e_dipn13a_Interest Expense_s16(2ABC)

This is a new concept under the interest flow back

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Unformatted text preview: deductible Total interest deduction ($0M + $1M) Persons Connected with the Borrower [Section 16(3B)] 34. This is a new concept under the interest flow-back test. regarded as being connected with the borrower if the person is – (a) (b) an associated corporation of the borrower; or a person (other than a corporation) – (i) (ii) (iii) who controls the borrower; who is controlled by the borrower; or 2 1 1 1 A person is who is under the control of the same person as is the borrower. 35. The term “associated corporation” is defined in section 16(3). This definition has not been changed by the 2004 Amendment Ordinance. The meaning of the term “control” [which is formerly defined in section 16(3)] is now provided under section 16(3A). So far as a corporation is concerned, the meaning of control has not been changed by the 2004 Amendment Ordinance. However, it has been expanded to cover the situation of controlling a person who is not a corporation. Excepted Persons 36. This is another new concept under the interest flow-back test. Interest restriction under the test does not apply where under the arrangement 19 concerned, the interest flows to a connected person who is an “excepted person”. The definitions of excepted person under sections 16(2E)(c) and 16(2F)(c) are the same and cover the following categories – a person who is charged to tax in respect of the interest in question; a person acting as a bare trustee; a beneficiary of a unit trust to which section 26A(1A)(a)(i) or (ii) applies, where the interest payment is in respect of a specified investment scheme; a member of a recognized retirement scheme, or a similar scheme established outside Hong Kong accepted by the Commissioner; a public body (which is defined under section 3 of the Interpretation and General Clauses Ordinance, Cap 1, as including the Executive Council, the Legislative Council, and District Council, any other urban, rural or municipal council, any department of the Government, and any undertaking by or of the Government); a body corporate of which the Government owns m...
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