|
Q:
|
Will the gain from disposal of property chargeable to Profits Tax?
|
|
A:
|
According to section 14 of the Inland Revenue Ordinance (“IRO”), profits tax shall be charged on every person carrying on a trade, profession or business in Hong Kong in respect of his assessable profits arising in or derived from Hong Kong for that year from such trade, profession or business (excluding profits arising from the sale of capital assets). The gain from the disposal of asset may be subject to profits tax if the disposal constitutes a transaction in the nature of trade. The word “trade” includes every trade and manufacture, and every adventure and concern in the nature of trade which specified under section 2 of IRO.
|
Q:
|
How to determine the disposal of property is in the nature of trade?
|
A:
|
It will depend on the facts of each case. Generally, the Inland Revenue Department (“IRD”) will look into several fact to collect relevant information such as the background to the transaction, the motive, the financial arrangements entered into, the mode of operation, the frequency of transactions, the length of the holding period etc.
|
Q:
|
How will IRD collect the information?
|
A:
|
IRD will apply risk management to identify suspected speculative cases, and then issues a questionnaire to taxpayer for collecting information for preliminary examination. Besides the questionnaire, IRD may also collect the information from third parties or require the taxpayer to provide further information in order to exam the nature of a trade.
|
Q:
|
What kind of documents are required to be kept for property transactions?
|
A:
|
Sufficient business records of both income and expenditure must be kept to enable taxpayer’s assessable profits to be readily ascertained.
|
Q:
|
How long should I keep those records?
|
A:
|
It must be retained for at least 7 years after the completion of the sale of property transaction.
|
FAQ
