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4.3. PE Force of Attraction Principle

In general, Hong Kong does not apply a force of attraction principle (FoA). However, a limited FoA principle has been adopted in four of Hong Kong's DTA’s; with Indonesia, Mexico, Pakistan, and Vietnam.

Under these DTA's the FoA provision is employed to grant taxing rights to a jurisdiction on profits attributable to the sale of goods or merchandise in that jurisdiction by a non-resident enterprise, which also sells the same or similar goods through a PE maintained by that non-resident enterprise in that jurisdiction.

The DTA's with Indonesia, Pakistan, and Vietnam also provide same FoA provision in regard to other business activities carried out by a non-resident in a jurisdiction while maintaining a PE in that jurisdiction which conducts same or similar business activities.

The FoA provisions should not apply if the non-resident enterprise can prove that the sales or other business activities were carried out for reasons other than obtaining benefits under the DTA.