Hong Kong – Netherlands Double Tax Treaty

The Hong Kong – Netherlands double tax treaty was signed in 2010 and it is applied to the financial periods on and after the 1st of January 2012 for the Netherlands and as of the 1st of April 2012 for Hong Kong. Its general purpose is to encourage more the economic relations between the two jurisdictions, as well as the investments and avoidance of double taxation. The agreement between Hong Kong and the Netherlands also serves for the prevention of tax evasion by specifying certain provisions meant to avoid the situations when double non-taxation or unwanted conduit could be performed. Our lawyers in Hong Kong can provide more details on these issues.

 

 

The foremost advantage of the Hong Kong – Netherlands double tax treaty is that it enables investments from Hong Kong, together with indirect Chinese investments, to be effectuated in a way in which the profits can be sent back to Hong Kong without having to pay any withholding tax. 

 

Other benefits of the Hong Kong – Netherlands double tax treaty include:

 

• The Netherlands does not impose a withholding tax on royalties and interest, however it does levy a 15% dividend tax if a double taxation agreement is not signed, with certain exemptions. Our Hong Kong law firm can provide more details on what this exemption may consist of;

• The local tax system in Hong Kong does not levy a tax on interest and dividends, however it does apply one on royalties gained by a resident of Hong Kong.

 

 

A tax rate of 0%, replacing the existing 15% one which applies in the Netherlands, is placed on dividends earned by businesses which own at least 10% of the share capital of the issuing company. 

 

To qualify for the 0% rate, one of the following requirements have to be met:

 

1. The shares of the business that earns the dividend have to be traded on a regular basis on an accepted stock exchange; or

2. Minimum 50% of the earning company shares is owned by a business with shares being traded on an accepted stock exchange.

 

If you need to know more details about the provisions of the Hong Kong – Netherlands double tax agreement, please contact our attorneys in Hong Kong.