XN000022-1992-02-26 — Page 19

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WEDNESDAY, FEBRUARY 26, 1992

PROPERTY SALE PROFITS CHARGEABLE TO TAX

PROFITS FROM THE SALE OF PROPERTY ARE CHARGEABLE TO PROFITS TAX IF THEY ARISE FROM THE CARRYING ON OF A BUSINESS OF PROPERTY DEALING OR PROPERTY TRADING, THE SECRETARY FOR THE TREASURY, MR YEUNG KAI-YIN, INFORMED THE LEGISLATIVE COUNCIL TODAY (WEDNESDAY).

IN A WRITTEN REPLY TO A QUESTION BY THE HOH TIK CHI-YUEN, MR YEUNG SAID PROFITS ARISING FROM THE SALE OF CAPITAL ASSETS WERE EXPRESSLY EXCLUDED FROM ASSESSMENT TO TAX.

HE SAID ARGUMENTS COULD ARISE OVER WHETHER THE VENDOR OF A PARTICULAR PROPERTY WAS CARRYING ON A BUSINESS OF PROPERTY DEALING, OR WHETHER HE WAS MERELY SELLING A CAPITAL ASSET.

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'WHILE A BODY OF LAW HAS BEEN DEVELOPED BY THE COURTS TO HELP IN RESOLVING SUCH QUESTIONS, MOST INDIVIDUAL CASES CAN ONLY BE DETERMINED BY LOOKING AT THE LENGTH OF TIME BETWEEN PURCHASE AND SALE, WHETHER THE VENDOR HAS CARRIED OUT OTHER PROPERTY TRANSACTIONS,.: THE FINANCING ARRANGEMENTS, THE REASONS GIVEN FOR PURCHASE AND SALE AND OTHER RELEVANT CIRCUMSTANCES, MR YEUNG SAID.

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FOR

HE SAID THE INLAND REVENUE DEPARTMENT (IRD) EXAMINED ALL PROPERTY TRANSACTIONS WHICH CAME TO ITS KNOWLEDGE AND DECIDED WHETHER, IN ITS OPINION, PROFITS ASSESSABLE TO TAX HAD ARISEN,

HE NOTED THAT ALTHOUGH THE IRD WAS FULLY CAPABLE OF MAKING APPROPRIATE ASSESSMENTS OF PROFITS TAX LIABILITY ON PROPERTY TRANSACTIONS ONCE THESE HAD BEEN IDENTIFIED, THERE MIGHT BE DIFFICULTY IN SOME CASES IN FINDING OUT WHETHER A TRANSACTION HAD ACTUALLY TAKEN PLACE.

"HOWEVER, FOLLOWING THE RECENT ENACTMENT OF THE STAMP DUTY (AMENDMENT) ORDINANCE 1992, DETAILS OF ALL TRANSACTIONS IN RESIDENTIAL PROPERTIES MUST NOW BE SUBMITTED ΤΟ THE DEPARTMENT'S STAMP DUTY OFFICE.

LIKELY TO

"THIS NEW REQUIREMENT WILL PROVIDE A SOURCE OF INFORMATION WHICH WILL ENSURE THE EARLY IDENTIFICATION OF TRANSACTIONS GIVE RISE TO PROFITS CHARGEABLE TO TAX," MR YEUNG SAID.

HE ADDED THAT THE IRD DID NOT KEEP SEPARATE PROPERTY DEALING.

STATISTICS ON

REVENUE FROM WAS GROUPED BANKING)

FOR STATISTICAL PURPOSES, THE PROFITS TAX PROPERTY TRANSACTIONS, INCLUDING PROPERTY DEVELOPMENT, WITH THAT FROM GENERAL INVESTMENT AND FINANCIAL (OTHER THAN BUSINESS,

/THE TAX