Hong Kong Case Law: Decisions & Judgments

Topic

Operations test

Legal area

Court

30 Aug 2024

TOUAX CONTAINER INVESTMENT LTD v. THE COMMISSIONER OF INLAND REVENUE

Citation

[2024] HKCFI 2242
Court

Court of First Instance
Case number

HCIA1/2023

Ground 1 dismissed: Board did not err in finding that the taxpayer carried on a business in Hong Kong based on consistent use of the Hong Kong address and documentary evidence. Grounds 2–4 allowed: Board's reasoning on source of profits was insufficiently reasoned and relied on irrelevant or unclear inferences as to profit‑producing operations; matter remitted under s.69AA(1)(a)(ii) IRO to a freshly constituted three‑person Board for rehearing on whether trading and leasing profits were sourced in Hong Kong for the six years in issue.
12 May 2004

CONSCO TRADING CO LTD v. THE COMMISSIONER OF INLAND REVENUE

Citation

CONSCO TRADING CO LTD v. THE COMMISSIONER OF INLAND REVENUE
Court

Court of First Instance
Case number

HCIA3/2003

The Court affirmed the Board's application of the operations test and concluded on the facts found that the preponderance of the Taxpayer's profit-generating activities occurred in Hong Kong (sourcing, financing, letters of credit, invoicing and receipts), that Beijing Sanjing was an independent contractor (not the Taxpayer's agent) and Mr Wang represented Beijing Sanjing, and therefore the Taxpayer's profits arose in or were derived from Hong Kong; apportionment was not permitted in the stated case and the appeal was dismissed.
17 Dec 1996

COMMISSIONER OF INLAND REVENUE v. MAGNA INDUSTRIAL CO LTD

Citation

COMMISSIONER OF INLAND REVENUE v. MAGNA INDUSTRIAL CO LTD
Court

Court of Appeal
Case number

CACV102/1996

On the facts found by the Board of Review the substantial profit-making activity — the sales network, authority of export managers to bind the company and contracts effected overseas — meant the profits in substance arose outside Hong Kong; the Board's conclusion was sustainable in law and the High Court judge erred in disregarding the subsidiary's separate legal identity without it being part of the Commissioner's case.
17 Jan 1995

COMMISSIONER OF INLAND REVENUE v. EURO TECH (FAR EAST) LTD

Citation

COMMISSIONER OF INLAND REVENUE v. EURO TECH (FAR EAST) LTD
Court

Court of First Instance
Case number

HCIA2/1994

The Board's three contested factual findings were not reasonably open on the evidence; documentary and commercial reality demonstrate that the taxpayer performed the core profit-making operations in Hong Kong (obtaining orders, placing confirmatory orders, invoicing and financial arrangements), therefore the profits arose in or were derived from Hong Kong; the Board's contrary conclusion was set aside and the case remitted to the Board for amendment under s.69(5).
15 Dec 1988

BANK OF INDIA v. COMMISSIONER OF INLAND REVENUE

Citation

BANK OF INDIA v. COMMISSIONER OF INLAND REVENUE
Court

Court of First Instance
Case number

HCIA4/1988

The court applied the operations test as formulated in the Hong Kong authorities (Sinolink and Hong Kong and Whampoa Dock) and held that the source of the discounting profits was Hong Kong because the decisive operations — contract formation, purchase/discounting, processing, treasury/funding and issuance of instructions — occurred in Hong Kong; routine presentation overseas by correspondent banks did not constitute the operations in substance producing the profit and therefore the Board of Review was correct to treat the profits as arising in or derived from Hong Kong.

Hong Kong Case Law

TOUAX CONTAINER INVESTMENT LTD v. THE COMMISSIONER OF INLAND REVENUE

CONSCO TRADING CO LTD v. THE COMMISSIONER OF INLAND REVENUE

COMMISSIONER OF INLAND REVENUE v. MAGNA INDUSTRIAL CO LTD

COMMISSIONER OF INLAND REVENUE v. EURO TECH (FAR EAST) LTD

BANK OF INDIA v. COMMISSIONER OF INLAND REVENUE