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.


Joint Editors

Jody Wong
The Hong Kong Polytechnic University
Percy Wong
The Hong Kong Polytechnic University
Philip Hung
The Taxation Institute of Hong Kong
Carol Liu
The Taxation Institute of Hong Kong
Kelvin Mak
The Taxation Institute of Hong Kong

Editorial Consultants

Nancy Su
The Hong Kong Polytechnic University
Nigel Eastaway
MHA MacIntyre Hudson
Michael Olesnicky
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
Simon James
University of Exeter
Jeyapalan Kasipillai
Monash University Malaysia
Betty Kwok
The Hang Seng University of Hong Kong
Patrick Kwong
Ernst & Young Tax Services Limited
David Lai
Hong Kong University of Science and Technology
Stephen Lee
Sinotax Services Limited
Thomas Lee
Thomas Lee & Partners
Tak Yan Leung
University of Sunshine Coast
Poh Eng Hin
Nanyang Technology University
Anthony Tam
Kalloe Vinod
KPMG, Netherlands
Jingyi Wang
Chinese University of Hong Kong
Fergus Wong
PricewaterhouseCoopers, HK
Chris Xing
KPMG, China
Eugene Yeung
KPMG, China

Letters From The Editors

Letter from the Editors

In the last quarter of 2023, there were numerous updates regarding Hong Kong tax law and practice. The notable ones included the adjustments to the demand-side management measures for residential properties that came into effect from 25 October 2023; the amendment of the stamp duty rate on stock transfers; the amendments to the tax law on aircraft leasing tax concessions; the tax law amendments that cover foreign-sourced disposal gains on assets other than shares or equity interests under Hong Kong’s foreign-sourced income exemption (“FSIE”) regime; and the tax law amendments concerning gains made by holders on the disposal of qualifying equity interests.

In the 2023 Policy Address, amongst other proposals, the Chief Executive of the HKSAR announced that the stamp duty rules would be adjusted to 1) shorten the applicable period of the special stamp duty from three years to two years; 2) reduce the respective rates of the buyer’s stamp duty and the new residential stamp duty from 15 to 7.5 per cent; and 3) introduce a stamp duty suspension arrangement (as opposed to “assess first and refund later”) for incoming talents’ acquisition of residential properties. Although these adjustments need to be implemented through the relevant legislative processes, the Chief Executive has exercised his statutory powers to give them full force and effect of law from 25 October 2023.

With the fiscal objectives to lower investors’ transaction costs, improve market sentiment, and enhance the competitiveness of Hong Kong as a world-class financial centre, the Stamp Duty (Amendment) (Stock Transfer) Bill 2023 was passed on 15 November 2023. This bill gave effect to the proposal to lower the stamp duty rate on stock transfers from 0.13 to 0.1 per cent of the consideration (or the market value if it is higher) per transaction. It came into operation on 17 November 2023.

To strengthen the competitiveness of Hong Kong in the global aircraft leasing industry, the HKSAR Government gazetted the Inland Revenue (Amendment) (Aircraft Leasing Tax Concessions) Bill 2023 on 17 November 2023. The legislative proposals contained in the bill include providing qualifying aircraft lessors with a tax deduction for the acquisition cost of aircraft and allowing a deduction of interest payable for the acquisition of aircraft to a financier outside Hong Kong who is not a financial institution and may be an associate of qualifying aircraft lessors.

The Inland Revenue (Amendment) (Taxation on Foreign-sourced Disposal Gains) Bill 2023 was passed on 29 November 2023. It refines Hong Kong’s FSIE regime by expanding the scope of assets in relation to foreign-sourced disposal gains to cover assets other than shares or equity interests. Under the refined FSIE regime, the profits tax exemption for foreign-sourced non-intellectual property (“non-IP”) disposal gains remains if the multinational enterprise entity has adequate economic substance in Hong Kong, whereas for foreign-sourced IP disposal gains, the extent of profits tax exemption continues to be determined by the nexus approach. The rules introduced under the refined FSIE regime now cover disposal gains other than equity interest disposal gains accrued on or after 1 January 2024. Because of the newly inserted “disposal gain” issue in the refined regime, the law amendment introduces an intra-group transfer, as the fourth exception to the FSIE rules, to defer the charging of tax if the property concerned is transferred between associated entities, subject to specific anti-abuse rules. Readers can obtain a detailed explanation and illustrations via the URL IRD: Foreign-sourced Income Exemption[1].

HKSAR has taken a major step forward to provide for a tax certainty enhancement scheme for onshore disposal gains. The Inland Revenue (Amendment) (Disposal Gain by Holder of Qualifying Equity Interests) Ordinance 2023 was enacted on 15 December 2023. Under the scheme, any onshore disposal gain (which occurs on or after 1 January 2024 and accrues in the basis period for a year of assessment commencing on or after 1 April 2023) derived by an eligible investor entity meeting specified conditions would be regarded as capital in nature not subject to profits tax in Hong Kong. It renders the conventional “badges of trade” analysis obsolete. Readers can gain an understanding of the scheme via the URL IRD: Onshore Gain on Disposal of Equity Interests – Tax Certainty Enhancement Scheme[2].

Having provided a cursory glance into the major legislative amendments to Hong Kong tax laws, we now summarise the messages of the authors of the articles included in the current issue of the Journal. Seven Board of Review cases are summarised in an article in the HK Technical column; apart from the technical contents of each case, the cases remind us that it is essential to observe the administrative requirements stipulated under the Inland Revenue Ordinance, Cap. 112, especially under situations such as appeals against tax assessments, whether or not the taxpayer has a reasonable excuse to breach certain provisions of the tax legislation, etc. In the same column, two articles cover contemporary tax practice in Hong Kong: One article uses various recent salaries tax case judgments concluded by courts to outline the current salaries tax landscape concerning a contentious issue (i.e., taxation of lump sum payments); the other discusses in what ways money laundering is relevant to tax professionals and how they can mitigate the risks involved.

In the PRC & International Technical column, there are three articles covering a diverse range of tax issues across major continents. The first article systematically outlines, with examples, the “substance” requirements under the tax laws in mainland China concerning income tax preferential treatments in qualified zones or designated regions. The second article covers the implementation of Pillar 2 in the context of a qualified domestic minimum top-up tax (“QDMTT”) and the GloBE Rules. The last article in the column uses three hypothetical examples to explain and illustrate the tax rules and principles of Canada concerning taxes on the basis of residence. In the Belt & Road column, there is a co-authored article reviewing the 2023 legislative changes, including new tax measures enacted, or introduced but not yet passed, in regard to New Zealand taxation.

Our heartfelt thanks go to the authors for their dedication and effort in contributing to the articles published in this volume. We are grateful to the reviewers for their valuable comments. Lastly, we wish to express our gratitude for the continuing support we receive from our readers, which is a key impetus in our ongoing efforts to streamline our work and shape the Journal. We gladly welcome any comments and critiques you may have as a reader. Letters to the editors are also very much encouraged and will be considered for publication on our website or in print.

The Joint Editors

January 2024


[2] IRD: Onshore Gain on Disposal of Equity Interests – Tax Certainty Enhancement Scheme