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Presented by Ayesha Macpherson Tax Partner, KPMG Hong Kong Making the Best Tax Decisions for Your China Business Ventures March 2004.

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Presentation on theme: "Presented by Ayesha Macpherson Tax Partner, KPMG Hong Kong Making the Best Tax Decisions for Your China Business Ventures March 2004."— Presentation transcript:

1 Presented by Ayesha Macpherson Tax Partner, KPMG Hong Kong Making the Best Tax Decisions for Your China Business Ventures March 2004

2 2 Comparison of Corporate Tax rates between Hong Kong & other ASPAC countries

3 3 Comparison of Individual Tax rates between Hong Kong & other ASPAC countries

4 4 No capital gains tax Dividend income not taxable Territorial concept of taxation (i.e. exempt offshore profits) Tax exemption for interest income from deposits placed with Hong Kong financial institutions Generous capital allowances (100% deduction on computers & manufacturing equipment) No withholding tax on dividends / management fees / interest (low effective withholding tax rate of 5.25% on royalties) No import/export duties (only excise duty on hydrocarbon oils, liquor, tobacco, cigarettes & methyl alcohol) Low capital duty of 0.1% (max: HK$30,000) Low stamp duty of 0.2% on share transfers No GST/VAT Other Tax Advantages of Hong Kong

5 5 Hong Kong as Investment Holding Vehicle PRC Co Foreign Parent HK Co Foreign Parent PRC Co 10% PRC Withholding Tax on disposal No PRC Withholding Tax on disposal No Withholding Tax on dividends No tax on dividends

6 6 Contract Processing Arrangement between Hong Kong & PRC entities Shenzhen Co HK Manufacturer Processing fees, Technical know-how & management skills, Plant & machinery Land, Factory premises, Labor Raw materials Finished goods HK Tax on 50% of Profits (effective tax rate: 8.75%) Hong Kong PRC No PRC Tax on Profits (no permanent establishment in PRC)

7 7 Foreign investment enterprises (“FIE”): Corporate tax rate reduced from 33% to 15% Service provider ~ Yr 1: Tax exempt ~ Yr 2 to 3: 50% reduction of tax rate (7.5%) Production-oriented ~ Yr 1 to 2: Tax exempt ~ Yr 3 to 5: 50% reduction of tax rate (7.5%) Export-oriented / Technologically advanced ~ Yr 6 & beyond: Tax at 10% Reinvestment of profits ~ 40% tax refund ~ 100% tax refund for export-oriented or technologically advanced enterprises Tax Advantages of Shenzhen (Special Economic Zone)

8 8 Trading Co in Hong Kong, Manufacturing Co in Shenzhen HK Co (Trading) Foreign Parent Shenzhen Co (Manufacturing) Corporate Tax Rates 17.5% 15% but Yr 1 & 2 full exemption, Yr 3 to 7.5%, & Yr 6 10% Profits HK$20 HK$80 _______ HK$100 _______

9 9 Trading Co in Hong Kong, Manufacturing Co in Shenzhen

10 10 kpmg


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