The company is head-quartered in China, and it won a lawsuit in the US. The US escrow company wanted to withheld tax. We used the US-China tax treaty to argue for exemption from withholding. The US escrow company was convinced by our evidence. However, the lawsuit was brought up by a Hong Kong company. We demonstrated that the HK company is a subsidiary of the China operation company, and we use the “substance over forms” principal to argue to treat the HK company as the China company. We won the case, and the company avoided over $300,000 tax cost. The moral of the story and our strategic approach: It is always easier to proactively plan earlier to avoid withholding to begin with. There are many rules and there are many aspects in each rule. The key is to construct your business logic to follow these rules and make them work in your favor.
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