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Hong Kong Tax News Flash 

Nov 2014, Issue 14

The latest IRD’s views on important tax treaty issues

In the 2014 annual meeting between the Inland Revenue Department (IRD) and the Hong Kong Institute of Certified Public Accountants (HKICPA), the IRD expressed its views on a number of tax issues in the domestic and treaty context that are of interests to taxpayers. This News Flash is the second of the two issued to summarise the more important corporate tax issues discussed in the meeting. It talks about the views expressed by the IRD on a number of issues related to the interpretation and application of Hong Kong tax treaties such as assessment of Hong Kong tax residency and factors to be considered by the IRD in processing applications for Hong Kong tax resident certificate (HKTRC).

Companies intend to apply a Hong Kong tax treaty should take note of the views expressed by the IRD in the meeting and assess if their current structures/arrangements are sustainable given both Hong Kong and overseas tax administrations are stepping up their efforts to counter treaty abuse in view of the Organisation for Economic Co-operation and Development’s Base Erosion and Profit Shifting (BEPS) project. In particular, given the IRD’s tightening up of the Hong Kong tax residency assessment in practice, Hong Kong incorporated intermediate holding companies need to be prepared to demonstrate their beneficial ownership status, the commercial justification of interposing the Hong Kong intermediate company and the substance in Hong Kong when applying for a HKTRC despite they meet the definition of ‘Hong Kong tax resident’ under the Hong Kong tax treaties.

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David Smith
Senior Advisor
Tel: +[852] 2289 5802 Email
Jeremy Ngai
Hong Kong
Tel: +[852] 2289 5616 Email
Kenneth Wong
Hong Kong
Tel: +[852] 2289 3822 Email