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Unformatted text preview: ufacturing business, it is the date
the manufacturing process starts.
The significances of date of commencement are: revenue expenditure before the commencement is
deductible by concession
capital expenditure, e.g. qualifying plant and
machinery, shall be deemed to have been
incurred on the first date of business.
27 Commencement of business - Example A
First business accounts cover 12-months. Business started on 1 July 2005. Annual accounts made up to 30 June every year.
Basis periods and assessments: Year of assessment 2005/2006: No assessment. Year of assessment 2006/2007: Accounts covering 1 July 2005
to 30 June 2006. Year of assessment 2007/2008: Accounts covering 1 July 2006
to 30 June 2007.
28 Commencement of business - Example B
First business accounts cover 6 months. Business started on 1July 2005. First accounts made up to 31
December 2005. Subsequent accounts all made up to 31December.
Basis periods and assessments: Year of assessment 2005/2006: From 1 July 2005 to 31
December 2005 --- 6 months. Year of assessment 2006/2007: From 1 January 2006 to 31
December 2006 --- 12 months.
December Year of assessment 2007/2008: From 1 January 2007 to 31
December 2007 --- 12 months. 29 Commencement of business - Example C
First business accounts cover 18 months. If the first accounting period covers more than 12 months, the
Revenue will decide the basis period for the business
commencement as it thinks fit. In practice, the profits are
apportioned by reference to the normal accounting date.
apportioned Business started on 1 July 2005. First account covers 1 July 2005
to 31 December 2006 showing assessable profits of $180,000.
Subsequent accounts are made up to 31 December.
Basis periods and assessments: Year of assessment 2005/2006: Basis period 1 July 2005 to 31
December 2005: $180,000 x 6 / 18 = $60,000. Year of assessment 2006/2007: Basis period 1 January 2006 to
31 December 2006: $180,000 x 12/18 = $120,000.
31 30 LOSSES
A loss is computed in a similar manner
& for a similar BP as profit (s 19D(1)). No loss can be relieved more than once
(s 19C(6)(a), (b) & (c)).
(s Only losses having a Hong Kong
source can be relieved (s 19C(6)(d)).
source 31 Unincorporated Business
(Individual ) (sole Proprietorship)
Individual (sole If an individual has sustained a business loss, that loss
can only be c/f to set-off against his/her assessable
profits from the same business for subsequent YAs (s
If the individual wants to set-off the loss against
his/her other income, he/she should elect personal
assessment (PA) (s 19C(3)). If his/her total income
under PA is insufficient to offset the loss, the excess
is c/f to be set off under PA in future. If PA has been
elected for a particular YA, the loss for that YA will
not be c/f under profits tax.
32 Partnership An individual partner's share of partnership losses
shall be set-off against his/her share of fut...
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This document was uploaded on 03/16/2014.
- Spring '14