Advance Ruling Case No. 3

1. The provisions of the Ordinance

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

2. Background

(a)

A Group of companies commenced business in Hong Kong before 1 April 1974 and have made up their accounts for each year up to 30 June.

(b)

Major customers of the Group are in the U.S.A. with financial year end at 31 December each year. In order to facilitate the analysis of financial data of the Group, the customers requested the Group to have an accounting year end date which is identical with theirs.

(c)

The Group has two subsidiaries in the Mainland of China which prepare their accounts up to 31 December each year. In order to comply with SSAP 2.132, the Group intends to change its accounting year end date to 31 December.

3. The arrangement

The arrangement is to change the financial year end of the Group from 30 June to 31 December with effect from 1 July 2001 onwards.

4. The ruling sought

The basis period of the year of assessment 2002/2003 is from 1 July 2001 to 31 December 2002.

5. Date of ruling issued

On 31 May 2001, the Commissioner declined to make a ruling.

6. Reasons for declining to make a ruling

The correctness of the ruling would depend on the making of assumptions in respect of the trading results of the Group for a future period.