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Hong Kong Tax News Flash 

Mar 2014, Issue 2

Fair value vs realisation basis - A choice for taxpayers for 2013/14 profits tax filing

The Court of Final Appeal (CFA) held in Nice Cheer Investment Ltd. v CIR that unrealised revaluation profits recognised in the financial statements are not taxable whereas unrealised revaluation losses may be deductible (the so-called realisation basis). Despite the CFA's decision in the Nice Cheer case, the Inland Revenue Department (IRD) announced on 4 March 2014 interim administrative measures that allow taxpayers to (1) file a 2013/14 profits tax return on the fair value basis and (2) request for re-computation of the 2013/14 assessable profits (which has been computed based on fair value basis) if they subsequently adopt the realisation basis, provided that such request is made within the specified time limits. This News Flash discusses the interim administrative measures announced by the IRD and shares our observations on the implications of those measures.

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Reynold Hung
China South and Hong Kong Tax Leader
Hong Kong
Tel: +[852] 2289 3604 Email
Oscar Lau
Hong Kong
Tel: +[852] 2289 5603 Email