By Agnes Lo, Lingnan University, Hong Kong & Raymond Wong, Associate Dean, City University of Hong Kong
China’s State Taxation Administration on 14 October published “Administrative Measures for Non-resident Taxpayers Claiming Tax Treaty Benefits” [Announcement (2019) No. 35].
Announcement (2019) No. 35 will become effective from 1 January 2020, and will replace existing Announcement (2015) No. 60. The new regulation simplifies filing procedures for claiming tax treaty benefits by non-resident taxpayers. It also clarifies the responsibilities of non-resident taxpayers and their withholding agents.
Under Announcement (2019) No. 35, the existing “record-filing” mechanism will be replaced by the “documentation-retaining for inspection” mechanism.
Non-resident taxpayers must self-assess their eligibility to enjoy tax treaty benefits, file the reporting form (via their withholding agents, if any), and retain specified supporting documents for any post-filing inspection by tax authorities.
Announcement (2019) No. 35 also reduces the amount of information to be filled in the reporting form.
Non-resident taxpayers are required to provide information for only 17 items in the revised form, including the taxpayer’s name, contact information, the treaty article, the amount of tax reduced or exempted.
The supporting documentation that must be retained by non-resident taxpayers under Announcement (2019) No. 35 is similar to the filing documentation specified under Announcement (2015) No. 60. Announcement (2019) No. 35 stipulates, however, that supporting documents that justify “beneficiary owner” status under the treaty article on dividends, interest, or royalties should also be retained.
MNEs should be aware that even though Announcement (2019) No. 35 simplifies the reporting form and reduces paperwork for claiming tax treaty benefits, due care and tax responsibility of non-resident taxpayers is not alleviated. Non-resident taxpayers are still responsible for the authenticity, accuracy, and legality of the reporting form and retained documents.
It should be noted that self-assessment under Announcement (2019) No. 35 can increase tax uncertainty for MNEs. For example, MNEs may find it challenging to ensure that the determination of “beneficial owner” is correctly self-assessed and the tax authorities will not disallow the tax treaty benefits claimed for dividends, interest, and royalties in a post-filing inspection.
Further, if eligibility for tax treaty benefits is denied in a subsequent administration process by tax authorities, non-resident taxpayers would be regarded as not fulfilling tax reporting responsibilities, and tax authorities can impose a late payment surcharge on underpaid tax.
Agnes W.Y. Lo
Professor Lo has been a faculty member at Lingnan University for more than 15 years.
She mainly teaches Taxation that covers a wide range of topics including international tax planning, transfer pricing, and tax policy and its relevance to society. Her primary research areas include corporate governance and disclosure, and tax avoidance in general and avoidance through transfer pricing in particular.
Professor Lo co-authored a book entitled “International Transfer Pricing in China: Post WTO”, the content of which was used as training materials for the HKICPA workshops.
She has also published her work in the mainstream accounting journals including The Journal of the American Taxation Association, Journal of Corporate Finance, Journal of Accounting and Public Policy, International Tax Journal, etc.
Latest posts by Agnes W.Y. Lo (see all)
- China simplifies unilateral advance pricing arrangement procedures for some taxpayers - April 1, 2021
- China signed 21 advance pricing arrangements in 2019, report shows - November 17, 2020
- Hong Kong revises transfer pricing guidance on advance pricing arrangements - July 23, 2020
- Hong Kong revises guidance on advance tax rulings - April 29, 2020
- China simplifies procedure for claiming tax treaty benefits - November 17, 2019
Dr. Raymond M. K. Wong
Dr. Raymond Wong currently serves as Associate Dean (Undergraduate Programmes) of the College of Business at City University of Hong Kong. During his tenure in City University of Hong Kong, he has taken up various executive roles and has been contributing tremendously to the Department’s undergraduate education program.
He obtained substantial experiences in handling academic and administrative issues related to teaching and learning, globalization in accounting education, and knowledge transfers. One of his primary research interests is about taxation, with particular focus on reporting of related-party transactions and transfer pricing issues in China.
His research also covers accounting and auditing issues in China and his work appeared in several leading accounting and finance journals.
Latest posts by Dr. Raymond M. K. Wong (see all)
- China simplifies unilateral advance pricing arrangement procedures for some taxpayers - April 1, 2021
- China signed 21 advance pricing arrangements in 2019, report shows - November 17, 2020
- Hong Kong revises transfer pricing guidance on advance pricing arrangements - July 23, 2020
- Hong Kong revises guidance on advance tax rulings - April 29, 2020
- China simplifies procedure for claiming tax treaty benefits - November 17, 2019
Thank you very much forsending documents. They are very useful for me.