Hong Kong Tax / Inland Revenue Ordinance Glossary

Profits Tax

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Profits Tax Details
S14 Major charging section for profits tax, as follows:
• the person must carry on a trade, profession or business in Hong Kong;
• the profits to be charged must be from such trade, profession or business carried on by the person in Hong Kong; and
• the profits must be profits arising in or derived from Hong Kong.
S14A Long term debt instrument means:
• is issued on or after 5 March 2003;
• has an original maturity of not less than 7 years or is undated; and
• cannot be redeemed within 7 years from the date of issue.
S14A(1)(a) Concessionary Trading Receipts Chargeable to Tax at half of the Profits Tax Rate Sums received by or accrued to a person as interest paid or payable on a medium term debt instrument.
S14A(1)(b) Sums received by or accrued to a person as any gain or profit on the sale or other disposal or the redemption on maturity or presentment of a debt instrument.
S14B Assessable profits of a corporation, to the extent they are the assessable profits of the corporation derived from the business of reinsurance of offshore risks as a professional reinsurer within the meaning of Section 23A(2).
S15(1)(a) Sums Specifically Chargeable to Profits Tax Sums, not otherwise chargeable to profits tax in Hong Kong, received by or accrued to a person from the exhibition or use in Hong Kong of any films, tapes, sound recording or any advertising materials connected with such films, tapes or recording.
S15(1)(b) Sums, not otherwise chargeable to profits tax in Hong Kong, received by or accrued to a person for the use of or right to use in Hong Kong any patent, design, trademark, copyright material, secret process or formula or other property of a similar nature, or for imparting or undertaking to impart knowledge directly or indirectly connected with the use in Hong Kong of any such patent, design, trademark, copyright, secret process or formula or other property.
S15(1)(ba) Sums not otherwise chargeable to tax (i.e., profits tax), received by or accrued to a person for the use of or right to use outside Hong Kong any patent, design, trademark, copyright material, secret process or formula or other property of a similar nature, or for imparting or undertaking to impart knowledge directly or indirectly connected with the use outside Hong Kong of any such patent, design, trademark, copyright material, secret process or formula or other property, which are deductible in ascertaining the assessable profits of a person (under profits tax).
S15(1)(c) Sums received by or accrued to a person by way of grants, subsidies or other financial assistance in connection with the carrying on of a trade, profession or business in Hong Kong, other than sums in connection with capital expenditure made or to be made by the person.
S15(1)(d) Rental income from leasing movable property in Hong Kong.
S15(1)(e) (Repealed)
S15(1)(f) Interest Income - Corporations.
S15(1)(g) Interest Income - Persons other than a corporation.
S15(1)(h) Refund of contributions to a RORS or refund of voluntary contributions to MPF scheme.
S15(1)(i) Interest Income – Financial institutions.
S15(1)(j) Gain from disposal of certificates of deposit or bills of exchange - Corporation.
S15(1)(k) Gain from disposal of certificates of deposit or bills of exchange – Persons other than a Corporation.
S15(1)(l) Gain from disposal of certificates of deposit or bills of exchange – Financial institutions.
S15(1)(m) Consideration for the transfer of the right to receive income.
S15A Transfer of the right to receive income. This section supplements Section 15(1)(m).
S15(2) Debts incurred but subsequently released.
S16(1)(d)(ii) Bad debt recovery (i.e. the debts previously allowed under Section 16(1)(d)(i) now recovered).
S16B(3) Proceeds from sale of machinery or plant used for research and development and previously allowed for deduction. The taxable amount is limit to the amount of the deduction (Section16B(3)(a)).
S16E(3) Proceeds from sale of patent rights previously allowed for deduction. There is no limit on the taxable amount.
S16G(3) Proceeds from sale of a prescribed fixed asset previously allowed for deduction. The taxable amount is limited to the amount of the deduction (Section16G(3)(a))
S18F(1) Balancing charges.
S15C Valuation of trading stock of a trade or business at the date of cessation  If stock is sold or transferred for valuable consideration and the purchaser will deduct the cost in computing his profit chargeable to tax, the stock should be valued at amount realised or consideration given for the transfer.
For Other cases, stock is valued at open market value on date of cessation.
S16(1) Deductions are allowable provided that the outgoings and expenses have been incurred in the production of profits chargeable to tax for any period.
16(1)(a) Allowable Deductions Where the condition for the application of this paragraph is satisfied under S16(2), and subject to subsections (2A), (2B) and (2C), sums payable by such person by way of interest on any money borrowed by him for the purpose of producing such profits, and sums payable by such person by way of legal fees, procuration fees, stamp duties and other expenses in connection with such borrowing.
16(1)(b) Rent paid by any tenant of land or buildings occupied by him for the purpose of producing such profits, but not exceeding, in the case of rent paid to the tenant’s spouse, or by a partnership to one or more of the partners thereof or to a spouse of any such partner, an amount equal to the assessable value of the land or buildings.
16(1)(c) Tax of substantially the same nature as tax imposed under this Ordinance, proved to the satisfaction of the Commissioner to have been paid elsewhere, whether by deduction or otherwise, by any corporation or by a person other than a corporation who carries on a trade, profession or business in Hong Kong, during the basis period for the year of assessment in respect of profits chargeable to tax by virtue of Section 15(1)(f), (g), (i), (j), (k) or (l):
Provided that no deduction shall be made under this paragraph if the corporation or person concerned is eligible for relief under Part VIII (i.e. double taxation relief) in respect of such profits.
16(1)(d) Bad debts incurred in any trade, business or profession, proved to the satisfaction of the Assessor to have become bad during the basis period for the year of assessment, and doubtful debts to the extent that they are respectively estimated to the satisfaction of the Assessor to have become bad during the said basis period notwithstanding that such bad or doubtful debts were due and payable prior to the commencement of the said basis period: Provided that:
i) Deductions under this paragraph shall be limited to debts which were included as a trading receipt in ascertaining the profits, in respect of which the person claiming the deduction is chargeable to tax under this Part (i.e., Profits Tax), of the period within which they arose, and debts in respect of money lent, in the ordinary course of business of the lending of money within Hong Kong, by a person who carries on that business;
ii) All sums recovered during the said basis period on account of amounts previously allowed in respect of the bad or doubtful debts shall for the purposes of this Ordinance be treated as part of the profits of the trade, business or profession for that basis period.
16(1)(e) Expenditure incurred in the repair of any premises, plant, machinery, implement, utensil or article employed in the production of such profits.
