Advance Ruling Case No. 74

The provisions of the Ordinance

The ruling applies in respect of sections 15H, 15I, 15M and 15N of the Inland Revenue Ordinance (“IRO”).

Background

(a)

The Applicant is a private limited company incorporated in Hong Kong. Its principal activity is investment holding. The Applicant’s immediate holding company and ultimate holding company were incorporated outside Hong Kong.

(b)

The Applicant has held 60% shares in Company F, a company incorporated in Jurisdiction F, since 1992. Company F is engaged in manufacturing and sale of oilfield equipment.

(c)

In Jurisdiction F, the enterprise income tax rate is 25% and the withholding tax rate on dividends for non-resident enterprises is 10%.

The arrangement

(a)

Certain portion of profits derived by Company F, after paying the enterprise income tax in Jurisdiction F, will be distributed to the Applicant as dividends (“the Dividends”). In relation to the Dividends, the Applicant will pay withholding tax at 10% in Jurisdiction F.

(b)

The Applicant will continue to hold its 60% shareholding in Company F in the coming five years.

The ruling

(a)

The Applicant is an MNE entity and a Hong Kong resident person as defined in section 15H(1) of the IRO.

(b)

Section 15I of the IRO shall not operate in relation to the Dividends as the conditions for the participation requirement under section 15M are satisfied.

(c)

For the purposes of section 15N, the Dividends will be regarded as subject to a qualifying similar tax in Jurisdiction F.

The period for which the ruling applies

The ruling applies to the years of assessment 2023/24 to 2027/28.

The material assumption in respect of a future event or any other matter made by the Commissioner

There is no assumption made by the Commissioner.

Date of ruling issued

7 November 2023