The Asia-Pacific Journal of Taxation (APJT) is a joint effort between the Taxation Institute of Hong Kong and the School of Accounting and Finance of The Hong Kong Polytechnic University.

It publishes research papers, commentary notes, book reviews and articles that address significant issues in the field of taxation relevant to Hong Kong, China and the Asian Pacific region.

The APJT aims to provide quality service to the readership by making its content ore informative and thorough, and by striking a proper balance between professionalism and intellectual stimulation.

The APJT normally publishes two issues every year.

Feature Articles

HK Technical Column(s)
Volume 25, Number 1
A Review of Recent Board of Review Cases (July 2021)


Joint Editors

Jody Wong
The Hong Kong Polytechnic University
Percy Wong
The Hong Kong Polytechnic University
Philip Hung
The Taxation Institute of Hong Kong
Webster Ng
The Taxation Institute of Hong Kong
Anita Tsang
The Taxation Institute of Hong Kong

Editorial Consultants

Agnes Cheng
The Hong Kong Polytechnic University
Nigel Eastaway
MHA MacIntyre Hudson
Michael Olesnicky
Baker & McKenzie, HK
Charles Swenson
University of Southern California, USA
Daniel Thornton
Queen's University, Canada
Jefferson VanderWolk
Squire Patton Boggs, USA
Marcellus Wong
AMTD Group

Editorial Board Members

Brian Andrew
University of Wollongong
Wilson Cheng
Ernst & Young Tax Services Limited
Cheng Chi
KPMG, China
Sarah Chin
Deloitte Touche Tohmatsu, HK
Jeremy Choi
PricewaterhouseCoopers, HK
Spencer Chong
PricewaterhouseCoopers, HK
Wilson Chow
The University of Hong Kong
Daniel Ho
Hong Kong Baptist University
Patrick Ho
FTMS Training System Limited
Betty Kwok
The Hang Seng University of Hong Kong
Simon James
University of Exeter
Jeyapalan Kasipillai
Monash University Malaysia
Patrick Kwong
Ernst & Young Tax Services Limited
Stephen Lee
Sinotax Services Limited
Thomas Lee
Thomas Lee & Partners
Tak Yan Leung
Open University of Hong Kong
Aldous Mak
Hong Kong Institute of Vocational Education (Haking Wong)
Kelvin Mak
Hong Kong University of Science and Technology
Poh Eng Hin
Nanyang Technology University
Anthony Tam
Kalloe Vinod
KPMG, Netherlands
Fergus Wong
PricewaterhouseCoopers, HK
Chris Xing
KPMG, China
Eugene Yeung
KPMG, China

Letters From The Editors

The ongoing work of the Organisation for Economic Cooperation and Development (OECD) on Pillar Two is gathering momentum. As noted in our last letter, the OECD published the blueprints on Pillar One and Pillar Two of the BEPS 2.0 project in October 2020. Pillar Two aims to ensure that large multinational enterprises pay at least a minimum level of tax. On 18 May 2021, the European Commission published its Communication on “Business Taxation for the 21st Century”. In the short term, the Commission sets out a targeted initiative to ensure greater public transparency on the taxes paid by businesses by requesting certain large companies operating in the EU to publish their effective tax rates on the basis of the methodology under discussion in Pillar Two of the OECD negotiations. The Commission also proposed to introduce Pillar Two to the criteria for assessing third countries/areas in the EU list of non-cooperative jurisdictions to incentivise them to join the international agreement. This may be alarming recalling that Hong Kong was once placed on the non-cooperative list until March 2019.


Two days later, on 20 May 2021, the US Treasury Department announced its support for a global minimum corporate tax rate of at least 15 per cent, which is below the 21 per cent minimum it has been seeking to impose on the foreign profits of US-based companies, to end the “race to the bottom” on corporate taxation. On 5 June 2021, the meetings of the Group of Seven finance ministers reached a landmark deal to back a global minimum tax of at least 15 per cent. This will put pressure on other countries to follow suit, including at the meeting of the G20 which is due to be held in July 2021.


