Sign up for tax alert emails    GTNU homepage    Tax newsroom    Email document    Print document    Download document

January 6, 2020

Hong Kong clarifies certain issues regarding treaty benefits

In its 2019 annual meeting, the Hong Kong Tax Authority (HKTA) clarified the following matters:

“Foreign tax minimization steps” must be taken if taxpayers are to maximize claims for tax credits in Hong Kong

The tax law provides that the amount of tax credit granted must not exceed the amount that would be granted had all foreign tax minimization steps been taken. For example, if a Hong Kong company did not apply for a Hong Kong certificate of residence (CoR) and accordingly could not claim a treaty benefit, the tax credit granted is limited to the reduced treaty rate.

A company is not entitled to a tax credit in Hong Kong if the HKTA rejected its CoR application

If the HKTA rejected the CoR application of a Hong Kong company, such Hong Kong company will not be regarded as a Hong Kong tax resident and thus will not be entitled to a tax credit in Hong Kong under the treaty, despite the income being subject to tax in Hong Kong.

Hong Kong applicants for the “same-treaty-benefit” rule under PN 91 are required to demonstrate sufficient economic nexus with Hong Kong

The HKTA’s position is that even if a Hong Kong applicant is deemed as a beneficial owner (BO) in respect of dividends received from mainland China under the “same treaty benefit” rule as prescribed in PN 9, such Hong Kong applicant is required to have sufficient business activities in Hong Kong before the HKTA issues a CoR for the purposes of PN 9.


1. Under the “same-treaty-benefit” rule as prescribed in Public Notice [2018] No. 9 (PN 9) issued by the State Taxation Administration (STA) of China, if (i) the shareholder directly or indirectly holding 100% of the equity interests of the Hong Kong applicant qualifies as a BO; and (ii) such shareholder and all the intermediate shareholder(s) are a resident of a treaty jurisdiction which enjoys the same or a better treaty benefits with respect to dividends received from mainland China as compared to the treaty benefits of the Hong Kong applicant, the Hong Kong applicant will be deemed as the BO of the dividends received.

For additional information with respect to this Alert, please contact the following:

Ernst & Young Tax Services Limited, Hong Kong
Ernst & Young LLP (United States), Hong Kong Tax Desk, New York
Ernst & Young LLP (United States), Asia Pacific Business Group, New York



The information contained herein is general in nature and is not intended, and should not be construed, as legal, accounting or tax advice or opinion provided by Ernst & Young LLP to the reader. The reader also is cautioned that this material may not be applicable to, or suitable for, the reader's specific circumstances or needs, and may require consideration of non-tax and other tax factors if any action is to be contemplated. The reader should contact his or her Ernst & Young LLP or other tax professional prior to taking any action based upon this information. Ernst & Young LLP assumes no obligation to inform the reader of any changes in tax laws or other factors that could affect the information contained herein.


Copyright © 2024, Ernst & Young LLP.


All rights reserved. No part of this document may be reproduced, retransmitted or otherwise redistributed in any form or by any means, electronic or mechanical, including by photocopying, facsimile transmission, recording, rekeying, or using any information storage and retrieval system, without written permission from Ernst & Young LLP.


Any U.S. tax advice contained herein was not intended or written to be used, and cannot be used, by the recipient for the purpose of avoiding penalties that may be imposed under the Internal Revenue Code or applicable state or local tax law provisions.


"EY" refers to the global organisation, and may refer to one or more, of the member firms of Ernst & Young Global Limited, each of which is a separate legal entity. Ernst & Young Global Limited, a UK company limited by guarantee, does not provide services to clients.


Privacy  |  Cookies  |  BCR  |  Legal  |  Global Code of Conduct