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Publications and Press Releases : Advance Ruling
Cases : Advance Ruling Case No. 8
Advance Ruling Case No. 8
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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The Company was incorporated
in Hong Kong on 25 March 2002. |
| (b)
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Its business will be the
trading of processed fruits and food related products
outside Hong Kong. It will purchase from suppliers in
Asia, excluding Hong Kong and resell to customers mainly
in Europe and other countries, excluding Hong Kong. |
| (c)
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The Company maintains offices
in Taiwan and Indonesia. The two directors, who will
be managing the daily operations of the Company, will
be residing in Indonesia and Taiwan respectively. Two
Marketing & Procurement Officers are presently located
in the Indonesian office. The Company aims to recruit
additional Marketing & Procurement Officers to be
located in the to-be-set-up Thailand office. |
| (d)
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As all the negotiation processes
of sales and purchase transactions will be carried out
in different countries, a centralized administrative
function is required to administer and co-ordinate work
performed by the employees and directors in these various
locations. Hong Kong has been selected as the "centralized
administrative office" in order to contribute to
the smooth running of the administrative functions. |
| (e)
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The Company therefore plans
to set up this office in Hong Kong. The staff in the
Hong Kong office are to undertake the following activities: |
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i. |
issuing or accepting invoices (not orders)
to or from an ex-Hong Kong customer or supplier on the
basis of contracts of sale or purchase already effected
by an ex-Hong Kong associate; |
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ii. |
arranging letters of credit; |
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iii. |
operating a bank account, making and
receiving payments; and |
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iv. |
maintaining accounting records. |
3. The arrangement
| (a)
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The Company intends to enter into purchase
contracts with an Indonesian supplier, S Ltd., and sales
contracts with a US customer, C Ltd. |
| (b)
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S Ltd. was located by the Taiwanese director
during a business trip to Indonesia, whilst C Ltd. was
located by the Indonesian director at a German food
exhibition. Communication with both supplier and customer
has been followed up outside Hong Kong via e-mail. |
| (c)
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Upon conclusion of both the purchase
and sales agreements with S Ltd. and C Ltd., arrangements
will be made outside Hong Kong for direct shipment from
S Ltd. to C Ltd. The goods will not pass through Hong
Kong and no stock of merchandise would be maintained
in Hong Kong. |
| (d)
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The Hong Kong office will perform the
functions of issuing or accepting invoices, arranging
letters of credit, operating a bank account, making
and receiving payments and maintaining accounting records. |
4. The ruling
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The profits to be derived by the Company
with respect to the trading transactions with supplier
S Ltd. and customer C Ltd. will not be taxable under
section 14 of the IRO. The ruling only applies to trading
transactions to be entered into by the Company with
the subject supplier and customer identified herein. |
5. The period for which the ruling applies
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This ruling will apply in the years
of assessment 2002/2003 and 2003/2004. |
| 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 trading transactions would be implemented
in the way stated in the ruling application and the ruling. |
7. Date of ruling issued
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