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These notes are issued for the information of taxpayers and their tax - page 62 / 68

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139.

Paragraph 3 of Article 21 provides that where dividends received by

a resident company of One Side which controls not less than 10% of the shares of a resident company of the Other Side, the credit that the resident company of that One Side is entitled to will include the tax paid by the company which pays the dividends in respect of the profits from which such dividends are

derived.

As dividends are not chargeable to tax in Hong Kong, this provision

will have no practical application to Hong Kong resident companies.

140.

Before a tax credit is allowed, it will need to be established to the

satisfaction of the Inland Revenue Department that the tax has been paid by the person in the Mainland. The person will need to submit the tax computation issued by the tax authority of the Mainland (showing details of the relevant income and tax paid thereon) together with documentary evidence to the effect

that the tax has been paid and is not subject to any further adjustment.

Article 22

NON-DISCRIMINATION

141.

Paragraph 1 of Article 22 establishes the principle that, for purposes

of taxation, discrimination based on the actual situs of an enterprise is forbidden. This paragraph provides that the taxation on a permanent establishment which an enterprise of One Side has in the Other Side shall not be less favourably levied in that Other Side than the taxation levied on

enterprises of that Other Side carrying on the same activities.

142.

Paragraph 2 of Article 22 aims at eliminating discrimination on the

grounds of the resident status of the persons receiving payments.

This

paragraph enterprise

provides that interest, royalties and other disbursements of One Side to a resident of the Other Side shall, for the

paid by

an

purpose

of

determining

the

taxable

profits

of

such

enterprise,

be

deductible

under

the

same

conditions

as

if

they

had

been

paid

to

a

resident

of

that

One

Side,

except

under

specified circumstances.

143.

Paragraph 3 of Article 22 forbids One Side to give less favourable

treatment to enterprises of that Side where the capital of the enterprise is wholly or partly owned or controlled, directly or indirectly, by one or more residents of the Other Side. This paragraph provides that enterprises of One Side shall not, by reason of their capital being owned or controlled by residents

58

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