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Order on arrangement for avoidance of double
taxation with Mainland gazetted
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An order, made by the Chief Executive in Council under the Inland
Revenue Ordinance to implement the Second Protocol to the Arrangement
for the Avoidance of Double Taxation with the Mainland, was gazetted
today (April 18).
Hong Kong has entered into avoidance
of double taxation arrangements/agreements (DTA) with the Mainland
and three other jurisdictions (Belgium, Thailand and Luxembourg).
"The Mainland and Hong Kong
have different views on the interpretation of some of the Articles
upon implementation of the DTA," a government spokesman said.
"After negotiation, both sides
reached an agreement on the necessary amendments to the DTA and
signed the Second Protocol," he said.
The Second Protocol clarifies the
following points:
(1) Hong Kong enterprises would be
considered as having a permanent establishment on the Mainland and
be chargeable to tax if they provide services for an aggregate of
183 days in any 12-month period on the Mainland.
The use of "183 days" instead
of the previous "six months" as the basis provides more
certainty, as the meaning of "month" was subject to different
interpretations previously.
(2) The gains derived by a Hong Kong
resident from the alienation of shares in a company may be taxed
on the Mainland, if not less than 50% of the assets of this company
consist of immovable properties on the Mainland at any time within
three years before the alienation. Previously, there was no "within
three years" as the reference period.
(3) The gains derived by a Hong Kong
resident from the alienation of shares in a Mainland company may
be taxed on the Mainland, if within 12 months prior to the alienation
the recipient of the gains once owned not less than 25% of the entire
shareholding of this company. Previously, there was no "within
12 months" as the reference period.
The order will be tabled at the Legislative
Council on April 23 for negative vetting.
The Second Protocol was signed by
the Secretary for Financial Services and the Treasury, Professor
K C Chan and the Deputy Commissioner of the State Administration
of Taxation, Mr Wang Li, in Beijing on January 30, 2008.
Ends/Friday, April 18, 2008
Issued at HKT 10:07
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