Hong Kong’s Inland Revenue Department (IRD) on March 3 advised that it will accept 2014-15 profits tax returns in which assessable profits are computed on a fair value basis while the government continues to consider its response to the decision in Nice Cheer Investment Limited v CIR. The IRD had allowed such treatment for 2013-14 profits tax returns.
In Nice Cheer Investment Limited, decided November 2013, the Court of Final Appeal ruled against the Commissioner of Inland Revenue, concluding that unrealized gains in respect of shares held for trading that were revalued for accounting purposes were not chargeable to profits tax in Hong Kong.
The IRD also said it will agree to recompute the assessable profits for 2014-15 computed on a fair value basis if taxpayers adopts the realisation basis as long as requests for recomputation are made within time limits laid down in sections 60 or 70A of the Inland Revenue Ordinance.
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