These developments will have an important impact on many jurisdictions, including Hong Kong, which is appealing to businesses due to the low tax burden. Hong Kong was ranked the seventh largest tax haven in the world and the largest in Asia in 2021, ahead of Singapore at number nine, according to the Tax Justice Network. While the corporate tax rate in Hong Kong is 16.5 per cent, the effective tax rate is significantly below 15 per cent due to various tax incentives and the territorial source principle. Hong Kong has to respond swiftly. According to the Budget Speech delivered by the Financial Secretary on 24 February 2021, being an international financial and business centre, Hong Kong would be committed to implementing the BEPS 2.0 proposals according to the international consensus, while minimising the compliance burden on affected corporations and the impact on local SMEs where possible when drawing up the response measures. The Government will strive to maintain the simplicity, certainty, and fairness of the local tax regime and will keep up its efforts to improve the business environment and enhance its competitiveness with a view to attracting multinational corporations to invest and operate in Hong Kong.


Over the past few months, a number of laws have been enacted in Hong Kong. On 29 January 2021, the Inland Revenue (Amendment) (Tax Concessions for Carried Interest) Bill 2021 was gazetted; the Bill sought to provide profits tax and salaries tax concessions in relation to particular types of carried interest received by, or accrued to, qualifying persons and qualifying employees from the provision of investment management services. Given that tax consideration is one of the key factors influencing the choice of jurisdiction for fund domiciliation and operations, it is hoped that the tax concessions will attract more private equity funds to operate in Hong Kong, thereby boosting investment management and related activities that would further create business opportunities in related professional services and bring economic benefits to Hong Kong. The Bill was passed on 28 April 2021.


The Inland Revenue (Amendment) (Miscellaneous Provisions) Bill 2021 was gazetted on 19 March 2021; it dealt with the long-awaited codification of the tax treatment for the amalgamation of companies under court-free procedures, and the transfer or succession of certain capital assets. Previously, the tax treatments had been based on the administrative practices of the Inland Revenue Department since the amended Companies Ordinance came into operation in March 2014. The Bill also dealt with enhancing the statutory framework for the furnishing of tax returns, paving the way for mandatory electronic filing of profits tax returns in the future after the development of a new Business Tax Portal is completed by 2025, as well as enhancing the current provisions for the deduction of foreign tax paid in respect of certain income, profits, or gains. The Bill was passed on 2 June 2021.


In relation to stamp duty, the Stamp Duty (Amendment) Bill 2020, which reverted the ad valorem stamp duty on non-residential property transactions to the rates under Scale 2 retrospectively from 26 November 2020, was passed by the Legislative Council on 17 March 2021. To increase Government revenue and ease the fiscal deficit amidst the COVID-19 pandemic, the Revenue (Stamp Duty) Bill 2021 was introduced to raise the rate of stamp duty on stock transfers from 0.1% to 0.13% with effect from 1 August 2021; the Bill was passed on 2 June 2021.


In this issue of the Journal, readers will, as usual, find a variety of articles contributed by a wide spectrum of authors. In the Hong Kong column, in addition to the usual review of recent Board of Review cases, one article examines the changing role of taxation in fiscal policy in the past 150 years and its prospective future, while another one looks at the practical issues in claiming the enhanced deduction for research and development expenditures.


In the International column, one article examines the practical issue of tax resident and permanent establishment exposures arising from the travel restrictions on personnel amidst the pandemic. Another article explores the Indian tax implications for a tax resident holding an individual retirement account in the United States.


An overview of the tax system in Luxembourg is featured in the Belt and Road column, while the Institute’s budget proposals and commentary for 2021/22 are presented in the Budget column.


We would like to express our heartfelt thanks to the authors for contributing the insightful articles. Our special thanks go to the reviewers for their valuable comments. Last but not least, we wish to thank our readers for their continued support. We hope you will enjoy reading the Journal. We welcome any comments and suggestions to improve its content and quality. The Letter to the Editors column is for you to voice your views and suggestions on any tax matters, be they policy issues or practical matters. We need your support for this column.


The Joint Editors


July 2021