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Point 1: Double Tax Arrangement may not waive Mainland PRC tax payable in whole but only deducted the tax already paid in Hong Kong

Point 2: Foreigners 'Ordinarily' resident in Mainland PRC over 5 years, but within 5 years ever departed from Mainland PRC over 30 days, with 'registered' with Mainland PRC authority, can waive global incomes from Mainland PRC tax (under consultation)

Point 3: Mainland PRC resident need to pay 20% Mainland PRC tax for dividend received from HK companies

Point 4: Mainland PRC residents having global income over or equivalent to RMB 120,000 need to report their income to Mainland PRC tax authority

Point 5: 第十條 股息 / Article 10 DIVIDENDS - HK companies can enjoy concession of 5% / 10% tax on dividend received from Mainland PRC companies (need to approve that HK companies is HK tax resident)

Point 6: Board of Review cases relating to Mainland PRC


Point 1: Double Tax Arrangement may not waive Mainland PRC tax payable in whole but only deducted the tax already paid in Hong Kong

For example, Mainland PRC resident Mr. A receives salaries income 1 million in Hong Kong. Assume under Hong Kong Salaries Tax, Mr. A pays HK$100,000 to HKSAR. And if under Mainland PRC Salaries Tax, HK$300,000 payable to Mainland PRC tax authority for this HK salary income, Mr. A need to report to Mainland PRC tax authority his Hong Kong salary income, and pay HK$200,000 ( = HK$300,000 - HK$100,000) to Mainland PRC tax authority.


2 types of tax treatments under Mainland PRC & HK double tax arrangement:

Type 1: Tax payable in Mainland PRC = Taxation under Mainland PRC tax law (global tax on resident) - tax already paid in Hong Kong

Type 2: If already taxed in Hong Kong, fully waive Mainland PRC tax.

《安排指明(中國內地) (對所得避免雙重徵稅和防止偷漏稅)令》

第二十一條 消除雙重徵稅方法

一、在內地,消除雙重徵稅如下:
內地居民從香港特別行政區取得的所得,按照本安排規定在香港特別行政區繳納的稅額,允許在對該居民徵收的內地稅收中抵免。但是,抵免額不應超過對該項所得按照內地稅法和規章計算的內地稅收數額。

二、在香港特別行政區,消除雙重徵稅如下:
除香港特別行政區稅法給予香港特別行政區以外的任何地區繳納的稅收扣除和抵免的法規另有規定外,香港特別行政區居民從內地取得的各項所得,按照本安排規定在內地繳納的稅額,允許在對該居民徵收的香港特別行政區稅收中抵免。但是,抵免額不應超過對該項所得按照香港特別行政區稅法和規章計算的香港特別行政區稅收數額。

三、一方居民公司支付給另一方居民公司的股息,而該另一方居民公司直接或間接控制支付股息的公司股份不少於百分之十的,該另一方居民公司可獲得的抵免額,應包括該支付股息公司就產生有關股息的利潤(但不得超過相應於產生有關股息的適當部份)而需要繳納的稅款。

Following tax applying Type 1(在雙邊稅務安排中的用語:可以在該另一方徵稅)(wording in DTA:  may be taxed in that Other Side):

第七條 營業利潤 / Article 7 BUSINESS PROFITS

第十條 股息 / Article 10 DIVIDENDS

第十一條 利息 / Article 11 INTEREST

第十二條 特許權使用費 / Article 12 ROYALTIES

第十三條 財產收益 / Article 13 CAPITAL GAINS

第十四條 受僱所得 / Article 14 INCOME FROM EMPLOYMENT

第十五條 董事費 / Article 15 DIRECTORS’ FEES

第十六條 藝術家和運動員 / Article 16 ARTISTES AND SPORTSPERSONS

第十七條 退休金 / Article 17 PENSIONS

Following tax applying Type 2(在雙邊稅務安排中的用語:該另一方應予免稅(在內地包括營業稅) / 應僅在該一方徵稅 / 該一方應免予徵稅 )(wording in DTA:  shall be exempt from tax (including business tax in the Mainland of China) in the Other Side / shall be taxable only in that Side / shall not be taxed in that One Side):

