Determining Beneficial Owners: An Interpretation of Announcement No. 9 and a Review of Momo’s 547 Million Tax Reimbursement Case
Published: June 2, 2026
In 2018, the State Taxation Administration issued Announcement No. 9, clarifying the rules for determining “beneficial owners.” That same year, Momo was subject to back taxes after its Hong Kong holding company was deemed a conduit company following a look-through analysis.547 million yuan.It is no coincidence that the timelines of these two events overlap—Announcement No. 9 was specifically aimed at “tax avoidance by conduit companies.”
I. What Does Announcement No. 9 Actually Say?
Key takeaway:To qualify for the benefits of a tax treaty, you must prove that you are the “beneficial owner” of this income—not merely a conduit for collecting and remitting funds, nor a transit point through which funds pass briefly before being transferred elsewhere, but the person who truly has the right to own, control, and dispose of these funds.
The criterion isn't your position on the organizational chart, but ratherWho really controls where this money goes?. This is a substantive test, not a formal one.
II. The “Negative List” in Announcement No. 9—Under What Circumstances Will Applications Be Rejected Outright?
1. Paying 50% or more to residents of a third country or region within 12 months of receiving the income—this is a typical characteristic of a conduit company.
2. The business activities engaged in are not substantive business operations—they consist solely of holding shares, receiving payments, and transferring funds
3. The tax jurisdiction where the company is located does not tax this income—Common Questions About Offshore Companies
Issues Identified Through Self-Assessment:Does your Hong Kong company immediately transfer the funds it receives back to the mainland or to other accounts? Does your company engage in no other substantive activities besides receiving payments? If the answer is “yes,” then you fall within the “red zone” defined by Announcement No. 9.
III. A Comprehensive Review of the Momo Case—Where Was the Fatal Flaw?
Background of the Case
• VIE Structure: Cayman Islands-listed entity → Hong Kong holding company → Mainland WFOE
• Capital Flow: Mainland profits → Hong Kong holding company → Cayman Islands-listed entity (dividends)
Chain of Critical Issues
1. What is the role of the Hong Kong holding company in the entire capital chain? — The tax authority has determined it to be a pure conduit.
2. Does the Hong Kong company engage in substantive business operations? — No office space, no employees, and no independent business operations
3. Can the applicant prove their status as the beneficial owner? — Unable to prove it; application denied
Results and Lessons Learned
Results:The State Taxation Administration denied its status as a beneficial owner and ordered it to pay 547 million yuan in back taxes.
• The weakest layer in an architecture determines the compliance of the entire architecture.
• It’s not enough for a company to be registered in Hong Kong; it must be able to prove that it “actually operates in Hong Kong.”
• Serves as a general warning to all companies with VIE or red chip structures
Cell phone: 18676749275 ｜ WeChat: qcygscszk
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IV. How to Establish a Chain of Evidence for the Beneficial Owner?
Types of Evidence
concrete content
What does this prove?
Minutes of the Executive Committee Meeting
To be held in Hong Kong at least once a year, with complete minutes and attendance sign-in sheets maintained
Business decisions are made in Hong Kong
Employee Hiring Records
Local Employee Contract + MPF Contribution History
The company has an actual management team
Office Lease Agreement
Lease Agreement for a Private Office Space + Utility Bills
Physically present; not a purely virtual address
Business Contract
Genuine business contracts with customers/suppliers
It's not just a payment gateway; it supports actual business operations.
CoR Certification
Official Certificate of Tax Residency Issued by the Tax Authority
The Strongest Endorsement: Compelling Evidence Rather Than Self-Justification
All five pieces of evidence are essential and together form a compliance file that can withstand scrutiny from both the tax authorities and the bank.
About
Founded in 2015, Qicaiying specializes in company registration in Hong Kong and overseas, bank account opening, and cross-border financial and tax compliance, and has served thousands of cross-border e-commerce, foreign trade, and global expansion companies. We provide full-service assistance for CoR tax residency certification—from eligibility assessment to certificate delivery. All you need to do is provide the basic information; we’ll handle the rest.
✔ Over 10 years of experience in Hong Kong company services
✔ Full-service handling—no need to travel to Hong Kong in person
✔ Automatic reminders for certificate expiration, ensuring uninterrupted long-term maintenance
Cell phone: 18676749275 ｜ WeChat: qcygscszk
Contact us now for a free compliance risk assessment.
Tags:
COR
Hong Kong Company Tax Compliance
Hong Kong company
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