The Mainland basically follows the Model Tax Convention of the
OECD with its definition of the term “resident of the Mainland”1. Since Hong Kong adopts a territoriality concept of taxation, tax is only imposed upon income derived from Hong Kong. No one is liable to tax in Hong Kong merely because of his resident status. As such, Hong Kong is not in a position to adopt the definition provided in the OECD Model Tax Convention. Instead, a detailed definition of “resident of Hong Kong” has been included in the Comprehensive Arrangement to enable taxpayers to ascertain whether they are entitled to the benefits of the Comprehensive Arrangement. It should be noted, however, that the definition of “resident of Hong Kong”(香港居民) in the Comprehensive Arrangement is different from the meaning given to “a resident person”(居港者) in section 20AB of the Ordinance. With regard to the latter, the Ordinance makes it clear that the meaning applies only to the interpretation
of provisions relating to offshore funds.
In Hong Kong, a resident individual means:
an individual who ordinarily resides in Hong Kong;
an individual who stays in Hong Kong for more than 180 days
during the relevant year of assessment or for more than 300 days in two consecutive years of assessment (one of which is the relevant year of assessment).
It is generally considered that an individual “ordinarily resides” in
Hong Kong if he has a permanent home in Hong Kong where he or his family lives. Other relevant factors include the duration of his stay in Hong Kong, whether he has a permanent place of residence in Hong Kong, whether he owns any property overseas for residential purposes, and whether he is primarily
resident in Hong Kong or overseas.
According to Article 4(1) of the Comprehensive Arrangement and the amendment in Article 2 of the Second Protocol, in the Mainland “resident of One Side” refers to any person who, under the laws of the Mainland, is liable to tax therein by reason of his/its domicile, residence, place of establishment, place of effective management or any other criterion of a similar nature. This term, however, does not include any person who is liable to tax in the Mainland in respect of income from sources in the Mainland.