2014 Self reading materials - Important cases

Kong clients were taxable no dispute commissions

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Unformatted text preview: ring Securities (HK) Limited v CIR (2008) Adopted from Deloitte Touche Tohmatsu ING Baring Securities (HK) Limited v CIR (2008) Points at Issue • Commissions earned from trading executed at Hong Kong stock exchange from overseas clients and Hong Kong clients were taxable – no dispute • Commissions earned from trading executed at overseas stock exchange from Hong Kong clients were exempt – under dispute Adopted from Deloitte Touche Tohmatsu ING Baring Securities (HK) Limited v CIR (2008) Agency Principle • The judge is of the view that it is relevant to consider to the acts of the agents of the taxpayer as well as the acts of the taxpayer itself, since the acts of agents are, in law, those of the principal. Operations Test • It is necessary to identify the operations of the taxpayer which in substance give rise to the profits under consideration. • The focus of the argument was on the operations of BSHK which gave rise to the income. Adopted from Deloitte Touche Tohmatsu ING Baring Securities (HK) Limited v CIR (2008) Decision – Source outside Hong Kong Rationale • 1) The judge is of the opinion that since BSHK’s main role in the agency brokerage business in respect of securities traded on the various markets in question was to allow itself to be interposed in such transactions between the ultimate clients and the execution office. • 2) The effect of this was that so far as the executing office was concerned, its client was BSHK, and it acted as BSHK’s agent in executing the trades on the local stock exchange in its country of operation. Adopted from Deloitte Touche Tohmatsu ING Baring Securities (HK) Limited v CIR (2008) • 3) That is the service for which the client of the sub-group pays the commission which it is charged. • 4) Having regard to the position of the execution office as an agent of BSHK, it would seem to follow that the actual execution of the trades was carried out by BSHK through its agents outside Hong Kong. Thus, the income was sourced at the local stock exchange, and thus all income sourced outside Hong Kong. Adopted from Deloitte Touche Tohmatsu CIR V Kwong Mile Services Ltd (2004) (2004) CIR V Li & Fung (Trading) Ltd (2012) Pls read p.42...
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