第八條 海運、空運和陸運 / Article 8 SHIPPING, AIR AND LAND TRANSPORT

第十八條 政府服務 / Article 18 GOVERNMENT SERVICE

第十九條 學生 / Article 19 STUDENTS

第二十條 其它所得 / Article 20 OTHER INCOME

Reference 1: 《内地和香港特别行政区关于对所得避免双重征税和防止偷漏税的安排》

Reference 2: IRD: Comprehensive Double Taxation Agreements concluded

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Point 2: Foreigners 'Ordinarily' resident in Mainland PRC over 5 years, but within 5 years ever departed from Mainland PRC over 30 days, with 'registered' with Mainland PRC authority (report your global income in Mainland PRC tax authority), can waive global incomes from Mainland PRC tax (under consultation)

Link for: 《中华人民共和国个人所得税法实施条例(修订草案征求意见稿)》征求意见

http://www.gov.cn/xinwen/2018-10/20/content_5332913.htm

Extra for attention: "第四条


在中国境内无住所的居民个人,在境内居住累计满183天的年度连续不满五年的,或满五年但其间有单次离境超过30天情形的,其来源于中国境外的所得,经向主管税务机关备案,可以只就由中国境内企事业单位和其他经济组织或者居民个人支付的部分缴纳个人所得税;在境内居住累计满183的年度连续满五年的纳税人,且在五年内未发生单次离境超过30天情形的,从第六年起,中国境内居住累计满183天的,应当就其来源于中国境外的全部所得缴纳个人所得税。"

Following chart is from HKICPA Aplus volume October 2018 page 51, we draw your attention that the additional requirements for the years from the 6th year onward (link: http://app1.hkicpa.org.hk/APLUS/2018/10/pdf/50-_large_source3.pdf):

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Point 3: Mainland PRC resident need to pay 20% Mainland PRC tax on dividend received from HK companies - global tax applying

Notice Mainland PRC clients on this when the Hong Kong company declaring dividends to them.

[2018 pictures]

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Point 4: Mainland PRC residents having global income over or equivalent to CNY 120,000 need to report their income to Mainland PRC tax authority

Under Mainland PRC tax law, tax payer has obligation to report their income (no matter onshore or overseas) to tax authority if the income is over CNY 120,000 (around, not accurate figure).

Source:《国家税务总局关于印发个人所得税自行纳税申报办法(试行)的通知》(国税发〔2006〕162号)要求,存在年收入超过12万等情况的个人,在次年3月底前要向税务机关申报。

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Point 5: 第十條 股息 / Article 10 DIVIDENDS - HK companies can enjoy concession of 5% / 10% tax on dividend received from Mainland PRC companies (need to approve that HK companies is HK tax resident)

How to approve that HK companies is HK tax resident please see: 

http://www.hkaudit.net/?qa=150/queries-miscellaneous-queries-difference-financial-summary

Sample 4: Query sample for application of HK Certificate of Resident Status between Mainland China & HK


第十條 股息

一、一方居民公司支付給另一方居民的股息,可以在該另一方徵稅。

二、然而,這些股息也可以在支付股息的公司是其居民的一方,按照該一方法律徵稅。但是,如果股息受益所有人是另一方的居民,則所徵稅款不應超過:

(一) 如果受益所有人是直接擁有支付股息公司至少25%資本的公司,為股息總額的5%;

(二) 在其它情況下,為股息總額的10%。

雙方主管當局應協商確定實施限制稅率的方式。
本款不應影響對該公司就支付股息的利潤所徵收的公司利潤稅。


Article 10 DIVIDENDS

1. Dividends paid by a company which is a resident of One Side to a resident of the Other Side, may be taxed in that Other Side.

2. However, such dividends may also be taxed in the Side of which the company paying the dividends is a resident, and according to the laws of that Side, but if the beneficial owner of the dividends is a resident of the Other Side, the tax so charged shall not exceed:

(1) where the beneficial owner is a company directly owning at least 25% of the capital of the company which pays the dividends, 5% of the gross amount of the dividends;

(2) in any other case, 10% of the gross amount of the dividends.

The competent authorities of both Sides shall by mutual agreement settle the mode of application of these limitations. 
This paragraph shall not affect the taxation of the company in respect of the profits out of which the dividends are paid.

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Point 6: Board of Review cases relating to Mainland PRC

  • (2009-10) VOLUME 24 INLAND REVENUE BOARD OF REVIEW DECISIONS - Case No. D51/08, the Board held that “On the whole, the Board accepts the evidence of the Taxpayer. In respect of the documents of Company D, on the totality of the evidence, the Board accepts that they were prepared in such a way as to satisfy the requirements of the Mainland authorities and do not reflect the reality of the situation.”
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