Description

Territoriality is the cornerstone of Hong Kong’s tax law: it is well-known, and often repeated that profits are taxable in Hong Kong only if and to the extent that they derive from a trade, profession or business carried on in Hong Kong, and are Hong Kong source, which means that they arise from operations that are in substance conducted physically in Hong Kong. That straightforward, intuitive approach to the taxation of business profits hides some serious practical difficulties. The Hong Kong Inland Revenue Department (IRD) has in recent years sought to expand the notion of territoriality by increments, in particular by (ab)using the decision of the Court of Final Appeal in Kim Eng Securities to support the proposition that any activity in Hong Kong may be regarded as sufficient for a company to generate Hong Kong source profits, especially if that company has not paid tax on those profits in any other jurisdiction.

In this seminar, we will discuss recent developments in IRD assessing practice and the landmark decision of the Court of First Instance in Newfair Holdings Limited, which is the first important case on the source of profits in a decade. We will also consider the future of territorial taxation in Hong Kong, and the IRD’s approach and strategies in tax litigation. This seminar should benefit professionals in both accountancy and law interested in tax dispute resolution solutions.