(Source : Information Services Department)
Hong Kong, United Arab Emirates enter into tax pact
The Financial Secretary, Mr John C Tsang, today (December 11) signed in Dubai an agreement on the avoidance of double taxation with the United Arab Emirates (UAE). The UAE Minister of State for Financial Affairs, HE Obaid Humaid Al Tayer, signed on behalf of his Government.
"This is the 32nd comprehensive agreement for the avoidance of double taxation (CDTA) that Hong Kong has signed with its trading partners," Mr Tsang said. Welcoming the agreement, Mr Tsang added that it sets out clearly the allocation of taxing rights between the two jurisdictions and thus will help investors better assess their potential tax liabilities from cross-border economic activities.
"The agreement will bolster the economic and trade connections between the two places, and offer added incentives for companies in the UAE to do business or invest in Hong Kong, and vice versa," Mr Tsang said.
In the absence of a CDTA, income earned by UAE residents in Hong Kong is subject to both Hong Kong and Emirati income tax. Under the agreement, tax paid in Hong Kong will be allowed as a credit against tax payable in the UAE. Furthermore, in the absence of a CDTA, the profits of Hong Kong companies doing business through a permanent establishment in the UAE may be taxed in both places if the income is Hong Kong-sourced. Under the agreement, double taxation will be avoided in that any Emirati tax paid by the companies will be allowed as a credit against the tax payable in Hong Kong in respect of the income, subject to the provisions of the tax laws of Hong Kong.
The Hong Kong-UAE CDTA has incorporated an article on exchange of information, which enables Hong Kong to fulfil its international obligations on enhancing tax transparency and combating tax evasion.
The CDTA will come into force after the completion of ratification procedures on both sides. In the case of Hong Kong, an order is required to be made by the Chief Executive in Council under the Inland Revenue Ordinance. The order is subject to negative vetting by the Legislative Council.
Hong Kong will continue its efforts to expand its network of CDTAs with trading and investment partners.
Details of the Hong Kong-UAE CDTA can be found on the Inland Revenue Department's website (www.ird.gov.hk/eng/pdf/Agreement_United_Arab_Emirates_HongKong.pdf).
Ends/Thursday, December 11, 2014
Issued at HKT 14:57