John Wiley & Sons UK2 LLP v Collector of Stamp Revenue

 [2024] HKCA 578, the Court of Appeal allowed the Collector of Stamp Revenue’s appeal. The CA held that a UK limited liability partnership has no “issued share capital”, such that the transaction in question was not entitled to stamp duty relief under s.45(2) of the Stamp Duty Ordinance (Cap 117) (“

”). This is the first case in Hong Kong to consider s.45 relief.

The transaction involved the transfer of the entire issued share capital of John Wiley & Sons (HK) Limited (“

”), a UK limited liability partnership, to Wiley International LLC (“

”). HoldCo owns 100% indirect beneficial interest in LLP2. Under s.45(2) SDO, the transaction is entitled to stamp duty relief if the transfer is made between associated bodies corporate, namely that one is beneficial owner of not less than 90% of the “issued share capital” of the other. There is no dispute that a limited liability partnership does not have “share capital” or “issued share capital”.

The Collector assessed that the transaction was not entitled to stamp duty relief because LLP2 does not have “issued share capital”. HoldCo and LLP2, as duty-payers, appealed to the District Court, which handed down judgment in their favour.

The Collector appealed to the CA, which allowed the appeal. The CA agreed with the Collector that the term “issued share capital” has a well-established meaning in company law, which should be adopted when construing a tax statute, in the absence of any contrary indication. “Issued share capital” means the total monetary value of the consideration paid or agreed to be paid by the shareholders in return for shares of a company as have been issued. The CA expressly rejected the duty-payers’ submission that “share capital” in s.45 refers to “a class of participation interest”, as that is vague and uncertain, and finds no support from the historical context or language of s.45. Moreover, the Court found that even though the current SDO has adopted the term “body corporate” in place of “company”, which was used in the old Stamp Ordinance, it remained the legislative intention for s.45 relief to be available only to associated companies which satisfy the 90% issued share capital association requirement.

Hence, even though a limited liability partnership is a body corporate, it is not a “company”. Further, as limited liability partnerships do not issue shares to their members, the capital paid by their members cannot be regarded as “issued share capital” under s.45. The s.45 stamp duty relief is therefore not available for the transaction.

, instructed by the Department of Justice, for the Collector of Stamp Revenue.

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