Worldwide: RSM Tax Advisory (Hong Kong) Limited - Weekly Alert Issue No. 18 [2017]

Last Updated: 11 May 2017
Article by RSM Tax Advisory

Welcome to issue 18 [2017] of Weekly Alert covering technical development in taxation around the globe.


1. Press Conference 2 May 2017 - The Gist of CIR's Speech and Major Statistics

On 2 May 2017, the Commissioner of Inland Revenue ("CIR") gave a speech on issuance of the 2016/17 tax returns for individuals, tax treaty negotiations, automatic exchange of financial account information in tax matters ("AEOI"), property demand-side management measures; and revenue collections in the financial year 2016/17.

The Inland Revenue Department ("IRD") issued 2.6 million tax returns for individuals for the year of assessment 2016/17 on 2 May 2017. The filing due dates for these 2016/17 tax returns are as follows:

Due Date
For individuals 2 June 2017
For sole proprietors 2 August 2017

An automatic extension of 1 month will be granted to taxpayers who file their tax returns through the Internet.

Up to 31 March 2017, Hong Kong has signed Comprehensive Double Taxation Agreements ("CDTAs") with 37 jurisdictions and concluded CDTA negotiations with 4 countries.

To implement the arrangement for AEOI more effectively and to respond to latest international developments, the Government introduced the Inland Revenue (Amendment) (No. 3) Bill 2017 into the Legislative Council in March 2017 with a proposed effective date on 1 July 2017. The IRD will provide full support to the Legislative Council and keep on expanding the network of AEOI.

In order to prevent local investors from acquiring multiple residential properties under a single instrument, the Government has introduced new property demand-side management measure which took effect from 12 April 2017. The Government will introduce the relevant legislative amendments into the Legislative Council as soon as possible.

In the year 2016/17, the IRD collected HK$290.2 billion which is HK$1.1 billion below that of last year. The forecast total revenue collection for the coming year is HK$286 billion.

Press Conference 2 May 2017 - The Gist of CIR's Speech and Major Statistics


1. Increase the Percentage of Extra Deductions of Research and Development Costs for Medium and Small-sized Scientific and Technological Enterprises


The Ministry of Finance ("MOF"), State Administration of Taxation ("SAT") and Ministry of Science and Technology have jointly issued the "Circular on Increasing the Percentage of Extra Deductions of Research and Development ("R&D") Costs for Medium and Small-sized Scientific and Technological Enterprises" on 2 May 2017.

According to the Circular, for medium and small-sized scientific and technological enterprises, an additional 75% of the actual R&D costs incurred from their R&D activities during the period from 1 January 2017 to 31 December 2019 can be tax deductible provided that no intangible asset has been formed; whist an intangible asset has been formed and such R&D costs has been capitalized, an amortization rate of 175% of the intangible asset's costs during the aforesaid period is allowed.

财税 [2017] 34

2. Policies for Simplifying and Consolidating VAT Rates


The MOF and SAT jointly released the "Circular on Policies for Simplifying and Consolidating VAT Rates" on 28 April 2017.

According to the Circular, from 1 July 2017, the VAT rates structure will be simplified and consolidated whilst the VAT rate of 13% will be cancelled. Sales or importation of products enumerated in Appendix I of this Circular, such as liquefied petroleum gas and natural gas, shall be subject to VAT at 11%. Export tax refund rate for products enumerated in Appendix II of this Circular, such as edible salt and frozen abalone, shall be adjusted to 11%.

财税 [2017] 37

3. Implementation of VAT Policies for Xinjiang's International Grand Bazaar Project


The MOF and SAT jointly issued the "Circular on Continuing the Implementation of VAT Policies for Xinjiang's International Grand Bazaar Project" on 28 April 2017.

According to the Circular, after the implementation of collection of VAT in Lieu of Business Tax, the taxable income derived by Xinjiang International Grand Bazaar Property Service Co., Ltd. and Xinjiang International Grand Bazaar Cultural Tourism Industry Co., Ltd. in respect of Xinjiang's International Grand Bazaar Project during the period from 1 January 2017 to 31 December 2019 shall be exempted from VAT.

The VAT paid prior to the issuance date of this Circular shall be used to offset against taxpayers' VAT payable in subsequent months or be refunded.

财税 [2017] 36


1. Estimated Revenue Loss in Panama Papers for European Union

The European Parliament's Committee of Inquiry into Money Laundering, Tax Avoidance and Tax Evasion ("PANA Committee") has released a study on "The Impact of Schemes Revealed by the Panama Papers on the Economy and Finances of a Sample of Member States".

According to the Study, the estimated total revenue loss to European Union member states revealed in the Panama Papers could be in the range of EUR 109 billion to EUR 237 billion. The Study has made the following recommendations:

  • Promote the establishment of registers that publicize beneficial ownership;
  • Encourage higher tax good governance standards;
  • Retain the political neutrality of the definition of a tax heaven;
  • More closely relating information on Anti Money Laundering and Tax Transparency rules;
  • Introduce measures to guarantee the protection of whistle-blowers;
  • Develop methodologies that can be used to generate publicly available, reliable and comparable data on the magnitude of tax avoidance and evasion; and
  • Promote the integrity and transparency in the financial sector within the framework of the European Semester.

The Impart of Schemes Revealed by the Panama Papers on the Economy and Finances of a Sample of Member States

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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