Jun 2016, Issue 6
Effective from 15 April 2016, a Hong Kong tax resident certificate (HKTRC) issued by the IRD under Mainland-HK CDTA for a calendar year can serve as a proof of the Hong Kong resident status for that calendar year and the two succeeding calendar years unless there are changes in the circumstances that render the applicant no longer a Hong Kong tax resident and/or eligible to the treaty benefits. Such streamlined administrative arrangement applies to all HKTRCs issued by the IRD to individual and non-individual taxpayers for the purpose of the Mainland-HK CDTA, including those issued before 15 April 2016.
In connection with the above revised administrative arrangement, the HKTRC application forms for use under the Mainland-HK CDTA have also been revised to reflect these changes. The new forms are used from 20 June 2016.
The extension of the valid period of a HKTRC from one calendar year to three will ease the administrative burden on Hong Kong tax residents. This will also reduce the number of HKTRC applications received by the IRD. Reduction in number of applications will allow the IRD to examine each application in greater details to prevent treaty abuse in the post-BEPS environment. As there is generally an expectation for the IRD to act as a "gatekeeper" against treaty abuse in the context of the Mainland-HK CDTA, it is expected that more stringent assessment of the HKTRC applications will be made by the IRD going forward. Companies wishing to claim a treaty benefit under the Mainland-HK CDTA should better prepare for the increasingly stringent approach adopted by the IRD in assessing their Hong Kong resident status and allow for more time to obtain a HKTRC.
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