As the implementation of the “Common Reporting Standard” (CRS) continues to deepen, Mainland China has also further upgraded its Golden Tax System Phase IV, allowing for an unprecedented level of precision and coverage in the regulation of cross-border financial activities. CRS has seen more than a hundred countries participate since the first exchange of account information was launched in 2017. As an international financial center, Hong Kong plays an important role in the exchange of information and the implementation of regulatory obligations.
Individual Tax Strategy: Dual Management of Identity and Income
The ongoing reform of China's individual income tax system has made cross-border income reporting increasingly stringent. For example, under Taxation Arrangement between the Mainland China and Hong Kong , withholding tax on dividends from Hong Kong stocks or overseas one is usually 5% to 10%, with a credit for tax paid overseas. Failure to proactively file returns, once traced, may result in the application of a personal marginal tax rate of up to 45%, which, together with penalties, will result in a sudden rise in costs.
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