TAXATION OF ECOMMERCE IN HONG KONG

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TAXATION OF E-COMMERCE IN HONG KONG

• Language Translation Service Co.

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• Hong Kong
• Web site hosted with assistance of a local
  internet service provider
• Web site
• Universally assessed
• Shows the availability of services with pricing,
  checks the schedule, runs credit check, receive
  the document on-line, receive credit card
  payment, performs translation and delivers
  products on-line

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• Whether the current tax policy can be effectively
  applied to e-commerce?

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• Current Tax Policy
• Tax is charged on profits arising in or derived
  from H.K. from a trade, profession or business
  carried on in H.K.

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• Carry on business in H.K. (P.E.)
• a fixed place
• Whether central management and control is
  exercised
• An agent generally and regularly act on behalf of
  the company to negotiate and conclude the contract

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• The OECD committee
• A web site cannot in itself constitute a
  permanent establishment
• Case-by-case analysis is recommended
• Uncertainty still exists

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• Hong Kong source
• Operations test
• What the taxpayer has done to earn the profits in
  question
• Where he has done it

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• Short-term (next year) solution
• Maintain current tax policy
• Simple and certain (16 for corporations 15
  for unincorporated business)
• lt5 of business adopted on-line transaction
• Future development on internet trading is still
  uncertain
• No major problems encountered
• No legislative procedure is required
• ? Undesirable imprudent to adjust current
  jurisdiction

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• Long-term (next 5 years) solution
• International consensus
• Sharing information
• Tax treaty
• Consistent rules to mitigate the disputes over
  tax issues
• Tax collection mechanisms