16(1)(f) Expenditure incurred in the replacement of any implement, utensil or article employed in the production of such profits, provided that no allowances have been or shall be made under the provisions of Part VI (i.e., depreciation allowances, etc) in respect of such implement, utensil or article.
16(1)(g) Notwithstanding Section 17, a sum expended for the registration of a trademark, design or patent used in the trade, profession or business which produces such profits.
16(1)(ga) The payments and expenditure specified in Sections 16AA, 16B, 16C and 16E, 16F and 16G as provided therein.
16(1)(h) Such other deductions as may be prescribed by any rule made under this Ordinance.
16(2)(a) Criteria for interest to be deductible The money has been borrowed by a financial institution.
16(2)(b) The money has been borrowed by a public utility company, at a rate of interest not exceeding the rate prescribed by the Financial Secretary by notice in the Gazette.
16(2)(c) Lender of money is subject to tax in Hong Kong
16(2)(d) The money has been borrowed from a financial institution or an overseas financial institution;
16(2)(e) Borrowing for the purchase of machinery or plant or trading stock
16(2)(f) Borrowing by issue of corporate debentures or instruments
16(2A) Secured Loan Test
If the money borrowed is secured by a deposit or loan made by the borrower or an associate of the borrower with or to
(i) the lender or an associate of the lender;
(ii) a financial institution or an associate of a financial institution; or
(iii) an overseas financial institution or an associate of an overseas financial institution; and
any sum payable by way of interest on the deposit or loan is not chargeable to tax under IRO, the amount of the interest deduction shall be reduced, having regard to the sum payable by way of interest on the deposit or loan, by an amount calculated or such basis as is most reasonable and appropiate in the circumstances of the case.
16(2B) Interest Flowback Test for sections 16(2)(c ), (d) and (e)
If arrangements are in place whether between the borrower and the lender or otherwise, whereby any sum payable by way of interest on the money borrowed on any part of the money borrowed is payable whether directly or through any interposed person, to the borrower or to a person other than the lender who is connected with the borrower, the amount of interest deduction shall be reduced by an amount calculated in accordance with the formula A/B*C
16(2C) Interest Flowback Test for sections 16(2)(f)
If arrangements are in place whether between the borrower and the holders of the listed debentures or marketable instruments concerned or on any interest on the debentures or instruments concerned is payable, whether directly or through any interposed person, to the borrower or to a person who is connected with the borrower, the amount of interest deduction shall be reduced by an amount calculated in accordance with the formula X/Y*Z
16(2D) This section provides that, for the purposes of subsection (2A), if a deposit or loan is made by a trustee of a trust estate or a corporation controlled by such a trustee, the deposit or loan shall be deemed to have been made by each of the trustee, the corporation and the beneficiary under the trust.
16(2E),16(2F) This section further extends the scope of the interest on secured borrowing (to include conditional guarantee) and provide definition of “excepted person”.
16(2G) This Section provides that, Section 16(2C) shall not apply where under the relevant arrangements, the relevant sum payable by way of interest on the debentures or instruments concerned or on any interest in the debentures or instruments concerned is payable to a market maker who, in the ordinary course of conduct of his trade, profession or business in respect of market making, holds such debentures or instruments or such interest for the purpose of providing liquidity thereof.
16(2H) "Market maker", as means a person who-
(a) is licensed or registered for dealing in securities under the Securities and Futures Ordinance (Cap 571) or authorised to do so by a regulatory authority in a major financial centre outside Hong Kong recognised by the Commissioner for the purposes of subsection (2)(f)(ii)(A);
(b) in the ordinary course of conduct of his trade, profession or business in respect of market making holds himself out as being willing to buy and sell securities for his own account and on a regular basis; and
(c) is actively involved in market making in securities issued by a wide range of unrelated institutions.
S16A Specific Deductions Expenditure Allowable Deductions Treatment of Refund/Sales Proceeds 
Special payment under a RORS or a MPF scheme 20% per year of assessment from the year of assessment in which the expenditure was incurred. Refund of contributions to recognised occupational retirement scheme or refund of voluntary contributions to mandatory provident fund scheme, to the extent that the sums were previously allowed as deductions, is taxable. 
S16AA Mandatory contributions in self-employment cases Mandatory contributions made by a self-employed person (sole-proprietor or a partner in a partnership) under the MPF Scheme Ordinance which are not otherwise allowable and not exceeding HK$12,000. N/A
S16B R&D General expenditure/expenditure on P&M fully deductible in the Y/A in which the expenditure was incurred. Expenditure on buildings or structure qualifies for IBA Sale proceeds of P&M, to the extent that they are not otherwise chargeable to profits tax and do not exceed the amount of the deduction previously allowed, are taxable. Balancing charge on disposal of the IB is taxable.
S16C Technical education Fully deductible in the year of assessment in which it was incurred. N/A
S16D Approved charitable donations Allowable if the aggregate is not less than HK$100 and not exceeding 25% of the assessable profits. N/A
S16E Patent rights, know-how, etc. Fully deductible (subject to on-off shore apportionment) in the Y/A in which the expenditure was incurred. Sale proceeds (subject to apportionment) of patent rights, know-how, etc. are taxable.
S16F Expenditure on building refurbishment 20% per year of assessment from the year of assessment in which it was incurred. N/A
S16G Capital expenditure on the provision of a prescribed fixed asset Fully deductible (subject to apportionment) in the Y/A in which the expenditure was incurred. Sale proceeds of the prescribed fixed asset, to the extent that they are not otherwise chargeable to profits tax and do not exceed the amount of the deduction previously allowed, are taxable.
S17(1)(a) Non-allowable Deductions Domestic or private expenses, including the cost of travelling between residence and place of business and contributions made to a mandatory provident fund scheme in the person’s capacity as a member of the scheme.
S17(1)(b) Subject to Section 16AA, any disbursements or expenses not being money expended for the purpose of producing chargeable profits.
S17(1)(c) Any expenditure of a capital nature or any loss or withdrawal of capital.
S17(1)(d) The cost of any improvements.
S17(1)(e) Any sum recoverable under an insurance or contract of indemnity.
S17(1)(f) Rent of, or expenses in connection with any premises or part of premises not occupied or used for the purpose of producing chargeable profits.
S17(1)(g) Any tax paid or payable under the IRO other than salaries tax paid in respect of employees’ remuneration.
S17(1)(h) Any sums made by a person as an employer in respect of an employee as –
• an ordinary annual contribution to a fund duly established under a recognised occupational retirement scheme; or
