Deloitte quoted by Ming Pao on PRC Individual Income Tax Reform

Ming Pao published an article entitled, 'Deloitte: Hongkongers' application of Residence Permit may be regarded as Tax residents in Mainland China' on 16 November 2018, in which our Deputy Tax Managing Partner, Deloitte China Patrick Yip was quoted in the article.

On 31 August 2018, the Standing Committee of the National People's Congress passed the amendment to reform PRC IIT Law. On 20 October 2018, China's State Administration of Taxation (SAT) released draft guidance as part of the new individual income tax (IIT) law for public consultation, which will be effective January 1, 2019.

Patrick mentioned that one of the factors defining 'residence' is household registration. Therefore, a Hongkonger may be regarded as a tax resident of Mainland China if he/she has been granted the Residence Permit, without needing to spend 183 days or more in China during a year.

Under the China-Hong Kong Double Tax Arrangement, it is possible for a Hong Kong resident to be treated as both a China tax resident and a Hong Kong resident and his tax residence would have to be determined based on a tie-breaker provision in the Arrangement. The relevant factors include where the person's permanent place of abode is, where his economic, social ties are and in which jurisdiction he is a national or citizen. If there is an impasse or a tie, the tax authorities of the two jurisdictions would have to negotiate and determine the person's tax residence.

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