Hong Kong pushes for tax breaks for home return permit holders Hong Kong pushes for tax breaks for home return permit holders

Hong Kong pushes for tax breaks for home return permit holders
10 Oct 2018

Hong Kong’s representatives in China’s national legislature and its top advisers to Beijing are pushing for a tax exemption on overseas income for all Hongkongers living on the mainland who hold a home return permit.

Under an amended income tax law passed in August by the Chinese government, Hongkongers living north of the border for more than 183 days a year will be subject to global taxation by the mainland authority from the start of next year.

Beijing has hinted that an exemption is on the way for those living and working on the mainland. But local delegates to the National People’s Congress and members of the country’s top political advisory body, the Chinese People’s Political Consultative Conference (CPPCC), want the exemption extended to cover everyone with a home return permit.

The permit is the ID card that Hongkongers currently use for travel to the mainland. More than 90% hold one.

Lobbying for the exemption has been led by Peter Kung Wing-tak, a Hong Kong member of the CPPCC. A China tax expert and senior adviser to auditors KPMG, Kung said mainland authorities were likely to implement a five-year grace period for non-mainlanders. But he argued that a blanket exemption for home return permit holders would be a more simple and long-lasting solution.

"We suggest adding an article to the agreement on avoiding double taxation by the mainland and Hong Kong governments," Kung told the South China Morning Post. "It would in general state that all Hongkongers holding a valid home return permit should have their overseas income taxed by Hong Kong authorities only."

Chinese Vice-Premier Han Zheng has hinted that a tax exemption for Hongkongers working on the mainland could be rolled out “very soon”.

Kung believes that most people working across the border would not be seriously affected by the new law because of an agreement between the two sides on double taxation. This means that Hongkongers with a permanent home or major family members still in the city would only be taxed by the Hong Kong authorities.

But at least four categories of people could still be at risk, Kung said. These include those with a permanent home and family on the mainland, unmarried people who work on the mainland and do not own a flat in Hong Kong, retirees living on the mainland, and employees in Hong Kong who return to homes across the border every day.

A spokeswoman for the Financial Services and Treasury Bureau in Hong Kong said: “The Financial Secretary called on the Commissioner of the State Administration of Taxation in mid-September in Beijing to exchange views. We will continue to follow up the matter with the Ministry of Finance and the State Administration of Taxation.”

 Emma Woollacott

Emma Woollacott is a freelance business journalist. Her work has appeared in a wide range of publications, including the Guardian, the Times, Forbes and the BBC.

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Hong Kong’s representatives in China’s national legislature and its top advisers to Beijing are pushing for a tax exemption on overseas income for all Hongkongers living on the mainland who hold a home return permit.

Under an amended income tax law passed in August by the Chinese government, Hongkongers living north of the border for more than 183 days a year will be subject to global taxation by the mainland authority from the start of next year.

Beijing has hinted that an exemption is on the way for those living and working on the mainland. But local delegates to the National People’s Congress and members of the country’s top political advisory body, the Chinese People’s Political Consultative Conference (CPPCC), want the exemption extended to cover everyone with a home return permit.

The permit is the ID card that Hongkongers currently use for travel to the mainland. More than 90% hold one.

Lobbying for the exemption has been led by Peter Kung Wing-tak, a Hong Kong member of the CPPCC. A China tax expert and senior adviser to auditors KPMG, Kung said mainland authorities were likely to implement a five-year grace period for non-mainlanders. But he argued that a blanket exemption for home return permit holders would be a more simple and long-lasting solution.

"We suggest adding an article to the agreement on avoiding double taxation by the mainland and Hong Kong governments," Kung told the South China Morning Post. "It would in general state that all Hongkongers holding a valid home return permit should have their overseas income taxed by Hong Kong authorities only."

Chinese Vice-Premier Han Zheng has hinted that a tax exemption for Hongkongers working on the mainland could be rolled out “very soon”.

Kung believes that most people working across the border would not be seriously affected by the new law because of an agreement between the two sides on double taxation. This means that Hongkongers with a permanent home or major family members still in the city would only be taxed by the Hong Kong authorities.

But at least four categories of people could still be at risk, Kung said. These include those with a permanent home and family on the mainland, unmarried people who work on the mainland and do not own a flat in Hong Kong, retirees living on the mainland, and employees in Hong Kong who return to homes across the border every day.

A spokeswoman for the Financial Services and Treasury Bureau in Hong Kong said: “The Financial Secretary called on the Commissioner of the State Administration of Taxation in mid-September in Beijing to exchange views. We will continue to follow up the matter with the Ministry of Finance and the State Administration of Taxation.”

 Emma Woollacott

Emma Woollacott is a freelance business journalist. Her work has appeared in a wide range of publications, including the Guardian, the Times, Forbes and the BBC.

OTHER ARTICLES THAT MAY INTEREST YOU

Taiwan, HongKong and Macau residents no longer require Chinese work permits

Double taxation deal signed between India and Hong Kong

HongKong citizens in China now eligible for housing benefits

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