On April 12, 2013, the State Administration of Taxation
("SAT") released Shuizonghan [2013] No.
165 ("Circular 165") to further clarify
the beneficiary ownership rules with respect to dividends received
by Hong Kong holding companies pursuant to the Mainland China-Hong
Kong double taxation agreement. Previously, the SAT issued
Guoshuihan [2009] No. 601 ("Circular
601") to define the term "beneficiary
owner" with respect to the tax treaty treatment of dividends,
interests, and royalties.Subsequently, the SAT issued Notice [2012]
No. 30 ("Notice 30") to explain the
application of the beneficiary ownership rules.
Circular 601 expressly lists seven factors, which generally lead
to unfavorable results, in determining beneficiary owners in the
process of reviewing such applications by foreign holding
companies. Circular 165 seeks to soften these unfavorable factors
in regard to dividends received by Hong Kong holding companies.
Below is a chart as to the respective