• an ordinary annual premium in respect of a contract of insurance under a recognised occupational retirement scheme; or
• regular contributions made to a mandatory fund scheme, to the extent that the total of the payments exceeds 15% of the total emoluments of the employee for the period to which the payments relate.
S17(1)(i) Any provision made by a person as an employer for the payment in respect of a recognised occupational retirement scheme, to the extent that the aggregate of such provision and any such payment in Section 17(1)(h) exceeds 15% of the total emoluments of an employee for the period of which the provision is made.
S17(1)(j) Any provision made by a person as an employer in respect of an unrecognised occupational retirement scheme.
S17(1)(k) Any sums made by a person as an employer in respect of an employee as –
• a contribution under an occupational retirement scheme; or
• a premium in respect of a contract of insurance under an occupational retirement scheme; or
• a contribution to a mandatory fund scheme, where provision for payment of the sum has been made in a prior year of assessment and a deduction has been allowed for the provision in that or another prior year of assessment.
S17(1)(l) Any contribution made by a person as an employer to the funds of an occupational retirement scheme other than a RORS; or Any payment made by a person as an employer for the purposes of the operation of an occupational retirement scheme other than a RORS.
S17(2) Salaries or other remuneration of, or interest on capital or loans provided by, or contribution made to a mandatory provident fund scheme in respect of the spouse of a person carrying on a trade, profession or business in Hong Kong or in the case of a partnership, subject to Section 16AA, salaries or other remuneration of, or interest on capital or loans provided by, or contribution made to a MPF scheme in respect of any partner therein or any partner’s spouse.
S16(1)(b) Tax Computation for a Partnership Business The deduction of rent paid by a partnership to any partners or partners’ spouses is restricted to the assessable value of the relevant property. In practice, this restriction has no operational significance as the assessable value is often equal to the actual rent consideration.
S17(2) No deduction is allowable on salaries or other remuneration to any partners or partners’ spouses, and interest on capital or interest on loan from any partners or their spouses or, subject to Section 16AA, contribution made to a mandatory provident fund in respect of a partner or a partner’s spouse. The disallowable payments are regarded as an appropriation of profits to the partners which are adjusted in the allocation of profits and loss.
S22B There are restrictions on the share of loss of a limited partner of a partnership which may be set off against the assessable profit of that limited partner which are outlined in the Section on Tax Planning and Anti-avoidance revisions.
S20B This section imposes a withholding obligation on the person who pays or credits the sums described in S15(1)(a), S5(1)(b) or S15(1)(ba).
S21A The assessable profits of a person’s income as described in S15(1)(a), S15(1)(b) or S15(1)(ba) shall be taken as 30% of the sums, except for sums derived from an associate in respect of rights that were previously owned by a person carrying on a trade, profession or business in Hong Kong, which are deemed at 100%.
S22(1) Where a trade, business or profession is carried on by two or more persons jointly, the assessable profits therefrom shall be computed in one sum and the tax in respect thereof shall be charged in the partnership name.
22A(3)(a) No allocation of profit and loss can be made and the partnership will be assessed as a single entity at the standard rate, regardless of any corporate partners. Also refer to S42(8)
S23 Life insurance business refers to business of life and annuity, marriage and birth, linked long term, tontines as specified in Part 2 of the First Schedule to the Insurance Companies Ordinance:
S23 provides two methods of ascertaining the assessable profits of a life insurance business.
S23A The computation of assessable profits of a non-life insurance company in most cases follows the financial accounts subject to apportionment between onshore and offshore business and the usual statutory adjustments.
S23A(1) The assessable profits of non-life insurance companies are to be ascertained as follows:
To calculate gross premiums from insurance business in Hong Kong:
Add: any interest or other income arising in or derived from Hong Kong;  balancing charge; and reserve for unexpired risks outstanding at the commencement of the period;
Less
• returned premiums;
• corresponding re-insurance premiums;
• reserve for unexpired risks outstanding at the end of the period;
• actual losses less recoveries;
• agency expenses;
• a fair proportion of the expenses of the head office; and
• depreciation allowances.
“Premium from insurance business in Hong Kong” includes:
• all premiums in respect of contracts of insurance, other than life insurance, made in Hong Kong; and
• all premiums on contracts of insurance, other than life insurance, the proposals for which were made to the corporation in Hong Kong.
S23A(2) Where a non-life insurance company carries on the business of reinsurance of offshore risk as a professional reinsurer, the assessable profits of the company derived from the business of reinsurance of offshore risk as a professional reinsurer for a year of assessment shall be ascertained in accordance with the following formula: B/C*D
S23A(2) It prohibits the share of profits from an illegal partnership in a personal assessment. In counting the number of partners, if a partnership is itself a partner, all the partners in that partnership must be counted as partners.
S23AA A mutual insurance corporation shall be deemed to carry on an insurance business, the surplus from which shall be ascertained in the manner provided in Section 23 and Section 23A for ascertaining assessable profits and shall be deemed to be assessable profits chargeable to tax under Section 14.
S23B “Ship owner” includes the owner or the charterer of a ship who carries on a business of chartering (i.e. letting of a ship under a charter party) or operating ships in Hong Kong. There are three main types of charter party (i.e. the contract or agreement between the ship-owner and the charterer for the hiring of a ship) as follows: bareboat charter; time charter; voyage charter.
S23C This section applies to resident aircraft owners. Under this section, the chargeable person is an aircraft owner (i.e. either the owner or the charterer of an aircraft) who carries on a business of chartering (i.e. letting of an aircraft under a charter party) or operating aircraft in Hong Kong. Similar to the letting of a ship, an aircraft may be chartered on bareboat charter, time charter and flight charter.
S23D This section deals with all owners or charterers of any aircraft that lands at any aerodrome or airport within Hong Kong, who do not come within the definition of Hong Kong aircraft owners in Section 23C.
S24(1) If not less than half of the club’s gross receipts on the revenue account (including entrance fees and subscriptions) are from voting members, the club is deemed not to carry on a business. On the other hand, if the answer to the test is negative, all the club’s receipts (including entrance fees) are deemed to be trading receipts chargeable to profits tax.
“Members” means those with voting rights. Non-members include non-voting members and outsiders.

