The Inland Revenue Department today issued the Departmental Interpretation and Practice Notes No. 53 (“Tax Treatment of Regulatory Capital Securities”) which sets out the Department’s interpretation and practice on the application of the profits tax provisions relating to regulatory capital securities in the Inland Revenue (Amendment) (No. 2) Ordinance 2016. The provisions clarify the profits tax treatment of regulatory capital securities issued by financial institutions to comply with Basel III capital adequacy requirements.
Hong Kong will implement Country-by-Country Reporting for the accounting periods commencing on or after 1 January 2018, subject to necessary legislative amendments. As a transitional arrangement, parent surrogate filing will be made available for the accounting periods commencing between 1 January 2016 and 31 December 2017.
The assessment practice in relation to court-free amalgamations has been updated to clarify the meaning of amalgamating company and amalgamated company, elaborate the tests for set-off of the tax losses carried forward in the amalgamated company or from the amalgamating company, and add examples to illustrate the application of the same trade test.