On August 24, 2009, the SAT issued Guishuifa [2009] No. 124 (“Circular 124”) to provide a comprehensive guidance for nonresidents on claiming the tax treaty benefits (please refer to our China Tax Bulletin September 2009 for more information about Circular 124). As usual, the implementation of Circular 124 has created some practical issues. To help solve those issues, the SAT released Guoshuihan [2010] No. 290 (“Circular 290”) to provide the supplemental rules on June 21, 2010. Here is a summary of the salient points of Circular 290.  

Tax Resident Certificate

Circular 124 generally requires nonresidents to provide a tax resident certificate issued by the competent tax authorities of the treaty partners, along with other documents, for the purpose of claiming the tax treaty benefits. Previously there was some confusion on whether nonresidents needed to choose between a standard form and a standing-alone certificate. Circular 290 states that either is acceptable and sufficient.

Circular 290 also provides that, on the implementation of the HK-China tax agreement, the treaty-specific rules shall preempt the general rules as laid out by Circular 124. Circular 290 specifically refers to Guoshuihan [1998] No. 381 (“Circular 381”) and Guoshuihan [2007] No. 403 (“Circular 403”) with respect to the requirements of a Hong Kong tax resident certificate. Pursuant to Circulars 381 and 403, a Hong Kong resident can just provide a residency document instead of a tax resident certificate. The residency documents include the certificate of incorporation, the business registration certificate, the personal identification card, the China re-entry permit and the employment letter. Only if the Chinese tax authorities consider those documents insufficient, a Hong Kong tax resident certificate will be required.

Resubmission of Documents

Circular 124 states that there is no need to resubmit documents already provided. In reality, one single nonresident could face different in-charge local tax authorities which do not share information. Circular 290 requires that different in-charge local tax authorities be separately counted for the resubmission requirements.