Archives October 2026

Hong Kong Level: Dividends Are Generally Not Taxable in Hong Kong

Hong Kong’s tax system follows the territorial source principle and does not impose a dividend withholding tax.

• Dividend Income: Regardless of whether the shareholder is a Hong Kong resident or a non-resident (foreign person), dividends received from a Hong Kong company are generally not subject to Hong Kong individual income tax or salaries tax.

Therefore, at the dividend payment stage, the Hong Kong company is not required to withhold any tax on behalf of the shareholder.

Chinese Mainland Level: Tax Liability Depends on Your “Tax Resident” Status

(For individual person whom working or living inside China mainland)

The “tax residence” status is the key factor in determining whether you need to pay tax in Mainland China on this Hong Kong dividend.

1. If you have no domicile in China and your residence period is short

According to regulations, for an individual without a domicile in China, and their cumulative residence within a tax year does not exceed 183 days, income sourced outside China is exempt from individual income tax. Dividends paid by a Hong Kong company are considered foreign-sourced income and typically fall outside this taxable scope.

2. If your cumulative residence in a tax year reaches 183 days

At this point, you would be classified as a resident individual without a domicile in China, and in theory, you would be required to pay tax on your worldwide income. However, an important “Six-Year Rule” exemption applies:

• Continuous residence for less than six years: If your cumulative residence in China reaches 183 days but the number of consecutive years in which you have met this threshold is less than six, then your income derived from sources outside China and paid by an overseas entity or individual is exempt from individual income tax. Dividends from a Hong Kong company fall into this category.
• The “absence exceeding 30 days” exception: When calculating this “consecutive six years,” if in any one of those years you have a single absence from China exceeding 30 consecutive days, the consecutive-year count will reset to zero, and you can still enjoy the aforementioned foreign-sourced income exemption.
• Continuous residence for six full years: If you have reached the 183-day threshold for six consecutive years (starting from 2019), the foreign-sourced income exemption will no longer apply. At that point, regardless of who pays the Hong Kong dividend, you will need to declare and pay individual income tax in Mainland China.

Summary and Action Recommendations

Your individual income tax liability can be simplified into the following scenarios:

Scenario	China Tax Liability
Residence < 90 days	Hong Kong dividends are generally not subject to tax in the China Mainland.
Residence ≥ 183 days, but less than 6 consecutive years (or with an absence exceeding 30 days)	Dividends paid by a Hong Kong company are treated as foreign-sourced income and are generally exempt from Mainland individual income tax.
Residence ≥ 183 days for 6 consecutive years	Hong Kong dividends must be declared and taxed in the Mainland, potentially at 20%.

Given the complexity of determining tax residency status, especially concerning the “Six-Year Rule” and the application of tax treaties, it is recommended that you:

• Keep proper records of your entry and exit dates to accurately calculate your days of residence.
• Consult a professional cross-border tax advisor (e.g. Colvass Tax Consulting Ltd) regarding your specific residence situation and shareholding structure to obtain accurate advice for your individual circumstances.

ref link:

Criteria for Individuals to Be Considered Chinese Tax Residents

The Six-Year Rule for non-domiciled individuals

The Six-Year Rule is a special buffer rule for non-domiciled individuals who are tax residents in China by virtue of the 183-day test. It determines when their worldwide income becomes fully taxable in China. In short: a non-domiciled individual who is a resident for less than six consecutive years (or who breaks the chain) can still enjoy an exemption on foreign-sourced income paid by overseas entities or individuals; once the six-year chain is complete, worldwide income becomes fully taxable from the seventh year.

---

1. Core condition for the Six-Year Rule

For a non-domiciled individual who resides in China for 183 days or more in a tax year, the six-year rule applies as follows:

Condition in the preceding six consecutive years	Tax treatment in the current tax year
In each of the six years, the individual resided 183 days or more in China, and in no year did a single departure exceed 30 days	Income from both within and outside China is subject to Chinese individual income tax (full worldwide taxation)
In any of the six years, residence was less than 183 days, or a single departure exceeded 30 days	Foreign-sourced income paid by overseas entities or individuals is exempt from Chinese IIT

This is stated in the official Announcement on March of 2019 issued by the Ministry of Finance and the State Taxation Administration.

---

2. How “preceding six years” is counted

• The “preceding six years” means the six consecutive tax years immediately before the current tax year (i.e., year −1 to year −6).
• Crucially, the starting year for counting is 2019. Years before 2019 are disregarded (“cleared to zero”). Therefore, 2024 was the first year in which the six-year chain could potentially be completed (2019.1.–2024.12.31).

This transitional rule meant that all non-domiciled individuals enjoyed the foreign-income exemption through 2024, regardless of how long they had actually lived in China before 2019.

