Hong Kong Spain tax residency certificate - HKWJ Tax Law

Application for Certification of Resident Status in Hong Kong – Spain

There has been some lobbying going on by tax representative groups in Hong Kong saying that the HK IRD should liaise with its tax treaty partners to accept the standard “Certificate of Incorporation” (issued by the Hong Kong Company Registrar upon incorporation of a Hong Kong company) as the proof for a Hong Kong company of its Hong Kong resident status, as is the case for example with the double taxation arrangement between Hong Kong and Mainland China.

However, up till now, when applying for a certification of resident status, one still needs to complete a one page standard application form and when “sufficient”, the HK IRD will issue a so-called “Hong Kong Special Administrative Region Certificate of Resident Status” which usually takes twenty-one (21) working days to complete.

As the double taxation agreement between Hong Kong and Spain is relatively new (effective in Hong Kong as from 1 April 2013), it is unclear yet what exact information is required or seen as sufficient for the standard application form (sometimes this information is pre-scribed by the tax treaty partner, in this case Spain) in order for the HK IRD to provide a Hong Kong company with the above-mentioned certification of resident status.

The standard application form for example, apart from the company details in itself, requires a Hong Kong company to provide information on its “business activities in Hong Kong”, the “number of management staff residing in Hong Kong”, whether or not “directors meetings are normally held in Hong Kong”, whether or not “staff in Hong Kong is normally involved in formulation of strategic policies, business directions, setting work plans, implementation of management decisions, any business financing and evaluation of business performance” and whether or not the Hong Kong company is “centrally managed and controlled in Hong Kong”.

Hong Kong – Spain Double Taxation Treaty

It is however clear that, according to article 4 of the double taxation treaty between Hong Kong and Spain, a “resident of a contracting party” in case of Hong Kong, means “a company incorporated in the Hong Kong Special Administrative Region or, if incorporated outside the Hong Kong Special Administrative Region, being normally managed or controlled in the Hong Kong Special Administrative Region”. As a result, it looks like that even if the Hong Kong company has no “management and control” in Hong Kong, the HK IRD would still be willing to issue a certification of residence status for the Hong Kong company as it has been incorporated in Hong Kong.

As a comparison, see for example the double taxation treaty between Hong Kong and Japan. Within this double taxation treaty, article 4 states that a “resident of a contracting party” in case of Hong Kong, is only “a company having a primary place of management and control in the Hong Kong Special Administrative Region”. This shows that in the case of acquiring a certification of residence status for the purposes of the Hong Kong – Japan double taxation treaty, a “Certification of Incorporation” is not enough/needed, but that the relevant Hong Kong company (also) needs to be managed and controlled from out of Hong Kong.

Conclusion

It seems therefore that for those purposes, the HK IRD needs to collect on the standard application form as much information regarding the management and control of a company. When however collecting this information for the purpose of acquiring a certification of residence status for the Hong Kong company under the Hong Kong – Spain double taxation treaty, the obtained information is likely to be ignored by the HK IRD as it is irrelevant for the application of the relevant double taxation treaty.

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