A recent decision¹ of the Court of First Instance has held that license fees received by a non-Hong Kong resident for its grant of rights to exhibit certain television programs outside Hong Kong, are chargeable to tax in Hong Kong under Section 15(1)(ba) of the Inland Revenue Ordinance.

In this regard, the Court held that the exhibition of the relevant television programs involved the use of, or right to use the copyright materials which subsisted in the television programs and the payer was entitled to claim the fees as tax deductible in Hong Kong.

However, as the decision indicates, what constitutes payments for the use of, or right to use a relevant intellectual property right would depend on the reasons for the payment and the terms of a license agreement. Where appropriate, clients who make similar payments should seek professional tax advice on their withholding and reporting obligations in respect of the Hong Kong tax liabilities of the non-residents.

In this issue, we discuss what the position of a taxpayer is when two tax provisions overlap via the following topics:

• Brief facts and issue in dispute
• Decision of the Court of First Instance
• Our insights

Notes
¹ Turner Entertainment Networks Asia, Inc. for Muse Communication Co. Limited vs CIR [HCIA 4/2010]

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