16 June 2019
Fan Bingbing's case brings to fore the impact of China's tax policy on Hongkongers working in the mainland. Photo: AFP
Fan Bingbing's case brings to fore the impact of China's tax policy on Hongkongers working in the mainland. Photo: AFP

Tax rule a key concern for Hongkongers working in China

Chinese superstar Fan Bingbing has been ordered to pay more than US$129 million in overdue taxes and fines.

Tax evasion cases involving celebrities are seldom heard of in Hong Kong, thanks to our simple tax regime and low tax rate.

Hong Kong’s income tax rate is capped at 15 percent, whereas the tax rate in the mainland can be as high as 45 percent.

That explains why many Chinese artists are tempted to resort to “yin and yang” dual contract arrangements, with one contract representing the actual payment for services rendered and the other for income tax filing.

Detailed plans for the Guangdong-Hong Kong-Macau Greater Bay Area are likely to be unveiled soon. Not surprisingly, many are interested to know about the tax policy of the scheme.

The Greater Bay Area plan is aimed at enhancing economic integration in the region, and establishing a super metropolitan area brings to mind other major bay areas such as those in Tokyo, San Francisco and New York.

However, disparities in tax rules will be a big hurdle to the free flow of talent and capital inside the Greater Bay Area.

In fact, many Hongkongers working on the mainland are already fretting over China’s latest individual tax policy. Under the new rule passed in August, non-residents who stay in China for more than 183 days in a calendar year will be subject to Chinese tax, which covers both onshore and offshore incomes.

A Hong Kong artist, for example, who works on the mainland for about half a year would need to pay taxes on incomes derived from mainland China and Hong Kong, which means a higher tax rate and possible double taxation.

There is also the complex issue of capital gain tax. Someone from Hong Kong who stays longer than 183 days in China and happens to realize gains from stock investments or property transactions in Hong Kong may have to pay the tax to mainland authorities.

That’s why many are suggesting that mainland authorities should introduce a special arrangement for Hongkongers working in Guangdong province.

It was reported that Vice Premier Han Zheng hinted over the weekend that Beijing may allow a special tax arrangement for Hongkongers who live across the border.

This article appeared in the Hong Kong Economic Journal on Oct 4

Translation by Julie Zhu

[Chinese version 中文版]

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Hong Kong Economic Journal columnist

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