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Publications and Press Releases : Advance Ruling
Cases : Advance Ruling Case No. 11
Advance Ruling Case No. 11
1. The provisions of the Ordinance
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This ruling applies
in respect of section 14 of the IRO. |
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2. Background
| (a)
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X Ltd. was incorporated in Hong Kong
on 24 August 2001. Its business is the trading of ink
products. |
| (b)
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The goods are manufactured by a fellow
subsidiary, S Ltd., in South Africa. |
| (c)
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About 80% of X Ltd.'s sales have been
made to related companies, one of which is A Ltd, a
fellow subsidiary in USA. |
| (d)
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X Ltd. has entered into a Master Purchase
Agreement ("MPA") with S Ltd., and Master
Sales Agreements ("MSA") with related customers
(such as A Ltd.). These agreements are made outside
Hong Kong. |
(e)
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X Ltd.'s holding company in Israel, H
Ltd., coordinates the trading transactions and production
of products. It decides all transfer pricing among its
subsidiaries ( such as X Ltd. and A Ltd. ) and with
S Ltd. It also prepares the production plan. |
3. The arrangement
| (a)
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Based on the prices and
production quantity already fixed by H Ltd. in Israel,
a Delivery Notice ("DN") was prepared for
an individual trading transaction by H Ltd. in Israel
for issue to S Ltd. and copied to X Ltd. and A Ltd. |
| (b) |
X Ltd. received the DN in Hong Kong and
prepared a DN to S Ltd. |
| (c) |
Invoices were prepared by S Ltd. in South
Africa and sent to and received by X Ltd. in Hong Kong.
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| (d) |
Invoices were prepared by X Ltd. In Hong
Kong and sent to A Ltd. in U.S.A. via S Ltd. |
| (e) |
Accounts were settled by remittances
to and from X Ltd.'s bank account maintained in Hong
Kong with remittance instructions made from Israel. |
4. The ruling
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The profits derived by X
Ltd are profits arising in or derived from Hong Kong
and assessable to Hong Kong tax under section 14 of
the IRO. |
5. The period for which the ruling applies
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The ruling applies to the year of
assessment 2001/02 and onwards. |
6. Date of ruling issued
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