(2) Research into and provide a summary of Departmental Interpretation and Practice Notes No. 39 (Revised) Profits Tax: Digital Economy, Electronic Commerce and Digital Assets from Paragraphs 8 to 26 only (i.e. Charge of Profits Tax, Carrying On Business In Hong Kong, Locality of Profits and Permanent Establishments). (25 marks)
(3) Based on (2) above, advise Mr So whether Super S Limited may be subject to Hong Kong Profits Tax in the year of assessment 2019/20.
Case: Mr So the famous KOL Background Mr So is a well-known Key Opinion Leader (KOL) and a Youtuber. The 30-year old was born and raised in Hong Kong but emigrated to Singapore in 2015. He is well-known in Hong Kong as a very entertaining chef and has over 1.5 million subscribers on YouTube. Mr So started his own channel in Patreon on 1 May 2019 in Singapore. Since then he has produced hundreds of exclusive video contents for his subscribers, (also known as "Patrons). In order to view his exclusive contents, the subscribers need to pay a monthly fee of HK$20 to Patreon. About Patreon Patreon is an e-commerce and membership platform based in the USA that provides business tools for creators to run a subscription content service. It allows creators and artists to earn a monthly income by providing exclusive rewards and perks to their subscribers, or Patrons. Patreon is used by YouTube videographers, webcomic artists, writers, podcasters, musicians and other categories of creators who post regularly online. It allows artists to receive funding directly from their fans, or patrons, on a recurring basis or per work of art. The company, started by musician Jack Conte and developer Sam Yam in 2013, is based in San Francisco. In general, Patreon charges a commission of 5-12% of creators' monthly income, in addition to payment processing and administration fees. Additional Facts: 1. The main server of Patreon is located in San Francisco, U.S.A. 2. Mr So is employed by his own company Super S Limited. He signed the employment contract with Super S Limited in Singapore. His salaries were paid to his bank account in Singapore. 3. Super S Limited is a company incorporated in Singapore in 2016 and wholly owned by Mr So. Its computer server is kept and maintained in Singapore. 4. Mr So's video contents were basically interviews with famous chefs in their kitchens. The shootings took place mostly in Singapore and Malaysia, and sometimes in Hong Kong. In all cases, an agreement has to be negotiated and signed between Super S Limited and the celebrity chefs being interviewed by Mr So. The negotiations and signing of the contracts (between Super S Limited and the Chefs) all took place in Singapore. Super S Limited would pay a small gratuity of HK$3,000 per shooting to these chefs. 5. The core activities of Super S Limited (including contract negotiations, planning, editing and uploading of videos, communicating with Patreon, the Chefs, other business partners etc.) took place in Singapore. 6. During the year of assessment (Y/A) 2019/20, Mr So has a total of 20,146 subscribers, or Patrons, on his Patreon channel. According to the Patrons' data, out of the 20.146 Patrons, 15,216 of them are Hong Kong based. 7. Mr So's subscribers make payment to Patreon on the website or mobile app. Patreon then makes payment to Super S Limited's bank account in Singapore. 8. In Y/A 2019/20, Super S Limited received total of HK$882,643 of net income from Patreon (after the deduction of 12% commission from total Patrons' contribution plus the payment processing and administration fees charged by Patreon.) 9. In the Y/A 2019/20 Mr So came back to Hong Kong once a month and spent 10 days per month shooting the video contents, at the same time visiting his wife and daughter living in Wanchai. 