Editorial Team. Editors. Webster Ng. Patrick Kwong. Vincent Lo. Jeremy Choi. Percy Wong

Transcription

1 2014 ISSUE No. 007

2 Editorial Team Editor-in-Chief Editors HO Chi-ming Webster Ng Patrick Kwong Vincent Lo Jeremy Choi Percy Wong

3 The President s Message Dear Fellow Members, This is the 7 th issue of TIHK newsletter. I am pleased to report a series of events and activities during the past two months. To enhance the communication with the Taxation authorities and associations in Mainland China, the Institute had arranged the Annual Guangdong visit for the purpose of Chinese New Year greeting as well as taxation knowledge exchange. The Spring Cocktail 2014, an annual event for the Institute, was held on 11 February at The Chinese Club. We are pleased that over 100 members and guests joined the event to celebrate the arrival of spring and for networking. The CTA Graduate Award Presentation for 2014 was also held at the cocktail. Master Lui, a Feng Shui Master kindly delivered a talk on the fortune in the year of Horse. The Institute had participated in the 4-day Education and Careers Expo 2014 organised by the Hong Kong Trade Development Council from February 2014 and succeeded in increasing the awareness of TIHK and CTA examination. Our Council members also participated in the Standard Chartered Marathon (SME Chairman Cup) on 16 February The Institute also participated in the University/ IVE Info Talks. More activities like Voluntary Tax Service and Taxation Exhibition in Times Square will be reported in the next issue. Yours sincerely, Joseph Yau President The Taxation Institute of Hong Kong

4 Contents I. Forthcoming Events P.1 II. Recent Events (February March 2014) P.1-4 III. Seminars (a) Recent Seminars (February 2014 March 2014) (b) Forth-coming Seminars & Events (April - May 2014) P.5-7 P.7 IV. Tax Updates (a) Hong Kong Tax Updates (b) PRC Tax Update P.8-9 P.10

5 I. Forthcoming Events Voluntary Tax Service to the public on Completion of Tax Return Individuals at Plaza Hollywood (17 & 18 May 2014) As part of our CSR program and a pledge to serve the community, the Institute will, for the third year, launch the voluntary tax services to the public to assist them in completing their Tax Return - Individuals in May this year. Taxation Exhibition at Times Square (31 May & 1 June 2014) In order to raise the public awareness of the Institute and the CTA qualification, we will be organizing a taxation exhibition on 31 May & 1 June 2014 at Times Square (Causeway Bay). II. Recent Events (February March 2014) Guangdong Visit 8-10 February 2014 The Institute has arranged the Annual Chinese New Year Guangdong visit on 8 and 10 February Various Taxation authorities and associations in Guangzhou, Shenzhen and Dongguan and Guangdong Province has been visited for Chinese New Year greeting as well as taxation knowledge exchange. Conference at Guangzhou Manicipal Office SAT, PRC Group photo at Shenzhen Provincial Office, SAT P.1

6 Spring cocktail 11 February 2014 The Annual Spring Cocktail was held on 11 February 2014 at The Chinese Club. Over 100 members had joined the event to mingle with each other. The President Mr. Joseph Yau had introduced each Committee Chairman to the guests and share the latest development of the Institute. The Graduation Certificates were also presented to the CTA graduates for Master Lui, a Feng Shui Master kindly delivered the talk on the fortune in the year of Horse. Group photo of the Council members Group photo of The President Mr. Joseph Yau with guests from Liaision Office of the Central People s Government in the HKSAR(CLO) The President Mr. Joseph Yau presenting the Graduation Certificate to the CTA graduates (1 st row from left) Ms. Liang Zi Yu, Mr. Leung Chi Wai, Mr. Pang Tsun Kit, Mr. Ho Shing Chak (2 nd row from left) Ms. Woo Yuk Ying, Patricia, Mr. Lau Justin Cham Sum, Ms. Lam Mei Hing P.2

7 Educational & Career Expo February 2014 The Institute had participated in the 4-day Education and Careers Expo 2014 organised by the Hong Kong Trade Development Council from February 2014 at the Hong Kong Convention and Exhibition Centre. The Institute has successfully promoted the brand and CTA examination since over 3,000 visitors had come and visit our booth. While TIHK and CTA leaflets were being distributed, many visitors came up for specific enquires. Seminar session presented by our CTA Graduates has also been organised. Visitors could understand more about TIHK and CTA examination through the talk. Group photo of Council members and CTA graduates and voluntary helpers Voluntary helper responded to visitor s enquiries on CTA study path and career prospect (Left to right) Mr. William Wong, Mr. Joseph Yau, Ms. Emma Liang Voluntary helper briefed the visitors on the background of TIHK and also the CTA examination during the seminar session P.3

