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These notes are issued for the information of taxpayers and their tax - page 18 / 68

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be counted separately. In such a case a permanent establishment would not be considered to exist in relation to a particular sub-project if it does not last more than 6 months. A project that does not last more than 6 months would not be regarded as a permanent establishment even if another project of the enterprise constitutes a permanent establishment.

40.

Where, after the commencement of work, a project is suspended (but

not terminated or ended) pending, for example, the arrival of equipment and materials or because of bad weather, and the persons, equipment and facilities as well as materials involved have not been completely moved out, the duration of the project will, in such a case, be counted continuously without any

deduction for the days on which the project is suspended.

41.

If the enterprise subcontracts part of a project to a subcontractor who

commences work earlier than the contractor, then in accordance with paragraph 39 above, the duration of the entire project would be counted from the date the subcontractor commences work up to the date on which the work is totally completed and handed over to the user. This method of counting the project period does not affect the separate and independent calculation of the duration

of continuous work by the subcontractor. enterprise of the Mainland, its subcontracted constitute a permanent establishment if it does In such a case, exemption from profits tax in

Where a subcontractor is an work in Hong Kong will not not last more than six months. Hong Kong would be granted

under

the

Comprehensive

Arrangement

to

the

subcontractor.

On

the

other

hand, if the exemption

subcontractor is a resident of Hong from tax in the Mainland would

Kong operating in the Mainland, likewise be granted under the

Comprehensive Arrangement.

Provision of services by an enterprise

42.

A permanent establishment also includes “the furnishing of services,

including consultancy services, by an enterprise of One Side in the Other Side, directly or through employees or other personnel engaged by the enterprise, but only if such services continue (for the same or a connected project) for a period

or periods aggregating more than 6 months within any 12-month period”. scope of consultancy services includes:

The

14

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