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Under the terms of its Action Plan on
Base Erosion and Profit Shifting, the
Organisation for Economic Co-operation
and Development pledges to address 15
identify issues related to e-commerce.
mismatches, such as arrangements that
transparent in another, dual-residence
in one country and equity in another.
low taxed entities.
situations and the use of interest
expense to finance exempt or deferred
tax practices” including preferential
tax regimes for income from financial
activities or from the provision of
provisions and recommend domestic
to prevent artificial avoidance of
inappropriate returns do not accrue
transactions that would not, or would
shifting and the actions to address it.
tax planning arrangements.
consideration compliance costs for
provide all relevant governments with
mechanisms more effective.
FIFTEEN POINTS OF LIGHT
Ho says her firm is already organizing a seminar for clients and
also taking steps internally to make sure staff are fully informed about
the implications of the action plan. “Companies need to get them-
selves ready for any possible changes,” she says.
Anthony Tam, a tax partner with Mazars in Shanghai and a deputy
chair of the Institute’s taxation faculty executive committee, says com-
panies shifting to Hong Kong should prove that they have substance.
“A Hong Kong company would only be used when there would indeed
be management activities and other commercial activities being car-
ried out in Hong Kong,” he points out.
Deloitte’s Yip adds that accounting firms could advise on putting
the necessary executives, employees and capital into Hong Kong and
what sort of business the client should conduct. “If someone wants to
do more business in Hong Kong, we can structure the transaction in a
way that is economically efficient,” he says.
Transfer-pricing issues, referring to the method used to allocate
profit and loss between a corporation’s entities in different tax juris-
dictions, might also become more common as a result of the action
plan. “We expect there to be more demand for transfer-pricing work,”
says Steven Kwan, director of tax at Baker Tilly Hong Kong and an In-
A possible flood of multinationals moving their subsidiaries to
Hong Kong in search of a more amenable transfer-pricing structure
is likely to draw attention from local tax authorities. “ We expect
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