Stella is the managing director of Fashion Design Ltd. (“FADES”), a U.K. company which markets designer...

Stella is the managing director of Fashion Design Ltd. (“FADES”), a U.K. company which markets designer clothing obtained from Paris and London. She plans to expand the company’s activities into Hong Kong. Specifically, from a Hong Kong tax perspective, she wants to know whether it is preferable to structure the proposed marketing operations in Hong Kong through a branch or a Hong Kong subsidiary of that company.

You are required to write to Stella giving advice on the choice of a branch or a subsidiary in Hong Kong with reference to the following perspectives:

Basis for ascertaining profits tax position of a branch versus a subsidiary (application of section 14, computation of assessable profits and tax payable, etc.)
Withholding tax on repatriation of profits and/or distribution o dividend
Home country tax deductions for losses incurred in Hong Kong (if any),
Deferral of home country tax, and
Withholding tax in Hong Kong generally

Expert Solution

ekkarill92 answered 2 years ago

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