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Publications
and Press Releases : Advance
Ruling Cases : Advance Ruling Case No. 36
Advance Ruling Case No. 36
| 1. |
The
provisions of the Ordinance |
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This ruling applies in respect
of section 14 of the Inland Revenue Ordinance. |
| 2. |
Background |
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(a) |
X Group's main business is fish trading. The Group has business operations in various countries and its management team is based in Europe. |
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(b) |
Y Ltd. is a member of X Group. It has been carrying on business in Europe in managing the product requirements of the companies within X Group. |
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(c) |
X Group has started sourcing fish in Asian countries. The Company was formed in order to manage and expand X Group's supplier-base in Asia. |
| 3. |
The
arrangement |
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(a) |
Pursuant to an agreement
made between the Company and Y Ltd. ("the Agreement"),
the Company will receive remuneration from Y Ltd. for
providing to Y Ltd. sourcing, procurement support, and
other services set out in the Agreement. |
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(b) |
The Company will employ local
staff in Asian countries where suppliers are located to
perform all the services under the Agreement. It will
not maintain any office, employ any staff, appoint any
agent nor operate any bank account in Hong Kong as long
as there is no supplier in Hong Kong. |
| 4. |
The
ruling |
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The profits to be derived by the Company in providing the services under the Agreement will not be chargeable under Hong Kong profits tax provided that no service will be rendered by the Company in Hong Kong, and there is no supplier in Hong Kong. |
| 5. |
The
period for which the ruling applies |
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This ruling will apply with effect from the year of assessment 2008/09 and subsequent years of assessment up to the termination of the Agreement. |
| 6. |
The
material assumptions in respect of a future event or any
other matter made by the Commissioner |
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There is no assumption made by the Commissioner. |
| 7. |
Date
of ruling issued |
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5 March 2008. |
| 8. |
Commentary |
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Under Section 14 of the Inland Revenue Ordinance, every person who carries on a trade, business or profession in Hong Kong is chargeable to profits tax on the profits arising in or derived from Hong Kong. For service fee income, the source of profits is the place where the services are performed which give rise to the service fee income. In the present case, the profits to be derived by the Company from the Agreement will not be chargeable to profits tax as the relevant services will be performed outside Hong Kong. |
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(This commentary is not a legally binding statement and it does not form part of the Ruling.) |
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