By using our website you consent to all cookies in accordance with our Privacy Policy.

double taxation agreements in hong kong

1. Double Taxation Agreements in Hong Kong

Double taxation agreements in Hong Kong would be one of the most concerned if you are running business overseas and do expect the avoidance of taxes across country borders.

Not only does Hong Kong offer people a high standard of living to be tailor-made for its fast-changing economy, but also you can gain a wide range of merits from its business-friendly tax regime, including taxation relief policy – which is the key pull factor for most investors and entrepreneurs.

The below article will cast light upon key features of double taxation relief for Hong Kong businesses.

1.1. What is double taxation?

The case in which the taxpayer is levied twice on the same profit/income item by two or more tax jurisdictions is termed double taxation.

For residents in Hong Kong which follows a territorial tax system, they do not suffer burdens of double taxation. Only income derived from Hong Kong is in charge of taxes while that of a source outside Hong Kong by local residents is not liable to taxes. That is the reason why incorporated businesses in Hong Kong are commonly not subject to double taxation of income. Some other countries, on the other hand, can require their residents on a worldwide basis to pay taxes.

It is also noteworthy that this jurisdiction offers foreign entrepreneurs favorable conditions to expand their business through the provisions of Hong Kong tax treaty, which helps to eliminate the tax obstacles in terms of cross-border investments as well as creates an ease for the sake of offshore sourced businesses in Hong Kong.

You are also advised to know about forms of relief from being taxed twice either on a unilateral basis under their domestic tax laws or on a bilateral basis under the double taxation agreements (DTAs) that Hong Kong concluded. In what follows, we will focus on the latter – Double taxation agreements (DTAs).

1.2. Double Taxation Agreements (DTAs)

1.2.1. What is DTA?

Double Tax Agreement (DTA), also referred to as tax treaties, is a bilateral (two-party) agreement made by two countries to avoid the double taxation of income and property. DTAs play a role as a powerful tool to restrain double taxation and fiscal evasion and strengthen relationships between Hong Kong and other international tax administrations. Please be noted that DTAs will only have the effect on you in case you are Hong Kong’s residents or the other DTA jurisdiction.

1.2.2. Benefits of DTAs

According to the Hong Kong Special Administrative Region Government (HKSARG), double taxation agreements (DTAs) brings a wide range of advantages:

  • Bring certainty to taxpayers on the taxing rights of the contracting parties;
  • Helps taxpayers to well perceive their potential tax liabilities in the other country;
  • Prevent double taxation deriving from the overlap of tax jurisdictions;
  • Eliminate the tax avoidance and evasion in respect to different forms of income flows between Hong Kong and the DTA partners;
  • Identify the tax rules/jurisdictional authority that will apply to transaction trade;
  • Offer added incentive for overseas businesses in Hong Kong and for Hong Kong companies to conduct business in other jurisdictions;

1.2.3. Countries and types of DTA that Hong Kong has concluded

Hong Kong has entered into Comprehensive Double Taxation Agreements (DTAs) with more than 40 jurisdictions. For detailed list of DTAs, you can click HERE.

Exclusive of Comprehensive DTAs, Hong Kong has also actively engaged the trading partners in negotiating DTAs, which include various types of income. Noticeably, airline income and shipping income are two aspects of concern that deserve its priority in addressing double taxation given its openness to this matter and long awaiting time of comprehensive DTA to be concluded. Both are listed as in the category of Limited Double Taxation Agreements.

Aircraft operations bear the international nature, and this results in its people – airline operators being likely to be easily influenced by double taxation in comparison with other taxpayers. Hong Kong, to minimize the susceptibility in such cases, has offered a policy on double taxation relief arrangements for airline income in the bilateral Air Services Agreements with the aviation partners.

Another income type that may draw your attention is shipping income. An amendment of reciprocal tax exemption since 1 April 1998 for shipping income has been made by this jurisdiction to benefit ship operators. Accordingly, ship operators are not subject to taxes provided by places with similar reciprocal tax exemption legislation. Hong Kong has also engaged negotiations of the double tax relief arrangement with other legislation in which reciprocal taxes exemption are not in place.

