Cap 112 s 9A Remuneration under certain agreements treated as being income derived from an employment of profit (Inland Revenue Ordinance)

Contents of Section

Chapter:	112	Title:	Inland Revenue Ordinance	Gazette Number:	E.R. 1 of 2012
Section:	9A	Heading:	Remuneration under certain agreements treated as being income derived from an employment of profit	Version Date:	09/02/2012

(1) Where a person (relevant person) carrying on (or deemed under this Ordinance to be carrying on) a trade, profession or business, or prescribed activity, has entered into an agreement, whether before, on or after the appointed day, under which any remuneration for any services carried out under the agreement on or after that day by an individual (relevant individual) for the relevant person or any other person is paid or credited on or after that day to-

(a) a corporation controlled by-

(i) the relevant individual;

(ii) an associate or associates of the relevant individual; or

(iii) the relevant individual together with an associate or associates of the relevant individual;

(b) a trustee of a trust estate under which the relevant individual or an associate or associates of the relevant individual is a beneficiary, or are beneficiaries, as the case may be, under the trust; or

then, subject to subsections (3) and (4), for the purposes of this Ordinance-

(i) the relevant individual shall be treated as having an employment of profit with the relevant person-

(A) commencing on-

(I) in the case of the trade, profession or business, the day the relevant individual commenced to carry out any of those services or the appointed day, whichever is the later;

(II) in the case of the prescribed activity, the day the notice concerned under subsection (6) commenced or the day the relevant individual commenced to carry out any of those services, whichever is the later;

(B) until the agreement terminates without the relevant individual continuing to carry out any of those services as an employee of the relevant person;

(ii) the relevant individual shall be treated as an employee of the relevant person, and the relevant person shall be treated as the employer of the relevant individual, whilst the relevant individual is treated, under paragraph (i), as having an employment of profit with the relevant person; and

(iii) any such remuneration shall be treated as being-

(A) income derived by the relevant individual from an employment of profit with the relevant person; and

(B) received by and accrued to the relevant individual at the time that it is paid or credited to the corporation or trustee concerned referred to in paragraph (a), (b) or (c),

and the other provisions of this Ordinance (including section 52) shall be construed accordingly.

(2) Where an agreement referred to in subsection (1) does not specify or otherwise identify the amount of any remuneration referred to in that subsection which is from time to time to be paid or credited to the corporation or trustee referred to in paragraph (a), (b) or (c) of that subsection, then any sum which under that agreement is paid or credited to that corporation or trustee, as the case may be, shall be deemed to be such remuneration (and the other provisions of this Ordinance, including that subsection, shall apply accordingly) except any such sum or part thereof in respect of which the relevant individual concerned or the relevant person establishes to the satisfaction of the Commissioner that it was not in substance remuneration for any services carried out under that agreement on or after the appointed day by the relevant individual for the relevant person or any other person.
(3) Paragraphs (i), (ii) and (iii) of subsection (1) shall not apply where-

(a) neither the agreement referred to in that subsection nor any related undertaking (and whether or not the agreement refers to that undertaking) provides for any remuneration for any of those services to include or to be the provision of annual leave, passage allowance, sick leave, pension entitlements, medical payments or accommodation, or any similar benefit, or any benefit (including money) in lieu thereof;

(b) if the agreement referred to in that subsection or any related undertaking (and whether or not the agreement refers to that undertaking) requires any of the services referred to in that subsection to be carried out personally by the relevant individual, the relevant individual carries out the same or similar services-

(i) for persons other than any person for whom those first-mentioned services are carried out under that agreement; and

(ii) during the term of that agreement or undertaking, as the case may be;

(i) which may be commonly exercised by an employer in relation to the performance of his employee's duties; and

(ii) by any person (including the relevant person) other than the corporation or trustee concerned referred to in subsection (1)(a), (b) or (c);

(d) the remuneration referred to in that subsection is not paid or credited periodically and calculated on a basis commonly used in relation to the payment or crediting and calculation of remuneration under a contract of employment;

(e) the relevant person does not have the right to cause any of those services to cease to be carried out in a manner, or for a reason, commonly provided for in relation to the dismissal of an employee under a contract of employment; and

(f) the relevant individual is not held out to the public to be an officer or employee of the relevant person.

