Avoidance of Double Taxation

An Expert's View about Taxes and Accounting in China

Last updated: 22 Feb 2011

4.3 Avoidance of Double Taxation between Hong Kong and the Chinese Mainland


In the levying of tax on incomes derived by individuals and FIEs from sources outside the territory of China, there may be cases where such incomes have already been taxed in the source country or region. In order to avoid double taxation and to prevent tax evasion, the mainland and Hong Kong have signed the Arrangement between the Mainland of China and the Hong Kong Special Administrative Region for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with Respect to Taxes on Income ("The Arrangement") to ensure that the same income, whether direct or indirect income, will not be taxed twice.
4.3.1 Existing Taxes Covered by the Arrangement

(a) Chinese Mainland

•Individual income tax


•Foreign-invested enterprise income tax and foreign enterprise income tax
(b) Hong Kong

•Profits tax
•Salaries tax


•Property tax
4.3.2 Definition of Hong Kong "Resident" in the Arrangement

•An individual who ordinarily resides in Hong Kong, i.e. an individual who has a permanent home in Hong Kong available to him and his family.


•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 being a relevant year of assessment), i.e. an individual who works and resides temporarily in Hong Kong.


•A Hong Kong corporate resident, i.e. a company incorporated in Hong Kong (including a company with incorporation status); or a company incorporated outside Hong Kong but normally managed or controlled in Hong Kong, i.e. the overall management of the company's daily business and operations, the execution of management decisions, or the making of management decisions by the board of directors, are carried out in Hong Kong. (For example, if the Hong Kong branch office of a foreign bank is not responsible for the management of the bank's overall operations and the making of the bank's decisions, it will not be entitled to the treatment of a Hong Kong resident under the Arrangement.)


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Posted: 19 February 2011, last updated 22 February 2011

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