Raymond Yeung Tax Consultant former Assessor of Inland Revenue Department 前稅局評稅主任楊輝洪

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Working in mainland China

If you are employed in Hong Kong and work in mainland China, these tips can help you.

Press here for Individual Income Tax in China.

If all your work is done in mainland, you are entitled to a full exemption. If you occasionally comes back to the Hong Kong office to attend meetings or report duties, the exemption will fall through. So, you had better report duties to your Hong Kong boss through telephone, fax or e-mail. It is also advisable for your employment contract to stipulate your duties in mainland only.  Press here for more.

In general, the relief under Section 8(1A)(c) of Inland Revenue Ordinance (IRO) is greater than the double taxation relief under Section 49. In brief, the Section 8(1A)(c) relief is to exempt the income attributable to services in mainland if mainland's Individual Income Tax is paid on such income. So, you had better keep all your mainland tax bills for your claim. Click here to read my tax tips on Individual Income Tax

Hardship allowance for working in mainland China has been held by Board of Review as not taxable. Press here for details.

Individual Income Tax paid by the employer should be wholly excluded under Section 8(1A)(c). Click here for details.

If you only work in Hong Kong during visits not exceeding 60 days during the year of assessment, you are entitled to a full exemption. But this exemption will not apply if your main base of work is in Hong Kong. In counting the days for this exemption, the Revenue  takes the departure day and the arrival day as two whole days in Hong Kong. You'd better keep record of all your stay in Hong Kong.

If your employment is of a non-Hong Kong source, you are entitled to claim relief under Section 8(1A)(a): that is to exempt the income attributable to your services in mainland. In practice, the exemption is computed on time basis: that is by reference to the number of days in mainland over the number of total days in Hong Kong and in mainland. From case law, whether your employment is of a non-Hong source depends on three factors: location of employment contract, location of employer's residence and place of payment of remuneration. So, you should keep record of your stay in mainland as well as the documents concerning  the source of your employment.

Click here to read IRD's usual query: Where a taxpayer claims exemption on the ground of payment of non-Hong Kong income tax.

Where a taxpayer is a Hong Kong resident as well as a mainland resident, he can enjoy the benefits under the Double Taxation Arrangement concerning the mainland's income tax. Briefly speaking, such benefits include: (a) only his income attributable to services rendered in the mainland is chargeable to mainland's Individual Income Tax and (b) he will be exempt from Individual Income Tax if all the following conditions are satisfied. 

  1. The Hong Kong resident stays in China for a period or periods not exceeding in the aggregate 183 days in the calendar year concerned; and

  2. The income is paid by, or on behalf of, an employer who is not a resident of China; and

  3. The income is not borne by a permanent establishment or a fixed base which the employer has in China.

A calendar year means 1 January to 31 December.

If a person is required by the mainland tax authorities to prove his Hong Kong resident status, he needs  a "Certificate of Hong Kong Resident Status". This certificate is issued by Hong Kong IRD upon application. To apply for the certificate, the person should first obtain a referral letter from the mainland tax authorities stating such requirement and then, with such referral letter he can lodge an application with Hong Kong IRD. 

Press here  for more on China tax


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