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Hong Kong – Finland Double Tax Treaty

Hong Kong – Finland Double Tax Treaty

Hong Kong and Finland have signed a Comprehensive Double Taxation Agreement which will allow for the prevention of double taxation on income between the two jurisdictions. although the treaty has been signed, it will need to be ratified by each party before it can enter into force.

Our team of Hong Kong company formation agents discusses the provisions of the treaty and can provide more information to Finnish investors in Hong Kong and vice versa.

The taxes covered by the treaty

A new double tax treaty between Hong Kong and Finland will allow investors from one jurisdiction to the other to benefit from reduced tax rates or even a complete exemption thereof. 

The taxes covered by the treaty in case of Hong Kong are the profits tax, the salaries tax, and the property tax. For Finland, the taxes are the state income taxes, corporate income tax, communal tax, church tax and the tax withheld at source from interest and that from non-residents’ income.

The Agreement for the Elimination of Double Taxation with Respect to Taxes on Income was signed by Hong Kong and Finland at the end of May 2018. The provisions of the treaty are not yet applicable to foreign investors from Finland. Before this is possible, the agreement needs to be ratified by both parties.

DTA conditions

The following list is a summary of part of the conditions under which the double tax treaty will apply:

  • • Resident company: the treaty will apply in case of resident companies, either incorporated in Hong Kong or in Finland. 
  • • Permanent establishment: for the purpose of the treaty, a permanent establishment that can benefit from double taxation relief will be considered not only a resident company but also a building site, construction site or location where activities last for more than nine months.
  • • Dividends: in order to benefit from the applicable reduction of the withholding tax on dividends, the beneficial owner needs to be a resident of either Hong Kong or Finland and hold a certain percentage of ownership in the company making the dividend payments.
  • • Types of income: the treaty defines several types of income (apart from dividend income) for which the double taxation relief will apply, among which income from immovable property, business profits, income from employment and others.

Contact our Hong Kong company formation agents for complete information about how the treaty will apply to Finnish foreign investors in Hong Kong.