the MNE group for the fiscal year if the top-up tax return is filed within the meaning of subsection (2). A reference to group local filing to be, intended to be or having been effected for an MNE group for a fiscal year is to be construed accordingly.(2) For the purposes of subsection (1), a top-up tax return for a fiscal year is filed if, by the filing deadline of a top-up tax return for the fiscal year, the designated local entity has filed a top-up tax return in accordance with section 3 of this Schedule for the group for the fiscal year.(3) In relation to an MNE group and a fiscal year, a constituent entity of the group is the designated local entity of the group if—(a) it is located in Hong Kong; and(b) it is appointed by all the HK constituent entities of the group—(i) to file a notice for the purposes of section 5 of this Schedule; and(ii) to file a top-up tax return in accordance with section 3 of this Schedule,with the Commissioner on behalf of those constituent entities for the fiscal year. 9. Filing deadline (1) In this Part— filing deadline (提交期限), in relation to a top-up tax return for a fiscal year, means, subject to subsection (2), the earlier of the following dates— (a) the date of expiry of 15 months after the end of the last day of the fiscal year; (b) if the return is required by a notice given under section 4 of this Schedule—the date specified in the notice. (2) For the transition year for filing purpose of an MNE group, the definition of filing deadline in subsection (1) has effect as if the reference to “15 months” in paragraph (a) of that definition were a reference to “18 months”.(3) A reference in subsection (2) to the transition year for filing purpose, in relation to an MNE group, means the earliest fiscal year for which a constituent entity, joint venture or JV subsidiary of the MNE group is subject to a qualified IIR or qualified UTPR in Hong Kong or another jurisdiction or is subject to the HKMTT. 10. Requirements of GloBE information return (1) A GloBE information return must be filed in a standard template that is developed in accordance with the GloBE implementation framework and must include the following information concerning the MNE group (as specified, expanded or restricted in accordance with the GloBE implementation framework, including through the development of simplified reporting procedures)—(a) identification of the constituent entities, joint ventures or JV subsidiaries, including their tax identification numbers (if they exist), the jurisdiction in which they are located and their status under the GloBE rules;(b) information on the overall corporate structure of the MNE group, including the controlling interests in the constituent entities held by other constituent entities;(c) the information necessary to compute—(i) the effective tax rate for each jurisdiction and the top-up tax of each constituent entity under Chapter 5 of the GloBE rules;(ii) the top-up tax of each standalone JV and each member of each JV group under Chapter 6 of the GloBE rules; and(iii) the allocation of IIR top-up tax, and the UTPR top-up tax amount, to each jurisdiction under Chapter 2 of the GloBE rules;(d) a record of the elections made in accordance with the relevant provisions of the GloBE rules;(e) other information that is agreed as part of the GloBE implementation framework and is necessary to carry out the administration of the GloBE rules.(2) The GloBE information return must apply the definitions and instructions contained in the standard template that is developed in accordance with the GloBE implementation framework. 11. Further requirements concerning top-up tax return and notice (1) Without affecting section 3(1)(a) of this Schedule, a top-up tax return for an MNE group must contain—(a) information specified by the Board of Inland Revenue as assessment triggering information (assessment triggering information); and(b) other information specified by the Board of Inland Revenue.(2) A top-up tax return, filed by a HK constituent entity of an MNE group, that contains assessment triggering information must contain a statement as to whether the assessment triggering information is provided in the return with the consent of all HK constituent entities, or the UPE, of the MNE group.(3) A top-up tax return filed for the purposes of this Part for an MNE group—(a) must be filed in the form of an electronic record that—(i) is sent by using a system designated by the Commissioner; and(ii) contains the required information arranged in a form specified by the Commissioner; and(b) if the return is filed because of a notice given under section 4 of this Schedule—must be filed in the way specified in the notice.(4) A notice for the purposes of section 5 of this Schedule for an MNE group must be filed—(a) in the form of an electronic record that is sent by using a system designated by the Commissioner;

and(b) in the way that the Commissioner specifies.(5) The Commissioner may designate a system for communication with the Commissioner for the purposes of subsections (3) and (4).(6) The Commissioner may, by notice published in the Gazette, specify requirement as to—(a) the way of generating or sending an electronic record for the purposes of this section or any attachment required to be given with such electronic record;(b) how a digital signature is to be affixed to a top-up tax return or to a notice filed under section 5 of this Schedule; and(c) the software and communication in relation to any attachment required to be given with an electronic record.(7) The Commissioner may, either generally or in a particular case, accept a top-up tax return for the purposes of this Part, despite a requirement under subsection (3) or (6) not being complied with in respect of the return.(8) The Commissioner may, either generally or in a particular case, accept a notice for the purposes of section 5 of this Schedule, despite a requirement under subsection (4) or (6) not being complied with in respect of the notice.