If a club is not chargeable to profits tax under Section 14 because of the compliance with the minimum test laid down under Section 24(1), it may still be subject to other taxes. For example, it may be subject to property tax if it has rental income from letting property in Hong Kong.
IRR Rule No.3 Where any accounts prepared by a bank for its own purpose disclose, in the opinion of the Assessor, the true profits of the Hong Kong branch, the assessable profits shall be computed on the basis of such accounts. If no accounts are prepared, or such accounts do not show the true profits, then the following formula will be used to compute the assessable profits of the branch.
IRR Rule No.5 “permanent establishment” means a branch, management or other place of business, but does not include an agency unless the agent has, and habitually exercises, a general authority to negotiate and conclude contracts on behalf of his principal or has a stock of merchandise from which he regularly fills orders on his behalf.
Part I of Schedule 6 of the IRO “Debt instrument” means an instrument which is lodged with and cleared through the Hong Kong Monetary Authority;
• is issued by a person who has a suitable credit rating;
• has an original maturity of five years or more;
• has a minimum denomination of HK$50,000 (with effect from 1 April 1999) or its equivalent in a foreign currency;
• is issued to the public in Hong Kong; and
• if it is a scripless instrument, it is one that would qualify if it were in a physical form.
Double Taxation Relief (Income from Shipping Operations) (United States of America) Order 1989
Double Tax Arrangements on International Aviation Income, involves S49
Tax Credit under the Avoidance of Double Taxation Arrangement between Mainland China and the HKSAR, involves S50
Avoidance of Double Taxation Arrangement between the HKSAR and Thailand
Avoidance of Double Taxation Arrangement between the HKSAR and Belgium
Salaries Tax Details
S8(1) salaries tax is imposed on a person’s income arising in or derived from Hong Kong from the following sources:
a) Any office or employment of profit.
b) Any pension.
S8(1A)(a) Income arising in or derived from Hong Kong from any employment is defined in Section 8(1A) as follows Includes all income derived from services rendered in Hong Kong, including leave pay attributable to such services.
S8(1A)(b) Excludes income derived from services rendered by a person who:
is not employed by the government or as master or member of the crew of a ship or
as commander or member of the crew of an aircraft; and
renders outside Hong Kong all the services in connection with his employment; and
S8(1A)(c) Excludes income derived by a person from services rendered by him in any territory outside Hong Kong where the person is chargeable to, and has paid tax of substantially the same nature as, salaries tax in Hong Kong in respect of the income.
8(1B) In determining whether or not all services are rendered outside Hong Kong for the purposes of 8(1A), no account shall be taken of services rendered in Hong Kong during visits not exceeding a total of 60 days in the basis period for the year of assessment.
S8(2)(c), (cb), (cc) Benefits Specifically Excluded from Tax under S8(2) Holiday warrants/passages were exempt from tax prior to the Y/A 2003/04. However, the exemption was repealed with effect from 1 April 2003.
S9(1A)(a) Payment (or refund) of rent by an employer or its associated company
S8(2)(c), (cb), (cc) Lump sum payment from RORS / MPF
S9(5) Receipt of share option rights
S9(1)(a),9(2A)(b) Items Specifically Chargeable to Salaries Tax Educational benefits
S9(1)(aa) Lump sum payment (as represents the employer’s contributions) from an unrecognised retirement scheme
S9(1)(ab)(i) Lump sum payment (as represents the employer’s contributions) from a recognised retirement scheme by reason other than termination of service, death, incapacity or retirement of the employee
S9(1)(ab)(ii) Lump sum payment (as represents such part of the employer’s contributions in respect of the employee that exceeds the proportionate benefit) from a recognised retirement scheme by reason of termination of service
S9(1)(ac) Lump sum payment (as attributable to the employer’s contributions) received by an employee pursuant to a judgement given under Section 57(3)(b) of the Occupational Retirement Schemes Ordinance (ORSO)
9(1)(ad) A sum equal to so much of the accrued benefit that an employee has received, or is taken to have received, from a mandatory provident fund scheme (otherwise than on retirement, death, incapacity or termination of service) as is attributable to contributions paid to the scheme by the employee’s employer
S9(1)(b) Accommodation benefits for a place of residence provided rent-free by the employer or an associated company of the employer
S9(1)(c) Accommodation benefits for a place of residence provided by the employer or an associated company of the employer at a rent less than the rental value
S9(1)(d) Stock option gains
S9(1A)(b) A place of residence for which an employer or its associated corporation has paid or refunded all the rent is deemed to be provided rent-free by the employer or associated corporation. The rental value of such accommodation is chargeable to tax.
S9(2) Rental value shall be deemed to be 10% of the income as described in Section 9(1)(a) derived from the employer for the period during which a place of residence is provided after deducting the outgoings, expenses (provided in Section 12(1)(a)) and depreciation allowances (provided in Section 12(1)(b)). Alternatively, the rateable value of the accommodation may be elected as the rental value under Section 9(2)(b).
S9(6) "Associated corporation” means –
(a) a corporation over which the employer has control;
(b) if the employer is a corporation –
(i) a corporation which has control over the employer; or
(ii) a corporation which is under the control of the same person as is the employer.

