India And Hong Kong Sign Limited Taxation Treaty

by Mary Swire, Tax-News.com, Hong Kong

14 July 2003

According to recent reports, Hong Kong and India will soon sign a limited double taxation treaty which will exempt shipping companies and airlines from having to pay income tax in both countries.

India has similar limited double taxation agreements in place with ten other nations. Nevertheless, doubts have been raised by some observers as to the benefit that the Indian government will derive from this particular treaty. This is due to the fact that Air India and Indian shipping companies are not as profitable as their counterparts from Hong Kong, meaning that the tax revenue transferred back to Delhi may be negligible.

However, according to the Indian Business Standard, government insiders have revealed that Air India is expected to become a profitable concern in the near future, which may have been a factor in the administration's decision to press ahead with the treaty.

In addition to the ten limited arrangements that India has signed with smaller trading nations, the country has negotiated 65 full double taxation treaties.

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