The Stain of Spotless Services Spreads to Hong Kong: The Tai Hing Cotton Mill Case

On 4 December 2007, the Hong Kong Court of Final Appeal issued its judgment in Commissioner of Inland Revenue v. Tai Hing Cotton Mill (Development) Ltd. The case was about whether the Commissioner was empowered by section 61A of the Inland Revenue Ordinance to adjust the price of a sale of land for tax purposes. The Court of Final Appeal’s leading judgment was written by Lord Hoffmann, a non-permanent judge of the Court and a member of the House of Lords in the United Kingdom. Lord Hoffmann adopted a broad interpretation of section 61A, Hong Kong’s general anti-avoidance statute, in finding that the Commissioner was entitled to adjust the terms of a genuine commercial transaction entered into by the taxpayer. In doing so, he relied heavily on a 1996 decision of the Australian High Court, Commissioner of Taxation v. Spotless Services Ltd. In this article, I will argue that Lord Hoffmann erred, like the Australian High Court before him, in...
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Lessons from Recent Board of Review Decisions

A total of 24 cases have been published in the recent First and Second Supplements to Volume 22 of the Hong Kong Inland Revenue Board of Review Decisions: six penalty tax cases, 10 salaries tax cases, and eight profits tax cases. These cases are discussed in the following paragraphs....
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A Review of Selected Cases from Recent Board of Review Decisions

This paper has selected 18 cases from Volume 21 and the first supplement to Volume 21 of the Hong Kong Inland Revenue Board of Review Decisions for discussion — there are nine profits tax cases and nine salaries tax cases. Of the profits tax cases, there are two cases on source of profits, two cases on adventure in the nature of trade, four cases on deduction claims, and one case on a section 70A claim. Of the salaries tax cases, there are four cases on home loan interest deduction, one case on offshore service exclusion, two cases on employment cessation income, one case on housing benefit, and one case on a deduction claim....
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Business Profits — To What Extent The Work Done By Persons Other Than The Taxpayer Himself Is Relevant To Determine The Source of Profits?

The recent Court of Final Appeal decision in ING Baring Securities (Hong Kong) Limited v. Commissioner of Inland Revenue1 shed light on the controversial issue — to what extent the work done by persons other than the taxpayer himself or herself is relevant in determining the source of profits. The Court of Final Appeal in Hong Kong unanimously held that, in considering the source of profits of a taxpayer, transactions which produced the profit in question carried out by a person acting on the taxpayer’s instructions on his behalf and for his account are relevant even though that person is not the agent of the taxpayer in a full legal sense....
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