Would an expatriate employee be considered a resident of Hong Kong for taxation purposes under the Arrangement?
Under Article 3 of the Arrangement, a "resident" of Hong Kong who works in the Mainland will be taxed on his remuneration for Mainland-based work by the PRC tax authorities. The Arrangement is sketchy on the meaning of "resident". The definition given is "any person who is liable to the taxes of one side by reason of his residence, domicile, place of effective management, place of head office or any other criterion of a similar nature in accordance with the laws of the respective sides". Without any further explanation on the criteria for Hong Kong taxation, it looks like nobody is a "resident" of Hong Kong. The introduction of the concept of residence for tax purposes is also confusing as in Hong Kong taxation is based on source rather than residence.