8 Standard Chartered Marathon (SME Chairman Cup) 16 February 2014 The Institute had obtained the opportunity of participating in the Standard Chartered Marathon (SME Chairman Cup) held on 16 February. We are pleasured to join this meaningful charity fund raising program since all the proceeds raised by the Standard Chartered SME Marathon Cup will be donated to ORBIS. Our representative Mr. Ho Chi-ming and Mr. Stephen Chow (Council members) had form a running team to take part in the event. Group photo of the participants Mr. Webster Ng, Vice President of the Institute Group photo of the Council members Info Talk at Universities and IVE In order to make TIHK and CTA examination more well-known, the Institute had arranged our Council members and CTA Graduates to deliver career talks to students at different universities and IVE providing a brief introduction of the taxation industry and a wider spectrum of choices in their career path. Council member Mr. Wilson Cheng explained the objective of TIHK at Hang Seng Management College Vice President Mr. Webster Ng delivered the talk in IVE (Kwun Tong) Our CTA graduated Ms. Emma Liang illustrated the CTA examination to students at City University. Mr. Philip Hung was presenting the CTA study and future career path at Polytechnic University. P.4

9 III. Seminar (February 2014 to March 2014) February 2014 The New Companies Ordinance - Key Changes (19 February 2014) Speaker: Chairman: Mr. Joseph Vaughan, Barrister-at-Law Ms. Jay Lo, CPD Committee member (Left to right) Mr. Wilson Cheng, Chairman of CPD Committee, Dr. Carlye Tsui, CEO of HKIoD, Mr. Joseph Vaughan, Speaker, Ms. Jay Lo, seminar chairman The seminar was well received by the participants. 2014/15 Hong Kong Budget - Impact On You And Your Business Co-organized by CPA Australia (27 February 2014) Speakers: Moderator: Mr. Kenneth Leung, Legislative Councilor of the Accountancy Functional Constituency of HKSAR Ms. Loretta Shuen, Chairperson, Taxation Committee, CPA Australia Greater China Mr. Paul Ho, Partner, Financial Services Tax, EY Ms. Theresa Chan, Partner, International Assignment Services, PwC Hong Kong Mr. Marcellus Wong, Senior Advisor, PwC Hong Kong, Council member and Past President of TIHK Mr. Marcellus Wong, Moderator Panel discussion in progress P.5

10 March 2014 A step by step approach to Tax Audit handling (1, 8 & 15 March 2014) Speaker: Mr. Philip Hung, Director of PricewaterhouseCoopers Ltd About 60 participants attended the workshop Mr. Philip Hung shared his experience in Tax Audit handling Latest challenges faced by multinational corporations on their cross-border transactions in China (24 March 2014) Speaker: Chairman: Ms. Catherine Tsang, China Tax Partner, PwC Mr. Wong Shun Loy, CPD Committee member Mr. Wong Shun Loy, CPD Committee member was presenting the souvenir to Ms. Catherine Tsang Ms. Catherine Tsang shared her practical experience and observations on recent tax cases in PRC P.6

11 Chinese investment into Canada and Canada's reaction to BEPS (25 March 2014) Speaker: Chairman: Ms. Harriet Man CA, CPA (Washington), international corporate tax partner at KPMG LLP in Canada Mr. Alan Cheung, CPD Committee member (Left to right) Mr. Vincent Lo, Vice president, Mr. Wilson Cheung, Chairman of CPD Committee, Ms. Harriet Man, Speaker, Mr. Joseph Yau, President, Mr. Alan Cheung, CPD Committee member Mr. Alan Cheung, CPD Committee member was presenting the souvenir to Ms. Harriet Man Forth Coming Seminars & Events (April May 2014) Seminars: Date & Time Venue Topic Speaker 29 April :30pm-8:30pm 19 May :30pm-8:30pm Room UT, SCOPE, 8/F, United Centre, 95 Queensway, Admiralty, Hong Kong Room A, Joint Professional Centre, Unit 1, G/F, The Center, 99 Queen s Road Central, Hong Kong To consider the impact of the investigation and prosecution of fraud offences upon a tax adviser Recent development in tax audits and appeals against the CIR Determinations Mr. CK Cho, Barrister, LLB (Hons.) London CFE, DMS, FCMI, MIMC, MIoD Ms. Susanne Harris, Partner of Mayer Brown JSM Mr. Joe Chan, Partner, Tax Policy & Controversy Resolution EY Hong Kong P.7

