Double Taxation Relief and Exchange of Information Arrangements
The Comprehensive Arrangement applies in the Hong Kong Special Administrative Region (Hong Kong) to income derived in any year of assessment commencing on or after 1 April 2007, and in Chinese Mainland (Mainland) to income derived in any taxable year commencing on or after 1 January 2007.
Determination of Residence Status under the Comprehensive Arrangement in Certain Circumstances
Under the Comprehensive Arrangement, the remuneration that a Hong Kong resident working in the Mainland receives may be exempted from taxation in the Mainland if he satisfies all of the following 3 conditions. These 3 conditions are:
- He is present in the Mainland for a period or periods not exceeding in the aggregate 183 days in any 12-month period commencing or ending in the taxable year concerned;
- The remuneration is paid by, or on behalf of, an employer who is not a Mainland resident;
- The remuneration is not borne by a permanent establishment that the employer has in the Mainland.
If any one of the above conditions is not satisfied, the remuneration will be subject to taxation in the Mainland. If the remuneration is also subject to taxation in Hong Kong, a tax credit will be allowed for the tax paid in the Mainland under the Comprehensive Arrangement. The directors’ fees and other similar sums derived by a Hong Kong resident in his capacity as a member of the board of directors of a Mainland company are subject to taxation in the Mainland. Such directors’ fees, etc. are not subject to taxation in Hong Kong.
Meaning of a Hong Kong resident individual under the Comprehensive Arrangement
Article 4(1)(2) of the Comprehensive Arrangement states that a Hong Kong resident individual means an individual who ordinarily resides in Hong Kong, or an individual who stays in Hong Kong for more than 180 days during a year of assessment or for more than 300 days in two consecutive years of assessment (one of which is the relevant year of assessment).
Hong Kong residents claim tax benefits under the Comprehensive Arrangement in the Mainland
Tax benefits under the Comprehensive Arrangement should be claimed directly in the Mainland. With effect from 1 November 2015, in the application for a Certificate of Resident Status for the purpose of claiming tax benefits under the Comprehensive Arrangement, an applicant is not required to attach a referral letter entitled.
