Analyse taxability of compensation received from us brand

Reference no: EM133320680

Case: Joyce Ltd ("J L") is a Hong Kong garment manufacturer for many US and European brands. During the year ended 3 1 December 201 1, a US brand terminated its manufacturing contract with J L, which accounted for 5% of J L's turnover. After negotiation, the US brand agreed to compensate J L with a sum of $20 million. The compensation was decided with reference to the pro?ts which J L derived during the remaining period of the contract.

Question: Analyse the taxability of the compensation received from the US brand for the termination of the manufacturing contract.

Reference no: EM133320680

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