12 IV. Tax Updates (A) Hong Kong Tax Updates Two recent court decisions relate to error or omission claim under s.70a, which is always a difficult issue. A. Moulin Global Eyecare Trading Limited v CIR (FACV5/2013) - late objection (s.64(1)) and error or omission claim (s.70a) On 13 March 2014, the Court of Final Appeal ( CFA ) handed down its decision in upholding the Court of Appeal's ( CA ) refusal to grant extension for lodging objection under s.64(1) and rejecting the application for correction of assessments for error or omission under s.70a. This is the first CFA decision on a s.70a application and an application for extension for time for objection made under s.64(1)(a). The decision is significant in taxation as well as in company law. The factual backgrounds are that the founder and Chairman of the group, his son and the group treasurer participated in falsifying the accounts of Moulin Global Eyecare Trading Limited ( MGET ) by inflating its profits. Profits taxes were duly paid on the inflated profits. These persons were convicted of fraud and sentenced to imprisonment. MGET was wound up. The liquidators made a late objection application under s.64(1)(a) and s.70a to claim refund of tax on the inflated profits amounting to HK$89 million. When the Commissioner refused the applications, the liquidators made a judicial review application. The main argument in the courts was whether the conduct or state of mind of the dishonest directors and officer should be attributed to MGET. MGET argued that the state of mind of the directors and officer should not be so attributed because it was they who were committing the fraud, not MGET i.e. the company was a victim, not a penetrator of the fraud ( the fraud exception ). The MGET did not deliberately submitted incorrect return. There was therefore reasonable ground for late objection. The Court of First Instance allowed the application. The CFI decision was reversed by the CA. On further appeal, the CFA upheld the decision of the CA (Tang PJ dissenting). The reasons for the majority decision was delivered by Lord Walker of Gestingthorpe NPJ: (1) Lord Walker inclined to accept the view that the ejusdem generis rule applies so that other reasonable cause in s.64(1)(a) should have a meaning related to sickness or absence from Hong Kong i.e. it contemplates some temporary impediment of an external and physical nature, rather than something internal and psychological. For instance, a taxpayer who refrained from lodging an objection within the time limit because that would involve too much trouble and expenses, cannot be regarded as having reasonable cause if he wishes to lodge an objection later. (2) The decision of the CFA contained a very useful examination of the ambit of s.70a. Essentially a deliberate act by a taxpayer is not an error or omission for the purpose of s.70a (the view of Mr. Justice Patrick Chan (as he then was) in Extramoney Ltd v CIR [1997] HKLRD 387 endorsed). (3) Whether the knowledge of fraudulent directors or persons in charge of management should be P.8

13 attributed to a company is always fact sensitive, depending on the facts of each case and also depends on the language and legislative purpose of the relevant statutes. (4) The fraud exception does not apply in the case of a claim by a third part against the company for the dishonest conduct of a director or employee. (5) The fraud exception applies where the company claims against the dishonest director or employee. The CFA found that since the state of mind of the dishonest directors and officer should be attributed to MGET, the company was not prevented from objecting within the time limit prescribed by s.64. S.70A does not apply since MGET must be taken as having known that its returns were false. Thus the acts of the company amounted to a deliberate act, not an error or omission within s.70a. Note that Lord Walker discussed the application of fraud exception in some criminal cases involving VAT fraud of companies. These should also be of interest to tax practitioners. B. Good Mark Industrial Limited v CIR HCAL 88/2012 s.70a Good Mark filed profits tax return for 2003/04 dated 16 August 2004 ( the Aug 2004 tax return ). The Assessor issued an assessment in according with this return dated 17 September 2004 ( the Sep 2004 assessment ). No objection was raised. By an additional assessment dated 28 January 2005, the Assessor disallowing certain bad debts ( the Jan 2005 assessment). No objection was raised. The Assessor issued a second additional assessment dated 17 March 2010 ( the Mar 2010 assessment ) for the reason that Good Mark failed to provide further information as requested by the Assessor in relation to depreciation allowances and deductions for expenditure on prescribed fixed assets. Good Mark objected against the Mar 2010 assessment by a letter dated 15 April Good Mark then applied under s.70a to reopen the Sep 2004 assessment and the Jan 2005 assessment. S.70A allows an application to be made within a time limit of 6 years after the year of assessment concerned or 6 month after the date on which the relative notice of assessment was served, whichever is the latter. Good Mark contended that once the Assessor issued the Mar 2010 assessment and objection has been duly lodged, the taxpayer is afforded a further 6 months after the date of service of the notice of the Mar 2010 assessment in which an application for s.70a may be made. And once the s.70a application has been made, Good Mark was entitled to reopen any error or omission falling within s.70a in respect of all assessments for 2003/04 including the Sep 2004 assessment and the Jan 2005 assessment. The Commissioner refused to entertain the s.70a claim in respect of the Sep 2004 assessment and the Jan 2005 assessment. Good Mark applied under judicial review. The judge of the Court of First Instance refused the application. Proviso (c) to s.64(1) provides that where there is a reassessment, the right of objection is restricted to the extent to which, any additional tax is imposed by the reassessment or an existing liability is increased or reduced. The contention by Good Mark, in the view of the judge, would render proviso (c) to s.64(1) otiose. The judge did not accept that s.70a has such a wider coverage as contended for by Good Mark. Reported by HO Chi Ming, Council Member (2013/14), FTIHK, CTA. P.9

