Hong Kong Case Law: Decisions & Judgments | LexChat

Hong Kong Case Law

Characterisation of receipts (capital v revenue)

  • 19 Oct 2023

    PATRICK COX ASIA LTD v. THE COMMISSIONER OF INLAND REVENUE

    Citation
    [2023] HKCFI 2676
    Court
    Court of First Instance
    Case number
    HCIA4/2023

    The Board’s factual findings that the taxpayer conducted the licensing business in Hong Kong and that the profit‑producing acts (entering the Deed of Cooperation and granting sub‑licences) took place in Hong Kong were supported by evidence; accordingly the 40% royalties and the upfront payment were sourced in Hong Kong; the upfront payment was a revenue receipt received in the ordinary course of the taxpayer’s licensing business and not a capital sum, so the appeal is dismissed.

    • Source of profits
    • Profits tax (s.14 iro)
    • Characterisation of receipts (capital v revenue)
    • Agency and attribution
    • Locality of business operations
    • Evidence and fact‑finding

  • 4 Dec 2012

    AVIATION FUEL SUPPLY CO v. COMMISSIONER OF INLAND REVENUE

    Citation
    AVIATION FUEL SUPPLY CO v. COMMISSIONER OF INLAND REVENUE
    Court
    Court of Appeal
    Case number
    CACV150/2011

    The Court held the Sum (US$449,043,000) payable under the Accelerated Facility Cost Payment was not chargeable to profits tax: it did not arise from AFSC's business receipts under s14, was capital in nature (payment to acquire/terminate AFSC's business interest), and was not brought within s15(1)(m)/15A because there was no transfer of AFSC's right to receive income to the Authority (the Authority's right pre-existed and the transaction amounted to extinguishment/novation or, if a transfer, fell within the s15A(3) exception); further, succession occurred to the Authority so no balancing charg…

    • Characterisation of receipts (capital v revenue)
    • Transfer of right to receive income (s15a)
    • Deeming provisions (s15(1)(m))
    • Franchise/build-operate-transfer arrangements
    • Novation vs transfer
    • Balancing charge and succession of business