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These notes are issued for the information of taxpayers and their tax - page 20 / 68

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arriving in the Mainland or ending in the month leaving the Mainland during

the course of the counting method.

project shall In Hong

be adopted for the purposes Kong, the term “month” is

of applying

the

defined in

the

Interpretation and General Clauses Ordinance (Cap. 1) as “calendar In its ordinary meaning, month (calendar month) means a period

month”. of time

between the same dates days (365 days divided

in successive calendar months; a period of around 30 by 12); a period of 28 days or a period of 4 weeks.

For the purposes of paragraph 3(2) of term “month” to be a period of 30 enterprise has furnished services in

Article 5, Hong Kong considers that the days. In counting whether a Mainland Hong Kong “for a period or periods

aggregating more add together each

than 6 months within any time period that services

12-month period”, Hong Kong will have been provided in Hong Kong

by

the

Mainland

enterprise

directly

or

through

its

employees

(irrespective

of

the length number of

of the time period) within any 12-month period. If days during the time period or time periods during

the cumulative which services

have days,

been provided in Hong Kong within that 12-month period Hong Kong would consider that the Mainland enterprise has

exceeds 180 a permanent

establishment in Hong Kong.

With effect from 11 June 2008, the term

months” Second

was repealed and substituted

Protocol.

In

other

words,

by

“183 days”

if

within any

under Article 3 of 12-month period

“6 the the

cumulative number of enterprise of One Side be regarded as having

days during in the Other a permanent

which services have been provided by an Side exceeds 183 days, that enterprise will establishment in the Other Side. For the

transitional “183 days”

arrangement,

Hong

rule will only

apply

Kong agreed with the Mainland that the new to those services which commenced after, and

for the

which the employees effective date of the

rendering such services arrived at Hong Second Protocol. For those enterprises

Kong

after,

which

have

commenced to provide services in Hong Kong prior to the effective date of Second Protocol, the original “6 months” rule will still be adopted determining whether they have a permanent establishment in Hong Kong.

the in

Whilst the method of counting the “183 days” was not stated in the Second Protocol, both Sides will in practice use the “days of physical presence” method. The day when one is in the Other Side, and the day of arrival or departure, irrespective of the duration and the purpose of the stay, will be counted as one day. This is because it is difficult if not impossible for the tax authority to ascertain, and for the taxpayers to prove, whether services were rendered on any particular day of presence in the jurisdictions concerned.

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