Welcome to Our Hong Kong Tax Residency Series Part 2. I am Henry Kwong, the Tax Partner of Cheng & Cheng. In part 2, I will talk about inbound investment into Asia and China via Hong Kong holding companies. Hong Kong is the platform for Multi-National Corporations to invest into Mainland China. For Chinese Enterprises listed in the US and Hong Kong, you can easily notice that most of them will set up a Hong Kong holding company to hold their subsidiaries in Mainland China. The key reason is that when the Hong Kong holding company becomes a Hong Kong tax resident, the Mainland China dividend withholding tax rates will be reduced by half from 10% to 5%. Remember that Hong Kong does not impose tax on capital gains and dividend income. There is no withholding tax on dividend neither. Please refer to Part 1 Video for details. Some Multi-National Corporations just want to set up back office instead of profit center in Mainland China. They are not expected to receive income in Mainland China. In that case, they may want to set up a Representative Office in China instead of a subsidiary. A Representative Office is not a separate legal entity. It is usually part of a Hong Kong company. Despite the fact that a Representative Office is a cost center, it still has to pay Corporate Income Tax on deemed profits in Mainland China. The most important point in this slide is that Tax Credit are available to set off against your Hong Kong Profits Tax liabilities. Remember to keep the Mainland China Tax Receipt and submit it to the Hong Kong Inland Revenue Department.