10. Mr So is a Singapore Citizen but he also has Hong Kong Permanent Residency. Any Hong Kong Tax? As a good friend of yours, Mr So is asking for your advice on his own tax as well as whether he or his company (Super S Limited) will be subject to Hong Kong Profits Tax in the year of assessment 2019/20. (2) Research into and provide a summary of Departmental Interpretation and Practice Notes No. 39 (Revised) - Profits Tax: Digital Economy, Electronic Commerce and Digital Assets from Paragraphs 8 to 26 only (i.e. Charge of Profits Tax, Carrying On Business In Hong Kong, Locality of Profits and Permanent Establishments). (25 marks) (3) Based on (2) above, advise Mr So whether Super S Limited may be subject to Hong Kong Profits Tax in the year of assessment 2019/20. (15 marks) Case: Mr So the famous KOL Background Mr So is a well-known Key Opinion Leader (KOL) and a Youtuber. The 30-year old was born and raised in Hong Kong but emigrated to Singapore in 2015. He is well-known in Hong Kong as a very entertaining chef and has over 1.5 million subscribers on YouTube. Mr So started his own channel in Patreon on 1 May 2019 in Singapore. Since then he has produced hundreds of exclusive video contents for his subscribers, (also known as "Patrons). In order to view his exclusive contents, the subscribers need to pay a monthly fee of HK$20 to Patreon. About Patreon Patreon is an e-commerce and membership platform based in the USA that provides business tools for creators to run a subscription content service. It allows creators and artists to earn a monthly income by providing exclusive rewards and perks to their subscribers, or Patrons. Patreon is used by YouTube videographers, webcomic artists, writers, podcasters, musicians and other categories of creators who post regularly online. It allows artists to receive funding directly from their fans, or patrons, on a recurring basis or per work of art. The company, started by musician Jack Conte and developer Sam Yam in 2013, is based in San Francisco. In general, Patreon charges a commission of 5-12% of creators' monthly income, in addition to payment processing and administration fees. Additional Facts: 1. The main server of Patreon is located in San Francisco, U.S.A. 2. Mr So is employed by his own company Super S Limited. He signed the employment contract with Super S Limited in Singapore. His salaries were paid to his bank account in Singapore. 3. Super S Limited is a company incorporated in Singapore in 2016 and wholly owned by Mr So. Its computer server is kept and maintained in Singapore. 4. Mr So's video contents were basically interviews with famous chefs in their kitchens. The shootings took place mostly in Singapore and Malaysia, and sometimes in Hong Kong. In all cases, an agreement has to be negotiated and signed between Super S Limited and the celebrity chefs being interviewed by Mr So. The negotiations and signing of the contracts (between Super S Limited and the Chefs) all took place in Singapore. Super S Limited would pay a small gratuity of HK$3,000 per shooting to these chefs. 5. The core activities of Super S Limited (including contract negotiations, planning, editing and uploading of videos, communicating with Patreon, the Chefs, other business partners etc.) took place in Singapore. 6. During the year of assessment (Y/A) 2019/20, Mr So has a total of 20,146 subscribers, or Patrons, on his Patreon channel. According to the Patrons' data, out of the 20.146 Patrons, 15,216 of them are Hong Kong based. 7. Mr So's subscribers make payment to Patreon on the website or mobile app. Patreon then makes payment to Super S Limited's bank account in Singapore. 8. In Y/A 2019/20, Super S Limited received total of HK$882,643 of net income from Patreon (after the deduction of 12% commission from total Patrons' contribution plus the payment processing and administration fees charged by Patreon.) 9. In the Y/A 2019/20 Mr So came back to Hong Kong once a month and spent 10 days per month shooting the video contents, at the same time visiting his wife and daughter living in Wanchai. 10. Mr So is a Singapore Citizen but he also has Hong Kong Permanent Residency. Any Hong Kong Tax? As a good friend of yours, Mr So is asking for your advice on his own tax as well as whether he or his company (Super S Limited) will be subject to Hong Kong Profits Tax in the year of assessment 2019/20. (2) Research into and provide a summary of Departmental Interpretation and Practice Notes No. 39 (Revised) - Profits Tax: Digital Economy, Electronic Commerce and Digital Assets from Paragraphs 8 to 26 only (i.e. Charge of Profits Tax, Carrying On Business In Hong Kong, Locality of Profits and Permanent Establishments). (25 marks) (3) Based on (2) above, advise Mr So whether Super S Limited may be subject to Hong Kong Profits Tax in the year of assessment 2019/20. (15 marks)