(9) The Commissioner may, by a means that the Commissioner considers appropriate, specify the circumstances or conditions in or under which a top-up tax return or a notice for the purposes of section 5 of this Schedule is to be accepted under subsection (7) or (8).(10) Any notice or other thing that specifies any matter for the purposes of this section is not subsidiary legislation. 12. Other obligations (1) An assessor may, by notice to a HK constituent entity, require it to provide information for determining whether the information furnished by the entity in a top-up tax return is accurate and complete.(2) The UPE of an MNE group must provide the HK constituent entities of the group with everything the HK constituent entities may reasonably require in order to comply with the filing obligations under this Part.(3) A HK constituent entity of an MNE group must provide the UPE, designated filing entity or designated local entity (the latter) with everything the latter may reasonably require in order to comply with the filing obligations under this Part. 13. Engagement of service provider (1) A service provider may be engaged for or on behalf of a HK constituent entity—(a) for filing a specified document on behalf of the HK constituent entity; or(b) if the HK constituent entity is the UPE, designated filing entity or designated local entity of an MNE group—for filing a specified document on behalf of the group.(2) To avoid doubt, even if a service provider has been engaged under subsection (1), none of the following is relieved from its obligation to file the specified document concerned—(a) if subsection (1)(a) applies, the HK constituent entity for or on behalf of whom the service provider has been engaged;(b) if subsection (1)(b) applies, each HK constituent entity of the MNE group for or on behalf of whose UPE, designated filing entity or designated local entity the service provider has been engaged.(3) In this section— specified document (指明文件) means— (a) a top-up tax return; or (b) a notice for the purposes of section 5 of this Schedule. Part 3 Modifications to Ordinance for Administration of Top-up Taxes in relation to HK Constituent Entity Division 1 General Provisions 14. Part 6C, sections 51B, 51C, 57 and 58, and Parts 10 to 13 apply subject to modifications by Part 3 of Schedule 63 For the purpose of administering top-up taxes—(a) the modifications specified in this Part to Part 6C, sections 51B, 51C, 57 and 58, Part 10 (except sections 61 and 61B) and Parts 11, 12 and 13 apply in relation to a HK constituent entity of an MNE group;(b) Part 9 (except sections 51B, 51C, 57 and 58) does not apply; and(c) sections 61 and 61B do not apply. 15. Modifications—references to person, year of assessment and returns in Part 6C, sections 51B, 51C, 57 and 58, and Parts 10 to 13 (1) This section applies for the purposes of section 14 of this Schedule.(2) In a provision of Part 6C, section 51B, 51C, 57 or 58, or Part 10, 11, 12 or 13, unless otherwise modified by this Part—(a) a reference to a person is to be read as including a reference to a HK constituent entity of an MNE group;(b) a reference to a year of assessment is to be read as a reference to a fiscal year;(c) a reference to a case where a person is chargeable to tax is to be read as including a reference to a case where top-up tax is payable by a HK constituent entity of an MNE group;(d) a reference (however worded) to a return, or a return under section 51 or 51(1) or a return required under section 51, is to be read as a reference to a top-up tax return; and(e) a reference to assess is to be read as a reference to any one or more of the following—(i) assess for IIR top-up tax;(ii) assess for UTPR top-up tax;(iii) assess for HKMTT,and a reference to assessed, assessment or additional assessment is to be read accordingly. Division 2 Modifications to Sections 16. Modifications to section 51B (power to issue search warrant) (1) For the purposes of section 14 of this Schedule, paragraphs (a) and (b) of section 51B(1) are to be read as—“(a) that there are reasonable grounds for suspecting that a HK constituent entity of an MNE group—(i) has made an incorrect top-up tax return or supplied false information that, if accepted as correct, would result in the HK constituent entity being assessed at an amount of top-up tax less than the proper amount; and(ii) has done so without reasonable excuse and not through an innocent oversight or omission; or(b) that a HK constituent entity of an MNE group has failed to comply with an order of a court made under section 80O(6) directing it to comply with section 3(1) or 5(1) of Schedule 63 or the requirements of a notice given to it under section 12(1) of Schedule 63,”.(2) For the purposes of section 14 of this Schedule, section 51B(1AAAA) is to be read as—“(1AAAA) For the purposes of subsection (1)(a), engaging a service provider under section 13 of Schedule 63 does not in itself constitute a reasonable excuse.”. 17. Modifications to section 51C (business records to be kept) (1) For the purposes of section 14 of this Schedule, section 51C(1) is to be read as requiring that a HK constituent entity of an MNE group must—(a) keep sufficient records of transactions, acts or operations relevant to the computation of top-up tax liability of the MNE group to enable the correctness and accuracy of the top-up tax return filed under this Schedule to be readily ascertained; and(b) retain the records at least until the expiry of 9 years after the completion of the transactions, acts or operations to which they relate.(2) For the purposes of section 14 of this Schedule, records required to be kept and retained, under section 51C(1) read with subsection (1), by a HK constituent entity of an MNE group (subject entity) include records in respect of any trade, profession or business carried on by any Part 4AA entity of the MNE group that are relevant to the ETR computations on the basis of which the top-up tax of the subject entity is to be computed.