COMMISSIONER OF INLAND REVENUE v. LI & FUNG (TRADING) LTD

COMMISSIONER OF INLAND REVENUE v. LI & FUNG (TRADING) LTD

The Board correctly identified that the profit-producing transactions were the sourcing and agency activities performed by overseas local affiliates; those activities occurred outside Hong Kong and thus the disputed profits were sourced offshore and not subject to Hong Kong profits tax. Apportionment was not required on the facts.

Citation
COMMISSIONER OF INLAND REVENUE v. LI & FUNG (TRADING) LTD
Parties
Appellant in HCIA 1/2010 / Respondent in HCIA 3/2010: Li & Fung (Trading) Limited; Respondent in HCIA 1/2010 / Appellant in HCIA 3/2010: Commissioner of Inland Revenue
Court
Court of First Instance
Jurisdiction
Hong Kong
Judgment Date
18 April 2011
Case Number
HCIA3/2010
Procedural Posture
Inland Revenue Appeal (case Stated) / Hearing on Source of Profits Issue in the Court of First Instance (appeal From Board of Review)
Outcome
Commissioner of Inland Revenue's appeal against the Board's conclusion on the source of LFT's disputed profits dismissed (in relation to source issue).
Legal Topics
Source of Profits, Offshore Profits, Apportionment of Profits, Agency Vs Contracting/subcontracting, Precedent Application (ing Baring, Ngai Lik)
Source Language
EN
Taxation Administrative Law Commercial Law Source of Profits Offshore Profits Apportionment of Profits Agency Vs Contracting/subcontracting Precedent Application (ing Baring, Ngai Lik)

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Parties

Li & Fung (Trading) Limited

Appellant in HCIA 1/2010 / Respondent in HCIA 3/2010

Commissioner of Inland Revenue

Respondent in HCIA 1/2010 / Appellant in HCIA 3/2010

Procedural Posture

Inland Revenue Appeal (case Stated) / Hearing on Source of Profits Issue in the Court of First Instance (appeal From Board of Review)

Legal Issues

  1. 1 Whether LFT's profits relating to goods sourced from suppliers outside Hong Kong were offshore and not chargeable to Hong Kong profits tax
  2. 2 Whether apportionment of LFT's 6% commission between Hong Kong and overseas activities was required (issue deferred)

Ratio Decidendi

The Board correctly identified that the profit-producing transactions were the sourcing and agency activities performed by overseas local affiliates; those activities occurred outside Hong Kong and thus the disputed profits were sourced offshore and not subject to Hong Kong profits tax. Apportionment was not required on the facts.

Court Disposition

Commissioner of Inland Revenue's appeal against the Board's conclusion on the source of LFT's disputed profits dismissed (in relation to source issue).

Orders

  • Order Nisi that the Commissioner pay Li & Fung (Trading) Limited's costs of the appeal in relation to the source of LFT's disputed profits
  • Costs to be taxed if not agreed