Speaking at the reception organised on Thursday by the HKTDC (Hong Kong Trade Development Council with the support of the Hong Kong Economic and Trade Office, the Deputy Representative for Hong Kong Economic and Trade Affairs to the European Communities, Ms Wong Yuet-wah, quoted the effective corporate taxation study by the Basel Economics Institute, which recently ranked Hong Kong as the most attractive place in the world for companies from the point of view of taxation.

"Hong Kong's tax provisions have just been made particularly attractive for Luxembourg companies with the signing of an Avoidance of Double Taxation Agreement between Hong Kong and Luxembourg last November," she suggested.

Under the agreement, Luxembourg nationals residing in Hong Kong will no longer be subject to taxes in both places once the agreement enters into force in April. The same applies to profits earned by Luxembourg companies established in Hong Kong.

Hong Kong residents receiving dividends from Luxembourg, where the agreement entered into force on January 1st, will see the Luxembourg withholding tax rate reduced from 20% to 10%. The withholding tax for companies will also be reduced, in some cases to nil. The agreement also covers profits derived from international shipping transport.

Ms Wong underlined that the HKSAR and the Grand Duchy of Luxembourg have much in common. Although small in size, they have succeeded in becoming two of the freest, most vibrant global economies and financial centres.

The two places enjoy excellent relations. There have been a number of high-level exchanges in recent years, with the visit of the then Chief Secretary for Administration Donald Tsang to Luxembourg in 2001, and more recently, the visit of Luxembourg's Minister of the Economy and Foreign Trade, Jeannot Krecke, to Hong Kong last November.

In addition to the Avoidance of Double Taxation Agreement, Hong Kong and Luxembourg have signed a number of mutually beneficial co-operation agreements, on customs, air services and investment protection and promotion.

The reception was one of a series of Chinese New Year events hosted or supported by the Brussels-based Hong Kong Economic and Trade Office - which covers 17 countries - around Europe over the last three weeks.