(3) Section 80 applies to a failure to comply with section 51C as modified by subsections (1) and (2) in the same way as section 80 applies to a failure to comply with section 51C. 18. Modification to section 57 (principal officer to act on behalf of a corporation or body of persons) For the purposes of section 14 of this Schedule, a reference in section 57 to a corporation or body of persons is to be read as a reference to a HK constituent entity of an MNE group that is a corporation or body of persons. 19. Modifications to section 59 (assessor to make assessments) (1) This section applies for the purposes of section 14 of this Schedule.(2) The reference in section 59(1) to “the notice requiring him to furnish a return under section 51(1)” is to be read as a reference to “the notice requiring the HK constituent entity to furnish a top-up tax return under section 3 of Schedule 63”.(3) A reference in section 59(2)(b) or (3) to “estimate the sum in respect of which such person is chargeable to tax” is to be read as a reference to “estimate the amount of top-up tax payable by the HK constituent entity”. 20. Modifications to section 60 (additional assessments) (1) This section applies for the purposes of section 14 of this Schedule.(2) Section 60 applies subject to this Schedule and Schedules 61 and 62.(3) Section 60(1) is to be read as—“(1) Where it appears to an assessor that, for any fiscal year, a HK constituent entity chargeable with any top-up tax has not been assessed for that top-up tax or has been assessed for that top-up tax at less than the proper amount, the assessor—(a) may assess the entity at the amount or additional amount of top-up tax at which, according to the assessor’s judgment, the entity ought to have been assessed; but(b) may only do so within 8 years or, if the non-assessment or under-assessment is due to fraud or wilful evasion, within 12 years, after—(i) the end of the fiscal year of the MNE group to which the non-assessment or under-assessment relates (if the fiscal year ends on 31 March); or(ii) the end of 31 March of the year next following the end of the fiscal year of the MNE group to which the non-assessment or under-assessment relates (if the fiscal year ends on a day other than 31 March),and the provisions of this Ordinance as to notice of assessment, appeal and other proceedings apply to the assessment or additional assessment and to the top-up tax charged under it.”.(4) In relation to a HK constituent entity to which the whole or part of any top-up tax repaid has been repaid by mistake, the reference to “6 years after the expiration thereof” in section 60(2) is to be read as a reference to the period of 8 years after—(a) the end of the fiscal year of the MNE group to which the repayment relates (if the fiscal year ends on 31 March); or(b) the end of 31 March of the year next following the end of the fiscal year of the MNE group to which the repayment relates (if the fiscal year ends on a day other than 31 March). 21. Modification to section 61A (transactions designed to avoid liability for tax) For the purposes of section 14 of this Schedule, section 61A has effect as if section 61A(1)(ca) and (cb) were enacted and read—“(ca) any change in the top-up tax liability of any Part 4AA entity of an MNE group, or the overall top-up tax liability of an MNE group, that has resulted, will result or may reasonably be expected to result from the transaction;(cb) whether the result that has been achieved, will be achieved or may reasonably be expected to be achieved by the transaction is inconsistent with the outcomes provided under the OECD GloBE model rules, as construed in accordance with the OECD GloBE rules guidance;”. 22. Modification to section 62 (notice to be issued by Commissioner) For the purposes of section 14 of this Schedule, section 62(1) has effect as if the reference to “the amount assessed,” were omitted. 23. Modification to section 64 (objections) (1) This section applies for the purposes of section 14 of this Schedule.(2) The reference to “1 month” in section 64(1) is to be read as a reference to “2 months”. 24. Modification to section 68 (hearing and disposal of appeals to the Board of Review) For the purposes of section 14 of this Schedule, the reference in section 68(1C) to “the amount of relevant assessable income or profits or net assessable value” is to be read as a reference to “the amount of top-up tax”. 25. Modification to section 70 (assessments or amended assessments to be final) For the purposes of section 14 of this Schedule, a reference in section 70 to “assessable income or profits or net assessable value” is to be read as a reference to “top-up tax”. 26. Modifications to section 70A (powers of assessor to correct errors) For the purposes of section 14 of this Schedule—(a) section 70A applies subject to this Schedule and Schedules 61 and 62;(b) the reference in section 70A(1) to 6 years after the end of a year of assessment is to be read as a reference to the period of 8 years after—(i) the end of the fiscal year of the MNE group (if the fiscal year ends on 31 March); or(ii) the end of 31 March of the year next following the end of the fiscal year of the MNE group (if the fiscal year ends on a day other than 31 March); and(c) the reference in section 70A(1) to “in the calculation of the amount of the net assessable value (within the meaning of section 5(1A)), assessable income or profits assessed or in the amount of the tax charged” is to be read as “in the calculation of the amount of top-up tax charged”. 