---

3. The “30-day reset” rule

If in any tax year during the six-year period the individual has a single departure from China exceeding 30 days, the continuous six-year count is broken and reset to zero. The counting starts anew from the following year.

This is a key planning point: a carefully timed single trip of more than 30 days can reset the clock and preserve the foreign-income exemption.

---

4. How residence days are counted

For the 183-day test (and for the six-year chain), days are counted as follows:

• A day on which the individual stays in China for 24 hours or more counts as one residence day.
• A day on which the individual stays less than 24 hours does not count as a residence day.

Example: A Hong Kong resident who commutes to Shenzhen every Monday morning and returns Friday evening—where Monday and Friday stays are each less than 24 hours—will have only 3 countable days per week (Tuesday, Wednesday, Thursday). Over 52 weeks, that is 156 days, below the 183-day threshold, so they would not be a resident individual at all.

---

5. The exemption and its procedural requirement

If the six-year chain is not completed, the foreign-sourced income exemption applies only if the individual files a record with the competent tax authority (备案). The exemption covers income sourced outside China and paid by overseas entities or individuals.

---

6. Practical illustration

Consider a non-domiciled individual who has been in China since 2019:

Year	Days in China	Single departure >30 days?	Six-year chain status
2019	210	No	Year 1
2020	195	No	Year 2
2021	185	No	Year 3
2022	207	No	Year 4
2023	184	No	Year 5
2024	195	No	Year 6 (chain complete)
2025	200	No	Worldwide income fully taxable

If, instead, in 2023 the individual had taken a 35-day trip abroad, the chain would have reset. The six-year count would restart from 2024, and the foreign-income exemption would continue to apply in 2025.

---

Summary table

Concept	Rule
Who it applies to	Non-domiciled individuals who are resident by the 183-day test
Effect of completing six years	Worldwide income becomes fully taxable from year 7
Effect of not completing six years	Foreign-sourced income paid overseas is exempt (with filing)
Counting start date	2019 (pre-2019 years disregarded)
Reset trigger	Any single departure exceeding 30 days in a tax year
Day counting	Only days with 24+ hours of stay count

The Six-Year Rule is essentially a transitional safe harbour designed to give non-domiciled residents time to adjust before full worldwide taxation applies. It is separate from—and additional to—the domicile and 183-day tests that determine resident status in the first place.

ref link:

criteria for individuals to be considered chinese tax residents

Criteria for Individuals to Be Considered Chinese Tax Residents

关于在中国境内无住所的个人居住时间判定标准的公告

https://www.gov.cn/zhengce/zhengceku/2019-10/16/content_5440701.htm

Who should pay individual income tax

https://english.shanghai.gov.cn/en-PersonalIncomeTaxPolicies/20231215/a47eca3fa1384bffb8c991809d2a4c4e.html#1

Criteria for Determining the Period of Residence of Individuals Without a Domicile in China

https://fgk.chinatax.gov.cn/eng/c102962/c102967/c102997/c103004/c5248304/content.html#1

Criteria for Individuals to Be Considered Chinese Tax Residents

1. Resident individual

An individual is a resident individual if either condition applies:

• They have domicile in China; or
• They do not have domicile in China, but have resided in China for 183 days or more in a tax year.

2. Non-resident individual

An individual is a non-resident individual if either condition applies:

• They have no domicile in China and do not reside in China; or
• They have no domicile in China and have resided in China for less than 183 days in a tax year.

3. Tax year

The tax year is the calendar year, from January 1 to December 31.

4. Domicile

Domicile means habitual residence in China based on factors such as:

• domiciliary registration, (e.g. Chinese ID, Chinese nationality)
• family ties,
• economic interests.

Habitual residence is a legal criterion for defining a taxpayer. It does not mean actual residence or physical presence for a particular period of time.

Example:
If an individual leaves China to stay, work, visit family, or tour elsewhere, but is expected to return to reside in China, China may still be their habitual residence.

Simple decision rule

Situation	Tax status
Has domicile in China	Resident
No domicile + resided in China 183 days or more in tax year	Resident
No domicile + resided in China less than 183 days in tax year	Non-resident
No domicile + does not reside in China	Non-resident

Tax Impact:

Under the Individual Income Tax Law, having a domicile in China makes you a resident taxpayer, which means you are generally subject to individual income tax on your worldwide income (both domestic and foreign sources), not just income earned inside China.

The Six-Year Rule:

Foreign individuals who do not have a domicile in China may benefit from special rules (such as the six-year rule) that can limit or exempt certain foreign-source income from Chinese taxation under specific conditions. (e.g. foreign sources income from HK)