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2014 Self reading materials - Important cases

Adopted from deloitte touche tohmatsu wardley

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Unformatted text preview: of commission from overseas brokers, having obtained prior approval from its clients approval Adopted from Deloitte Touche Tohmatsu Whether the rebate received from overseas brokers was taxable in Hong Kong? Adopted from Deloitte Touche Tohmatsu Wardley Investments Wardley BoR: the rebates were not taxable as they arose from the BoR: not activities of the overseas brokers outside HK activities HC: for CIR, the rebates did not represent income but a HC: reduction of expenses reduction CA: for CIR – the rebate is taxable – T had done nothing abroad to earn the rebates – Rebate was additional remuneration paid to Wardley for its services to HK clients in Hong Kong – The Taxpayer while carrying on business in HK, instructed the overseas broker from HK to execute a particular transaction. – T was carrying out its contractual duties to its client and performing services under the management agreement in HK and in return receiving the management fee as well as the “additional remuneration as manager” to which it was entitled under the agreement. Adopted from Deloitte Touche Tohmatsu Kim Eng Securities (HK) Ltd (2007) Background Singapore stock market in 1990 – Minimum commission rules: Stockbrokers in Singapore were permitted to rebate one half of the commission to foreign brokers. – A foreign broker was one who was not a member of the Singapore Stock Exchange but one who held a dealer’s licence from another exchange. – Kim Eng Securities (HK) fell into that category. – Kim Eng Group took advantage of the system Adopted from Deloitte Touche Tohmatsu Kim Eng Securities (HK) Ltd (2007) The Arrangement: Whether the rebates were sourced in Hong Kong? Adopted from Deloitte Touche Tohmatsu Kim Eng Securities (HK) Ltd (2007) Decision • The taxpayer would not have earned its share of the minimum commission if the overseas brokers had not executed the relevant transactions, and these took place abroad •BUT this does not explain why the taxpayer came into the picture at all. •What the taxpayer was doing to earn its share of the commission was bringing together the complementary needs of the customer (to pay less than the minimum commission) and the overseas broker (to earn a portion of the minimum commission from customers who were not prepared to pay the minimum commission), and that bringing together the taxpayer did in Hong Kong Decision – Source in Hong Kong Consistent with the Wardley case Adopted from Deloitte Touche Tohmatsu ING Ba...
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