Tax Structure for China Operation.ppt

TAX STRUCTURE FOR CHINA OPERATION TAX STRUCTURE FOR CHINA OPERATION TAX STRUCTURE FOR CHINA OPERATION JULY, 2012 For reference only. Any risk will be taken by users of the slides. CONTENT Tax Treaty between Hong Kong (HK) and Mainland China Analysis of Setting up a HK Co Barbados Holding Co. Capital Movement Alternatives Tax Treaty between HK and Mainland China HK continued to expand its tax treaty network. By the end of 2011, HK SAR Government signed 22 comprehensive agreements for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income (CDTA). Tax treaty with mainland China was signed on August 21, 2006. Under the agreement, dividends out of mainland China to HK are subject to a 5% withholding tax instead of 10% in most cases. Withholding tax on interest and royalties from Mainland China to HK is 7% instead of 10% for all almost all the other treaty countries. More and more companies considered HK as the parent location for mainland China subsidiaries. Will Canada benefit from the tax treaty by setting up a HK company to be China division’s parent company? Analysis of Setting up a HK Co. During the coming years since tax treaty was signed, more and more companies took the advantages of tax benefits by setting up virtual offices or shell companies in HK. In recent years, the situation has been changed. New policies issued in 2009 to strengthened the administration of the application of the preferential tax rate specified in Dividend Clause of tax treaties. Guo Shui Han [2009] No. 81 G