“Control”, in relation to a corporation, means the power of a person to secure –
(a) by means of the holding of shares or the possession of voting power in or in relation to that or any other corporation; or
(b) by virtue of any powers conferred by the articles of association or other document regulating that or any other corporation, that the affairs of the first-mentioned corporation are conducted in accordance with the wishes of that person.
S11B the assessable income of a person for a year of assessment shall be the total amount of income accruing to that person from all sources in that year (i.e. the accrual basis).
S11D income accrues to a person when he becomes entitled to claim payment thereof. However, Section 11D(a) also provides that an assessment on income accrued but not received is to be deferred until the income is received. Income is treated as received when it has been made available to the taxpayer or has been dealt with according to his instructions.
S11D(b) Payments received after cessation of an employment are deemed to have accrued on the last day of that employment.
S11D(b)(i) Within 2 years after the end of the Y/A in which a lump sum payment on cessation of office/employment, termination of employment contract or deferred pay was received, application in writing can be made to have that lump sum payment related back for a period of:
• 36 months; or
• actual period of employment; whichever is the shorter.
The lump sum payment should be related back from:
• the last date of employment; or
• the date on which the person became entitled to claim payment; whichever is the earlier.
The lump sum payments that may be related back are as follows:
• lump sum payment or gratuity granted upon retirement or termination of office/employment or contract of employment; or
• lump sum payment of deferred pay or arrears of pay.
S12(1)(a) Allowable Deductions All outgoing and expenses, other than expenses of a domestic or private nature and capital expenditure, wholly, exclusively and necessarily incurred in the production of assessable income.
S12(1)(b) Depreciation allowances on machinery or plant
S12(1)(c) Loss brought forward
S12(1)(d) Allowable deductions of a spouse under joint assessment
S12(1)(e) Self-education expenses
S26C Approved charitable donations
S26D Elderly residential care expenses
S26E Home loan interest
S26G Contributions to recognised retirement schemes
S28 Basic allowance Y/A 05/06 & 06/07 Y/A 07/08
$100,000 $100,000
S29 Married person’s allowance $200,000 $200,000
S30/30A Dependent parent/g.parent allowance >60 $30,000 $30,000
Dependent parent/g.parent allowance 55-59 $15,000 $15,000
Addn dependent parent/g.parent allowance >60 $30,000 $30,000
Addn dependent parent/g.parent allowance 55-59 $15,000 $15,000
S30B Dependent brother/sister allowance (each) $30,000 $30,000
S31 Child allowance $40,000 $50,000
Additional CA in the yr of birth (each child) nil $50,000
S31A Disabled dependant allowance $60,000 $60,000
S32 Single parent allowance $100,000 $100,000
Arrangement between the Mainland of China and The HKSAR for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with respect to taxes on income
Avoidance of Double Taxation on Income and Prevention of Fiscal Evasion was signed between HKSAR and the Mainland
DIPN25 Factors distinguishing an employee will be under a 'contact of service' or an idependent contractor providing 'contract for service' would be:
1. Control test - whether master and servant relationship Is established;
2. Economic reality test - whether business management is exercised such that the service provider earns profits from sound management or operating own equipment;
3. Reality test - whether employment like benefits are provided;
4. Other factors like business registration obtained and intention of parties.
DIPN 10 In determining the situs of employment of a taxpayer, DIPN specifies:
• the place where the employment contract is negotiated, concluded and enforceable;
• the residence of the employer; and
• the place where the employee’s remuneration is paid.
These three factors are not conclusive. The Commissioner may need to look further than the external or superficial features of the employment or examine other factors in determining a person’s situs of employment.
Properties Tax Details
S2 “Owner” includes the following persons:
• a person holding directly from the Government (i.e. the Government lessee);
• a beneficial owner;
• a tenant for life;
• a mortgagor;
• a mortgagee in possession;
• a person with adverse title to land who is receiving rent from buildings or other structures erected on the land;
• a person who is making payments to a co-operative society registered under the Cooperative Societies Ordinance for the purpose of the purchase thereof;
• a person who holds land or buildings or land and buildings subject to a ground rent or other annual charge; and
• an executor of the estate of an owner.
S5 Property tax is charged for each Y/A on the owners of any land or buildings or land and buildings situated in Hong Kong, at the standard rate on the net assessable value of such land or buildings or land and buildings.
S5(1A) Allowable Deductions under Property Tax includes Rates, Bad debts and Statutory outgoings.
S5(2)(a) Owner of any land or buildings should apply to the Commissioner in writing for an exemption from property tax if its rental income is chargeable to profits tax.
S5(2)(c ) Once the exemption is granted, the corporation is obliged to inform the CIR of any change in ownership or use of the property within 30 days after the change.
5B(2) The assessable value of or land and buildings for each Y/A shall be the consideration, in money or money’s worth, payable in that year to, to the order of, or for the benefit of, the owner in respect of the right of use of that land and buildings.
S25 If The consideration from any land or buildings may be within the scope of charge to property tax and also the scope of charge to profits tax. To avoid double tax on such consideration, the owner may apply for set-off of the property tax payable from the profits tax payable.
S87,S88 Owners of property exempted from property tax:
• government;
• consular (for property used for consular purposes or residence of consular employee);
• charitable bodies;
• corporations carrying on business in HK (with rental income chargeable to profits tax);
• those with exemptions granted by the Chief Executive in Council.
OBLIGATIONS OF PROPERTY OWNERS
S51(1) Filing of Returns Property owners are obliged to complete the tax returns issued to them and return them to the IRD within the time limit stipulated in the tax return
S51(2) Notification of Chargeability to Tax Every person who is chargeable to Property Tax for any Y/A but has not received a return form is required to notify the CIR in writing that he is so chargeable within 4 months after the end of that Y/A
51(6) Notification of Cessation of Ownership Where the ownership of a property has changed as a result of a sale or transfer, the vendor or the transferor must notify the Department of the change in writing within 1 month after the sale or transfer is effected.
51(8) Notification of Change of Address Person chargeable to Property Tax who changes his address should, within 1 month, inform the CCIR in writing of the particulars of the change.
51D Keeping of Sufficient Rental Records Owners of properties must keep sufficient records of rent received, such as lease agreements and duplicates of rent receipts, to enable their tax liability to be readily ascertained. Such records should be retained for a period of not less than 7 years.
5(2)( C) Notification of Change in Exemption Statu Where the owner is a corporation exempted from Property Tax under section 5(2)(a), the owner should notify the CIR in writing within 30 days of any change in the ownership or use of the property or any other circumstances affecting the exemption previously granted.
56A Responsibility of Joint Owners or Co-owners Where 2 or more persons are joint owners or owners in common of any property, each and every owner will have full responsibility for doing all such acts required to be done under the Ordinance as if he is the sole owner, including the filing of tax returns and paying the tax [section 56A(1)].
Furthermore, this section does not relieve any person of any obligation under the Ordinance or affect any right or obligation of the joint owners or owners in common as between themselves [section 56A(2)].
Anti-avoidance Details
S9A Remuneration under certain agreements treated as income derived from an employment of profit Deems remuneration paid or credited to a company for the services of an individual who exercises control over the company (either directly or indirectly) to be income derived by the individual from an employment of profit. The person paying the remuneration will therefore have an obligation to file various employer’s returns.
S15A Transfer of right to receive income The consideration received (or receivable) by a person in respect of a transfer of a right to receive income from property from that person to another person will be treated as trading receipt.
S15A(1) shall not apply if the person, before or at the time of the transfer of the right to receive income from the property to another person, also transfer the ownership or interest in the property to that person.
S16G(3)(c) Commissioner’s power to determine the true value of a prescribed fixed asset on sale Empowers the Commissioner to determine the value of a prescribed fixed asset when it is being disposed of at a price other than the true market price in the following circumstances:
• the buyer is a person over whom the seller has control; or
• the seller is a person over whom the buyer has control; or
• both the seller and the buyer are persons over both of whom some other person has control; or
• the sale is between a husband and wife, not being a wife living apart from her husband.
S20 Liability of certain non-resident persons Where a non-resident carries on business with a resident with whom he is closely connected and the course of such business is so arranged that it produces for the resident either no profits which arise in or derive from Hong Kong or less than the ordinary profits which might be expected to arise in or derive from Hong Kong, the business done by the non-resident in pursuance of his connection with the resident shall be deemed to be carried on in Hong Kong, and such non-resident shall be assessable and chargeable to tax in respect of his profits as if the resident were his agent.
