Chapter Thirty-Four

Permanent Establishment Parameters: Hong Kong versus India

Governments Across asia are increasingly willing to assert taxation over activities of an alien business doing business in their jurisdictions. These governments are more than willing to find that the activities of the alien business create a permanent establishment in that location. This permanent establishment assertion brings with it the taxability of that enterprise in that jurisdiction together with the ensuing transfer pricing considerations. This chapter compares and contrasts permanent establishment parameters in Hong Kong and in India.

India asserts permanent establishment status based on any of the five inquiries: direct business activities, agency relationships, more-than-stewardship activities, and the power shift personnel, as well as an “entirety of the operations” approach. In contrast, Hong Kong bases its permanent establishment activities on a more amorphous standard, “the economically significant activities and responsibilities” of the nonresident enterprise.


At the outset, the reader should distinguish between Hong Kong and India by three specific permanent establishment considerations:

1. Although Hong Kong asserts that its transfer pricing regime closely follows the Organisation for Economic Co-operation and Development (OECD) Transfer Pricing Guidelines for Multinational Enterprises and Tax Administrations, India acknowledges that ...

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