The Ministry of Finance, the State Administration of Taxation (SAT) and the China Securities Regulatory Commission (CSRC) jointly issued the Notice on Relevant Tax Policies on the Mutual Recognition of Funds between the mainland and Hong Kong, effective from 18 December 2015. The notice has clarified PRC tax treatment on income derived under the mutual recognition of funds (MRF) scheme.
The notice specifies that income derived by a Hong Kong investor (individual or enterprise) from the transfer of fund units in an MRF is exempt from PRC income tax. The PRC-invested company is obligated to withhold 10% of the dividends, or 7% of the interest paid to the recognized mainland fund. Then, no withholding tax will apply when the fund distributes dividends or interest to the Hong Kong investor.
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Business Law Digest is compiled with the assistance of Baker & McKenzie. Readers should not act on this information without seeking professional legal advice. You can contact Baker & McKenzie by e-mailing Danian Zhang (Shanghai) at: danian.zhang@bakermckenzie.com