S22B Limited partner loss relief Loss relief available to a limited partner of a partnership is restricted to the lesser of:
• the amount of the loss shared from the partnership; or
• the relevant sum.
S38B Commissioner’s power to determine the true value of an asset on sale Empowers the CIR to determine the value of plant and machinery when they are being disposed of at a price other than the true market price in the circumstances described in S16G(3)(c )
S39E Depreciation allowances on leased machinery and plant Depreciation allowances to the lessor of P&M acquired in the following circumstances is denied if:
a) the P&M was acquired under a sale and leaseback arrangement; or
b) the P&M, other than a ship or an aircraft, is, while the lease is in force,
• used wholly or principally outside Hong Kong by a person other than the taxpayer;or
• the whole or a predominant part of the cost of acquisition or construction of the P&M was financed directly or indirectly by a non-recourse debt;
c) the P&M is a ship or aircraft or any part thereof and
• the lessee is not an operator of a Hong Kong ship or aircraft; or
• the whole or a predominant part of the cost of acquisition or construction of the P&M was financed directly or indirectly by a non-recourse debt.
S61 Certain transactions and dispositions to be disregarded Where an assessor is of the opinion that any transaction which reduces or would reduce the amount of tax payable by any person is artificial or fictitious or that any disposition is not in fact given effect to, he may disregard any such transaction or disposition and the person concerned shall be assessed accordingly. (S61 has been considered to be narrow as it only applies to artificial or fictitious transactions or dispositions not in fact carried out and that the only action that can be taken by the IRD is to disregard such transactions or dispositions.)
S61A Transactions that confer a tax benefit on a person Losses of a corporation cannot be set off against future profits if a change in ownership of the shares in the corporation occurred for the sole or dominant purpose of obtaining a tax benefit from the losses. The provision aims at countering trafficking in loss companies.
S61B Utilisation of losses to avoid tax Commissioner shall disallow the set-off of any loss or balance of loss if he/she is satisfied that:
a) any change in the shareholding in any corporation, as a direct or indirect result of which profits have been received by or accrued to that corporation during any Y/A, has been effected by any person after 13 March 1986; and
b) the sole or dominant purpose of the change was for the purpose of utilising any loss or any balance of any loss sustained in a trade, profession or business carried on by the corporation, in order to avoid liability on the part of that corporation or any other person for the payment of any tax or to reduce the amount thereof.
S88A Advanced ruling system Commissioner may in exceptional cases at his discretion, waive in whole or in part any fee payable by an applicant for a ruling request.
Tax Administration
Taxpayer's Obligation   Section
Obligation Non-compliance Payment of Tax
S51(1) S80(2) S71(1)
S51(2) S80(2) S71(5)
S51(3) S80(1)(a) S71(5A)
S51(6) S80(1)(c) S75(1)
S51(7) S80(1)(c) S76
S51(8) S80(1)(c) S77
S51C S80(1)(A) Penalty for Omission or Understatement of Income
S51D S80(1)(c) 80(1)
Employer's Obligation 80(1A)
S52(2) S80(1)(a) 80(1AA)
S52(4) S80(1)(c) 80(1AB)
S52(5) S80(1)(c) S80(2)
S52(6) S80(1)(c) S82A
S52(7) S80(1)(c) 80(2B)
Issue of Tax Assessment 80(2C)
Section 80(3)
S54(b) 80(5)
S59(1) 82(1)
S59(2)(a) 82(2)
S59(2)(b) 82A(1)
S59(3) 82A(2)
S59(4) 82A(3)
S60(1) 82A(4)
Tax in dispute pending the outcome of an objection 82A(4A)
S71(2) 82A(5)
S71(7) 82A(6)
Appeal to BOR, CFI, CA, CFA 82A(7)
S64(3) Offenses under S82/S82A
S66(1) S82A
S67 S82B
S68(4) S82
S69(7)
S70
S70A
Stamp Duty Details (Under SDO)
Head 1 Heads of charge under SDO Immovable property in Hong Kong
Head 2 Hong Kong stock
Head 3 Hong Kong bearer instruments
Head 4 Duplicates and counterparts of chargeable instruments
S2(1) “Conveyance” includes “every instrument and every decree or order of any court whereby any immovable property is transferred to or vested in any person”.
S2(1) “Stock” includes the following investments:
i) shares and marketable securities;
ii) unit trust units; and
iii) rights to subscribe for any stock (excluding employees’ share options).
S9 Any dutiable instrument not stamped within the specified time may be subject to a penalty for late stamping.
S15 Subject to court orders or an endorsement of the Collector of Stamp Revenue, no unstamped instruments can be accepted in evidence in courts except in:
a) criminal proceedings; or
b) civil proceedings instituted by the Collector of Stamp Revenue to recover stamp duty or penalty.
S19 Deem a verbal agreement to transfer the beneficial interest in Hong Kong stock other than by sale and purchase as a sale and purchase of Hong Kong stock and the parties to such a transaction are required to execute contract notes, which are chargeable to stamp duty.
S19(1) Any person who effects any sale or purchase of Hong Kong stock as principal or agent shall:
i) make and execute a contract note;
ii) cause the note to be stamped
iii) if he is the agent, transmit the note duly stamped to his principal;
iv) cause an endorsement to be made on the instrument of transfer of such Hong Kong stock.
S22 Where the consideration or any part of the consideration for a conveyance on sale consists of any stock, the conveyance shall be chargeable with stamp duty by reference to the value of the stock on the date of the conveyance. Where the consideration or any part of the consideration for a conveyance on sale consists of any security not being stock, the conveyance shall be chargeable with stamp duty by reference to the amount due on the date of the conveyance for principal and interest upon the security.
S23 With regard to consideration consisting of periodic payments, SD is to be charged as: Payable for a definite period not exceeding 20 years. chargeable by reference to the total amount of the periodic payments.
Payable for a definite period exceeding 20 years or in perpetuity or for any indefinite period not terminable with life. Chargeable by reference to an amount equal to the total amount which will or may, according to the terms of sale, be payable during the period of 20 years after the date of the conveyance or contract note.
Payable periodically for a life or lives. Chargeable by reference to an amount equal to the total amount which will or may, according to the terms of sale, be payable during the period of 12 years after the date of the conveyance or contract note.
S24(1) In the case of a conveyance on sale or any transaction whereby a beneficial interest in Hong Kong stock passes, where the conveyance or transaction is in consideration of any debt due to the transferee or is subject either certainly or contingently to the payment or transfer of any money or stock, whether or not being or constituting a charge or incumbrance upon the property or interest so conveyed or passing, the debt, money or stock is to be deemed the whole or part, of the consideration by reference to which the conveyance or contract note is chargeable with SD.
S24(2) If the amount of the debt consideration exceeds the value of the property conveyed or beneficial interest passing, the value for stamp duty purposes will be restricted to that of the property. In such case, the conveyance or contract note has to be adjudicated.
S24(3) When there is a transfer of a beneficial interest in a body corporate and the transferee will incur liability in respect of any indebtedness of the body corporate, the amount of the indebtedness will form part of the consideration of the transfer.
S27 Empowers the Collector of Stamp Revenue to charge duty on voluntary disposition inter vivos on conveyance of immovable property or transfer of Hong Kong stock as follows:
a) conveyance or transfer not expressly worded as a gift but having the effect of a gift; and
b) conveyance or transfer on sale for an inadequate consideration.
Indeed, intentional understatement of consideration (contrast to selling at below market value) for the purpose of mitigating stamp duty payable is an offence S59).
S27(4) If marriage is the consideration for a conveyance of immovable property or a transfer of Hong Kong stock (as the case may be), the conveyance or transfer is not deemed to be a conveyance or transfer operating as a voluntary
disposition inter vivos. 
S1 (1) Dutiable Instruments Conveyance on sale HK$100 or 0.75 - 3.75% on the higher of consideration and market price.
S1 (1A) Agreement for sale of residential property
S1(2) Lease of immovable property:
S2(1) Contract note, not jobbing business 0.2% (0.1% on bought note, 0.1% on sold note).
S2(2) Contract note, jobbing business HK$5
S2(3) Instrument of transfer for voluntary disposition inter vivos HK$5 + 0.2% on value of stock.
S2(4) Instrument of transfer for any other kind HK$5
S3(1) Hong Kong bearer instrument 3% on market value.
S3(2) Instrument in substitution for duly stamped instrument under Head 3(1) HK$5
S4 Duplicates and counterparts of chargeable instruments
S39 Exemptions and Relief Instruments generally exempted.
S40 Instruments specially exempted.
S41 Exemption to Government or public officer.
S42 Relief for leases between Government/public officer and another person.
S43 Relief for leases of consular premises.
S44 Relief for gifts to exempted institutions.
S45 Relief for conveyance or transfer between associated bodies corporate.
S47A Relief for transfer of units of Constituent Funds under MPF Schemes
S47B Instruments of transfer relating to indirect allotment or redemption of units under unit trust schemes
S24(2) Items with adjudication fee ($50) waived Conveyance/contract notes in consideration of debt
S27(3), S29F(2) Instruments operating as a gift
S29H(3), S45(3) Instruments qualifying for the relief for associated companies assets transfer
S44(3) Instruments effecting a gift to exempted institution
Note 4 to head 1(1) and Note 3 to Head 2(3) Foreclosure order

