Did you know that Hong Kong is the 22nd largest goods trading partner? For this reason and more, many people look to start businesses in Hong Kong.
Dealing with taxes gets a little complicated when it comes to international trade. If you as an individual or business are an income recipient in Hong Kong, you can apply for tax residency.
Keep reading to learn more.
What Is Tax Residency?
If you are an income recipient in Hong Kong, you’ll be issued a Tax Residency Certificate. This document is for those that require proof of resident status for the purposes of claiming tax benefits.
Under the Comprehensive Double Taxation Agreements/Arrangements (DTAs), resident status is decided. A Hong Kong authority will issue the certificate after the DTA becomes effective.
There are other jurisdictions but the largest DTA partner is the Mainland of China.
The Inland Revenue Department (IRD) can refuse to issue a Tax Residency Certificate if an organization is not entitled to tax benefits. Receiving a Tax Residency Certificate doesn’t guarantee a person will receive benefits.
The decision to receive foreign taxes is granted by the treaty partner. They determine whether or not the right conditions have been met.
Who Can Apply?
According to the tax jurisdiction, only certain people can apply for a Tax Residency Certificate. These are the qualifications regarding who can apply:
- A person who ordinarily resides in Hong Kong
- A Hong Kong resident for more than 180 days in a year
- Partnership/trust/body of persons/company incorporated or constituted in Hong Kong
- Partnership/trust/body of persons/company incorporated or constituted outside of Hong Kong but managed in Hong Kong
A certificate of resident status is beneficial for a lot of businesses who want to receive their correct benefits.
Applying for a Certificate of Tax Resident
A tax resident must fill out an application to apply for certification. The IRD will take your application and determine whether to issue you the certificate. Some of the questions they’ll answer about your application include:
- What are the principal activities of the applicant?
- Where is the applicant controlled and managed?
- Where are the board of directors’ meetings physically held?
You can send your completed application through the mail.
Once received, the processing time for the application takes around 21 working days. If your application does not have sufficient information to determine the status of residency, the IRD will ask for further details.
Maintain Your Tax Resident Status as an Income Recipient
To maintain your tax resident status as an income recipient, you need to fill out the correct application to get a Tax Residency Certificate.
If you are eligible for receiving tax benefits, the IRD will accept your application for that year. Persons and companies that reside in Hong Kong can apply. Companies that are managed in Hong Kong are also eligible.
Receiving a Tax Residency Certificate doesn’t mean you will receive benefits.
Use this guide for help with tax benefits and don’t forget to come back for more articles like this on our blog.