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(Source : Government Information Centre)

HK-Belgium agreement on avoidance of double taxation on income
enters into force


Residents in Hong Kong and Belgium can now claim tax relief or tax savings on their income derived from each other's territory from businesses, employment or investment starting from 2004 as the Agreement for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with respect to Taxes on Income and on Capital entered into force on October 7, 2004.

The Commissioner of Inland Revenue, Mrs Lau Mak Yee-ming, Alice said today (October 21): "The Hong Kong Special Administrative Region (HKSAR) Government and the Belgian Government signed the agreement in December last year. The Order made by the Chief Executive in Council to give effect to the agreement has passed through all necessary legislative procedures.

The HKSAR Government received the notification from the Belgian Government of the completion of the legislative process on its side on October 7, 2004 when the agreement entered into force.

"The agreement will apply in Hong Kong for any year of assessment beginning on or after April 1, 2004 and in Belgium in respect of taxes charged on or after January 1, 2004," Mrs Lau said.

"The agreement seeks to eliminate double taxation instances encountered by Hong Kong and Belgian investors through the allocation of taxing rights and the provision of tax relief. It also formalises the tax relief being offered by the two tax authorities unilaterally at present, thereby providing a further level of certainty and stability to potential investors. In some instances, taxes are reduced. This will bring about tax savings as well as promote the flow of investment between the two places," she continued.

In real terms, Belgian residents doing business in Hong Kong through a permanent establishment situated in Hong Kong will have the relevant Hong Kong income exempted from tax in Belgium. Ship and aircraft operators resident in Hong Kong or Belgium will only be subject to tax in either Hong Kong or Belgium on income they derive from international traffic. Withholding rates of taxes on investment income of dividend and interest, and on royalties income in Belgium will be lowered as provided for under the agreement.

Mrs Lau further explained, "This agreement is the first of its kind. It represents an important milestone in Hong Kong's own programme of comprehensive double taxation agreements. Hong Kong has concluded a double taxation arrangement with the Mainland in 1998 that deals with business income, income from personal services and transportation income. On the international traffic side, which is more susceptible to double taxation, Hong Kong has concluded 18 double taxation avoidance arrangements on airline income, five agreements on shipping income and two agreements on airline and shipping income."

The HKSAR Government is keen to establish a network of double taxation agreements with its major trading and investment partners. Negotiations with other tax administrations for such agreements are under way or being scheduled.

Ends/Thursday, October 21, 2004