EY Hong Kong Tax Alert

Hong Kong Tax Alert: 14 November 2013

Unrealized gains arising from the revaluation of unsold listed securities are non-taxable

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Court of Final Appeal rules against Commissioner in his attempt to tax unrealized revaluation gains in respect of listed securities held for sale.

In a judgment of Nice Cheer Investment Limited FACV 23/2012, the Court of Final Appeal ruled that year-end unrealized revaluation gains in respect of listed securities held for sale were not chargeable to tax in Hong Kong.

While the non-taxability of such unrealized gains in respect of trading stock is now clear, the deductibility of unrealized losses may in some instances still be unclear. 

Furthermore, clients should also note that year-end translation gains of an asset denominated in a foreign currency may not be regarded as being unrealized for tax purposes.

We discuss this case via the following topics:

The above are by their nature complicated issues and clients should seek professional tax advice where necessary.