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(1) Shiu Wing Limited (2) Futurian Limited (3) Shiu Kwong Limited v. The Commissioner of Estate Duty

This is a landmark decision in Hong Kong.

The Deceased entered into a number of transactions, the essential element in each being a disposal by him of Hong Kong property to an Isle of Man Unit Trust. The end result of each transaction – viewing the facts from the most favourable Revenue viewpoint – was that the Deceased transferred his Hong Kong property to an Isle of Man Unit Trust in consideration of the Unit Trust issuing units to an Isle of Man Discretionary Trust for the benefit of the Deceased’s family. The Hong Kong Revenue argued that, applying the Ramsay principle to the admittedly pre-ordained series of transactions, the Deceased had made a gift of property situate in Hong Kong which was liable to estate duty because the Deceased failed (by 2 days) to survive the 3 year gift period.

In the High Court Findlay J. held that, even on the worst view of the facts from the taxpayer’s viewpoint, the Deceased’s gift was of non-Hong Kong property, i.e. units in the Isle of Man Unit Trust. The Court of Appeal, by a 2-1 majority, reversed Findlay J. The Court of Final Appeal has now unanimously (5-0) restored Findlay J.’s decision.

The case is extremely important in Hong Kong, first, in that it indicates for the first time the Court of Final Appeal’s approach to the Ramsay principle and, secondly, because it upholds the effectiveness of arrangements that have been regularly used in Hong Kong in order to avoid estate duty.

Michael Flesch QC, Robert Kotewell SC and Eugene Fung (instructed by Messrs. Simmons & Simmons) for the appellants

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