Avoid Double Taxation With A Certificate of Resident Status
Hong Kong has signed tax treaties known as Comprehensive Double Taxation Agreements / Arrangements (DTAs) with various jurisdictions. Some DTAs make provision for corporate bodies and individuals who qualify as Hong Kong residents to claim tax benefits in the relevant foreign jurisdiction that allow them to avoid double taxation. To prove their status as a Hong Kong resident when applying for such tax benefits however it is usually necessary to obtain a Certificate of Resident Status.
What Is A Certificate Of Resident Status?
A Certificate of Resident Status is a document issued by the Inland Revenue Department (IRD) to Hong Kong residents who need to prove their resident status to claim tax benefits under a DTA. For a list of jurisdictions that have entered into a DTA with Hong Kong click here.
Applying For A Certificate Of Resident Status
Generally speaking, the following persons can apply for a Certificate of Resident Status:
- An individual who ordinarily resides in Hong Kong (i.e., has a permanent home in Hong Kong);
- An individual who stays in Hong Kong for more than 180 days during a year of assessment or for more than 300 days in two consecutive years of assessment one of which is the relevant year of assessment;
- Company / partnership / trust / body of persons incorporated or constituted in Hong Kong; or
- Company / partnership / trust / body of persons incorporated or formed outside Hong Kong but managed or controlled in Hong Kong.
Applicants should doublecheck the relevant DTA as to whether or not a person (individual or corporate) qualifies as a Hong Kong resident for that particular DTA.
All applicants must provide documentary proof of their Hong Kong resident status.
Specific to corporate entities, it is essential to prove that they have a real business in Hong Kong with an office, executives and that they pay tax. Without such proof, it will be difficult if at all possible, to obtain a Certificate of Resident Status. With this in mind, a company should be duly incorporated and have commenced business operations to start applying.
The IRD typically takes 21 working days to process an application from the day all necessary information has been provided. I.e., extended processing time can be expected if insufficient proof to determine resident status of the applicant is provided.
Those intending to apply should be aware that obtaining a Certificate of Resident Status is not a simple process and can take time, but if you provide sufficient information, there should not be any reason you cannot get one. It should also be noted however that merely having such Certificate will not guarantee the success of an application to claim benefits under a DTA; final approval is in the hands of the treaty partner.
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