Hong Kong Tax Question

Overseas Properties Ltd (OPL) is a property investment and property management company incorporated in the British Virgin Islands. Its investment portfolio includes properties in China, Japan, Singapore and Malaysia. OPL has recruited you as their financial controller. Your office is located in Hong Kong, which is merely a business administration centre handling all accounting and fund management matters.

OPL would like to establish a subsidiary or branch in Hong Kong to invest in luxury apartments and houses in prime locations in Hong Kong for resale and for letting. OPL would also like to purchase old buildings for redevelopment into modern units for resale or for long-term investment.

The Board of Directors would like to have an understanding of OPLs tax exposure in Hong Kong with regard to their business objectives and the nature of income and profits to be generated from Hong Kong. They have asked you to prepare a report to address these issues.

(b) Analysis of the investment structure (a subsidiary or a branch), repatriation of profits to OPL and how the subsidiary or branch could be financed by OPL; and the tax implications.