27. Modifications to section 79 (tax paid in excess to be refunded) For the purposes of section 14 of this Schedule—(a) section 79 applies subject to this Schedule and Schedules 61 and 62; and(b) the reference in section 79(1) to 6 years of the end of a year of assessment is to be read as a reference to the period of 8 years of—(i) the end of the fiscal year of the MNE group (if the fiscal year ends on 31 March); or(ii) the end of 31 March of the year next following the end of the fiscal year of the MNE group (if the fiscal year ends on a day other than 31 March). Division 3 Modifications to Parts 28. Interpretation of Division 3 of Part 3 of Schedule 63 In this Division— assessed subgroup (被評稅子集團), in relation to an MNE group— (a) for UTPR top-up tax, means HK constituent entities of the MNE group other than those that are investment-related entities; (b) for HKMTT, means—(i) HK constituent entities of the MNE group, other than the following—(A) those that are investment-related entities;(B) those that are minority-owned constituent entities;(ii) HK constituent entities that—(A) are minority-owned constituent entities of the same minority-owned subgroup of the MNE group; and(B) are not investment-related entities; or(iii) a HK constituent entity that—(A) is a minority-owned constituent entity but not of a minority-owned subgroup of the MNE group; and(B) is not an investment-related entity; specified assessment (指明評稅) means an assessment, additional assessment or reassessment made in respect of any top-up tax. 29. Parts 10 to 13 apply subject to Division 3 of Schedule 63 For the purpose of administering top-up taxes, Parts 10, 11, 12 and 13 apply in relation to a HK constituent entity of an MNE group, subject to the provisions of this Division. 30. Combined specified assessment in relation to 2 or more HK constituent entities etc. (1) A combined specified assessment may be made in respect of the UTPR top-up tax allocated to Hong Kong and payable by HK constituent entities of an assessed subgroup of an MNE group.(2) Subject to section 32 of this Schedule, a combined specified assessment under subsection (1) for an assessed subgroup of an MNE group must state the UTPR top-up tax payable by each HK constituent entity of the assessed subgroup.(3) A combined specified assessment may be made in respect of the HKMTT payable by HK constituent entities of an assessed subgroup of an MNE group.(4) Subject to section 32 of this Schedule, a combined specified assessment under subsection (3) for an assessed subgroup of an MNE group must state the HKMTT payable by each HK constituent entity of the assessed subgroup.(5) This section applies—(a) whether or not group local filing is effected within the meaning of section 8 of this Schedule; and(b) whether or not an election is made for the payment by designated paying entities under section 32 of this Schedule. 31. Allocation of UTPR top-up tax or HKMTT in special circumstances (1) Subsection (2) applies if—(a) a HK constituent entity of an assessed subgroup of an MNE group is chargeable to UTPR top-up tax or HKMTT (top-up tax) under the GloBE rules or Schedule 62 for a fiscal year; and(b) the HK constituent entity no longer exists on the date of filing of the top-up tax return for the fiscal year (return-filing date).(2) The top-up tax chargeable on the HK constituent entity is to be allocated among the remaining HK constituent entities of the assessed subgroup, as at the return-filing date—(a) in the case of UTPR top-up tax, in proportion to the remaining HK constituent entities’ number of employees and value of tangible assets in Hong Kong for the fiscal year; or(b) in the case of HKMTT, in proportion to the remaining HK constituent entities’ GloBE income for the fiscal year.(3) If the Commissioner is satisfied that it is impracticable to apply the GloBE rules or Schedule 62 with respect to the allocation of top-up tax in a particular case, the Commissioner may allocate the top-up tax in a manner that the Commissioner considers reasonable in the circumstances.(4) This section does not apply to the HK constituent entities of an assessed subgroup of an MNE group for a fiscal year if the filing constituent entity has made an election for the assessed subgroup for payment by designated paying entities under section 32 of this Schedule in the top-up tax return. 32. UTPR top-up tax or HKMTT of assessed subgroup may be paid by designated paying entities (1) If—(a) either—(i) group GloBE filing is effected in Hong Kong (within the meaning of section 6 of this Schedule) for an MNE group for a fiscal year, and the UPE or the designated filing entity (within the meaning of section 6(4) of this Schedule) of the MNE group makes an election in writing; or(ii) group local filing is effected within the meaning of section 8 of this Schedule for an MNE group for a fiscal year, and the designated local entity (within the meaning of section 8(3) of this Schedule) of the MNE group makes an election in writing;(b) one or more than one HK constituent entity is designated for payment of any UTPR top-up tax or HKMTT (top-up tax) of an assessed subgroup of the MNE group (each a designated paying entity); and(c) if there are 2 or more designated paying entities—the amount of top-up tax that each designated paying entity is to pay is specified in the election,an assessor may make an assessment or assessments on the designated paying entity or entities, instead of making assessments on all HK constituent entities of the assessed subgroup on whom the top-up tax would have been chargeable had this section not been enacted.(2) If any assessment or assessments is or are made under subsection (1) on the designated paying entity or entities, top-up tax of the assessed subgroup of the MNE group for the fiscal year is payable by the designated paying entity or entities as directed in the assessment or assessments.(3) A HK constituent entity (entity P) of an MNE group may be a designated paying entity in an election under subsection (1) for a fiscal year, if—(a) entity P was a HK constituent entity of the assessed subgroup of the MNE group for the fiscal year, and remains a HK constituent entity of the assessed subgroup as at the date of filing of the top-up tax return for the fiscal year;(b) entity P has consented to its being the designated paying entity for the amount of the UTPR top-up tax or HKMTT (as the case requires) specified, in relation to it, in the election; and(c) all the HK constituent entities of the assessed subgroup have consented to the designated payment arrangements specified in the election.