OFFSHORE CLAIM CHECKLIST – TRADING COMPANY

The Company’s business establishments

  1. An organization chart with full details of the Company’s establishments in Hong Kong and overseas. This should include in respect of each office, its address, size, the number of employees and their respective name, post title and duties.

 

  1. For the overseas establishment, describe in detail its functions and specify its authorities if it was involved in the negotiations with the buyers and suppliers. If there was no establishment overseas, provide details of any other group companies or independent third parties involved in the sales and purchases of the Company’s products, their respective responsibilities and authorities.

The Company’s products

  1. The type of goods being purchased and sold with a copy of catalogue or price list/quotation of the products issued by the Company in the relevant basis period.

 

The Company’s mode of trading

  1. Full details of how the Company carried out the claimed offshore trading transactions, including

 

  1. whether the sales were on indent basis or inventories were held for filling up order; and in the latter case, advise the place where the inventory was kept;
  1. whether samples were produced to potential customers and if yes, provide full details of how, where and by whom the samples were produced and delivered to the customers;

 

  1. whether the Company’s own sales staff were sent overseas to negotiate and conclude sales and if yes, a full list of all staff involved in the claimed offshore operations, their respective name, Hong Kong Identity Card number, post title and a full set of itinerary of the business trips made during the relevant basis period including the period of each trip, the places visited, the purposes of each visit and the suppliers/customers contacted;
  1. whether overseas group companies or any other parties were involved in the offshore transactions and if yes, the staff employed by each of these overseas company, their respective name, Hong Kong Identity Card number, post title and a full set itinerary of the business trips made including the period of each trip, the place visited, the purpose of each visit and the supplier/customers contacted;

 

The Company’s purchases

  1. For each of the years of assessment involved, provide an analysis of the suppliers, giving their respective name, address, amount of yearly purchases and relationship with the partners/Company, its directors or shareholders, if any. If the number of suppliers exceeds 10, provide a list of the five largest suppliers with the above details.

 

  1. Full details of how, where and by whom the suppliers were procured and how the purchase price of the goods was determined. If by negotiation, explain how, where and by whom the negotiations were carried out. If there was a long established business relationship, provide full details of how such relationship was established. If the suppliers were group companies, confirm whether the products supplied and the purchase prices were predetermined according to group policy, or the Company had the authority to determine the purchase prices and/or adjust the prices such as by way of discount.
  1. Whether any distribution agreement or other form of master agreement was entered into with any of the suppliers and if yes, provide a copy.

 

  1. For individual transaction, confirm whether formal purchase contract was made for every order/repeated order. Describe how, where and by whom the contract was prepared and signed.
  1. Full details of how, where and by whom the purchase order was initiated, processed and placed with the supplier and whether confirmation from the supplier is required.

 

 

  1. Full details of the method of financing the purchase of goods and how payment was made to the suppliers. In respect of banking facilities obtained by the Company to finance the purchases, provide a copy of the banking facility letter of the relevant period showing the extent of the facility obtained and the security provided.  Advise the names of staff authorized by the Company to act as signatories of the Company’s bank accounts.

 

The Company’s sales

  1. For each of the years of assessment involved, provide an analysis of the customers, giving their respective name, address, amount of yearly sales and relationship with the partners/Company, its directors or shareholders, if any.  If the number of customers exceeds 10, provide a list of the five largest customers with the above details.

 

  1. Full details of how, where any by whom the customers were solicited and how the selling price of the goods was determined. If by negotiation, explain how, where and by whom the negotiations were carried out. If there was a long established business relationship, provide full details of how such relationship was established. If the customers were group companies, confirm whether the products sod and the selling prices were predetermined according to group policy, or the Company had the authority to determine the selling prices and/or adjust the prices such as by way of discount.
  1. Whether any distribution agreement or master sale agreement was entered into with any of the customers any if yes, provide a copy.

