e_dipn13a_Interest Expense_s16(2ABC)

Condition c borrowings from persons other than

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Unformatted text preview: inue to satisfy conditions (a) and (b) respectively. Condition (c) – borrowings from persons other than financial institution 12. The main part of this subsection remains unchanged. The comments in paragraph 4 above continue to apply. In addition, interest deduction on a loan satisfying this condition is also subject to the new restrictions under section 16(2A) and (2B). 6 Condition (d) – borrowings from financial institutions or overseas financial institutions 13. This condition will be satisfied if the loan is borrowed from a financial institution or an overseas financial institution. The requirement that the loan is not being secured by a deposit of the borrower or his associate that can generate tax free interest is removed from this condition, but a similar test is added as a criterion for restricting interest deduction under section 16(2A). On top of that, deduction of interest payable on this type of loan is further subject to the new restrictions under section (2B). Condition (e) – borrowings for specified purposes 14. As before, this condition will be satisfied by the borrower establishing that – the money has been borrowed wholly and exclusively to finance capital expenditure on machinery and plant, or for the purchase of trading stock, for the purpose of producing chargeable profits; and the lender is not an associate of the borrower in terms of section 16(3). Deduction of interest under this type of loan is subject to the new restrictions under section 16(2A) and (2B). Condition (f) – interest on debentures and debt instruments 15. This condition continues to relate to corporate borrowings by way of debentures or other marketable debt instruments. For the interest payable on debentures, the condition will be satisfied where such debentures are listed on a stock exchange in Hong Kong or any other stock exchange recognized by the Commissioner. Insofar as debt instruments are concerned, the condition will be satisfied if the instruments are issued (A) bona fide and in the course of carrying on business and is marketed in Hong Kong or any other major financial centre recognized by the Commissioner; or 7 (B) pursuant to any agreement or arrangements, where the issue of an advertisement, invitation or document in respect of the agreement or arrangements to the public has been authorized by the Securities and Futures Commiss...
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This note was uploaded on 03/11/2010 for the course BBA B415 taught by Professor Mrli during the Spring '10 term at Academy of Art University.

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