Hong Kong – UK Double Tax Treaty
Hong Kong – UK Double Tax TreatyUpdated on Friday 29th April 2016
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The double tax treaty in place between Hong Kong and the United Kingdom regulates the taxation system used for individuals who are residents of one of both countries and derive income from their activities in these jurisdictions.
The treaty allows for reduced withholding tax rates on dividends and it is beneficial for Hong Kong residents who are doing business in the UK or otherwise as well as for companies who open branches or subsidiaries in one of the two tax jurisdictions.
Taxes covered by the Hong Kong – UK taxation agreement
The agreement for the avoidance of double taxation concluded between Hong Kong and the United Kingdom of Great Britain and Northern Ireland applies to all income taxes imposed by the two tax jurisdictions on the total income or partial income produced by individuals and companies operating on their territory.
The taxes to which the double tax treaty applies in case of the Hong Kong Special Administrative Region are:
- the profits tax,
- the personal income tax,
- the property tax.
The taxes for which the treaty applies in the case of UK are the income tax, the corporate tax, and the capital gains tax. Any other taxes imposed in addition to or in place of the ones listed above are also subject to the treaty. The attorneys at our law firm in Hong Kong can help you understand the manner in which these provisions apply if you are a foreign investor from the United Kingdom.
Other provisions of the double tax treaty between Hong Kong and the UK
For the purpose of the agreement, companies to which the treaty may apply are those that are treated as a legal entity for taxation purposes in either jurisdiction. A company incorporated in Hong Kong is a tax resident and so is a company that is incorporated outside of Hong Kong but has its main place of management in the city. Hong Kong residents are those individuals who stay in the city for more than 180 during a fiscal year. Resident companies are taxed on their worldwide income while non-resident companies only on their Hong Kong source income.
Under the double tax treaty, the withholding tax on dividends is reduced to 0% in some cases or 15% in others. The non-treaty rate is 20%.
For more information about how the double tax treaty can apply to your business or in-depth information about taxation in Hong Kong, please contact our Hong Kong law firm.