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What is double taxation?
What is double taxation
  • Double taxation arises when two or more tax jurisdictions overlap, such that the same item of income or profit is subject to tax in each.
HK’s special case - because of territorial concept - no need of double tax treaty
  • Hong Kong adopts the territorial basis of taxation, whereby only income / profit sourced in Hong Kong is subject to tax and that derived from a source outside Hong Kong by a local resident is in most cases not taxed in Hong Kong;
  • Therefore, Hong Kong residents generally do not suffer from double taxation;
  • Many countries which tax their residents on a worldwide basis also provide their residents operating businesses in Hong Kong with unilateral tax credit relief for any Hong Kong tax paid on income / profit derived from Hong Kong;
  • We allow a deduction for foreign tax paid on turnover basis in respect of an income which is also subject to tax in Hong Kong. Businesses operating in Hong Kong therefore do not generally have problems with double taxation of income.
Double Tax Agreement (DTA) - provides more certainty
  • Notwithstanding this, the Hong Kong Government recognizes that there are merits in concluding double taxation agreements (DTAs) with our trading partners;
  • A DTA provides certainty to investors on the taxing rights of the contracting parties; helps investors to better assess their potential tax liabilities on economic activities; and provides an added incentive for overseas companies to do business in Hong Kong, and likewise, for Hong Kong companies to do business overseas;
  • Therefore, it has been the policy of the HK Government to establish a DTA network that would minimize exposure of Hong Kong residents and residents of the DTA partner to double taxation.
DTA coverage
  • Can be divided into 3 categories :
    • Airline related income;
    • Shipping related income;
    • General income (other than airline and shipping business);
  • Due to the international nature of transportation operations, airline and shipping operators are more susceptible to double taxation than other taxpayers. Therefore, most DTA is relating to airline and shipping business.
Hong Kong - Double Tax Agreement (DTA) - as at 30/7/2008
  • ( Extracted from IRD website = Country / Territory Analysis )
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    General Income
    Airline Income
    Shipping Income
    Bangladesh
    -
    Available
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    Belgium
    Available
    Available
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    Canada
    -
    Available
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    Croatia
    -
    Available
    -
    Denmark
    -
    Available
    Available
    Estonia
    -
    Available
    -
    Ethiopia
    -
    Available
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    Finland
    -
    Available
    -
    Germany
    -
    Available
    Available
    Iceland
    -
    Available
    -
    Israel
    -
    Available
    -
    Jordan
    -
    Available
    -
    Kenya
    -
    Available
    -
    Korea
    -
    Available
    -
    Kuwait
    -
    Available
    -
    Luxembourg
    Available
    -
    -
    Macao SAR
    -
    Available
    -
    Mainland of China
    Available
    Available
    Available
    Mauritius
    -
    Available
    -
    Mexico
    -
    Available
    -
    Netherlands
    -
    Available
    Available
    New Zealand
    -
    Available
    -
    Norway
    -
    Available
    Available
    Russian Federation
    -
    Available
    -
    Singapore
    -
    Available
    Available
    Sri Lanka
    -
    Available
    Available
    Sweden
    -
    Available
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    Switzerland
    -
    Available
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    Thailand
    Available
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    -
    United Kingdom
    -
    Available
    Available
    USA
    -
    -
    Available