The 2004 Amendment Ordinance has introduced amendments to the interest deduction
ID: 2588217 • Letter: T
Question
The 2004 Amendment Ordinance has introduced amendments to the interest deduction scheme with three new sections, s 16(2A), s 16(2B) and s 16(2C), with effect from 25 June 2004. Assuming that conditions under all relevant sections of the Inland Revenue Ordinance (IRO) are satisfied and the only sections of the IRO have not been tested in the following independent questions are s 16(2A), s 16(2B), and s 16(2C). Based upon the descriptions of Hong Kong taxation in the textbook, and class discussion, answer the following independent questions under Hong Kong profits tax with reference to s 16(2A), or s 16(2B) or s 16(2c):
(a) Taxpayer X, a Hong Kong trading corporation, borrowed $100,000 from a bank at 4%. The loan was secured by its fixed deposit of $100,000 earning tax-free interest income of 3% per annum.
Required:
How much was the amount of interest expenses allowable for taxpayer X to deduct for a full year of assessment prior to 25 June 2004? (4 points)
How much was the amount of interest expenses allowable for taxpayer X to deduct for a full year of assessment after 25 June 2004? (4 points)
(b) Taxpayer Y, a Hong Kong trading corporation, borrowed $100,000 from a bank at 4%. The loan was secured by its fixed deposit of $100,000 earning tax-free interest income of 3% per annum and some shares which were worth $60,000 by reference to month-end balances.
Required:
How much was the amount of interest expenses allowable for taxpayer Y to deduct for a full year of assessment after 25 June 2004? (4 points)
(c) Under an arrangement, Company A, a Hong Kong trading corporation, borrowed $1,000,000 from Bank K at an interest rate of 10% per annum. At its inception, $800,000 of the loan was sub-participated by Company B, an associate of Company A. The repayment by Bank K to Company B of the principal and interest of the $800,000 loan was made conditional to the repayment of principal and interest of the $1,000,000 loan made by Company A to Bank K. In a year of assessment after 25 June 2004, Company A paid interest of $100,000 to Bank K. Correspondingly, Bank K paid interest in the amount attributable to the $800,000 loan to Company B. Either Company A or Company B was not an excepted person within the meaning of s 16(2B)(e).
Required:
How much was the amount of interest expenses allowable for Company A to deduct for a full year of assessment after 25 June 2004? (4 points)
Explanation / Answer
The Criminal Law (Amendment) Act, 2013 is an Indian legislation passed by the Lok Sabha on 19 March 2013, and by the Rajya Sabha on 21 March 2013, which provides for amendment of Indian Penal Code, Indian Evidence Act, and Code of Criminal Procedure, 1973 on laws related to sexual offences.
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