Arrangement between the Mainland of China and the Hong Kong Special Administrative Region for the Avoidance of Double Taxation
China-Hong Kong Tax Treaty
The Arrangement between the Mainland of China and the Hong Kong Special Administrative Region for the Avoidance of Double Taxation (the "Arrangement") is a bilateral tax treaty designed to prevent individuals and businesses from being taxed twice on the same income or capital gains. It was signed on December 12, 2003, and entered into force on January 1, 2004.
Key Provisions of the Arrangement:
Scope: The Arrangement covers income derived from various sources, including employment income, business profits, dividends, interest, royalties, capital gains, and other income.
Residence: The Arrangement determines the country of residence of an individual or entity based on specific criteria, such as the center of vital interests or the habitual abode.
Source-Based Taxation: Generally, income derived from sources within one territory is subject to taxation in that territory, regardless of the residence of the recipient.
Residence-Based Taxation: In certain cases, income derived from sources outside a territory may be taxed in the territory of residence if specific conditions are met.
Double Taxation Relief: To prevent double taxation, the Arrangement provides for various methods of relief, including the exemption method, the credit method, and the deduction method.
Exchange of Information: The Arrangement requires the competent authorities of both territories to exchange information necessary for the implementation of the Arrangement, subject to certain safeguards to protect taxpayer confidentiality.
Additional Considerations:
The Arrangement is subject to periodic reviews and updates to address changes in tax laws and international tax standards.
The Arrangement may be superseded by other tax treaties or agreements between China and Hong Kong.
Resources:
Official Text of the Arrangement: https://www.ird.gov.hk/eng/tax/dta_china.htm
Hong Kong Inland Revenue Department: https://www.ird.gov.hk/
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