2. Double taxation relief methods in Hong Kong

A glance at double taxation relief methods as below will help you to get insights in Hong Kong taxation policy.

Four popular methods of relieving double taxation include:

  • Tax exemption: Foreign sourced income is not subject to the domestic tax, but whether it is applied for the whole or just a part of foreign income depends on specific cases.
  • Foreign tax credit: The tax paid in the jurisdiction where the income arises is deducted from tax payable on the same income in the jurisdiction where the income is received.
  • Tax deduction: Hong Kong allows domestic tax to be applied on the foreign income after a deduction for foreign tax on turnover basis.
  • Reduced tax rate: This allows income to be taxed at a lower rate and more often than not, is applicable to interest, dividends and royalties. You can find a summary of cap on tax rate chargeable to Hong Kong residents for payments of interest, dividends, royalties and technical service fees HERE

In the light of these facts, among various reasons Hong Kong appears as a top of choice with vantage ground for both expatriates and for corporations is its great system of taxation. The key benefit of minimizing a large tax burden makes double taxation agreements in Hong Kong, among others, being worth taking into your consideration when choosing the best place for business operations.

Should you have any questions to start business in Hong Kong, do not hesitate to contact us by dropping a chat message or sending an email via!

Recent Posts

30 Sep 2020

Offshore company for Indian citizens: What things to consider

If the place of effective management of your offshore company is in India, then your company shall be taxed in India. Check out this article to know what an Indian should consider before moving offshore!

Read more
29 Sep 2020

A Glance at RAK International Company

Ever wondered about the popular RAK IC (RAK International Company) and its ideal business structure for an offshore company? Find out with BBCIncorp now!

Read more
30 Sep 2020

Vietnam Accounting Standards

Keynotes and in-depth details on Vietnam accounting standards that all foreign investors should know of. Keep yourself posted with the latest VAS before investing!

Read more
30 Sep 2020

Hong Kong Business Trends After Mid-2020: New Updates [Infographic]

Check it out! Below infographic helps you to capture Hong Kong situations and update top five business trends to be worth expected in a post Covid-19 outbreak

Read more
16 Sep 2020

3 Reasons why Hong Kong banks may reject your application

Nationality, business activities or supporting documents can be reasons why Hong Kong banks may reject your application for opening a bank account. Learn more with Lyli, Relationship Manager from BBCIncorp!

Read more
14 Sep 2020

Get to know Vietnam tax credit and incentives

Get hold of tax incentives in Vietnam and what you’re up to if you decide to invest in it. No exaggeration to say Vietnam is an investment paradise for foreigners.

Read more
14 Sep 2020

Understanding Vietnam Tax System

A brief overview of the Vietnam Tax System that all foreigners should take into consideration. These taxes can heavily affect the way you do business in Vietnam.

Read more
8 Sep 2020

Hints To BVI Beneficial Ownership Legislation (BOSS Act)

BVI Beneficial Ownership Secure Search System Act (BOSS Act) underpins reporting regime regarding the beneficial owner of corporate and legal entities with legal personality in the BVI.

Read more
28 Sep 2020

Top 5 best banks in Hong Kong that you must know in 2020

Which is the best bank in Hong Kong for expats? Let BBCIncorp help you find out the answer with top 5 banks: DBS, HSBC, Bank of China, Standard Chartered and Citibank.

Read more
30 Sep 2020

2020 Update: A Guide to BVI Economic Substance Requirements

The British Virgin Island (BVI) adopted Economic Substance Act 2018, which came into force from 1 January 2019. Let’s explore all about BVI economic substance requirements with BBCIncorp!

Read more
28 Aug 2020

A General Guide to Winding Up of Hong Kong Companies

A Hong Kong company may be wound up by either voluntary or compulsory winding up by the court. Below guide clarifies the procedure for winding up a company through these two types!

Read more
7 Sep 2020

Hong Kong Company Annual Compliance Requirements

Learn more about annual compliance and filing requirement of a Hong Kong private limited company.

Read more