(4) However, a HK constituent entity of an assessed subgroup of an MNE group may not be a designated paying entity, for any top-up tax of an assessed subgroup of an MNE group for a fiscal year, in an election under subsection (1) if—(a) where it is a partnership—(i) the constituent entity has been dissolved; or(ii) any of its partners has become bankrupt, or has entered into a voluntary arrangement within the meaning of the Bankruptcy Ordinance (Cap. 6) with his or her creditors; or(b) where it is a corporation—winding up proceedings have been commenced in relation to the constituent entity or the constituent entity has been dissolved.(5) An election under subsection (1)(a)(i) or (ii) is an annual election and is irrevocable.(6) A consent given for the purposes of subsection (3)(b) or (c) is irrevocable. 33. Objection to specified assessment or combined specified assessment (1) A specified assessment of any top-up tax payable by a HK constituent entity (assessed entity) of an MNE group may only be objected to under section 64 by—(a) the HK constituent entity—(i) that has filed a top-up tax return required under this Schedule; and(ii) that—(A) is the UPE, designated filing entity or designated local entity of the MNE group; or(B) has complied with section 11(1)(a) and (2) of this Schedule; or(b) the assessed entity.(2) No objection may be made under section 64 to a combined specified assessment, with respect to the allocation of any UTPR top-up tax or HKMTT (top-up tax) among the HK constituent entities of an assessed subgroup of an MNE group if—(a) the top-up tax of the assessed subgroup under the combined specified assessment is payable by designated paying entities under section 32 of this Schedule; and(b) the acceptance of the objection would not result in a change in the total amount of top-up tax payable under the combined specified assessment.(3) An objection made to a combined specified assessment by any of the HK constituent entities of an assessed subgroup of an MNE group under section 64, as modified by this Part—(a) is to be regarded as made, under that section as so modified, by all the other HK constituent entities of the assessed subgroup; and(b) may be disposed of accordingly.(4) In this section—combined specified assessment (合併指明評稅) means a combined specified assessment made under section 30(1) or (3) of this Schedule on HK constituent entities of an assessed subgroup of an MNE group. 34. UTPR top-up tax or HKMTT: overpayment by HK constituent entity may be applied to offset its assessed subgroup’s liability (1) This section applies if—(a) a combined specified assessment (1st-mentioned assessment) of a UTPR top-up tax or HKMTT (subject top-up tax) for a fiscal year is made on HK constituent entities of an assessed subgroup and one or more than one such HK constituent entity has paid a sum for settling its liability for the subject top-up tax; and(b) subsequently, any additional assessment or reassessment that is a combined specified assessment (2nd-mentioned assessment) is made of the subject top-up tax for that fiscal year on those constituent entities under which—(i) one or more than one HK constituent entity has its liability for the subject top-up tax reduced (each a liability-reduced entity) and would, but for this section, become entitled to a refund of any sum as tax overpaid (overpaid sum); and(ii) one or more than one other HK constituent entity has its liability for the subject top-up tax increased (each a liability-increased entity).(2) The Commissioner may apply a liability-reduced entity’s overpaid sum to offset any subject top-up tax of a liability-increased entity.(3) Subsection (2) applies even if section 32 of this Schedule does not apply to the assessed subgroup.(4) This section does not affect the right and liabilities of a HK constituent entity of an assessed subgroup in relation to any other HK constituent entities of the assessed subgroup.(5) In subsection (1)—combined specified assessment (合併指明評稅) has the meaning given by section 33(4) of this Schedule. 35. Joint and several liability if designated paying entity defaults (1) If any amount of the UTPR top-up tax or HKMTT (top-up tax) of an assessed subgroup of an MNE group for a fiscal year is payable by a designated paying entity under section 32 of this Schedule, but the amount is not paid in the manner directed in the notice of assessment concerned by the date specified in the notice—(a) the amount of the top-up tax is taken to be in default;(b) the designated paying entity is taken to be a defaulter of the amount of the top-up tax for the purposes of this Ordinance; and(c) without affecting paragraphs (a) and (b)—(i) all linked entities become jointly and severally liable for the total amount of the top-up tax of the assessed subgroup that is not paid; and(ii) the Commissioner may issue a notice to any linked entity (recipient) requiring the recipient to pay, by a date and to an extent specified in the notice, the amount of the top-up tax not paid, referred to in subparagraph (i).(2) In relation to a notice under subsection (1)(c)(ii) in respect of the top-up tax of an assessed subgroup of an MNE group for a fiscal year (taxable year), a linked entity is each entity or permanent establishment that was at any time in the taxable year a HK constituent entity of the assessed subgroup.(3) If the total amount of the top-up tax not paid referred to in subsection (1)(c) is not fully recovered by payment in the manner directed in the notice under subsection (1)(c)(ii) by the date specified in the notice, the recipient of the notice (or, if 2 or more notices are issued under subsection (1)(c)(ii), the recipient of each notice) is taken to be a defaulter of the top-up tax for the purposes of this Ordinance.(4) For a notice under subsection (1)(c)(ii) in respect of any liability for top-up tax based on any assessment, determination or other decision—(a) the recipient of the notice has no right to object to, or appeal against, the assessment, determination or decision; and(b) the notice is not a specified assessment on the recipient and is not to be objected to, or appealed against, as such.