Cap 112 s 16J Proceeds of sale of environmental protection facilities to be treated as trading receipts (Inland Revenue Ordinance)

Contents of Section

Chapter:	112	Title:	Inland Revenue Ordinance	Gazette Number:	E.R. 1 of 2012
Section:	16J	Heading:	Proceeds of sale of environmental protection facilities to be treated as trading receipts	Version Date:	09/02/2012

(1) This section applies notwithstanding the exclusion relating to the sale of capital assets in section 14.
(2) If any environmental protection machinery in respect of which a deduction has been allowed under section 16I in ascertaining the profits from a trade, profession or business is subsequently sold, the relevant proceeds of sale shall, to the extent that they are not chargeable to tax under any other section of this Part and do not exceed the amount of the deduction, be treated as a trading receipt of the trade, profession or business, arising in or derived from Hong Kong and accruing—

(a) at the time of the sale; or

(b) if the sale occurs on or after the date on which the trade, profession or business is permanently discontinued, immediately before the date of discontinuance.

(2A) If any environment-friendly vehicle in respect of which a deduction has been allowed under section 16I in ascertaining the profits from a trade, profession or business is sold before the cessation of the trade, profession or business, the relevant proceeds of sale, to the extent that they are not chargeable to tax under any other section of this Part and do not exceed the amount of the deduction, are to be treated as trading receipts of the trade, profession or business, arising in or derived from Hong Kong and accruing at the time of the sale. (Added 10 of 2010 s. 5)
(3) If any environmental protection installation in respect of which a deduction has been allowed under section 16I in ascertaining the profits from a trade, profession or business is subsequently sold—

(a) if there is an unallowed amount that exceeds the relevant proceeds of sale, the excess shall be deducted for the year of assessment in the basis period for which the sale occurs;

(b) if there is an unallowed amount but the relevant proceeds of sale exceed that amount, the excess shall, to the extent that it is not chargeable to tax under any other section of this Part and does not exceed the amount of the deduction, be treated as a trading receipt of the trade, profession or business, arising in or derived from Hong Kong and accruing—

(i) at the time of the sale; or

(ii) if the sale occurs on or after the date on which the trade, profession or business is permanently discontinued, immediately before the date of discontinuance; or

(c) if there is not an unallowed amount, the relevant proceeds of sale shall, to the extent that they are not chargeable to tax under any other section of this Part and do not exceed the amount of the deduction, be treated as a trading receipt of the trade, profession or business, arising in or derived from Hong Kong and accruing—

(i) at the time of the sale; or

(ii) if the sale occurs on or after the date on which the trade, profession or business is permanently discontinued, immediately before the date of discontinuance.

(4) If, in relation to the sale of an environmental protection facility as referred to in subsection (2), (2A) or (3)— (Amended 10 of 2010 s. 5)

(a) the buyer is a person over whom the seller has control;

(b) the seller is a person over whom the buyer has control;

(d) the sale is between a husband and his wife, not being a wife living apart from her husband,

the Commissioner shall, if he is of the opinion that the sale price of the facility does not represent its true market value at the time of the sale, determine such true market value, and the amount so determined shall, for the purposes of subsection (2), (2A) or (3), as the case may be, be treated as the proceeds of that sale. (Amended 10 of 2010 s. 5)

(5) For the purposes of subsections (2) and (3), if any environmental protection machinery or environmental protection installation in respect of which a deduction has been allowed to a person under section 16I in ascertaining the profits from a trade, profession or business is subsequently destroyed— (Amended 10 of 2010 s. 5)

(a) the machinery or installation is deemed to have been sold immediately before the destruction; and

(b) any insurance money, other compensation of any description and any money derived from the remains of the machinery or installation that are received by the person in respect of the destruction are to be treated as the proceeds of that sale. (Amended 10 of 2010 s. 5)

(5A) For the purposes of subsection (2A), if an environment-friendly vehicle in respect of which a deduction has been allowed to a person under section 16I in ascertaining the profits from a trade, profession or business is destroyed or stolen before the cessation of the trade, profession or business—

(a) the vehicle is deemed to have been sold immediately before it was destroyed or stolen; and

(b) any insurance money, other compensation of any description and any money derived from the remains of the vehicle that are received by the person in respect of the destruction or theft are to be treated as the proceeds of that sale. (Added 10 of 2010 s. 5)

(5B) For the purposes of subsection (2A), if an environment-friendly vehicle in respect of which a deduction has been allowed to a person under section 16I in ascertaining the profits from a trade, profession or business has not been sold, destroyed or stolen before the cessation of the trade, profession or business—

(a) the vehicle is deemed to have been sold immediately before the cessation; and

(b) the person is deemed to have received immediately before the cessation the proceeds of that sale. (Added 10 of 2010 s. 5)

(5C) The amount of proceeds of sale deemed to have been received under subsection (5B)(b) is such amount as the Commissioner may consider the vehicle would have realized had it been sold in the open market at the time of cessation. (Added 10 of 2010 s. 5)
(5D) If the environment-friendly vehicle referred to in subsection (5B) is sold, destroyed or stolen on, or within 12 months after, the cessation of the trade, profession or business, the person may claim an adjustment to the amount deemed to have been received under subsection (5C). (Added 10 of 2010 s. 5)
(5E) Despite section 70, an assessor may make any necessary correction to any assessment due to an adjustment under subsection (5D). (Added 10 of 2010 s. 5)
(6) For the purposes of this section, a reference to the time of the sale, in relation to an environmental protection facility, shall be construed as a reference to the time of completion of the sale of the facility, or the time when possession of the facility is given, whichever is the earlier.

(Added 21 of 2008 s. 4)