The competent authorities of both Sides would endeavour to
resolve the case presented within taxation not in Arrangement.
by mutual agreement. However, such a case must be 3 years from the first notification of the action resulting in accordance with the provisions of the Comprehensive
As the issue of transfer pricing arising from the provisions on
“associated enterprises” is complicated, the Inland Revenue Department intends to publish a Departmental Interpretation and Practice Note on the subject. The Note will provide information and guidance on the time limit for claims, factors to be taken into consideration in relation to appropriate
adjustments, the tax adjustment methods, etc.
INCOME FROM INVESTMENT – DIVIDENDS, INTEREST AND ROYALTIES
Income derived from investment activities is indirect or passive
income, and is different from profits from business activities. The taxation of such income (including dividends, interest and royalties) is governed by
specific Articles of the Comprehensive Arrangement.
Under the Comprehensive Arrangement, the key principle in relation
Other Side unless it carries on business in that Other Side through a permanent establishment situated therein. On the other hand, if the enterprise does carry
on business in the establishment may
latter manner, the profits attributable to
that permanent for investment even if there is
no permanent establishment situated therein.
Although the Side of the source of investment income has the taxing
rights, this does not mean that the Side of which the recipient is a resident has no taxing rights. In other words, both the Side of source and the Side of residence are given the right to tax the same item of investment income (the Side of residence is required to give double taxation relief to its residents for any income doubly taxed, see paragraphs 128 to 140 below). It is specifically stipulated in the relevant provisions of the Comprehensive Arrangement that