Date: May 23, 2006
Organiser: Ontario Bar Association
Event: Ontario Bar Association “Brown Bag Series”
Topic: How to Structure Business Tax Effectively in the PRC
Synopsis
Structuring Business Tax Effectively in the PRC
Today Canadian companies are looking at not only doing business in China, but also establishing a permanent presence in the region through representative offices, joint ventures, or Wholly Foreign-Owned Enterprises (WFOEs). As of 2005, over 400 Canadian companies had permanent operations in China, which was more than double the number of eight years ago. Chinese products accounted for C$29.5 billion of Canadian imports in calendar year 2005, which signals a 22.4% increase over the 2004 figure. A key question in this business matrix is how companies can use international corporate structures to do business in China and how they can tax-effectively structure the exit of goods from China to Canada.
Hong Kong’s corporate and tax laws may be most suitable for addressing these issues. Hong Kong offers a mature tax system. Its territorial source principle of taxation and low corporate tax rate provide added incentives for businesses to operate in China through Hong Kong. In addition to tax advantages, structuring through Hong Kong also serves as an effective means of placing a ‘firewall’ between a company’s international headquarters and its operations in China, limiting the risk exposure of the overseas parent company. Partnering with a world-class banking system and a transparent legal system that is based on British Common Law, the attractive tax system makes Hong Kong an ideal gateway to China.
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