Skip to main content
Skip to content
GovHK Trandition Chinese Simplified Chinese Background A A A Search Search Site Map Contact Us

Level Double-A conformance, W3C WAI Web Content Accessibility Guidelines 2.0

Web Accessibility Recognition Scheme
Mobile / Accessible Version IconMobile / Accessible Version Printer View IconPrinter View RSS Icon RSS
  Home > Publications and Press Releases > Advance Ruling Cases > Advance Ruling Case No. 19

Advance Ruling Case No. 19


1. The provisions of the Ordinance

  This ruling applies in respect of section 14 of the Inland Revenue Ordinance.

  back to top


2. Background

(a) The Company has entered into a contract processing agreement with a China party operating a factory in China ("the China Factory").
(b) Under the contract processing agreement, the China party provides labour, factory premises, water and electricity facilities for the operation of the China Factory to process goods for the Company in return for processing fees. The Company provides the raw materials, plant and machineries, and training of the workers.

  back to top


3. The arrangement

(a) After the China Factory comes into operation, the Company's activities in Hong Kong will be the conclusion of sales, purchase of raw materials to be delivered to the China Factory, and product design.
(b) The China Factory will be responsible for processing of the goods.
(c) A number of the Company's employees will visit the China Factory to train the labour and supervise the production. Some would have to work five or six days in the China Factory every week.

  back to top


4. The ruling

  The Company's profits arising from the sale of the goods processed by the China Factory under the contract processing agreement can be apportioned on a 50 : 50 basis for Hong Kong Profits Tax purpose.

 

  back to top


5. The period for which the ruling applies

  This ruling will apply with effect from the year of assessment 2004/2005, up to the termination of the contract processing agreement.

 

  back to top


6. The material assumptions in respect of a future event or any other matter made by the Commissioner

  The Commissioner has assumed that the China Factory's name should be X Factory.

  back to top


7 . Date of ruling issued

  1 February 2005.

  back to top


Additional Note :

The assumption is made specific to the facts of this case as presented to the Department in its application.

 

back to top