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Bank interest on deposits held by solicitors for property purchase before completion not tax-exempt for developer
The Deputy Commissioner of Inland Revenue (DCIR) determined that the interest when received by the taxpayer from the solicitors under the agreement for sale and purchase (ASP) was not exempt from profits tax in Hong Kong under the Interest Exemption Order for the years of assessment 2015/16 to 2017/18.
The Taxpayer then appealed to the Board of Review (BOR) against the DCIR’s determination.
The BOR dismissed the taxpayer’s appeal.
The BOR decision of this case will have wide implications for property developers given that the ASP is a standard agreement for sale and purchase of uncompleted property units in Hong Kong and that the amount of interest involved could be substantial. Therefore, other taxpayers in similar situations may be keen to see whether the Taxpayer would appeal against this decision.