The tax document at the heart of the Magna Industrial court battle is being rewritten after an Inland Revenue Department (IRD) decision not to contest a Court of Appeal ruling to the Privy Council, sources say.
The document - practice note number 21, dealing with the source of a company's profits - would be rewritten to bring it into line with pronouncements made in the Magna case, the sources said.
The practice note has been described as the single biggest point of disagreement remaining between the IRD and the tax profession.
The Magna tax case went against the basic principle of the disputed practice note, which stated that 'where either the contract of purchase or contract of sale is effected in Hong Kong, the profits will be fully taxable'.
The Court of Appeal, however, used a different principle, finding that because the bulk of Magna's profits did not arise in Hong Kong, they therefore fell outside a charge to profits tax.
Magna was appealing against the payment of about $30 million in tax from $150 million in profits earned between 1984 and 1992.
It is not known how far the rewrite will go, as there are understood to be divergent views within the IRD on what direction the review will take.