By Vlad Cuc, specialist in company formation matters
The main provisions of the Hong Kong – UK treaty
The taxes on income produced by residents of one or both states are regulated through an Agreement for the avoidance of double taxation and the prevention of fiscal evasion. The Government of the Hong Kong Special Administrative Region and the one of the United Kingdom of Great Britain and Northern Ireland have signed the renewed treaty and its protocol on 21 June 2010 and it was entered into force on 20 December 2010.
The Agreement for the avoidance of double taxation applies to the residents of the two States. For Hong Kong the definition of residents includes individuals who reside in Hong Kong or who stay in the region for more than 180 days in one assessment period and it also includes any companies incorporated in Hong Kong according to its specific laws. In the case of the United Kingdom the treaty applies to individuals who are liable to tax under the laws of the country and companies incorporated in or managed from the country.
Taxes covered by the Hong Kong – UK treaty
The taxes for which the treaty applies in case of Hong Kong are:
– profits tax;
– salaries tax;
– property tax.
In case of the United Kingdom the taxes for which the double tax agreement applies are:
– the income tax;
– the corporate tax;
– the capital gains tax.
The provisions of the convention also apply to any taxes imposed in place of or in addition to the ones mentioned above.
Types of income covered by the treaty UK – Hong Kong treaty
The types of income that are exempt from double taxation according to the double tax treaty include a multitude of sources, among which income from immovable property, business profits, dividends, interest royalties, capital gains, income from employment in Hong Kong or in the UK, or director’s fees, pensions or other income.
The treaty stipulates that when an individual or company produces one or more of these types of income the amount will only be taxed in the country where it was produced. This is advantageous for foreign investors in Hong Kong coming from the United Kingdom and vice-versa. The treaty also imposes a preferential rate on the withholding tax on dividends.
Our representatives can help you with more details about other double tax treaties concluded by the Special Administrative Region. Contact our Hong Kong company formation agents if you have any questions.