1964_INLAND_REVENUE_RULES — Page 6

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[Subsidiary]

CAP. 112]

Inland Revenue Rules

[1986 Ed.

L.N. 101/65.

Profit of Hong Kong branch offices.

7 of 1986, s. 12.

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 objection and appeal in accordance with the provisions of Part XI of the Ordinance.

4. [Revoked, 49 of 1956, s. 69]

Method of ascertainment and determination of the profits of the Hong Kong branch of a person whose head office is elsewhere than in Hong Kong

5. (1) In this rule-

"person" 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 exercises, 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 Hong Kong, but whose head office is situated elsewhere than in Hong Kong, 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 Hong Kong 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 Hong Kong, his tax liability will be computed by reference to his total profits wherever made. The same proportion of his total profits as his turnover in Hong Kong bears to his total turnover shall be treated as profits arising in or derived from Hong Kong and shall be taxed accordingly;

(c) for the purposes of determining total profits of a person, 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;