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Mainland China and Hong Kong entered into arrangements for the avoidance of double taxation
The introduction of this section is that Hong Kong residents who are engaged in employment both in China and Hong Kong should pay attention to matters of taxation.
On February 11, 1998，China and Hong Kong signed the "Mainland China and the HKSAR for the Avoidance of Double Taxation Arrangement" (the "Non-Comprehensive Arrangement") which makes a reasonable division of taxation on the right of taxation ,in order to avoid an income being double taxed in two area.
On August 21, 2006, the two sides signed a more comprehensive "Mainland and the HKSAR for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion Arrangement" ( "the Comprehensive Arrangement"). The "comprehensive arrangement" broaden the coverage of income by adding real estate income, associated enterprises, dividends, interest, royalties, capital gains, pensions and government services.
Hong Kong's tax burden
If a Hong Kong resident provides services in both cities:
- The income through engaging in employment in Hong Kong, which will be paid by the employer whether in HK or in the Mainland, shall all be included within the assessable income. However, if he / she pays the personal income tax on the income gained through the performance of their duties in the Mainland, he or she can apply for tax exemption of this part of the income according to "the Inland Revenue Ordinance," or Tax credit under "the Comprehensive Arrangement". Generally speaking, applying for the income tax exemption can be given more tax credits than tax relief.
- The income derived from engaging in the Mainland or overseas employment, which will be paid by the employer whether in HK or in the Mainland, if the person in the relevant year of assessment visits to Hong Kong more than 60 days and provides services, it is required to calculate the amount of assessable income according to the number of days stayed in Hong Kong.
The Mainland's tax burden
If a employed Hong Kong resident only provides services in mainland China, and does not require to provide services when he or she returns to Hong Kong, his or her income derived from employment, which will be paid or burdened by the employer whether in the Mainland or oversea (including Hong Kong employer),all belongs to the income by providing services in the Mainland , unless he / she shall meet the following three conditions, it shall be paid Individual Income Tax in full charge in the Mainland:
- In the relevant calendar year (ie: January 1 to December 31 each year ) staying in the Mainland for a period or periods not exceeding 183 days; And
- About that the income is not paid by the mainland employers (or their representatives); And
- About that the income is not paid by the employer located the permanent establishment or fixed base in the Mainland.
If a employed Hong Kong resident who is engaging services both in China and Hong Kong, the taxes are calculated as follows:
The continuous or cumulative period of staying in the Mainland not more than 183 days
His or her received income, only on the payment or part of the burden in the mainland authorities, the personal income tax should be paid according to the number of days stayed in the Mainland. The part of the income which is paid by overseas employer (including Hong Kong employer) will not be taxed.
The continuous or cumulative period of staying in the Mainland more than 183 days
The total amount of income from his / her body in the Mainland and the overseas employer (including Hong Kong employer), shall be paid personal income tax according to the number of days of staying in the Mainland.
