China simplifies procedure for claiming tax treaty benefits – 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 TreatyA Double Taxation Agreement (DTA), also known as a Double Taxation Treaty (or a Tax Treaty), is an international tax treaty between two or more countries that aims to prevent individuals or businesses from being taxed twice on the same income. With globalisation and the increase in cross-border economic activities, DTAs have become essential tools for promoting trade, investment, and... 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 treatyA Double Taxation Agreement (DTA), also known as a Double Taxation Treaty (or a Tax Treaty), is an international tax treaty between two or more countries that aims to prevent individuals or businesses from being taxed twice on the same income. With globalisation and the increase in cross-border economic activities, DTAs have become essential tools for promoting trade, investment, and... 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 treatyA Double Taxation Agreement (DTA), also known as a Double Taxation Treaty (or a Tax Treaty), is an international tax treaty between two or more countries that aims to prevent individuals or businesses from being taxed twice on the same income. With globalisation and the increase in cross-border economic activities, DTAs have become essential tools for promoting trade, investment, and... 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 “beneficiaryIn tax law, a beneficiary is the person or entity entitled to receive funds or other benefits from an arrangement, such as a trust or a will. Beneficiaries are often named explicitly in legal documents, ensuring that their rights and interests are protected. The concept of a beneficiary also extends to corporate contexts, such as when a company or trust... owner” status under the treaty article on dividends, interest, or royalties should also be retained.

MNEsWhat are Multinational Enterprises (MNEs)? Multinational Enterprises, commonly referred to as MNEs, are corporations that operate in multiple countries through various subsidiaries, branches, or affiliates. These entities maintain a central management structure while leveraging diverse resources, labour markets, and customer bases across borders. The fundamental aspect that distinguishes MNEs from other corporate forms is their cross-border activity, which can include... should be aware that even though Announcement (2019) No. 35 simplifies the reporting form and reduces paperwork for claiming tax treatyA Double Taxation Agreement (DTA), also known as a Double Taxation Treaty (or a Tax Treaty), is an international tax treaty between two or more countries that aims to prevent individuals or businesses from being taxed twice on the same income. With globalisation and the increase in cross-border economic activities, DTAs have become essential tools for promoting trade, investment, and... benefits, due care and tax responsibilityTax liability represents the total amount of tax owed by an individual or business to a tax authority, whether local, national, or international. This obligation arises through various forms of income, profits, or transactions subject to taxation laws and regulations. Understanding tax liability is essential for compliance and efficient financial management for corporations and individuals. It influences how businesses structure... 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 MNEsWhat are Multinational Enterprises (MNEs)? Multinational Enterprises, commonly referred to as MNEs, are corporations that operate in multiple countries through various subsidiaries, branches, or affiliates. These entities maintain a central management structure while leveraging diverse resources, labour markets, and customer bases across borders. The fundamental aspect that distinguishes MNEs from other corporate forms is their cross-border activity, which can include.... For example, MNEsWhat are Multinational Enterprises (MNEs)? Multinational Enterprises, commonly referred to as MNEs, are corporations that operate in multiple countries through various subsidiaries, branches, or affiliates. These entities maintain a central management structure while leveraging diverse resources, labour markets, and customer bases across borders. The fundamental aspect that distinguishes MNEs from other corporate forms is their cross-border activity, which can include... 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 treatyA Double Taxation Agreement (DTA), also known as a Double Taxation Treaty (or a Tax Treaty), is an international tax treaty between two or more countries that aims to prevent individuals or businesses from being taxed twice on the same income. With globalisation and the increase in cross-border economic activities, DTAs have become essential tools for promoting trade, investment, and... benefits claimed for dividends, interest, and royalties in a post-filing inspection.

Further, if eligibility for tax treatyA Double Taxation Agreement (DTA), also known as a Double Taxation Treaty (or a Tax Treaty), is an international tax treaty between two or more countries that aims to prevent individuals or businesses from being taxed twice on the same income. With globalisation and the increase in cross-border economic activities, DTAs have become essential tools for promoting trade, investment, and... 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.