Desktop VersionSite MapContact UsShare RSS

*

1.

Q:

Mr. Chan and his spouse have following businesses:

Business Issued share capital/ voting rights/ profits entitled
Mr. Chan Mrs. Chan
Corporation A 50% 50%
Corporation B 50% 50%
Partnership C 60% 40%
Sole Proprietorship D 100% --
Sole Proprietorship E -- 100%
Sole Proprietorship F -- 100%


Note: All the above businesses adopt the same basis period for a year of assessment.

 
 

A:

Corporation A and Corporation B are not connected entities as neither Mr. Chan nor Mrs. Chan has control over them. Both Corporation A and Corporation B qualify for the two-tiered profits tax rates.

Partnership C and Sole Proprietorship D are connected entities as Mr. Chan has control over them. Either Partnership C or Sole Proprietorship D can elect two-tiered profits tax rates in Partnership C's Profits Tax Return or Mr. Chan's Tax Return – Individuals.

Sole Proprietorship E and Sole Proprietorship F are also connected entities as they are sole proprietorship businesses carried on by Mrs. Chan. In her Tax Return – Individuals, Mrs. Chan can elect two-tiered profits tax rates for Sole Proprietorship E or Sole Proprietorship F.

  back to top


*

2.

Q:

Mr. Lee and his family members have following businesses:

Business Issued share capital/ voting rights/ profits entitled
Mr. Lee Mrs. Lee Brother of
Mr. Lee
Son of Mr.
& Mrs. Lee
Corporation A 40% 60% -- --
Corporation B 40% -- 60% --
Corporation C -- -- 70% 30%
Partnership D 80% -- 20% --
Sole Proprietorship E 100% -- -- --
Sole Proprietorship F -- 100% -- --


Note: All the above businesses adopt the same basis period for a year of assessment.

 
 

A:

Partnership D and Sole Proprietorship E are connected entities as Mr. Lee has control over them. Either Partnership D or Sole Proprietorship E can elect two-tiered profits tax rates in Partnership D's Profits Tax Return or Mr. Lee's Tax Return – Individuals.

Corporation A and Sole Proprietorship F are connected entities as Mrs. Lee has control over them. Either Corporation A or Sole Proprietorship F can elect two-tiered profits tax rates in Corporation A's Profits Tax Return or Mrs. Lee's Tax Return – Individuals.

Corporation B and Corporation C are connected entities as the brother of Mr. Lee has control over them. Only either Corporation B or Corporation C can elect two-tiered profits tax rates in its Profits Tax Return.

Corporation A and Partnership D are not connected entities even Corporation A is controlled by Mrs. Lee and Partnership D is controlled by Mr. Lee.

  back to top


*

3.

Q:

Mr. Wong and Corporation H hold corporations and trust as follows:

Business Issued share capital/ voting rights
Corporation H Note Mr. Wong
Corporation A 100% --
Corporation B 60% 40%
Corporation C 50% 50%
Corporation D 30% 70%
Trust T -- Mr. Wong as trustee


Note: Mr. Wong does not own any issued share capital and voting rights in Corporation H.

 
 

A:

Corporation H, Corporation A and Corporation B are connected entities. Only one of them can elect two-tiered profits tax rates.

Corporation C has no connected entity and qualifies for two-tiered profits tax rates.

Trust T is not a connected entity of Corporation D as Mr. Wong does not have control over Trust T solely by acting in the capacity of a trustee.

  back to top


*

4.

Q:

Group companies

Mr. Cheung and Corporation H hold corporations as follows:

 
 

A:

Business Issued share capital/ voting rights
(directly or indirectly)
Corporation H Mr. Cheung
Corporation H1 100% --
Corporation S1 100% --
Corporation S2 80% --
Corporation S3 50% --
Corporation S4 40% Note 1 --
Corporation H2 80% --
Corporation S5 80% Note 2 --
Corporation S6 48% Note 3 --
Corporation H3 20% 80%
Corporation S7 20% 80% Note 4
Corporation S8 14% Note 5 56% Note 6
Corporation S9 44% Note 7 --

Notes:
(1) The remaining 60% shareholding in Corporation S4 is held by shareholders each holding not more than 10% of the issued share capital.
(2) Corporation H owns or controls 80% (i.e. 80% x 100%) in aggregate of the issued share capital / is entitled to exercise or controls the exercise of 80% in aggregate of the voting rights in Corporation S5.
(3) Corporation H owns or controls 48% (i.e. 80% x 60%) in aggregate of the issued share capital / is entitled to exercise or controls the exercise of 48% in aggregate of the voting rights in Corporation S6.
(4) Mr. Cheung owns or controls 80% (i.e. 80% x 100%) in aggregate of the issued share capital / is entitled to exercise or controls the exercise of 80% in aggregate of the voting rights in Corporation S7.
(5) Corporation H owns or controls 14% (i.e. 20% x 70%) in aggregate of the issued share capital / is entitled to exercise or controls the exercise of 14% in aggregate of the voting rights in Corporation S8.
(6) Mr. Cheung owns or controls 56% (i.e. 80% x 70%) in aggregate of the issued share capital / is entitled to exercise or controls the exercise of 56% in aggregate of the voting rights in Corporation S8.
(7) Corporation H owns or controls 44% (i.e. 100% x 80% x 55%) in aggregate of the issued share capital / is entitled to exercise or controls the exercise of 44% in aggregate of the voting rights in Corporation S9.

 

Corporations H, H1, H2, S1, S2 and S5 are connected entities as Corporation H has control, either directly or indirectly, over the other entities. Only one of them can elect two-tiered profits tax rates.

Corporation S6 is a connected entity of Corporation H2 and Corporation S5. Corporation S6 can elect two-tiered profits tax rates if Corporation H2 and Corporation S5 do not elect.

Corporation S9 is a connected entity of Corporation S2. Corporation S9 can elect two-tiered profits tax rates if Corporation S2 does not elect.

Corporation H3, Corporation S7 and Corporation S8 are also connected entities. Only one of them can benefit from two-tiered profits tax rates.

Corporation S3 and Corporation S4 do not have connected entity and they both qualify for the two-tiered profits tax rates.