On August 12, Hong Kong signed its 14th comprehensive agreement for the avoidance of double taxation (DTA), incorporating the latest Organisation for Economic Cooperation and Development standard on exchange of information for tax purposes.
The Special Representative for Hong Kong Economic and Trade Affairs to the European Union, Mary Chow, signed the agreement on behalf of Hong Kong, while the Liechtenstein Prime Minister, Klaus Tschutscher, signed on behalf of his government.
The DTA sets out clearly the allocation of taxing rights between the jurisdictions, and the relief on tax rates on different types of passive income and capital gains. As such, it currently applies to Hong Kong’s profits, salaries and property taxes, and, for Liechtenstein, the personal and corporate income, corporation, real estate capital gains, wealth and coupon taxes.
Hong Kong or Liechtenstein residents receiving dividends, interest or royalties, or earning capital gains, from the other country will be subject to tax only in their resident jurisdiction. Similarly, under the DTA, Hong Kong or Liechtenstein airlines operating international flights, or international shipping businesses, will also only be taxed in their resident country.
The DTA will come into force after the completion of ratification procedures on both sides. In the case of Hong Kong, an order to be made by the Chief Executive in Council under the Inland Revenue Ordinance is required. The order is subject to negative vetting by the Legislative Council.
A comprehensive report in our Intelligence Report series, examining in depth the situation of offshore transparency and secrecy in a number of the most prominent jurisdictions, is available in the Lowtax Library at http://www.lowtaxlibrary.com/asp/subs_reports.asp and a description of the report can be seen at http://www.lowtaxlibrary.com/asp/description_report2.aspTags: tax | law | agreements | aviation | legislation | double tax agreement (DTA) | capital gains tax (CGT) | Hong Kong | Liechtenstein | property tax | dividends | interest | royalties | Hong Kong | Liechtenstein
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