Hutchison Whampoa Ltd's Hong Kong port unit lost an appeal in the city's Court of Final Appeal against a tax ruling over a US$1.72 billion fund raising.
The city's Inland Revenue Department was right to disallow the deduction of interest payments on debt held by an offshore company, the court ruled on Tuesday. Hongkong International Terminals Ltd and its HIT Finance Ltd unit will have to accept an assessment of more than HK$1 billion (S$186.2 million) in taxes due, the South China Morning Post said yesterday.
The company has already set aside funds to pay the tax and the ruling will have no impact on current year results, Hutchison Whampoa said in response to Bloomberg News questions.
Hutchison bought a British Virgin Islands-based company to hold two-thirds of the notes in the 1994 sale after failing to reach its fundraising target in the debt market, the court ruling said. HIT Finance then paid interest on the notes, which it claimed tax deductions for, the ruling added.
The revenue department disallowed these, saying that the transaction was only carried out to receive tax benefits.
'It is impossible to avoid the conclusion that the sole or predominant purpose' of this arrangement 'was to secure the tax benefit by holding the loan notes, an overseas sources of income, in an offshore company', Lord Hoffmann wrote in the ruling.
BNP Paribas SA arranged the original debt sale, according to the ruling. Costs will be dealt with by the court on written submissions.
The case is Commissioner of Inland Revenue and HIT Finance Ltd, Final Appeal No 8 and 16 of 2007 (Civil), Hong Kong Court of Final Appeal.
The city's Inland Revenue Department was right to disallow the deduction of interest payments on debt held by an offshore company, the court ruled on Tuesday. Hongkong International Terminals Ltd and its HIT Finance Ltd unit will have to accept an assessment of more than HK$1 billion (S$186.2 million) in taxes due, the South China Morning Post said yesterday.
The company has already set aside funds to pay the tax and the ruling will have no impact on current year results, Hutchison Whampoa said in response to Bloomberg News questions.
Hutchison bought a British Virgin Islands-based company to hold two-thirds of the notes in the 1994 sale after failing to reach its fundraising target in the debt market, the court ruling said. HIT Finance then paid interest on the notes, which it claimed tax deductions for, the ruling added.
The revenue department disallowed these, saying that the transaction was only carried out to receive tax benefits.
'It is impossible to avoid the conclusion that the sole or predominant purpose' of this arrangement 'was to secure the tax benefit by holding the loan notes, an overseas sources of income, in an offshore company', Lord Hoffmann wrote in the ruling.
BNP Paribas SA arranged the original debt sale, according to the ruling. Costs will be dealt with by the court on written submissions.
The case is Commissioner of Inland Revenue and HIT Finance Ltd, Final Appeal No 8 and 16 of 2007 (Civil), Hong Kong Court of Final Appeal.