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Hong Kong CUs fighting tax battle
HONG KONG (2/24/10)—China’s Inland Revenue Department is requiring credit unions in Hong Kong to pay tax for the first time in four decades, reports South China Morning Post (IHS Global Insight Daily Analysis Feb. 13). Some credit unions would be forced to pay millions of dollars in back taxes for the past seven years. The Credit Union League of Hong Kong said its member credit unions received the payment requests in March 2000 and that they have appealed. However, they received tax return forms for the current year last month. Total assets of the 42 credit unions were HK$5.3 billion (US$502.8 million) with a police credit union alone accounting for HK$3 billion (US$284.6 million). The Inland Revenue Department said credit unions don’t fit the definition of a club outlined by law and that they should be viewed as businesses and subject to tax on any profits from sale of assets or property. The league argued that credit unions only gather deposits from members to provide loans for “provident or productive purposes.” They cannot charge interest rates above 1% per month on loan balances.
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