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 2
A Review of Recent Board of Review Cases (December 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
Kelvin Mak
The Taxation Institute of Hong Kong
Webster Ng
The Taxation Institute of Hong Kong

Editorial Consultants

Nancy Su
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

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
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
Hong Kong Metropolitan University
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

In this letter from the editors, two recent issues will be discussed: first, the inclusion of Hong Kong in the European Union’s watch list; second, the e-filing proposals of the Inland Revenue Department (IRD).

On 5 October 2021, the European Union (EU) announced the inclusion of Hong Kong in its watch list on tax co-operation as it considered that the non-taxation of certain foreign-sourced passive income in Hong Kong might lead to situations of “double non-taxation”. The EU is concerned that corporations with no substantial economic activity in Hong Kong are not subject to tax in respect of certain offshore passive income (such as interest and royalties), hence resulting in “double non-taxation”. Hong Kong’s inclusion in the list is undoubtedly of great concern to the HKSAR Government, which responded that “as an international financial centre, Hong Kong has all along been actively participating in and supportive of international tax co-operation.” To address the EU’s concern, the HKSAR Government has made a commitment to the EU to amend the Inland Revenue Ordinance (IRO) by the end of 2022 and to implement relevant measures in 2023 (see

Notwithstanding its commitment to amend the IRO, the HKSAR Government stressed that “Hong Kong will continue to adopt the territorial source principle of taxation… [and] endeavour to uphold our simple, certain and low-tax regime…”. Moreover, the HKSAR Government stated that “the proposed legislative amendments will merely target corporations, particularly those with no substantial economic activity in Hong Kong… Individual taxpayers will not be affected. As to financial institutions, their offshore interest income is already subject to profits tax under the Inland Revenue Ordinance at present, and hence the legislative amendments will not increase their tax burden” (see

On the other hand, the EU published the guidance on the foreign-sourced income exemption regime in October 2019 and commenced a corresponding assessment of the tax arrangements of a number of tax jurisdictions (including Hong Kong). The assessment aimed at addressing situations where offshore shell companies obtain tax benefits through “double non-taxation”. The HKSAR Government has been in contact with the EU on its assessment and has been actively engaging with the EU on the follow-up work.

The HKSAR Government tried to comfort the Hong Kong business community by expressing that “Hong Kong enterprises will not be subject to defensive tax measures imposed by the EU as a result of being included in the watchlist on tax co-operation. The HKSAR Government will request the EU to swiftly remove Hong Kong from the watchlist after amending the relevant tax arrangements.”

The EU will monitor the measures implemented by Hong Kong to comply with its commitments. If the issue is not resolved by 31 December 2022, Hong Kong will be put on the EU’s “blacklist”, where certain defensive measures may be applied by EU member states (e.g. non-deductibility of costs, controlled foreign company rules, withholding tax measures, etc).

Apart from amending its “territorial source regime”, Hong Kong has committed to implementing the BEPS 2.0 Pillar Two project (Pillar Two) by 1 January 2023. For taxpayers with consolidated revenues over EUR750 million, the impact of Pillar Two is likely to be far more significant than the impact of the territorial regime revisions as their effective tax rate will be required to be at least 15 per cent if Hong Kong introduces a domestic minimum tax rate.

As to the issue of e-filing, Hong Kong’s Legislative Council passed the Inland Revenue (Amendment) (Miscellaneous Provisions) Bill 2021 on 2 June 2021. Inter alia, the bill covers the filing of tax returns. The Secretary for Financial Services and the Treasury, Mr. Christopher Hui, said that the bill would “provide the legal basis to enable more businesses to voluntarily file tax returns, including financial statements, electronically, with the ultimate goal of implementing electronic filing of profits tax returns through the Business Tax Portal” (see In November 2021, the IRD issued a Consultation Paper on its e-filing proposals. Under the proposals, the IRD encourages businesses or interested parties (e.g. software suppliers) to upgrade or develop their own computer programs which are capable of converting their existing financial statements into iXBRL (i.e. Inline eXtensible Business Reporting Language) format, creating iXBRL tax computations, and generating the required iXBRL data files for e-filing purposes. The IRD proposes to upload a preliminary edition of the IRD Taxonomy Package and the specifications in iXBRL schemas onto its website in early 2022. To support taxpayers, the IRD will provide free iXBRL preparation tools to assist taxpayers in converting financial statements and tax computations in Word or Excel files to iXBRL data files. The IRD will also provide a one-on-one e-concierge consultation on the use of the preparation tools. The proposed implementation timelines of the e-filing project are as follows:

  • uploading of the IRD Taxonomy onto the IRD’s website in early 2022;

  • rollout of the iXBRL Preparation Tools by the end of 2022 or early 2023;

  • launch of trial/pilot run in the fourth quarter of 2022;

  • voluntary and mandatory e-filing of profits tax returns by April 2023 and 2025 respectively for large multinational enterprises; and

  • mandatory e-filing of profits tax returns in general by 2030 tentatively.

The IRD’s goal should be implementing e-filing for all profits tax payers in general. Hence, businesses should review their own existing resources and capability on e-filing and assess whether it is more beneficial for them to do the e-filing in-house or outsource it to a service provider. If they prefer to handle the e-filing themselves, they should assess what accounting system changes/upgrade will be required and how to leverage the IRD’s free conversion tools and one-on-one e-concierge consultation. Taxpayers and services providers are highly encouraged to participate in the trial/pilot run and provide feedback and suggestions. The IRD might consider extending its promotion of e-filing proposals to more profits tax payers given the profound impact of e-filing on IT resource requirements.

Let’s go back to the Journal. In this issue, there are three articles in the Hong Kong Tax Column: an article examining in outline and from a practitioner’s perspective the options available in amending the IRO in response to the EU’s inclusion of Hong Kong on its watch list; an article summarising the cases reported in first and second supplements of Volume 35 of the Board of Review Decisions; and an article discussing issues relating to charitable institutions, particularly what common activities of charities constitute a “business” and the tax implications of a charity’s non-Hong Kong activities. In the China Tax Column, there are two articles on the development of tax policies, respectively for the Greater Bay Area and the Hainan Free Trade Zone. The Philippines, an emerging trading partner of China and Hong Kong, is the reported country in the One Belt One Road Column.

Our heartfelt thanks go to the authors for their efforts and commitment in writing such insightful articles. Our great thanks also go 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 for our ongoing efforts to develop and improve the Journal.


The Joint Editors

January 2022