Background- Mr. A originally buying from China and selling to France using his own French company as the middle trading firm (F Ltd);
- Mr. A flies frequently to Hong Kong and China – to meet clients and suppliers;
- Trading profit of Euro 100,000 is subject to French tax rate – around 40% .
New arrangement- Mr. A setup a Hong Kong company, H Ltd;
- H Ltd becomes the middle trading company – buying from China and selling to France;
- Goods still shipping directly from China to France;
- Selling and purchase at same price as before;
- Mr. A hires a staff in Hong Kong – to help handle the sales and purchase orders.
Benefit- Profit of Euro 100,000 will be profit of H Ltd;
- Hong Kong profits tax rate of 17% applies;
- There is saving of 23% in profits tax.
| Important : Overall Tax Position |
Mr. A still needs to fulfill personal income tax filing to French government – in order to assess overall tax saving scenario. |
