Easier access to tax treaty benefits for Hong Kong companies receiving dividends from China
On 12 April 2013, the State Administration of Taxation (SAT) issued Circular Shuizonghan  No.165 (Circular 165) as a reply to local-level tax bureaus regarding their cases on the assessment of beneficial ownership (BO) in respect of dividends under the Mainland/Hong Kong Double Taxation Arrangement (Mainland/HK DTA). If the BO status of a Hong Kong company is accepted, the company would be eligible for a lower withholding tax rate of 5% on dividends it derives from the Chinese invested entity. Circular 165 further explains how to apply the unfavourable factor tests provided in Circular Guoshuihan  No.601 (Circular 601), as well as relevant interpretations on Public Notice  No.30 (Public Notice 30) in BO assessment. Generally, the principles and guidelines presented in Circular 165 are practical and reasonable. It would be helpful for Hong Kong companies in obtaining favourable determination on its BO status.
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