Question 2 (14 marks) SuperAD Ltd is the holding company for a group of marketing companies in Hong Kong. It produces digital marketing material and provides advertising service (such as filming, graphic reproduction and graphic design etc) mainly in Hong Kong and Macau, although the directors are considering expanding its business in Mainland China. On March 2021 the directors were approached by a PRC company, Enterprise T, to provide advertising production services in Mainland China. Both parties signed an agreement in Zhuhai. Under the agreement, Enterprise T will pay annual fee to SuperAD Ltd for the advertising production services rendered for two years. Francis Line, one of the top-performing directors at SuperAD Ltd, will be offered a secondment to Enterprise T at Zhuhai from 1 July 2021. Francis will spend the whole periods from July to December 2021 ( 1st period); and March to June 2022 ( 2nd period) supporting Enterprise T in Mainland China. Francis wants to travel in Zhuhai on 1 June 2022 and will stay there for a month before starting work at Zhuhai, while SuperAD Ltd will pay him during this time. SuperAD Ltd will pay for his accommodation in Zhuhai and for his partner to visit him three times during his secondment. Francis owns a house in Hong Kong which his wife and parents stay there during the secondment. His annual salary of HKD\$1 million will be paid by SuperAD Ltd. Required: In the context of the China and Hong Kong Avoidance of Double Taxation Agreement: a) State the relevant rules determining existence of a permanent establishment (PE) in Mainland China concerning SuperAD Ltd's activities in the Mainland. (3 marks) b) Based on your answer in (a), discuss whether SuperAD Ltd's activities in the Mainland will be regarded as a PE under the tax jurisdiction in China Mainland. (3 marks) c) Identify, supported by reason(s), Francis's tax residency. (2 marks) d) Briefly evaluate the Salary/Individual Income Tax position of Francis in Mainland China for his secondment at Zhuhai. ( 2 marks) e) Assume SuperAD Ltd is deemed to have a PE in Mainland China in respect of the services provided there. Thus, the company is required to pay Enterprise Income Tax in the Mainland China for the profits attributable to that PE. The relevant information of SuperAD Ltd is shown as follows: Required (i) Compute Enterprise Income Tax payable in Mainland China. (ii) Compute Profits Tax payable in Hong Kong. (iii) Compute the tax credit and net Hong Kong Profits Tax payable after tax credit Question 2 (14 marks) SuperAD Ltd is the holding company for a group of marketing companies in Hong Kong. It produces digital marketing material and provides advertising service (such as filming, graphic reproduction and graphic design etc) mainly in Hong Kong and Macau, although the directors are considering expanding its business in Mainland China. On March 2021 the directors were approached by a PRC company, Enterprise T, to provide advertising production services in Mainland China. Both parties signed an agreement in Zhuhai. Under the agreement, Enterprise T will pay annual fee to SuperAD Ltd for the advertising production services rendered for two years. Francis Line, one of the top-performing directors at SuperAD Ltd, will be offered a secondment to Enterprise T at Zhuhai from 1 July 2021. Francis will spend the whole periods from July to December 2021 ( 1st period); and March to June 2022 ( 2nd period) supporting Enterprise T in Mainland China. Francis wants to travel in Zhuhai on 1 June 2022 and will stay there for a month before starting work at Zhuhai, while SuperAD Ltd will pay him during this time. SuperAD Ltd will pay for his accommodation in Zhuhai and for his partner to visit him three times during his secondment. Francis owns a house in Hong Kong which his wife and parents stay there during the secondment. His annual salary of HKD\$1 million will be paid by SuperAD Ltd. Required: In the context of the China and Hong Kong Avoidance of Double Taxation Agreement: a) State the relevant rules determining existence of a permanent establishment (PE) in Mainland China concerning SuperAD Ltd's activities in the Mainland. (3 marks) b) Based on your answer in (a), discuss whether SuperAD Ltd's activities in the Mainland will be regarded as a PE under the tax jurisdiction in China Mainland. (3 marks) c) Identify, supported by reason(s), Francis's tax residency. (2 marks) d) Briefly evaluate the Salary/Individual Income Tax position of Francis in Mainland China for his secondment at Zhuhai. ( 2 marks) e) Assume SuperAD Ltd is deemed to have a PE in Mainland China in respect of the services provided there. Thus, the company is required to pay Enterprise Income Tax in the Mainland China for the profits attributable to that PE. The relevant information of SuperAD Ltd is shown as follows: Required (i) Compute Enterprise Income Tax payable in Mainland China. (ii) Compute Profits Tax payable in Hong Kong. (iii) Compute the tax credit and net Hong Kong Profits Tax payable after tax credit