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Publications
and Press Releases : Advance
Ruling Cases : Advance Ruling Case No. 40
Advance Ruling Case No. 40
| 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) |
The Company was
incorporated in Hong Kong. It has been engaged in the
trading of coke and chemical products ("the Products"). |
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(b) |
The Company is a member of
the R Group. Mr. Y, a resident of Country A, is the major
shareholder, chairman and chief executive officer of the
R Group. He is also the sole director of the Company,
and closely manages its businesses and operations. |
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(c) |
The Company has a related
company in Country A, namely, H Limited. It is a company
incorporated in Country A, and is a supplier of the Products. |
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(d) |
The business activities of
the Company are all managed by Mr. Y in the offices of
the R Group or H Limited in Country A. Practically, other
employees of the R Group also assist Mr. Y in managing
the business of the Company on Mr. Y's request from time
to time. |
| 3. |
The
arrangement |
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(a) |
The
Company purchases the Products solely from H Limited and
resells the Products to customers outside Hong Kong and
Country A. None of its customers or suppliers is located
in Hong Kong. |
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(b) |
The Company has
no office (other than a registered office maintained for
meeting the statutory requirements under the Companies
Ordinance of Hong Kong), director, employee or agent in
Hong Kong. All business activities of the Company giving
rise to its trading profits (including the finance and
accounting functions, shipment arrangements, and negotiation,
conclusion and execution of the purchase and sales contracts)
are all carried out by Mr. Y and/or staff of the R Group
or H Limited in Country A, in the manner described in
paragraph 2(d) above. |
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(c) |
The Company maintains
bank accounts in Hong Kong for collection of trade debts
from customers and making of payments to supplier. Mr.
Y operates the bank accounts from Country A. Documents
relating to the banking transactions were prepared in
Country A by staff of the R Group or H Limited and after
approving by Mr. Y, will be faxed to the relevant banks
in Hong Kong for dealing with the banking transactions. |
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(d) |
No transit of
goods in Hong Kong is required as the Products are shipped
directly from Country A to overseas ports where the customers
are located. |
| 4. |
The
ruling |
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The Company will not be chargeable
to Profits Tax under section 14 of the Inland Revenue
Ordinance in respect of profits it derived from transactions
described in the Arrangement. |
| 5. |
The
period for which the ruling applies |
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This ruling will apply for
the year of assessment 2008/09 and subsequent years of
assessment. |
| 6. |
The
material assumptions in respect of a future event or any
other matter made by the Commissioner |
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The Commissioner has assumed
that the subject transactions will be implemented in the
way stated in the ruling application and the ruling. |
| 7. |
Date
of ruling issued |
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15 April 2009. |
| 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.
In the present case, the Company would not effect any
contracts for purchase and sale of the Products in Hong
Kong. The trading profits to be derived by the Company
are offshore sourced. Therefore, section 14 does not apply. |
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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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