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The Chinese government has recently released the draft amendments to the Individual Income Tax (“IIT”) Law to the public for consultation. The proposed amendments comprise broad changes to the IIT system and the salient proposed changes are as follows:

Definition of resident

The draft amendments introduce the internationally recognized “183-day” test for determining whether an individual is a Chinese tax resident, which will make it much easier for a non-China-domiciled individual to be considered a Chinese resident for tax purposes. According to the proposed changes, if a non-China-domiciled individual stays in China for 183 days or more (instead of a “full year” as defined under the existing system) in a calendar year, he/she is considered as a China tax resident who is subject to IIT on his/her China sourced and non-China sourced income. If he/she stays in China for less than 183 days, he/she is subject to IIT on his/her China sourced income, unless he/she is exempted from IIT under the relevant provision in a tax treaty (if applicable).

The Chinese Ministry of Commerce (‘‘MOC’’) released on 30 July 2018 a draft on the amended Administrative Measures for Strategic Investment by Foreign Investors in Listed Companies (the ‘‘Draft’’), which aims at further opening the Chinese market to foreign investors. The Draft is set to revise the existing laws and regulations (the ‘‘Existing Measures’’), in effect since 30 January 2006, and proposes looser restrictions on strategic foreign investments into Chinese listed companies, in line with the new regulatory regime and China’s economic development strategies.

Over the past few years, the Central Government has implemented various measures to streamline governmental approval process on foreign investments in China’s strategic sectors in order to enhance market entry and attract foreign capitals.

The State Council published on 28 July 2018 the Circular GuoFa [2018] No. 28 (the ‘‘Circular’’), abolishing 11 administrative licenses in China, among which the work permit for Taiwan, Hong Kong and Macao residents (‘‘THKM’’).

Under the Circular, THKM residents will be treated the same as local mainland Chinese residents and will thus no longer need work permits to work in Mainland China.

Previously, under the Administrative Regulations on Employment of Taiwan, Hong Kong and Macau Residents in Mainland, a Chinese company was required to obtain prior-approval from the city-level authorities before hiring a THKM resident. The would-be employer was required to submit various supportive documents, including but not limited to the business license, the employee’s health certificate, and his/her valid travel document.

Hong Kong recently announced record-breaking fiscal surplus of 138 billion HKD from the 2017-18 fiscal year. This is mostly thanks to high revenue from profits tax, land sales, stamp duties and salaries tax. Last year was indeed exceptional for the Asia’s world city, as its economy grew by 3.8% and unemployment rate reached a 20-year low of 2.9%.

The Financial Secretary proposed in his budget speech to share with the community about 40% of the surplus and use the remaining 60% for improving government services and investment in the future.