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Hong Kong-Japan Double Tax Treaty

Hong Kong-Japan Double Tax Treaty

The tax treaty between Hong Kong and Japan

The Hong Kong-Japan double tax treaty is the first of its kind between the two parties and has the scope to clarify the manner in which income is taxed by the two governments so that individuals can be protected from double taxation. The treaty also helps to reduce certain taxes and stipulates special provisions for mediation in tax-related problems between Hong Kong and Japan.

Our Hong Kong company formation representatives can help you understand the effects of the treaty if you are a foreign investors from Japan who wants to open a Hong Kong company.

Taxes covered by the Japan Hong Kong treaty

The Agreement stipulates the manner in which each government may levy certain taxes on individuals. It applies on taxes on income, irrespective of the manner in which they are levied. The types of taxes taken into consideration are all taxes imposed on total income or on elements of income including taxes from the profits made by the alienation of movable or immovable property.

In the case of Hong Kong the taxes for which the treaty applies are:

– the profits tax;

– the salaries tax;

– the property tax.

For Japan, the taxes covered by the treaty are:

– the income tax;

– the corporate tax;

– the local inhabitant taxes.

The two governments must notify one another if any changes occur in their taxation laws. The Agreement also applies to any taxes that might be levied in addition to or in place of the ones listed above after the signature date of the treaty. Hong Kong has signed a series of other double taxation treaties.

The taxation of Hong Kong and Japanese residents

The Agreement applies to persons who are residents of one or both Contracting Parties. The term “person” includes an individual, company in Hong Kong and Japan or any other body of persons. 

Articles 10 thru 21 describe the types of income for which the treaty applies: dividends, royalties, interest, capital gains, income from employment or director’s fees are some of the types of income received by individuals in Hong Kong and Japan that falls under the scope of the treaty.

For information about how this treaty influences your branch or subsidiary in Hong Kong and more detailed information about taxation you can contact our Hong Kong company formation agents.