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Unformatted text preview: tock exchange recognized by the Commissioner. Insofar as “marketable instruments” were concerned, the condition would be satisfied if the instruments were issuedbona fide and in the course of carrying on business and was marketable in Hong Kong or any other major financial centre approved by the Commissioner; or pursuant to the authorisation of the Securities and Futures Commission under section 105 of the Securities and Futures Ordinance [under section 4(2)(g) of the Protection of Investors Ordinance before 1 April 2003.] . 9. Condition (f) would also be satisfied where the borrowing was from an associated corporation and the moneys borrowed in the hands of the associated corporation arose entirely from the proceeds of an issue of debentures or marketable instruments as described above. As for borrowings
5 from associated corporations, the deduction for interest paid by the borrowing corporation was restricted to the amount of interest paid by the associated corporation to the holders of its debentures or instruments. INTEREST DEDUCTION SCHEME AFTER THE COMMENCEMENT OF THE 2004 AMENDMENT ORDINANCE 10. The 2004 Amendment Ordinance has introduced substantial amendments to the interest deduction scheme. The conditions for interest deduction under section 16(2)(a) to (f) as regards the types of loans remain, in broad terms, the same as before. However, the condition under section 16(2)(d) on the loan not being secured or guaranteed by a deposit that can generate tax free interest has been removed to a new provision [section 16(2A)] which has a broader application. New provisions have also been added to restrict the deduction of interest despite the satisfaction of the respective conditions under section 16(2). The new scheme of interest deduction after the 2004 Amendment Ordinance is discussed below. Conditions for Deduction Conditions (a) and (b) – borrowings by financial institutions and public utilities 11. No amendment has been made to these two conditions. All borrowings by a financial institution and any borrowings by public utilities at a rate of interest not exceeding a specified rate will cont...
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