(5) Subsection (4)—(a) does not affect any right to appeal against any assessment, determination or decision that the recipient may have without regard to the notice under subsection (1)(c)(ii); and(b) does not prevent the recipient from disputing liability under the notice on the ground that—(i) the recipient is not a linked entity within the meaning of subsection (2); or(ii) the amount specified in the notice exceeds the extent to which the recipient is jointly and severally liable under subsection (1)(c).(6) The top-up tax payable under a notice under subsection (1)(c)(ii) by its recipient is recoverable by all means provided in this Ordinance against the recipient as tax payable under an assessment made against a person is recoverable against the person. Division 4 Miscellaneous 36. Application of obligations if HK constituent entity is not corporation or is permanent establishment (1) In relation to a HK constituent entity of an MNE group that is not a corporation, the CE-related provisions apply to a person who acts for the HK constituent entity or is responsible for the management of the HK constituent entity as if the obligations imposed on the HK constituent entity by the CE-related provisions were imposed on the person.(2) In relation to a HK constituent entity of an MNE group that is a permanent establishment of a main entity, the CE-related provisions apply to the main entity as if the obligations imposed on the HK constituent entity by the CE-related provisions were imposed on the main entity.(3) In this section— CE-related provisions (成員實體相關條文) means the following— (a) Parts 6C, 9, 10, 11, 12 and 13, as modified by this Part; (b) Part 2 of this Schedule. Part 4 Application of this Schedule to MNE Group Entities other than HK Constituent Entities 37. Application to HK standalone JV and HK member of JV group (1) This Schedule applies to a HK standalone JV of an MNE group in the same way as it applies to a HK constituent entity of an MNE group.(2) This Schedule applies to HK members of a JV group of an MNE group in the same way as it applies to HK constituent entities of an MNE group.(3) For the purposes of Division 3 of Part 3 of this Schedule as applied under this section, the definition of assessed subgroup in section 28 of this Schedule is to read as—“assessed subgroup (被評稅子集團), in relation to HKMTT, means—(a) HK members of a JV group of an MNE group; or(b) a HK standalone JV;”. 38. Application to Part 4AA stateless constituent entity (1) This Schedule applies to a Part 4AA stateless constituent entity of an MNE group in the same way as it applies to a HK constituent entity of an MNE group.(2) For the purposes of Division 3 of Part 3 of this Schedule as applied under this section, the definition of assessed subgroup in section 28 of this Schedule is to read as—“assessed subgroup (被評稅子集團), in relation to HKMTT, means a Part 4AA stateless constituent entity;”. Schedule 64 [ss. 26AD & 26AG & Sch. 61]OECD GloBE Rules Guidance (Schedule 64 added 21 of 2025 s. 31) Part 1 OECD GloBE Rules Documents Column 1 Column 2 Column 3 Column 4 Column 5 Item Title of the document Date of publication Abbreviation used in this Ordinance The document applies to the fiscal year that begins on or after 1. OECD/G20 Base Erosion and Profit Shifting Project: Tax Challenges Arising from the Digitalisation of the Economy—Consolidated Commentary to the Global Anti-Base Erosion Model Rules (2023) 25 April 2024 2023 Commentary 1 January 2025 2. OECD/G20 Base Erosion and Profit Shifting Project: Tax Challenges Arising from the Digitalisation of the Economy—Administrative Guidance on the Global Anti-Base Erosion Model Rules (Pillar Two) 2 February 2023 Feb-2023 Administrative Guidance 1 January 2025 3. OECD/G20 Base Erosion and Profit Shifting Project: Tax Challenges Arising from the Digitalisation of the Economy—Administrative Guidance on the Global Anti-Base Erosion Model Rules (Pillar Two) 17 July 2023 Jul-2023 Administrative Guidance 1 January 2025 4. OECD/G20 Base Erosion and Profit Shifting Project: Tax Challenges Arising from the Digitalisation of the Economy—Administrative Guidance on the Global Anti-Base Erosion Model Rules (Pillar Two) 18 December 2023 Dec-2023 Administrative Guidance 1 January 2025 5. OECD/G20 Base Erosion and Profit Shifting Project: Tax Challenges Arising from the Digitalisation of the Economy—Administrative Guidance on the Global Anti-Base Erosion Model Rules (Pillar Two) 17 June 2024 Jun-2024 Administrative Guidance 1 January 2025 6. OECD/G20 Base Erosion and Profit Shifting Project: Tax Challenges Arising from the Digitalisation of the Economy—Global Anti-Base Erosion Model Rules (Pillar Two) Examples 25 April 2024 Apr-2024 Illustrative Examples 1 January 2025 7. OECD/G20 Base Erosion and Profit Shifting Project: Tax Challenges Arising from the Digitalisation of the Economy—Administrative Guidance on the Global Anti-Base Erosion Model Rules (Pillar Two), Central Record of Legislation with Transitional Qualified Status (January 2025) 15 January 2025 First Jan-2025 Administrative Guidance 1 January 2025 8. OECD/G20 Base Erosion and Profit Shifting Project: Tax Challenges Arising from the Digitalisation of the Economy—Administrative Guidance on Article 8.1.4 and 8.1.5 of the Global Anti-Base Erosion Model Rules 15 January 2025 Second Jan-2025 Administrative Guidance 1 January 2025 9. OECD/G20 Base Erosion and Profit Shifting Project: Tax Challenges Arising from the Digitalisation of the Economy—Administrative Guidance on Article 9.1 of the Global Anti-Base Erosion Model Rules 15 January 2025 Third Jan-2025 Administrative Guidance 1 January 2025 10. OECD/G20 Base Erosion and Profit Shifting Project: Tax Challenges Arising from the Digitalisation of the Economy—GloBE Information Return (January 2025) 15 January 2025 Jan-2025 GloBE Information Return 1 January 2025 11. OECD/G20 Base Erosion and Profit Shifting Project: Tax Challenges Arising from the Digitalisation of the Economy—Administrative Guidance on the Global Anti-Base Erosion Model Rules (Pillar Two), Central Record of Legislation with Transitional Qualified Status 31 March 2025 Mar-2025 Administrative Guidance 1 January 2025 Part 2 Specified OECD GloBE Rules Guidance Column 1 Column 2 Column 3 Column 4 Item Corresponding provision of the GloBE rules Corresponding provision of the OECD GloBE