Hong Kong To Ratify Three New Double Tax Agreements
by Mary Swire, Lowtax.net, Hong Kong
06 July, 2017
Hong Kong has tabled legislation into parliament to bring into effect double tax agreements (DTAs) with Latvia, Belarus, and Pakistan.
The comprehensive DTA between Hong Kong and Latvia was signed in April 2016. It provides that Latvia's withholding tax rate on royalties (currently at various rates that can be as high as 23 percent in some cases) will be reduced to zero percent for companies and capped at 3 percent in all other cases.
Latvia's withholding tax rate on dividends and interest (currently at various rates that can be as high as 30 percent in some cases) will also be reduced to zero percent for companies and capped at 10 percent in all other cases.
The Hong Kong-Belarus CDTA was signed in January 2017. Under the agreement, Belarusian withholding taxes on dividends and interest will be capped at five percent. This will also be the rate for withholding tax on royalties unless they are for the use of, or the right to use, aircraft, which will be reduced to three percent. The agreement also clarifies that Hong Kong residents earning profits from international shipping transport will not be taxed in Belarus.
The CDTA between Hong Kong and Pakistan signed in February 2017 caps Pakistani withholding taxes. These will be 10 percent for royalties, 12.5 percent for technical services, and 10 percent for dividends and interest. There is also a 50 percent reduction in Pakistani tax on profits from international shipping transport earned by Hong Kong residents.
All three CDTAs provide that Hong Kong residents can receive relief for taxes paid on profits in the other jurisdiction as a credit against their Hong Kong tax liability on those profits. They also agree that Hong Kong air carriers operating flights to the countries will be taxed at Hong Kong's corporation tax rate, 16.5 percent.
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