The Hong Kong Inland Revenue Department released Advance Ruling Case No. 65 to deal with tax treatment of assets, liabilities and losses in business combination.
In this case, Company A and Company B are private limited companies incorporated in Hong Kong. Company B became a directly wholly owned subsidiary of Company A in July 2012. Company A recorded accumulated losses prior to the amalgamation. In 2017, Company A and Company B were amalgamated with Company A as the amalgamated company. After the amalgamation,
Upon the amalgamation, Company A succeeded to all the assets and liabilities of Company B. Such succession shall not constitute a sale, transfer or other disposal of or a change in the nature of those assets and liabilities for the purposes of the Inland Revenue Ordinance (IRO). No profit or loss shall arise or be deemed to arise in Company A and/or Company B as a result of the amalgamation.
Unutilized tax losses sustained by Company A prior to the amalgamation will be carried forward and will be available for set off against the Assessable Profits derived after the amalgamation as follows:
Source: HK Inland Revenue Department
TPA Global provides solutions in the area of BEPS, Value Chain Analysis for multinationals along with variety of tax, business and educational technologies. Let us show you how to improve your operations and move from “staying out of trouble” to “being in control”.