Hong Kong Tax: Effective causes of profit-producing transactions

Establishing the geographical location of profit-producing transactions and distinct from those activities on
antecedent or incidental matters are important to determine whether profits are taxable as sourced in Hong
Kwong Mile Services Ltd v. Commissioner of Inland Revenue [2004] 7 HKCFAR 275 and ING Baring
Securities (Hong Kong) Ltd v CIR [2007] 10 HKCFAR 417 are the leading authorities on this aspect of
section 14. One may refer to what Ribeiro PJ summarised in ING Baring Securities:
?38. In Kwong Mile Services Ltd v Commissioner of Inland Revenue, applying the abovementioned
authorities, this Court noted the absence of a universal test but emphasised ?the need to grasp the reality
of each case, focusing on effective causes without being distracted by antecedent or incidental matters.?
The focus is therefore on establishing the geographical location of the taxpayer?s profit-producing
transactions themselves as distinct from activities antecedent or incidental to those transactions. Such
antecedent activities will often be commercially essential to the operations and profitability of the
taxpayer?s business, but they do not provide the legal test for ascertaining the geographical source of
profits for the purposes of section 14.?

Zircon - This is a contributing Drupal Theme
Design by WeebPal.