strength and weakness of china tax system!!

The strengths and weaknesses of the present China tax system
Compare between Hong Kong and China.
In China tax, the firm is taxed on worldwide income in its country of residence, and gets a tax credit in the country of residence for host country taxes. And the country of residence taxes the firm's worldwide income at a rate that is higher than 33%.

The strengths of the present China tax system:
•The firm may be eligible for a tax holiday ranging from two to five years. This is only a tax advantage if
The firm defers repatriation of profits and
The tax savings due to the tax holiday are greater than the tax benefits lost due to operating loss carry-forwards and capital allowances that cannot be claimed due to the holiday.
•A 40% tax refund is available on taxes paid on profits that are reinvested in the mainland.
•The firm may be eligible for a reduced tax rate (compared to the standard tax rate of 33%) for some years depending on the location of the project and other characteristics. If the reduced tax rate falls below that in Hong Kong, this would only be an advantage if the firm decides to defer repatriation of profits.

The weaknesses of the present China tax system:
•Hong Kong has a lower standard profits tax rate (16%) than China one (33%). However, this is not an advantage if the home country's tax rate is higher than 33%, and the firm repatriates profits regularly.
•It could be an advantage if the firm defers profit repatriation and is not eligible for a reduced tax rate in China.
•Hong Kong offers better capital allowances: 60% on investment plus 30% declining balance thereafter. This is likely to benefit the firm if the investment is capital-intensive, and particularly if the investment occurs in early years. The tax benefit of capital allowances could be lost in Mainland China in early years because of the tax holiday. This advantage would only be useful if the firm decides to defer repatriation of profits.
•Hong Kong offers unlimited loss carry-forwards. This could make Hong Kong preferable if the company expects significant losses in the first few years of operation. The tax benefit of these losses would be lost in Mainland China because of the tax holiday. This advantage would only be useful if the firm decides to defer repatriation of profits.
•Hong Kong is a source jurisdiction while the Mainland is a residence jurisdiction. Therefore profit items with a non-host source could be excluded from taxation in Hong Kong, but not in Mainland China. This advantage would only be useful if the firm decides to defer repatriation of profits.
•Hong Kong does not levy any sales tax on most commodities, unlike the mainland. This advantage only exists if the project does not derive its revenues from exports, since value-added tax paid on exports would be refunded in the mainland.
•Chinese companies will be at a disadvantage if the Chinese government continues to practice preferential tax policies because the country will have to gradually remove trade barriers when it enters the WTO.

如果你打中文,會有好多人明白.

唔明白你說什麼～