Hong Kong Case Law: Decisions & Judgments

Topic

Tax avoidance

Legal area

Court

13 Mar 2024

CHANG HSIEN SUNG v. CHEN CHIN HO

Citation

[2024] HKCFI 764
Court

Court of First Instance
Case number

HCA2414/2018

The Plaintiff failed to prove the alleged August 1997 Oral Agreement and the 2000–2001 Acquisition Agreement; the payments to the Defendant (NTD2.6m and other periodic sums) were paid by SLTW and constituted dividends/distributions (or similar company payments), not consideration from the Plaintiff; the March 2009 acknowledgements were signed for tax avoidance and do not evidence sale or transfer of beneficial interests; accordingly there is no trust over the 3,000 SLHK shares and the Plaintiff's claims are dismissed.
31 Aug 2009

KAM KIU (HONG KONG) LTD v. COMMISSIONER OF INLAND REVENUE

Citation

KAM KIU (HONG KONG) LTD v. COMMISSIONER OF INLAND REVENUE
Court

Court of First Instance
Case number

HCAL61/2009

The Commissioner acted within lawful discretion under IRO s.71(2) in imposing a conditional hold‑over requiring TRCs because there were reasonable grounds and indicia to doubt the overseas sourcing of KMY's profits and the applicant failed to adduce evidence of financial hardship or to make a proper case for an unconditional hold‑over; the court will not substitute its own assessment for the Commissioner's absent Wednesbury‑level irrationality.
18 Dec 2008

SHUI ON CREDIT CO LTD v. COMMISSIONER OF INLAND REVENUE

Citation

SHUI ON CREDIT CO LTD v. COMMISSIONER OF INLAND REVENUE
Court

Court of Appeal
Case number

CACV85/2008

The Court held that the Board of Review and Commissioner were correct: the deferred expenditure was properly treated as capital or otherwise disallowable, and s.61A empowers the Commissioner to determine assessable profits and adjust transactions that confer a tax benefit; the Board properly exercised its discretion to refuse the taxpayer leave to raise the limitation/pleading point; therefore the appeal was dismissed.
15 Oct 2008

NGAI LIK ELECTRONICS CO LTD v. COMMISSIONER OF INLAND REVENUE

Citation

NGAI LIK ELECTRONICS CO LTD v. COMMISSIONER OF INLAND REVENUE
Court

Court of Appeal
Case number

CACV22/2008

The Court upheld the Board of Review and the judge: the identified scheme had the effect of conferring a tax benefit by enabling profits to be shifted offshore through non-arm's-length transfer pricing and related arrangements, and having considered the seven matters in s61A(1) the dominant purpose was to obtain that tax benefit; quantification of the benefit was not required and s61A(2) assessments to counteract the benefit were lawful and applicable.
13 Mar 2008

COMMISSIONER OF INLAND REVENUE v. TAI HING COTTON MILL (DEVELOPMENT) LTD

Citation

COMMISSIONER OF INLAND REVENUE v. TAI HING COTTON MILL (DEVELOPMENT) LTD
Court

Court of Final Appeal
Case number

FACV2/2007

Raising alternative arguments (including the section 16 deductibility issue) on the same evidence was legitimate and did not significantly increase the length or cost of the proceedings; accordingly the general rule that costs follow the event applies and the Commissioner is entitled to her costs in this Court and in the courts below.
11 Dec 2007

NGAI LIK ELECTRONICS CO LTD v. COMMISSIONER OF INLAND REVENUE

Citation

NGAI LIK ELECTRONICS CO LTD v. COMMISSIONER OF INLAND REVENUE
Court

Court of First Instance
Case number

HCIA5/2007

Given the Board's unchallenged findings that prices were fixed after the event by accountants, arbitrary annual discounts redistributed profits among group companies, and management fees were nominal despite substantial services, the scheme operated to transfer assessable profits away from Ngai Lik and the dominant purpose of the transaction was to obtain a tax benefit; accordingly the Board's application of s.61A and its upholding of the Commissioner’s assessments were legally correct.
4 Dec 2007

COMMISSIONER OF INLAND REVENUE v. HIT FINANCE LTD

Citation

COMMISSIONER OF INLAND REVENUE v. HIT FINANCE LTD
Court

Court of Final Appeal
Case number

FACV8/2007

Although the transactions were real, the introduction of Strategic and the circular borrowing were found to have the sole or predominant purpose of securing a tax benefit by enabling larger interest deductions; under s.61A the Commissioner was entitled to counteract that benefit by disallowing interest deductions in excess of the net proceeds actually received by the group, so the assessment on Hongkong International Terminals Limited was confirmed while the appeal against Hit Finance Limited was dismissed.
4 Dec 2007

COMMISSIONER OF INLAND REVENUE v. TAI HING COTTON MILL (DEVELOPMENT) LTD

Citation

COMMISSIONER OF INLAND REVENUE v. TAI HING COTTON MILL (DEVELOPMENT) LTD
Court

Court of Final Appeal
Case number

FACV2/2007

The Court held that the profit-sharing sale to the wholly owned subsidiary did have the effect of conferring a tax benefit under s.61A because it reduced the group's tax by enabling larger deductions than market value would have allowed, that the dominant purpose of the chosen price formula was to obtain that tax benefit, and that the Commissioner validly could assess on the alternative hypothesis of market value under s.61A(2)(b); appeal allowed and assessment confirmed.
13 Feb 2007

HONGKONG INTERNATIONAL TERMINALS LTD v. COMMISSIONER OF INLAND REVENUE

Citation

HONGKONG INTERNATIONAL TERMINALS LTD v. COMMISSIONER OF INLAND REVENUE
Court

Court of First Instance
Case number

HCIA15/2005

The Board erred in law in holding that 'no real money' was raised by the Strategic Notes and that they were artificial and fictitious; the Notes were legally issued and capable of producing real funds and interest was potentially deductible under s.16; s.61A can cover deductible interest as a 'tax benefit' but factual determinations on sole or dominant purpose under s.61A are for the Board and must be reconsidered without the unsustainable 'no real money' premise. The appeals are allowed and the matters remitted to the Board for redetermination consistent with this judgment.
4 Dec 2003

THE COLLECTOR OF STAMP REVENUE v. ARROWTOWN ASSETS LTD

Citation

THE COLLECTOR OF STAMP REVENUE v. ARROWTOWN ASSETS LTD
Court

Court of Final Appeal
Case number

FACV4/2003

Applying the Ramsay purposive approach the court held the non-voting shares were created and issued solely to secure stamp duty relief and had no genuine commercial purpose; they therefore should be disregarded in calculating issued share capital under s.45(2), so the Memorandum was not relieved and is chargeable to stamp duty; additionally the Collector's arguments on outsider provision of consideration and s.45(5) were rejected on the facts but the core decisive ground was disregard of the artificially created shares.