Hong Kong has signed a double tax agreement with Italy on 14 January 2013, regulating the corporate taxes on income and preventing the tax evasion. The agreement contains provisions that will enable a better economic and trade relationship between the two countries. The tax provisions of the agreement, applicable in Hong Kong to the profits tax, salaries tax and property tax, present advantageous measures for investors interested in opening a company in Hong Kong.
Hong Kong – Italy agreement structure
The agreement signed by the two contracting states, offers, from the Hong Kong point of view, incentives for investors who intent to open a company in Hong Kong. As such, residents and non-residents in Hong Kong are subject to taxes on income, only for the income that arises or that is derived from the business activity carried out on the territory of Hong Kong. Companies with a permanent establishment here are subject to a 16.5% profit tax.
A permanent establishment represents, in accordance with the double tax agreement, any building site or construction in which activities last more than 6 months. In terms of furnishing of services, the same period of time is considered, as long as the employee’s activity is on a continuous basis within 12 months period.
Taxes on dividends and interest in Hong Kong
Companies resident in Hong Kong and companies that do not own a permanent establishment in Hong Kong do not have to pay withholding taxes. In terms of royalties, the agreement stipulates a 4.95% withholding tax, if they are paid by companies resident in Hong- Kong to non-residents companies. Hong Kong does not apply any capital gain taxes.
An important aspect of the agreement is that companies which are involved in the international shipping and air transport activities are subjected to taxes on income only in the country of residence.
Through the new DTA, Hong Kong has improved its tax laws, aligning them to the Organisation for Economic Cooperation and Development, offering very good prospects for company registration in Hong Kong.
If you need further information on the Hong Kong –Italy double tax treaty, please contact our specialists in company formation, who can present to you the structure of the economic market in Hong Kong.