 

  1. For individual transaction, confirm whether formal sales contract was made for every order/repeated order. Explain how, where and by whom the contract was prepared and signed.
  1. Full details of how, where and by whom the purchase order from customer was initiated, processed and placed with the Company, the name of staff who had the ultimate authority to accept the order and whether confirmation with the customer was required.

 

 

  1. Full details of how, where and by whom the shipment of goods from suppliers to customers was arranged and the inspection of good before shipment was made, whether the goods from suppliers passed through Hong Kong or not and if the goods passed through Hong Kong, whether transhipment was instantly arranged or they were temporarily stored in the Company’s warehouse.
  1. Advise how customers settled their accounts (e.g. by letter of credit, bill of exchange etc.)

 

Representative transactions

  1. For the two largest sales transactions in terms of sales value with the largest customer (one in the month of                   and the other in the month of                  ), provide a full indexed set of documents in chronological order, including sales and purchase agreements, purchase and sales orders, order confirmation, correspondence by way of letters, facsimile transmission, emails, invoices, letter of credit and shipping and insurance documents etc.

 

  1. For the two transactions selected above,
  1. details of the nature, quantity and value of the products purchased and sold as well as the parties involved.

 

  1. clear and full version of each document with a brief description of the nature of the document and the parties concerned.
  1. the routing of documents (i.e. the sender and recipient of the documents.)  By reference to the documents, describe thoroughly how, where and by whom the purchase and sales activities were performed, from negotiations with buyers and supplies, conclusion of contracts, issue and receipt of sales and purchase orders, confirmation and acceptance of the orders, arrangement of finance, inspection, delivery of goods to final settlement of accounts.

 

 

Tabulate your reply in the following format :

 

Ref No.

 

Date

Nature of Documents

Mode of Transmission

Description of Activities

 

Where1

 

To Whom2

 

By Whom3

 

 

 

 

 

 

 

 

Note 1: State the exact location, do not just state “outside Hong Kong”
Note 2: Indicate the full name and capacity of the staff involved in the activity, do not just state “staff”.      

   Basis of the offshore claim

  1. Full justifications of how the onshore and offshore transactions are distinguished and the reasons why the claimed offshore profit is not chargeable to Hong Kong Profits Tax.

 

Expenses attributable to the claimed offshore transactions

  1. In respect of salaries and allowance for the years of assessment concerned, provide a breakdown for each year showing in respect of each employee his/her name and the remuneration paid.

 

  1. In respect of the overseas traveling expenses for the years of assessment concerned, provide a breakdown for each year showing details of the business  trip taken, the names of employees involved and the purposes of the trips (if not otherwise provided above).
  1. In respect of commission expenses charged in the accounts, a breakdown showing for each recipient its name and address, the amount paid and the services rendered that gave rise to the Company’s onshore/offshore income.

 

  1. If the trading profit is accepted as not arising in Hong Kong, furnish details of the expenses attributable to the earning of such profit. If an apportionment of expenses is made, specify the basis of calculation.

Commission

  1. A list setting out in respect of each recipient:

 

  1. his name, address and Hong Kong Identity Card Number/ Business

Registration Number and place of incorporation, if known;

  1. his relationship with the Company, its directors and shareholders, if any;
  2. details of services rendered;
  3. the amount paid/payable and basis of calculation;
  4. date, amount and mode of each payment made with supporting documents.

China office expenses

  1. A detailed breakdown of the expenses including :

 

  1. exact nature of each item; and
  2. total amount.
  1. Overseas establishment and overseas staff had been remunerated by commissions and management fee respectively. It therefore seems to the IRD that the Company had earned the profits merely because of risk bearing from the trading transactions. As the Company was incorporated in Hong Kong and all sales invoices carrying address in Hong Kong only, IRD consider that the profits in questions should therefore be derived from Hong Kong. Regarding this, give your comment and enlighten the IRD the reasons for booking relevant profits in the name of the Company instead of oversea establishment / company.

 

  1. Explain the purposes of stay of director during the following periods in Hong Kong as extracted from copies of passport provided by you.
  1. Advise under what circumstances the Company had been allowed to utilize the premises “Room A&B, 2/F, Lee Kee Commercial building, 221-227 Queen’s Road Central, Hong Kong” as registered office.  Provide copy of relevant agreement, if any.

 

  1. Advise how the Company operated bank accounts opened in Hong Kong.
  1. All correspondences issued by you, including your above reply letter, commercial invoice, packing list, original forwarders cargo receipt, certificate of origin, sales contract, export trade collection/negotiation instructions and proforma invoice, carried only the address, telephone number and fax number in Hong Kong.

 

 

  1. The business activities of the Hangzhou representative office in Zhejiang should be restricted to liaison activities. Therefore, you are not supposed to be capable of negotiating, concluding and effecting any trading transactions in Mainland.

China representative office

  1. Provide a copy of business registration certificate of the office.

 

  1. Provide a copy of tax registration documents of the office.
As revealed in your reply that you have established the office in Mainland only, you should have derived your income from the Mainland office. However, representative office is not allowed to carry on income-generating business as restricted by the Chinese business registration regulations. It also appears that your offshore claimed profits derived from the representative office have not been fully subject to the Mainland tax. Please let me have your comments.

OFFSHORE CLAIM CHECKLIST (SERVICE COMPANY)

(1)An itinerary of Director for the year ended  DD/MM/YYYY  showing the date of arrival in and departure from Hong Kong and the nature and purpose of each stay in Hong Kong.


(2)How and where Director provide information to overseas related company.


(3)Consultancy Fees


A detailed list setting out in respect of each recipient:


  1. (a)his name, address and Hong Kong Identity Card Number/Business Registration Number and place of incorporation, if known;
  2. (b)his relationship with the Company, its directors and shareholders, if any;
  3. (c)details of services rendered;
  4. (d)the amount paid/payable and the basis of calculation;
  5. (e)date, amount and mode of each payment made with supporting documents;
  6. (f)copies of the relevant service agreement.

(4)Consultancy income


Provide for each consultation


  1. (a)the date and place of consultation;
  2. (b)the amount of consultancy income;
  3. (c)copy of the invoice issued to the client;
  4. (d)how the client made payment, i.e. cash, cheque, bank transfer, credit card, etc.
  5. (e)whether Director or the Company had an office in the place mentioned in (a) above. If yes, please state the name and address of each clinic and provide copies of the registration certificates with the relevant authorities.

 

(5)A copy of the traveling document of Director to support (4) (a) above.