14 (B) China Tax Updates 國家稅務總局召開全國國際稅收工作視訊會議 國家稅務總局在 2014 年 3 月 18 日召開全國國際稅收工作視訊會議, 會議回顧了這四十年來在國 際稅收工作改革發展方面取得的成績 : 國際稅收法規體系不斷完善 - 到 2013 年底, 已簽署 多邊稅收征管互助公約 和 99 個雙邊稅 收協定 2 個稅收安排和 10 個情報交換協定, 出臺了特別納稅調整 非居民稅收管理 走出 去 企業稅收管理等政策規章和制度規定 ; 跨境稅源管理力度不斷加大 - 與 2008 年相比,2013 年反避稅對稅收增收貢獻達到 469 億元, 增長 37 倍, 非居民企業稅收由 384 億元增加到 1172 億元, 年均增長 25%, 對外情報交換國家由 18 個增長到 46 個, 通過征管協作查補稅款 56 億元 ; 服務跨境納稅人的水準不斷提升 - 已對外達成或簽署 39 個雙邊預約定價安排和 39 個轉讓定價 相應調整協議,2013 年為納稅人消除雙重徵稅 億元 2011 年以來處理享受稅收協定待遇 申請 件, 其中涉及港澳安排 件, 為企業或個人減免稅額 億元 ; 國際影響力不斷提高 - 深化國際稅收交流與合作, 創新性地提出成本節約和市場溢價等的反避 稅理念和操作方法, 積極參與稅收透明度與情報交換全球論壇, 提升了我國在世界稅收領域的透 明度 話語權和影響力 在會上還提出了今後應著重做好的六項工作 : 參與國際規則制定, 完善法規制度 深入開展 稅基侵蝕和利潤轉移 專題研究, 使未來規則更多體現中國立場 梳理現行國際稅收制度, 查找政策漏洞, 完善跨境交易稅收法規體系, 以及稅收征管法 個人所得稅法中涉及國際稅收的內容 強化工作機制, 優化跨境稅源管理與服務 大力開展反避稅工作, 推進預約定價安排談簽, 加強 非居民稅收管理和國際稅收征管協作, 積極參與國際反避稅資訊交換, 遏制跨境逃避稅和不良稅 收籌畫, 防止稅收流失 規範居民企業境外所得資訊報告制度, 維護我國 走出去 企業和個人 的稅收權益 推進資訊化建設, 促進資源整合 將國際稅收資訊化建設工作納入稅收資訊化體系, 形成境外資 訊 國內資訊 典型案例和征管系統互為補充的資訊管理機制 P.10

15 加強跨境稅源監控, 深化稅收經濟分析 探索以稅收風險為導向的跨境稅源監控路徑, 強化稅源 監控和風險分析, 提升稅收執法的統一性和納稅人的稅法遵從度 擴大國際交流與合作, 提升我國話語權 以 稅基侵蝕和利潤轉移 專案 多邊公約和情報交換 為重點, 積極參與稅收領域國際合作, 提高參與國際稅收協調與合作的能力和成效 注重專業人才培養, 推動隊伍建設 加強和完善國際稅收管理機構, 充實專職人員, 選拔培養專 業領軍人才, 打造具備國際視野 德才兼備 精通業務的人才隊伍 Disclaimer: The information provided by The Taxation Institute of Hong Kong (the "Institute") on this newsletter is for general information and reference only. Whilst the Institute will keep the contents of this newsletter accurate and up-to-date, no warranty or guarantee, expressed or implied, is given as to the accuracy and completeness of the information. The views expressed by contributors to this Newsletter are the personal views of the contributors and do not necessarily represent the views of the Institute. Neither the Institute nor any contributor or the editors shall assume liability for any statement, opinion or advice contained in this Newsletter. In no event shall the Institute, its members and council members be liable for any loss and damages arising from or related to the use of the contents of this newsletter. 21 Floor, Kam Sang Building, Des Voeux Road Central, Hong Kong Tel: (852) Fax: (852) Website: P.11