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(Source : Government Information Centre)

LCQ14: Double Taxation Agreements


Following is a question by the Hon David Li and a written reply by the Secretary for the Treasury, Miss Denise Yue, in the Legislative Council today (November 29):


To further Hong Kong's role as an international financial centre, it is important that we conclude treaties with our trading partners covering double taxation relief for financial services, will the Government inform this Council:

(a) with which countries have we concluded treaties covering double taxation relief for financial services; and

(b) with which countries are we currently negotiating and the status of those negotiations?

Reply :


In the 1999-2000 Budget Speech, the Financial Secretary has announced, as one of the helping business initiatives, to negotiate double taxation agreements (DTA) with trade and economic partners with a view to minimising exposure of the respective residents to double taxation. We have, since mid-1998, approached 19 countries through their respective Consulates in Hong Kong, inviting them to consider negotiating a comprehensive DTA with Hong Kong. In line with our objective of maintaining a non-discriminatory tax regime for businesses, we are proposing to conclude a comprehensive DTA, which covers double taxation relief provisions for all types of businesses, including financial services.

The countries which we have approached include Australia, Bahrain, Bangladesh, Belgium, Canada, Chile, Denmark, Germany, Hungary, Japan, Malaysia, the Netherlands, the Philippines, Russia, Singapore, South Africa, Thailand, the United Kingdom and the United States. Most countries which we approached on our own initiative are important trading entities in the world with good economic and trade relations with Hong Kong, while the others are those which we approached in response to their request to have a DTA with Hong Kong.

Of these countries, Denmark, Hungary, Russia, South Africa and Thailand have expressed interest in having a comprehensive DTA with Hong Kong. We have scheduled to have the first round of meeting with Denmark on a comprehensive DTA in early 2001. Negotiations with the other countries will be scheduled once we have analysed our respective DTA texts and agreed on mutually convenient meeting arrangements.

Apart from these countries, a few of the governments we have approached, Malaysia and Singapore, have only indicated interest in a limited DTA on shipping and airline profits. For some others like Germany, the Netherlands and the United Kingdom whose air services agreements with us already include avoidance of double taxation arrangements on airline profits, the negotiations would be confined to shipping profits only. We have been negotiating with these countries on such basis, with the Economic Services Bureau taking the lead. In fact, free-standing DTAs on shipping profits were signed with the Netherlands and the United Kingdom earlier this year.

The response to our invitation for negotiation of a comprehensive DTA from most of our major trading partners, especially those belonging to the Organisation for Economic Co-operation and Development, has not been very enthusiastic. As we understand it, it is mainly because, most of them do not consider it imminently important to have a DTA with Hong Kong, since our low tax rates, as well as our simple, predictable and territorial-based tax regime are considered sufficiently conducive to the mutual flows of investments even without a DTA.

We believe that a comprehensive DTA will provide certainty to investors on their potential tax liabilities and help investors to better assess their cost of doing business. For Hong Kong investors abroad, a DTA can provide some relief from withholding taxes. A DTA will also strengthen our economic ties with the agreement partners. We will therefore continue with our efforts in persuading our trading partners to consider having a DTA with Hong Kong.

End/Wednesday, November 29, 2000