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Hong Kong And Belgium Sign Comprehensive Double Tax Treaty

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

11 December 2003


The governments of Hong Kong and Belgium yesterday signed a double taxation and prevention of fiscal evasion treaty marking the first comprehensive double taxation agreement concluded by the government of the Special Administrative Region.

Signing the agreement on behalf of the Hong Kong administration, the Secretary for Financial Services and the Treasury Frederick Ma noted that the treaty “ensures that investors will not have to pay tax twice on a single source of income.”

"In simple terms, the Agreement will translate into tax savings to Belgian and Hong Kong investors doing business in each other's areas, through the allocation of taxing rights between the two places and the provision of tax relief in case of double taxation," added Mr Ma.

Currently, royalties received by a Hong Kong resident from a Belgian source not attributable to a permanent establishment in Belgium are subject to a Belgian withholding tax at 15% on the gross amount of royalties less a 15% fixed deduction. Under the Agreement, the Belgian withholding tax will be reduced to 5% of the gross amount of royalties (without the 15% fixed deduction).

In the case of interest received by a Hong Kong resident that arises in Belgium and which is not attributable to a permanent establishment in Belgium, the Belgian withholding tax will be reduced from the current 15% of the gross amount of interest to 10% under the Agreement.

Profits from international shipping transport earned by Hong Kong residents that arise in Belgium which are currently subject to income tax in Belgium will also enjoy exemption under the Agreement.

"The Agreement also formalises the tax relief being offered by the two tax authorities at present, thus providing a further level of certainty and stability to existing and potential investors alike," Mr Ma said.

The government of the SAR is hoping the Belgian treaty will represent the first of a network of similar agreements it wants to conclude in the future.

"Many places in the region have already established a network of CDTAs. Having such a network in place for Hong Kong will put us on a par with other places in the region that already have one, thereby further enhancing our competitiveness in attracting foreign investment," Mr Ma explained.

At present, Hong Kong has a total of 18 DTAs on airline income, five agreements on shipping income and one agreement on airline and shipping income.


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