model rules Guidance in the OECD GloBE rules document 1. Article 1.4.1 Article 1.4.1 (1) Paragraphs 36.1 to 36.4 of Chapter 1 of the 2023 Commentary (2) Section 1.4 of the Feb-2023 Administrative Guidance 2. Article 1.5.2 Article 1.5.2 (1) Paragraph 43.1 of Chapter 1 of the 2023 Commentary (2) Section 1.5 of the Feb-2023 Administrative Guidance 3. Article 1.5.2(a) Article 1.5.2(a) Paragraph 45 of Chapter 1 of the 2023 Commentary 4. Article 1.5.2(a)i Article 1.5.2(a)i (1) Paragraph 54.1 of Chapter 1 of the 2023 Commentary (2) Section 1.5 of the Feb-2023 Administrative Guidance 5. Article 1.5.2(a)ii Article 1.5.2(a)ii (1) Paragraphs 54.2 to 54.5 of Chapter 1 of the 2023 Commentary (2) Section 1.6 of the Feb-2023 Administrative Guidance 6. Article 3.1.2 Article 3.1.2 Paragraphs 3 and 4 of Chapter 3 of the 2023 Commentary 7. Article 3.1.2 Article 3.1.2 (1) Paragraphs 5 to 5.6 of Chapter 3 of the 2023 Commentary (2) Section 1 of the Jul-2023 Administrative Guidance 8. Article 3.1.3 Article 3.1.3 Paragraph 13 of Chapter 3 of the 2023 Commentary 9. Article 3.1.3 Article 3.1.3 (1) Paragraph 16.1 of Chapter 3 of the 2023 Commentary (2) Section 1 of the Jul-2023 Administrative Guidance 10. Article 3.2.1 Article 3.2.1 (1) Paragraphs 86.1 to 86.7 of Chapter 3 of the 2023 Commentary (2) Section 2.4 of the Feb-2023 Administrative Guidance 11. Article 3.2.1(b) Article 3.2.1(b) (1) Paragraphs 36 and 45 of Chapter 3 of the 2023 Commentary (2) Sections 3.4 and 3.5 of the Feb-2023 Administrative Guidance 12. Article 3.2.1(b) Article 3.2.1(b) (1) Paragraph 45 of Chapter 3 of the 2023 Commentary (2) Section 3.5 of the Feb-2023 Administrative Guidance 13. Article 3.2.1(c) Article 3.2.1(c) (1) Paragraphs 57 to 57.3 of Chapter 3 of the 2023 Commentary (2) Section 2.2 of the Feb-2023 Administrative Guidance 14. Article 3.2.1(c) Article 3.2.1(c) (1) Paragraphs 57.4 and 57.5 of Chapter 3 of the 2023 Commentary (2) Section 2.9 of the Feb-2023 Administrative Guidance 15. Article 3.2.1(c) Article 3.2.1(c) (1) Paragraph 54 of Chapter 3 of the 2023 Commentary (2) Section 3.4 of the Feb-2023 Administrative Guidance 16. Article 3.2.1(f) Article 3.2.1(f) (1) Paragraphs 66 to 74.1 of Chapter 3 of the 2023 Commentary (2) Section 1 of the Jul-2023 Administrative Guidance 17. Article 3.2.1(i) Article 3.2.1(i) (1) Paragraph 85 of Chapter 3 of the 2023 Commentary (2) Section 2.5 of the Feb-2023 Administrative Guidance 18. Article 3.2.1(i) Article 3.2.1(i) (1) Paragraph 86 of Chapter 3 of the 2023 Commentary (2) Section 2.5 of the Feb-2023 Administrative Guidance 19. Article 3.2.3 Article 3.2.3 Paragraphs 100 to 103 of Chapter 3 of the 2023 Commentary 20. Article 3.2.4 Article 3.2.4 (1) Paragraphs 112.1 to 114.1 of Chapter 3 of the 2023 Commentary (2) Section 2 of the Jul-2023 Administrative Guidance 21. Article 3.2.4 Article 3.2.4 (1) Paragraphs 57.6 to 57.12 of Chapter 3 of the 2023 Commentary (2) Section 2.9 of the Feb-2023 Administrative Guidance (3) Section 2 of the Jul-2023 Administrative Guidance 22. Article 3.2.4 Article 3.2.4 (1) Paragraphs 57.10.1 to 57.10.3 of Chapter 3 of the 2023 Commentary (2) Section 2 of the Jul-2023 Administrative Guidance 23. Article 3.5.3 Article 3.5.3 Paragraph 37 of Chapter 2 of the 2023 Commentary 24. Article 4.1.5 Article 4.1.5 (1) Paragraphs 21.1 to 21.8 of Chapter 4 of the 2023 Commentary (2) Section 2.7 of the Feb-2023 Administrative Guidance 25. Article 4.3.2(c) Article 4.3.2(c) (1) Paragraphs 58.1 to 58.7 of Chapter 4 of the 2023 Commentary (2) Section 2.10 of the Feb-2023 Administrative Guidance (3) Section 4 of the Dec-2023 Administrative Guidance 26. Article 4.3.2(e) Article 4.3.2(e) (1) Paragraph 60.1 of Chapter 4 of the 2023 Commentary (2) Section 2.6 of the Feb-2023 Administrative Guidance 27. Article 4.4.1 Article 4.4.1 (1) Paragraphs 71.1 to 71.3 of Chapter 4 of the 2023 Commentary (2) Section 1.3 of the Feb-2023 Administrative Guidance 28. Article 4.4.1(e) Article 4.4.1(e) (1) Paragraphs 82.1 to 82.4 of Chapter 4 of the 2023 Commentary (2) Section 2.8 of the Feb-2023 Administrative Guidance 29. Article 4.6.1 Article 4.6.1 Paragraph 124 of Chapter 4 of the 2023 Commentary 30. Article 5.1.1 Article 5.1.1 Paragraphs 6 and 7 of Chapter 5 of the 2023 Commentary 31. Article 5.2.1 Article 5.2.1 (1) Paragraphs 15.1 to 15.5 of Chapter 5 of the 2023 Commentary (2) Section 2.7 of the Feb-2023 Administrative Guidance 32. Article 5.3.1 Article 5.3.1 (1) Paragraph 29.1 of Chapter 5 of the 2023 Commentary (2) Section 3 of the Jul-2023 Administrative Guidance 33. Article 5.3.3 Article 5.3.3 (1) Paragraph 36.1 of Chapter 5 of the 2023 Commentary (2) Section 3 of the Jul-2023 Administrative Guidance 34. Article 5.3.3 Article 5.3.3 (1) Paragraphs 33 and 33.1 of Chapter 5 of the 2023 Commentary (2) Section 3 of the Jul-2023 Administrative Guidance 35. Article 5.3.4 Article 5.3.4 (1) Paragraph 48.1 of Chapter 5 of the 2023 Commentary (2) Section 3 of the Jul-2023 Administrative Guidance 36. Article 5.3.4 Article 5.3.4 (1) Paragraphs 38 and 38.1 of Chapter 5 of the 2023 Commentary (2) Section 3 of the Jul-2023 Administrative Guidance 37. Article 5.3.4 Article 5.3.4 (1) Paragraphs 43 to 43.7 of Chapter 5 of the 2023 Commentary (2) Section 3 of the Jul-2023 Administrative Guidance 38. Article 5.3.5 Article 5.3.5 Paragraph 52 of Chapter 5 of the 2023 Commentary 39. Article 5.3.5 Article 5.3.5 Paragraph 49 of Chapter 5 of the 2023 Commentary 40. Article 5.5.1(a) Article 5.5.1(a) (1) Paragraph 83 of Chapter 5 of the 2023 Commentary (2) Section 1 of the Jul-2023 Administrative Guidance 41. Article 5.5.3 Article 5.5.3 Paragraph 92 of Chapter 5 of the 2023 Commentary 42. Article 5.5.3 Article 5.5.3 Paragraph 82 of Chapter 5 of the 2023 Commentary 43. Article 6.3.1 Article 6.3.1 (1) Paragraph 73.1 of Chapter 6 of the 2023 Commentary (2) Section 2.1 of the Feb-2023 Administrative Guidance 44. Article 7.1.1(a)(i) Article 7.1.1(a)(i) Paragraph 12 of Chapter 7 of the 2023 Commentary 45. Article 7.1.1(b)(ii) Article 7.1.1(b)(ii) Paragraph 18 of Chapter 7 of the 2023 Commentary 46. Article 7.2.2 Article 7.2.2 Paragraph 46 of Chapter 7 of the 2023 