(4) Paragraphs (i), (ii) and (iii) of subsection (1) shall not apply where the relevant individual establishes to the satisfaction of the Commissioner that at all relevant times the carrying out of the services referred to in that subsection was not in substance the holding by him of an office or employment of profit with the relevant person.
(5) It is hereby declared that where, by virtue of the operation of this section, the relevant individual is chargeable to salaries tax on remuneration referred to in subsection (1), then-

(a) the corporation or trustee concerned referred to in paragraph (a), (b) or (c) of that subsection to whom that remuneration is paid or credited is not chargeable to tax thereon; and

(b) the relevant individual is not chargeable to tax on any remuneration paid or credited to him by that corporation or trustee, as the case may be-

(i) in respect of any office or employment of profit he has with that corporation or trustee, as the case may be; and

(ii) to the extent that the remuneration referred to in this paragraph is attributable to any of the services referred to in that subsection.

(6) The Commissioner may, by notice in the Gazette, prescribe an activity for the purposes of this section.
(7) For the avoidance of doubt, it is hereby declared that-

(a) where there are 2 or more relevant individuals under an agreement referred to in subsection (1), then that subsection shall apply to them individually and not collectively, and the other provisions of this section (including subsection (2)) shall be construed accordingly;

(b) paragraphs (i), (ii) and (iii) of subsection (1) shall not apply where under an agreement referred to in that subsection-

(i) the relevant person is also the relevant individual; or

(ii) the relevant person is a partnership and the relevant individual is a partner of the partnership.

(8) In this section-
appointed day (指定日期) means the day appointed under section 1(2) of the Inland Revenue (Amendment) (No. 2) Ordinance 1995 (54 of 1995);
associate (相聯者), in relation to the relevant individual, means-

(a) a relative of the relevant individual;

(b) a partner of the relevant individual and any relative of that partner;

(d) any corporation controlled by the relevant individual, by a partner of the relevant individual or by a partnership in which the relevant individual is a partner;

(e) any director or principal officer of a corporation referred to in paragraph (d);

(f) another relevant individual who is such an individual under the agreement referred to in subsection (1) under which the first-mentioned relevant individual is also such an individual;

beneficiary (受益人), in relation to a trust estate, means any person who benefits or is capable (whether by the exercise of a power of appointment or otherwise) of benefiting under the trust estate, either directly or through any interposed person, or who is able or might reasonably be expected to be able, whether directly or indirectly, to control the activities of the trust estate or the application of its corpus or income;
control (控制), in relation to a corporation, means the power of a person to secure-

(a) by means of the holding of shares or the possession of voting power in or in relation to that or any other corporation; or

(b) by virtue of any powers conferred by the articles of association or other document regulating that or any other corporation,

that the affairs of the first-mentioned corporation are conducted in accordance with the wishes of that person;

prescribed activity (訂明活動) means any activity prescribed in a notice under subsection (6);
principal officer (主要職員) means-

(a) a person employed by a corporation who, either alone or jointly with one or more other persons, is responsible under the immediate authority of the directors for the conduct of the business of the corporation; or

(b) a person so employed who, under the immediate authority of a director of the corporation or a person to whom paragraph (a) applies, exercises managerial functions in respect of the corporation;

relative (親屬) means the spouse, parent, child, brother or sister of the person concerned, and, in deducing such a relationship, an adopted child shall be deemed to be a child both of the natural parents and the adopting parent and a step child to be the child of both the natural parents and of any step parent.

(Added 54 of 1995 s. 2)