• Version
• Download 9
• File Size 189.86 KB
• File Count 1
• Create Date 4 April, 2013
• Last Updated 11 March, 2021

Lesson from the Li & Fung (Trading) Limited Case Decided by the Court of Appeal

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 source of profits of the agent or principal service provider in Hong Kong.