|
Publications and Press Releases :
Press Release
: News Archives
Government signs Comprehensive Agreement for
Avoidance of Double Taxation with Belgium
**************************************************************************************************
The Government today (December 10) signed an Agreement
with Belgium for the Avoidance of Double Taxation and the Prevention
of Fiscal Evasion with Respect to Taxes on Income and on Capital.
This is the first comprehensive agreement for the avoidance of double
taxation (CDTA) concluded by the Hong Kong Special Administrative
Region Government with another economy.
Representing an important milestone in Hong Kong's efforts in the
area of CDTA, the Agreement will bring about tax savings to Hong
Kong and Belgian investors doing businesses in each other's area
in respect of certain income, and provide a further level of certainty
in tax liabilities. It will thus help to promote investment and
trade between the two places. Besides, establishing a network of
CDTAs will put Hong Kong on a par with other places in the region
and hence further enhance our competitiveness in attracting foreign
investment.
The Secretary for Financial Services and the Treasury, Mr Frederick
Ma, signed the Agreement on behalf of the HKSAR Government. The
Belgian Government was represented by its Minister of Finance, Mr
Didier Reynders.
Speaking at the signing ceremony, Mr Ma noted that the Agreement
was a very important one. "The Agreement ensures that investors
will not have to pay tax twice on a single source of income. In
simple terms, the Agreement will translate into tax savings to Belgian
and Hong Kong investors doing businesses in each other's area, through
the allocation of taxing rights between the two places and the provision
of tax relief in case of double taxation," Mr Ma said.
In the absence of a CDTA, profits earned by Belgian residents in
Hong Kong are subject to both Hong Kong and Belgian income taxes.
Profits derived by Belgian companies from Hong Kong by doing business
here through a permanent establishment (such as a branch) are subject
to both Hong Kong profits tax and Belgian income tax. Belgian tax
authorities provide a relief of 50% reduction in Belgian income
tax for such income derived by Belgian individuals on a unilateral
basis. Under the Agreement, Belgium will eliminate double taxation
by providing full exemption to Belgian residents (companies and
individuals alike) for such income.
Also, in the absence of a CDTA, royalties received by a Hong Kong
resident from a Belgian source not attributable to a permanent establishment
in Belgium is currently subject to a Belgian withholding tax at
15% on the gross amount of royalties less a 15% fixed deduction.
Under the Agreement, the Belgian withholding tax will be reduced
to 5% of the gross amount of royalties (without the 15% fixed deduction).
In the case of interest received by a Hong Kong resident that arises
in Belgium, which is not attributable to a permanent establishment
in Belgium, the Belgian withholding tax will be reduced from the
current 15% of the gross amount of interest to 10% under the Agreement.
Profits from international shipping transport earned by Hong Kong
residents that arise in Belgium which are currently subject to income
tax in Belgium will enjoy exemption under the Agreement.
"The Agreement also formalises the tax relief being offered
by the two tax authorities at present, thus providing a further
level of certainty and stability to existing and potential investors
alike," Mr Ma said.
As a result, it will provide added incentives for businesses in
Hong Kong and Belgium to enhance their cross border investments
or activities, thus fostering closer economic ties between the two
places.
Mr Ma said that the Government was keen to establish a network of
CDTAs with our major trading and investment partners.
"Many places in the region have already established a network
of CDTAs. Having such a network in place for Hong Kong will put
us on a par with other places in the region that already have one,
thereby further enhancing our competitiveness in attracting foreign
investment," Mr Ma explained.
The Government began to explore the possibilities of concluding
CDTAs with its major trading partners in 1998. It concluded a double
taxation arrangement with the Mainland in 1998. In circumstances
where CDTA discussions could not immediately proceed, the Government
sought to conclude limited double taxation avoidance arrangements
(DTAs) for revenues arising from international shipping/air transport.
A total of 18 DTAs on airline income, five agreements on shipping
income and one agreement on airline and shipping income have been
concluded.
Subject to the completion of ratification procedures for both sides,
the Hong Kong/Belgium CDTA will take effect with respect to Hong
Kong taxes from April 1, 2004, and with respect to Belgian taxes
from January 1, 2004. In the case of Hong Kong, an Order to be made
by the Chief Executive in Council under the Inland Revenue Ordinance,
which is subject to negative vetting by the Legislative Council,
will be required.
Ends/Wednesday, December 10, 2003
NNNN
|
|