INLAND REVENUE RULES

INLAND REVENUE RULES

INLAND REVENUE.
INLAND REVENUE RULES.
(Cap. 112, section 85).
(Ordinance No. 20 Of 1947).

[22nd August, 1947.1

1. These rules may be cited as the Inland Revenue Rules.

Rates of Depreciation.
2. (1) The following rates of depreciation are hereby prescribed for
the purpose of ascertaining the 'annual allowance- to be made under
subsection (2) of section 37 Of the Ordinance. In all cases depreciation
will be calculated on the reducing value of the asset concerned.
(2) Except with the permission of the Commissioner, who sliall in
special cases allow such greater depreciation as lie thinks fit, no
depreciation sliall be allowed in excess of that specified in the scale.
(3) For the purposes of sections 37, 38, and 39 of the Ordinance the
expression 'plant and machinery-'' sliall be
deemed to include the items mentioned below-
General rate for plant and machinery -where no

special rate is prescribed
Aircraft
Bar Syphon apparatus
Bicycles
Brewing Plant/Machinery .
Boilers
Cables, electric
Cinema and Photographic Processing Equipment IS
Copper Stills-Distillery
Concrete Pipe Moulds
Diesel Engines
Domestic Appliances-
Electric Cookers and Kettles
Gas Cookers and Fires
Electric Refrigerators, water-heaters, etc .
Other gas and electric domestic appliances





Foundry Plant
Grill Equipment
Lamp Standards, gas or electric
Steel
.
Wood
Meters, gas or electric
Motor Vehicles-
Petrol Driven
Oil Driven .......
Motor Launches ....
Office Furniture, Fixtures and Equipment
Oil Tanks
Printing Machinery
Pumps and Motors
Pipe Lines
Refrigerating Plant
Sailing Vessels
Scales and Gears
Show Cases
Ships
Sprinklers
Steam Engines
Steam Launches
Steam ','Inches
Tank Lorries
Tractors
Trail Lorries
Tramway rolling stock

Tags
Type and Mocks
Weaving, Knitting and Sewing Machinery

Method of ascertainment and determination
of /he pro ' fits of the Hong Kong branch of a
bank whose head office is outside the Colony.

3. (1) In this rule-
'bank' means anv bank whose head office is outside this Colony;
'Hong Kong branch' means the business carried on in Hong Kong by
any such bank.





(2) Where any accounts prepared by a bank for its own purposes
disclose, in the opinion of the Assessor, the true profits of the Hong
Kong branch, the assessable profits shall be computed on the basis of
such accounts.
(3) Where no accounts are prepared which in the opinion of the
Assessor disclose the true profits of the I-long Kong branch, the
following provisions sliall apply in the determination of such profits-
the same proportion of the total profits of the bank as the assets of
the Hong Kong branch bear to the total assets of the bank shall be
treated as profits made from transactions in the Colony and shall be
assessed accordingly;
(b)for the purposes of determining the total profits of the bank,
similar adjustments for tax purposes will be made in the
accounts of the bank as would have been necessary had the
whole of those profits been liable to tax under this Ordinance;
(c)where the Assessor is of the opinion that it would be
impracticable or inequitable to adopt the provisions of sub-
paragraphs (a) and (b) of this paragraph, he may estimate the
amount of the profits of the Hong Kong branch, and assess
such profits accordingly:
Provided that any decision of an Assessor under this rule shall be
subject to appeal in accordance with the provisions of Part XI of the
Ordinance.
Note.
This rule applies to non-resident banks operating in Hong Kong.
It is expected that the accounts of the Hong Kong branch of most banks
will be sufficiently accurate for the computation of the profits of the branch to
be based on those accounts.
Where, however, either no branch accounts are prepared, or the Hong
Kong branch accounts are so merged with the accounts of other branches as to
make it difficult to compute the true profits, provision is made for the profits to
be ascertained by apportioning the total profits of the bank in the ratio of the
Hong Kong assets to the total assets.
Method of ascertaining the amount of a dividend
liable to tax and to be included in the recipient's
'total, income'' as defined in section 42(2).

