2011-07-07-KPMG_China-中国居民企业向香港居民派发股息的税务安排_2页_107kb

Tax Alert Summary - Issue 13, July 2011: Dividends Paid by Mainland Companies to Hong Kong Residents

• Withdrawal of Prior Exemption: Circular Guo Shui Fa [1993] No. 45 was withdrawn effective 4 January 2011, ending the temporary tax exemption for dividends paid to foreign individuals by Mainland companies.

• Current Taxation Confusion: H share companies initially with-held 20% tax on dividends, which contradicted the Double Taxation Agreement (DTA) limiting the tax to 10%, causing uncertainty for Hong Kong residents.

• SAT Clarification: The State Administration for Taxation stated that for Hong Kong-listed non-foreign investment companies, individual shareholders are subject to 10% withholding tax, with no need for shareholders to apply for this rate.

• Practical Concerns: Despite the clarification being welcomed, questions remain regarding how the tax applies if shares are held through brokers and the obligations of companies to verify shareholder residence status.