Double Tax Agreement Between Hong Kong And China

The agreement applies in the United Kingdom from 1 April 2011 for corporation tax and from 6 April 2011 for income and capital gains tax. It applies from April 1, 2011 in Hong Kong. In August 2006, the Chinese and Hong Kong authorities signed an agreement to avoid double taxation, which aims to guarantee tax debt and tax savings to investors and taxpayers in both localities. On 21 August 2006, the two sides signed a broader agreement entitled “Agreement between mainland China and the Hong Kong Special Administrative Region to avoid double taxation and the prevention of income tax evasion” (comprehensive agreement). The comprehensive agreement expanded income coverage by adding up income from real estate, related companies, dividends, interest, royalties, capital income, pensions and utilities, etc. Regarding the new agreement, Donald Tsang announced that the agreement was also the first DBA in Hong Kong to be signed using the Organisation for Economic Co-operation and Development standard for the exchange of tax information. China This article provides a general overview of how investors can leverage Hong Kong`s DBA network to structure their investments in China under general anti-avoidance rules and requirements imposed by tax authorities in mainland China with respect to actual beneficiaries. Although many foreign countries have closed DBA with mainland China, most of their conditions for withholding tax on passive income, including dividends, interest, royalties and capital gains, are not as favourable as those imposed by the DBA between mainland China and Hong Kong. Under the new Income Tax Act (“EIT”) effective January 1, 2008, the general withholding tax rate in mainland China is 10%. However, the DBA between mainland China and Hong Kong provides for reduced rates, as summarized in the table below: the following information provides succinct information on some important double tax evasion agreements signed by the ASA. In addition to Jersey, Hong Kong completed a series of new full DBAs between 2010 and August 1, 2012.

Although these countries have the DBA with China, there are still opportunities to exploit the benefits of the more favorable DBA between Hong Kong and China by creating a regional headquarters in Hong Kong. The agreement provides that profits from the land transport activities of a Hong Kong-based hong Kong-based company are taxable and may be exempt from corporate and business tax in China. Cross-border land transport activities between Hong Kong and the mainland are generally operated in the form of a cooperative enterprise. The company will be considered a community-based business, originating from a Hong Kong resident and a mainland resident. This means that, in most cases, Hong Kong residents will invest in capital and vehicles, while mainlanders will provide services for applications for authorization, licensing, tax compliance and management. Profits made by the Hong Kong-based company are subject to income tax in Hong Kong, but are exempt from tax on the mainland.