Commentary 47. Article 7.2.4 Article 7.2.4 Paragraph 50 of Chapter 7 of the 2023 Commentary 48. Article 7.3.7(b) Article 7.3.7(b) Paragraph 71 of Chapter 7 of the 2023 Commentary 49. Article 7.5.1 Article 7.5.1 (1) Paragraphs 91 and 91.1 of Chapter 7 of the 2023 Commentary (2) Section 3.6 of the Feb-2023 Administrative Guidance 50. Article 9.1.1 Article 9.1.1 (1) Paragraph 6.4 of Chapter 9 of the 2023 Commentary (2) Section 4.1 of the Feb-2023 Administrative Guidance 51. Article 9.1.1 Article 9.1.1 (1) Paragraph 6.1 of Chapter 9 of the 2023 Commentary (2) Section 4.1 of the Feb-2023 Administrative Guidance 52. Article 9.1.2 Article 9.1.2 Paragraphs 8 and 9 of Chapter 9 of the 2023 Commentary 53. Article 9.1.3 Article 9.1.3 (1) Paragraphs 10.2 to 10.6 of Chapter 9 of the 2023 Commentary (2) Sections 4.2 and 4.3 of the Feb-2023 Administrative Guidance 54. Article 9.1.3 Article 9.1.3 (1) Paragraph 10.1.1 of Chapter 9 of the 2023 Commentary (2) Section 4 of the Jul-2023 Administrative Guidance 55. Article 9.1.3 Article 9.1.3 (1) Paragraph 10 of Chapter 9 of the 2023 Commentary (2) Section 4.3 of the Feb-2023 Administrative Guidance 56. Article 9.1.3 Article 9.1.3 (1) Paragraph 10.9 of Chapter 9 of the 2023 Commentary (2) Section 4.3 of the Feb-2023 Administrative Guidance 57. Article 9.1.3 Article 9.1.3 (1) Paragraph 10.8 of Chapter 9 of the 2023 Commentary (2) Section 4.3 of the Feb-2023 Administrative Guidance 58. Article 10.1.1 (definition of consolidated financial statement) Article 10.1.1 (definition of consolidated financial statement) (1) Paragraphs 8.1 to 8.4 of Chapter 10 of the 2023 Commentary (2) Section 1.2 of the Feb-2023 Administrative Guidance 59. Article 10.1.1 (definition of controlling interest) Article 10.1.1 (definition of controlling interest) (1) Paragraph 8.5 of Chapter 10 of the 2023 Commentary (2) Example 10.1-4 of the Apr-2024 Illustrative Examples (3) Section 1.2 of the Feb-2023 Administrative Guidance 60. Article 10.1.1 (definition of disqualified refundable imputation tax) Article 10.1.1 (definition of disqualified refundable imputation tax) Paragraph 11 of Chapter 10 of the 2023 Commentary 61. Article 10.1.1 (definition of eligible distribution tax system) Article 10.1.1 (definition of eligible distribution tax system) Paragraph 14 of Chapter 10 of the 2023 Commentary 62. Article 10.1.1 (definition of eligible distribution tax system) Article 10.1.1 (definition of eligible distribution tax system) Paragraph 16 of Chapter 10 of the 2023 Commentary 63. Article 10.1.1 (definition of entity) Article 10.1.1 (definition of entity) (1) Paragraph 17.1 of Chapter 10 of the 2023 Commentary (2) Section 1.2 of the Feb-2023 Administrative Guidance 64. Article 10.1.1 (definition of GloBE reorganisation) Article 10.1.1 (definition of GloBE reorganisation) Paragraph 22 of Chapter 10 of the 2023 Commentary 65. Article 10.1.1 (definition of insurance investment entity) Article 10.1.1 (definition of insurance investment entity) Paragraph 90 of Chapter 7 of the 2023 Commentary 66. Article 10.1.1 (definition of ownership interest) Article 10.1.1 (definition of ownership interest) Paragraph 85 of Chapter 10 of the 2023 Commentary 67. Article 10.1.1 (definition of ownership interest) Article 10.1.1 (definition of ownership interest) Paragraph 81 of Chapter 10 of the 2023 Commentary 68. Article 10.1.1 (definition of ownership interest) Article 10.1.1 (definition of ownership interest) Paragraph 83 of Chapter 10 of the 2023 Commentary 69. Article 10.1.1 (definition of real estate investment vehicle) Article 10.1.1 (definition of real estate investment vehicle) Paragraph 147 of Chapter 10 of the 2023 Commentary 70. Article 10.3.4 Article 10.3.4 Paragraphs 198 and 207 of Chapter 10 of the 2023 Commentary Schedule 65 [s. 51AAB]Specified Person, Specified Return and Specified Year of Assessment for Purposes of Section 51AAB (Schedule 65 added 21 of 2025 s. 31) Part 1 Specified Person, Specified Return and Specified Year of Assessment Column 1 Column 2 Column 3 Column 4 Item Specified person Specified return Specified year of assessment 1. Phase 1 applicable entity Return for profits tax under Part 4, of either of the following types— (a) profits tax return—corporations; (b) profits tax return—persons other than corporations Year of assessment beginning on or after 1 April 2025 Part 2 Interpretation 1. In this Schedule—fiscal year (財政年度) has the meaning given by Article 10.1.1 of the GloBE rules;in-scope MNE group (受涵蓋跨國企業集團) has the meaning given by section 1(1) of Schedule 63;MNE group (跨國企業集團) has the meaning given by Article 1.2.1 of the GloBE rules;Part 4AA entity (第4AA部實體) has the meaning given by section 1(1) of Schedule 63;phase 1 applicable entity (第1階段適用實體) is to be construed in accordance with sections 2 and 3 of this Part. 2. An entity or permanent establishment (subject entity) is a phase 1 applicable entity for a year of assessment (subject year of assessment) if—(a) the subject entity is a Part 4AA entity of an MNE group for the corresponding fiscal year of the group for the subject year of assessment; and(b) any of the following applies—(i) the MNE group is an in-scope MNE group for the corresponding fiscal year of the group (beginning on or after 1 January 2025) for the subject year of assessment;(ii) the MNE group was an in-scope MNE group for a fiscal year of the group (beginning on or after 1 January 2025) preceding the fiscal year mentioned in subparagraph (i). 3. An entity or permanent establishment that is, under section 2 of this Part, a phase 1 applicable entity for a year of assessment remains to be a phase 1 applicable entity for every subsequent year of assessment, whether or not it meets any of the conditions in section 2(a) and (b) of this Part for any such subsequent year of assessment. 4. For the purposes of this Part and in relation to an entity or permanent establishment of an MNE group, the corresponding fiscal year of the MNE group for a year of assessment is the fiscal year of the MNE group within which the basis period for the year of assessment of the entity or permanent establishment ends.