Hong Kong and Korea have signed a comprehensive double taxation agreement. This bilateral tax treaty serves the purpose of providing resident individuals and companies with double taxation relief but it is also used to prevent tax evasion.
The double tax agreement (DTA) applies on all taxes on income levied by the Governments of the Contracting Parties.
Taxes covered by the Hong Kong – Korea DTA
The double tax treaty applies for the following taxes in case of Hong Kong:
– the profits tax,
– the salaries tax,
– the property tax.
For Korea, the treaty covers the income and the corporate tax, the local income tax and the tax levied for rural development. All other taxes impose din place of the ones listed or in addition to them will also be covered by the treaty.
The double tax treaty is advantageous for foreign investors from Korea in Hong Kong. According to the provisions of the agreement, the withholding tax rates for dividends, interest and royalties are reduced. The usual withholding tax rate on dividends is 20% and under the treaty, this rate is 10% or 15%, depending on the company making the payment. The lowest rate applies if the company receiving the dividend payment holds at least 25% of the capital belonging to the company making the payment. A 0% withholding tax rate is possible if the owner of the interest is the Hong Kong Government or other governmental institutions.
General provisions of the Hong Kong – Korea DTA
According to the definitions set forth in the treaty, a company in Hong Kong is subject to the tax reductions if it is incorporated in the Hong Kong Special Administrative Region or if it is incorporated elsewhere but managed from Hong Kong.
A permanent establishment in Hong Kong that can benefit from the provisions of the DTA is a management office, branch in Hong Kong, factory, workshop, mine or other place used for extracting natural resources.
A Hong Kong resident is an individual who resides in Hong Kong or who spends more than 180 days in the Special Administrative Region during one taxable year.
Our company registration agents in Hong Kong can help you with detailed information about how the double tax treaty applies to your company or your personal income.