Advance Ruling Case No. 75

The provisions of the Ordinance

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

Background

(a)

The Applicant is a limited company incorporated in Hong Kong. Its principal activities are trading and investment holding. It is a member of a multinational group (“the Group”). The Applicant’s immediate parent company is Company P, a company incorporated and carrying on business in Hong Kong.

(b)

Company S1, a company incorporated in Jurisdiction A, is a wholly owned subsidiary of the Applicant. Prior to the internal restructuring exercise mentioned in paragraph (d) below, Company S1 owned 100% of the shares in Company S2.

(c)

Company S2 was incorporated in Jurisdiction A. At the relevant time, Company S2 has re-domiciled to Jurisdiction B and operated its business there. Company S2 does not have any establishments, operations or assets in Hong Kong.

(d)

The Group has been undergoing an internal restructuring exercise (“the Restructuring”) which involves the Applicant, Company P, Company S1, Company S2 and various affiliates located outside Hong Kong.

The arrangement

(a)

As part of the Restructuring, Company S1 distributed all its issued shares in Company S2 at their fair value to the Applicant as an in-kind dividend (“the Dividend”) on a particular day in 2024.

(b)

On the same day, the shares were distributed to the Applicant’s sole shareholder, Company P, as in-kind dividend.

The ruling

The Dividend shall not be regarded as received in Hong Kong under section 15H of the IRO, and section 15I shall not apply to bring the Dividend under the charge of profits tax in Hong Kong.

The period for which the ruling applies

The ruling applies for the year of assessment 2024/25.

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

30 September 2024