Question

Question 2 Based on the Double of Tax Arrangement signed between the Mainland of China and Hong Kong Special Administrative Region, discuss with what criteria a Hong Kong company may be chargeable with the PRC corporate income tax (ie. enterprise income tax).

Answer 1

Hong Kong company is chargeable with PRC corporate tax if profits arised or accrued in Hong Kong trade or businees is of related to Permanent Establishment. And here are the few instance to ascertain whether the company is the Permanent Establishment.

Contract- The time period of contract must be more than 6 months then only it will be taxable.

Service Sector- The service muat be handled in Hong Kong for more than 6 months in a year.

* Goods storing, maintaining stocks or delivering goods would not be considerdes a permanent establishment.

Dependent Agent- If the agent who acts on behalf of company is the final signatory and resides in Hong Kong then it would be Permanent Establishment otherwise not.

Immovable Property income is taxable in Hong Kong jurisdiction.

Transportation is exempt apart from business transportation.

Investment, Dividend Interest, Royalties if given in China to Hong Kong citizen then both sides taxable otherwise if given in Hongkong its not taxable.