There is a significant danger many Hong Kong manufacturing companies with operations in China will be forced to pay tax in both jurisdictions beyond the handover, a tax expert said yesterday.
Deloitte Touche Tohmatsu tax partner Yvonne Law told a Hong Kong Society of Accountants meeting that Chinese tax law had become increasingly sophisticated in recent years, and tax authorities on the mainland were now increasingly taking a tough line on cross-border transactions.
China has until recently taken a relatively passive stance on the taxation of Hong Kong companies operating on the mainland.
Chinese tax authorities have been lenient about situations such as sub-contracting arrangements adopted by Hong Kong companies on the mainland.
These arrangements were not taxed in China because they supposedly required low numbers of staff.
Ms Law said that many Hong Kong companies were channelling growing numbers of staff into these sub-contracting operations and this raised the question of whether these arrangements could in future be fully taxed on the mainland.
