Doing Business Hong Kong and China Relevant Tax Considerations

Transcription

1 Kortrijk Verzoek anonieme pre-filing bespreking 3 Maytot2011 Dossier Kurt Haen KurtDeDe Haen Doing Business with fusie Belastingvrije opwaartse Belastingvrije fusie Hong Kong and China Relevant Tax Considerations Considerations Relevant 1

2 0. Content 1. About the Belgium Hong Kong Tax Treaty 2. Tax Treaty Comparison 3. Key Issues to Consider 4. Best-Practice Cases (7) 5. Contact Details 2

3 1. About the Belgium Hong Kong Tax Treaty Concluded on 10 December 2003 First tax treaty ever concluded by Hong Kong Ever since: increased investments by Europeans into Asia via Belgium/Hong Kong (and vice versa) Recently: Hong Kong concluded tax treaties with e.g. Luxembourg and the Netherlands As per April 2011, Hong Kong signed 19 tax treaties so far 3

4 2. Tax Treaty Comparison WHT rates Dividend Interest Royalty HK domestic law 0% 0% 4,95% HK BE Treaty 0% (cond.) 10% 5% HK Lux Treaty 0% (cond.) 0% 3% HK NL Treaty (*) 0% (cond.) 0% 3% (*) Still to be ratified 4

5 2. Tax Treaty Comparison Compare with Singapore, that other Asian Tiger Areas for Consideration HK SI Corporate tax rate 16,5% 17% Personal tax rate ca. 15% ca. 15% Territorial tax regime? yes yes Goods and Services Tax / VAT? n/a 7% GST Good PRC tax treaty? yes yes 5

6 2. Tax Treaty Comparison Compare with Singapore, that other Asian Tiger Areas for Consideration HK SI Dividend WHT (*) 0% 0% Interest WHT (*) 0% 15% Royalty WHT (*) 4,95% 10% (*) Pursuant to either domestic tax law or the Tax Treaty with Belgium 6

7 3. Key Issues to Consider Possible goodwill exit tax when investing into Asia Tax-efficient financing of cross-border activities Tax-efficient profit / cash-flow repatriation Transfer pricing Human Resources aspects Consider upfront tax ruling comfort 7

8 3. Key Issues to Consider Relevant local substance: Office space Business cards Required relevant local skills Own payroll versus subcontractor? Belgium Directors of local Ltd Actual business risk exposure Evidence local presence! 8

9 4. Best-Practice Cases (1) 0% HK dividend withholding tax ( WHT ) dividend BelCo HKCo capital gain 95% Belgium dividend participation exemption 100% Belgium net capital gains participation exemption Confirmed by Belgium case law Confirmed by Belgium Ruling Commission 9

10 4. Best-Practice Cases (2) dividend PRC RO BelCo HKCo capital gain Taiwan RO Mere Representation Office (RO) is not a Permanent Establishment (PE) Look at prevailing applicable tax treaty If no tax treaty, look at local tax law If no PE, no 15% offshore ETR test to be satisfied PRC PE would be taxable at 25% PRC corporate tax 10

11 4. Best-Practice Cases (3) BelCo X HKCo X PRC Co capital gain capital gain 10% capital gain tax in PRC if nonresident sells PRC Co shares Hence, need for good PRC tax treaty HK PRC is good PRC tax treaty (conditions) Either HKCo sells PRC Co shares Either BelCo sells HKCo shares Quid new BE-PRC tax treaty? Beware of real estate companies! 11

12 4. Best-Practice Cases (4) dividend Ltd Assume Belgium tax resident individual directly holds Ltd shares No HK dividend WHT 15% or (less likely) 25% Belgium dividend WHT is final tax Belgium communal taxes can be due as well (ECJ Dijkman Case a contrario) Realized capital gains on shares are in principle tax-free 12

13 4. Best-Practice Cases (5) Director s fee Ltd Director salary <tax> Net salary Assume Belgium tax resident individual is Director of Ltd Approx. 15% HK personal tax Exemption with progression reserve in Belgium 100% BE 50% BE 50% HK 100% HK <35.342> <23.671> <12.000> ETR (BE+ HK) 44% 30% 15% 13

14 4. Best-Practice Cases (6) royalty BelCo Ltd Assume BelCo charges at arm s length royalty to Ltd 4,95% HK royalty WHT However, ca. 18% Foreign Tax Credit in Belgium Hence, ETR of BelCo significantly lowers if BelCo has tax capacity 14

15 4. Best-Practice Cases (7) BelCo BE PRC Assume BelCo predominantly operates in RMB environment Hence, BelCo is exposed to significant EUR/RMB FX exposure However, BelCo can obtain approval to do bookkeeping and file annual accounts in RMB If so, BelCo can obtain tax ruling comfort that EUR/RMB evolution no longer impacts BelCo s tax basis! 15

16 5. Contact Details Kurt De Haen VMB Accountants & Tax Consultants / NEXIA member Tel: +32 (0)2/

17 THANK YOU! 17