STA Interpretation: Using Hong Kong Tax Residency Certificates in Mainland China

关于《国家税务总局关于在内地使用香港居民身份证明有关问题的公告》的解读

Source (Chinese): STA Policy Database — 政策解读 (STA General Office, June 6, 2016)

English translation: Independent translation. Not an official government translation.

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I. Purpose of the Announcement

The Mainland tax authority and the tax authority of the Hong Kong Special Administrative Region (hereinafter the "Hong Kong tax authority") reached an administrative arrangement through an exchange of letters regarding the use of tax residency certificates issued by the Hong Kong tax authority in Mainland China. This arrangement simplifies the procedure for Hong Kong tax residents to enjoy the benefits of the Arrangement between Mainland 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 (hereinafter the "Arrangement"). This Announcement was formulated to implement the administrative arrangement agreed upon through the exchange of letters.

II. Validity Period of Hong Kong Tax Residency Certificates

Pursuant to the exchange of letters, a tax residency certificate issued by the Hong Kong tax authority for a Hong Kong resident in respect of a particular calendar year may be used as proof of that Hong Kong resident's Hong Kong resident status for that calendar year and the two consecutive calendar years immediately following.

For example, if a Hong Kong taxpayer obtains a tax residency certificate issued by the Hong Kong tax authority in 2016 to certify the taxpayer's tax resident status for 2016, that certificate may serve as supporting documentation for claiming Arrangement benefits with respect to income derived from Mainland China for the three calendar years of 2016, 2017, and 2018.

If a Hong Kong taxpayer obtains a tax residency certificate issued by the Hong Kong tax authority in 2016 to certify the taxpayer's tax resident status for 2014, that certificate may serve as supporting documentation for claiming Arrangement benefits with respect to income derived from Mainland China for the three calendar years of 2014, 2015, and 2016.

III. Handling of Changes in Taxpayer's Tax Resident Status

If, after obtaining a tax residency certificate issued by the Hong Kong tax authority, a Hong Kong taxpayer's circumstances change such that the taxpayer no longer meets the conditions for being recognized as a Hong Kong tax resident, the residency certificate that was originally applicable to the relevant calendar years may not be used as proof of the taxpayer's Hong Kong resident status for the period after the change in circumstances.

IV. Scope of Application of the Administrative Arrangement under the Exchange of Letters

The administrative arrangement made through the exchange of letters became effective on April 15, 2016, the date on which both sides completed the exchange of letters procedure, and applies to all tax residency certificates issued by the Hong Kong tax authority, including those issued before April 15, 2016.