Advance Ruling Case No. 2

1. The provisions of the Ordinance

This ruling applies in respect of section 18E of the Inland Revenue Ordinance.

2. Background

(a)

A Ltd commenced business in Hong Kong after 1 April 1974.

(b)

A Ltd has made up its accounts for each year up to 31 March.

(c)

The latest set of accounts submitted by A Ltd covered the period from 1 April 1999 to 31 March 2000.

(d)

A Ltd's ultimate holding company is H Ltd, a company incorporated in Japan.

(e)

As a result of the "Notice of Requirement for Early Disclosure of Consolidated Financial Information" as announced by the Tokyo Stock Exchange, H Ltd has to report its consolidated financial results for the year ended 31 March by 30 June of the same year.

(f)

To alleviate time pressure for consolidated reporting purposes, H Ltd has directed that A Ltd's accounting date be changed from 31 March to 31 December.

3. The arrangement

The subject transaction is the change of accounting year end date of A Ltd from 31 March to 31 December in 2000.

4. The ruling

(a)

The Commissioner agrees that the 9 months period from 1 April 2000 to 31 December 2000 will be accepted as the basis period of A Ltd for the year of assessment 2000/2001 under Section 18E(1)(i).

(b)

The Commissioner agrees that the assessable profits of A Ltd for the year of assessment 1999/2000 will not be re-computed under Section 18E(1)(ii).

5. The period for which the ruling applies

This ruling applies to A Ltd for the years of assessment 1999/2000 to 2000/2001.

6. The material assumptions in respect of a future event or any other matter made by the Commissioner

The Commissioner has made no assumptions.

7. Date of ruling issued

7 February 2001.