4. (1) Where a dividend is paid partly out of profits liable to Hong
Kong tax and partly out of profits not liable






to Hong Kong tax, the corporation paying the dividend shall state
in the certificate issued to the shareholders as prescribed by
subsection (2) of section 27 of the Ordinance the proportionate
parts of that dividend liable to and exempt from Hong Kong tax
respectively, also the amount of tax deducted.
(2) A resident shareholder claiming to be personally assessed
under section 41 shall include in his return of 'total income- as
defined by subsection (2) of section 42, only that portion of such a
dividend which is liable to Hong Kong tax and the tax thereon.

Method of ascertainment and determination, of
the Profits of the Hong Kong branch, of a person
whose head office is outside the Colony.

5. (1) In this rule-
pson' includes a company, partnership, or body of
persons
'permanent establishment' means a branch, management
or other place of business, but does not include an
agency unless the agent has, and habitually exercis . es,
a general authority to negotiate and conclude contracts
on behalf of his principal or has a stock of merchandise
from which he regularly fills orders on his behalf.
(2) The Hong Kong profits of a person having a permanent
establishment in the Colony, but whose head office is situated
outside the Colony, will be assessed as follows
(a) where the person keeps accounts for his Hong
Kong establishment in such a way that his true
profits arising in or derived from the Colony can
be readily ascertained from those accounts, his
assessment to Profits Tax will be computed by
reference to the profits disclosed in those accounts;
(b) where the person's accounts do not disclose the
true profits arising in or derived from the Colony,
his tax liability will be computed by, reference to
his total profits wherever made. The same propor-
tion of his total profits as his turnover in the ' Colony
bears to his total turnover shall be treated as profits





arising in or derived from the Colons, and shall be taxed
accordingly;
(c)for the purposes of determining a person's total profits,
similar adjustments for tax purposes will be made in his
accounts as would have been necessary had the whole
of those profits been liable to tax under the Ordinance;
Where the Assessor is of the opinion that it would be
impracticable or inequitable to adopt the provisions of,
sub-paragraphs (b) and (c) of this paragraph lie may
compute the amount of the profits arising in or derived
from the Colony, on a fair percentage of the person's
turnover in the Colony.
Provided that the decision of an Assessor under this rule
shall be subject to appeal in accordance with the provisions of
Part XI of the Ordinance.

Method of apportioning an annuity between
capital and income.
6. (I) For the purpose of assessment to Salaries and Annuities
Tax under Part 111 of the Ordinance, an annuity, payable in
respect of valuable consideration given shall first be apportioned
as between capital and income in accordance with the provisions
of this rule. The capital portion shall be ascertained by dividing
the consideration (i.e., premiums paid, or the total of such
premiums if more than one, or other valuable consideration given)
b), the figures ascertained from the Table set out in paragraph (2)
hereof by reference to the age of the annuitant at the date of his
or her last birthday prior to the first payment of the annuity. The
excess of the annual annuity over the capital portion thus
computed shall be deemed to be income and liable to Salaries and
Annuities Tax. This apportionment between capital and income
shall be constant each year until such time as the accumulated
total of the capital portions shall equal the total consideration.
Thereafter, the whole of the annual amount of the annuity shall
be regarded as income for the purpose of Salaries and Annuities
Tax: Provided that no apportionment to capital shall be made in
respect of any consideration given by a person other than the
annuitant, or his or her spouse, and provided further that any
premium





or portion of a premium which has been allowed as a deduction tinder
section 42 Of the Ordinance, shall be Cap 112). excluded from the amount of the
consideration.

(2) TABLE.

Age of Ageof
Annuitant
Annuitant
on last on last
birthday prior MALES FEMALES birthday prior MALES FEMALES
to first to first
payment of payment of
annuity. annuity.
G.N. 658/47. G.N.A. 18/48. Citation. (Cap. 112.)
Banks; Hong Kong Branch Offices.
[r. 3 cont.] (Cap. 112.) Dividends liable to tax.
(Cap. 112) Profits of Hong Kong branch offices.
[r. 5 cont.] (Cap. 112.) Apportion-ment of annuity. G.N.A. 18/48.
(Cap. 112).

G.N. 658/47. G.N.A. 18/48. Citation. (Cap. 112.)
Banks; Hong Kong Branch Offices.
[r. 3 cont.] (Cap. 112.) Dividends liable to tax.
(Cap. 112) Profits of Hong Kong branch offices.
[r. 5 cont.] (Cap. 112.) Apportion-ment of annuity. G.N.A. 18/48.
(Cap. 112).

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