Question 1

Red Sun Travel Inc. is an Japanese company which wishes to expand its travelling services in China. The company would like to use Hong Kong as a strategic point in developing the Chinese market. The company has not yet decided whether it will run the Hong Kong business as a branch or a subsidiary. It has very little knowledge on the Hong Kong taxation. The President of the company approaches you and wishes you to give him some advice on its future development of business in Hong Kong. Required: Briefly explain all the things you want to draw to the attention of the company in respect of the aforesaid arrangement. (50 marks)