a)
Section 15 (1) (b) states that the deemed trading receipts of non-resident corporation are the sums not otherwise chargeable to profits tax, received by or accrued to a person for the use of or the right to use in Hong Kong any patent, design, trademark, copyright material, secret process or formula or other similar property, or for imparting knowledge connected with the use in Hong Kong of any such properties.
In the case of CIR V Emerson Radio Corporation, two of the judges were of the view that Emerson HK had used the trademark in Hong Kong by virtue of affixing the mark to goods made in Hong Kong during the manufacturing process. The royalties could be apportioned between those relating to the use of the trademark in Hong Kong and those relating to the use of the trademark elsewhere.

To counteract the impact of the CFA’s decision, s15 (1) (b) (a) was enacted. It states that the deemed trading receipts of non-resident corporation are the sums not otherwise chargeable to profits tax, received by or accrued to a person for the use of or the right to use outside Hong Kong any intellectual properties listed in s15 (1) (b), or for imparting knowledge connected with the use outside Hong Kong of any such properties, which are deductible in ascertaining the assessable profits of a person under profits tax.

In the case of Lam Soon Trademark Limited v CIR, the CFI held that additional assessments to charge the taxpayer under s14 could be issued even though the taxpayer has been charged under s15 (1) (b) previously.

In the case, ABC limited used the patent rights of the overseas licensor during the manufacturing process, the royalty fee is taxable.

Section 21A, the assessable profits form deemed trading receipts under ss. 15 (b) or (ba) are taken to either 30% or 100% of the sum as follows: the deemed profits will be charged 100% if the payment is made by