Category: APJT Archive

The issues surrounding intangibles have been a significant area of debate and discussion in the world of transfer pricing in recent times. As the market values of companies have grown steadily over the past several decades, the contribution of intangible assets to such enterprise values has also grown. Ocean Tomo, LLC, an Intellectual Capital Merchant Banc™ firm, in its annual study of the composition of equity market value, provided data from 2009 that indicated that the implied intangible asset value of the S&P 500 reached 80 per cent, an all-time high for the years covered by the firm’s research, which extends back to 1975. The steadily increasing share of intangibles in overall firm values is summarised in Table 1....

Since the Enterprise Income Tax Reform in 2008, Chinese tax authorities have been increasing their scrutiny of cross-border transactions and have been challenging the perceived abusive use of holding structures and other offshore tax arrangements. One of the areas which Chinese tax authorities have been focusing on is whether the offshore recipient of dividends, interest, and royalties from mainland Chinese enterprises is, in fact, the “beneficial owner” thereof under China’s double tax treaties or arrangements (“DTAs”)....

Anti-tax avoidance has become a common effort of the international tax community to prevent companies from eroding the tax base of the source/resident countries and paying tax nowhere.1 China is no exception. The year 2012 witnessed a significant growth in China’s tax collection through anti-tax avoidance efforts. According to the latest statistics published by the State Administration of Taxation (SAT),2 the total amount of tax collected from anti-tax avoidance efforts amounted to RMB34.6 billion (or approx. US$5.5 billion), representing a year-to-year growth of 45 per cent over the year 2011 and 74 times the amount collected in 2005. The Chinese tax authorities initiated 233 anti-tax avoidance cases in 2012. Among the 175 settled cases, the average amount of tax collected was RMB26.2 million (or approx. US$4.2 million) per case, and the largest single sum of tax collected was RMB843 million (US$134 million). Altogether, there were nine cases in which the reclaimed tax amounted to over RMB100 million and 59 cases...

Instruments for the transfer of immovable property in Hong Kong have been subject to an ad valorem stamp duty (AVD) at a range of rates (currently up to a maximum rate of 4.25 per cent) depending on the amount or value of the consideration paid for the property. For a residential property, AVD is levied on the agreement for sale and purchase, whereas for a non-residential property, it is imposed on the assignment. The buyer and the seller are jointly and severally liable for paying AVD. Since the onset of the global financial crisis in late 2008, abundant liquidity and historically low interest rates have contributed to an influx of capital into Hong Kong, fuelling a speculative market in Hong Kong property and a consequent surge in property prices. In fact, property prices in Hong Kong have skyrocketed to such a level that home ownership is now unattainable for the general population. In an effort to address the pressing housing...

From the 1st, 2nd, and 3rd Supplements of the 27th Volume of the Decisions of the Board of Revenue (Inland Revenue), a total of 37 cases were recorded: 12 cases on salaries tax, 1 on personal assessment, 17 on profits tax, 1 on penalty tax, 4 on late appeal, and 2 on stated case. The cases included an attack on a tax avoidance scheme, capital gains and offshore profit issues, home loan interest deduction, eligibility for personal assessment, and other topics....

Discretion is an inevitable part of bureaucratic action, and tax discretion is situated between the tax authority’s immediate concern for maximizing revenue and the wider concern for good governance. Striking a balance between the conflicting choices is more challenging in developing countries than in other countries. This paper explores the extent of tax discretion in the context of value added tax (VAT) in Bangladesh. Based primarily on documentary analysis, the paper adopts the social science perspective to argue that the discretionary powers in the Bangladesh VAT regime are strong and endemic enough to infringe taxpayers’ rights to certainty, transparency, and fairness in a tax system, and hence they require an effective control mechanism to confine, structure, and check them. The paper argues that besides striking a balance between the discretion of the revenue authority and the rule of law, the administrative discretionary behaviour in the revenue authority needs to be streamlined by the social control that entails a paradigm of...

This paper was composed with the sole purpose of studying the term “beneficial ownership” (BO) in the context of the prevailing China tax regulations and highlighting the assessment of BO under current international practices, including the OECD model and other jurisdictions. This paper conducts an in-depth discussion on Circular 601 and Announcement 30 promulgated in Mainland China and also the related articles of the OECD Model Convention. Relevant practical and court cases are provided to demonstrate the way(s) tax authorities observe the relevant rules from different perspectives. At the end of the paper, an attempt is made to summarise the development trend of Chinese tax rules on BO assessment, compare the tax regimes in other jurisdictions with regard to the determination of BO, and provide a general p icture of our findings and insights....

In a global economy that is increasingly knowledge based, the contribution of intellectual property (“IP”) is often of great importance to business success. IP, such as cutting-edge technology or a well-known brand name associated with high standard of quality, brings additional incremental value to businesses. The quality of revenue, business sustainability, and growth are all highly related to IP....

Aside from avoiding double taxation in respect of cross-border transactions and facilitating trade and investment between two jurisdictions by way of lowering withholding taxes on certain passive income flows, the prevention of tax evasion is also a key purpose of a comprehensive avoidance of double taxation agreement1 (“CDTA”). In this regard, a CDTA will normally include an exchange-of-information (“EoI”) article specifying that the tax authorities of the two jurisdictions can exchange certain information in respect of taxpayers in order to prevent tax evasion....

The Li & Fung (Trading) Ltd (Li & Fung) case was heard by the Court of Appeal (COA) on 14 and 15 February 2012. The COA upheld the Court of First Instance’s judgment and unanimously handed down the case on 19 March 2012.1 As the Inland Revenue Department (IRD) has decided not to appeal against the COA’s decision to the Court of Final Appeal (CFA), the COA’s decision that the commission earned by Li & Fung is offshore profit and not taxable is thus now final. It is observed that the COA’s decision follows the well-established principle in the CFA’s decision in ING Baring Securities (Hong Kong) Ltd v. CIR (ING Baring case)2 that to determine the source of profits, the focus should be on direct profitproducing transactions rather than on antecedent or incidental business activities. The COA’s decision also indicates that, where appropriate, the activities of a subagent or a subcontracted service provider would be relevant in determining the...