Hong Kong has reportedly just signed Double Taxation Avoidance Agreements (DTAs) with the UK & Ireland, which brings to 13 the number of such treaties signed with its trading partners.
The DTAs generally follow the OECD model treaty and spell out the allocation of taxing rights between the jurisdictions and the relief on tax rates on different types of passive income, including capital gains.
In the absence of the DTAs, profits earned by British and Irish residents (& companies doing business through a branch in Hong Kong in Hong Kong) are subject to both Hong Kong and local tax. Pursuant to the new DTA, the UK and Ireland will provide tax credits to their residents and companies against UK and Irish tax payable in respect of that income.
Hong Kong residents currently receiving dividends from the UK and Ireland are subject to a withholding tax, which is currently 20% in both jurisdictions. The new regime provides however that the withholding tax rate will be reduced to 15% in the UK and exempted in Ireland.
Hong Kong residents receiving royalties and interest from the UK hitherto have been subject to withholding tax at 20% in both the UK and Ireland. Under the new agreements, withholding tax on royalties will be capped at 3% and on interest will be reduced to 10% in Ireland, and exempted in the UK.
Special arrangements have also been negotiated as regards airlines and shipping between Hong Kong and UK/Ireland.
The Hong Kong/UK DTA incorporates the latest OECD standard on exchange of information (but is limited to taxes covered by the agreement ie taxes imposed on income, on gains from the alienation of property and on capital appreciation).
The existing taxes to which the agreement will apply are, therefore, profits tax, salaries tax and property tax in Hong Kong; income tax, corporation tax and capital gains tax in the UK; and income tax, income levy, corporation tax and capital gains tax in Ireland.
The provisions of the agreements will take effect from the next calendar year.
Hong Kong says it is actively seeking to establish a network of comprehensive DTAs & where comprehensive DTA discussions cannot be started for the time being, Hong Kong will seek to conclude limited double taxation avoidance arrangements for airline and shipping income with relevant partners. So far, 27 such agreements on airline income, six agreements on shipping income, and two agreements on airline and shipping income have been reached.
The Canadian Ministry of Finance has announced the signing of two Tax Information Exchange Agreements, with the Bahamas on June 17, and with Saint Lucia on June 18.
The two agreements were negotiated in line with the OECD standard on transparency and tax information exchange and are a direct result of efforts to ‘level the playing field’ in tax competition. The agreements will provide the respective tax authorities with access to tax information on request in civil tax matters and in the investigation of fiscal crime.
The Ministry of Finance said that the agreements are consistent with “Canada’s international efforts to promote transparency and effective exchange of tax information.”
“The Agreements will provide the mutual exchange of tax information that is possessed by, or accessible to, the taxation authorities of either jurisdiction, and by the Canadian Revenue Agency, in order to better administer and enforce taxation laws and to prevent international fiscal evasion,” the ministry stated.
The agreements will enter into force after the concerned countries have completed their individual ratification procedures.