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Hong Kong, Malta DTA Enters Into Force

by Mary Swire,, Hong Kong

31 July 2012

It has been announced that the double taxation agreement (DTA) between Hong Kong and Malta entered into force on July 18, 2012, after completion of ratification procedures on both sides.

The DTA was signed on November 8 last year, and sets out the allocation of taxing rights between the two jurisdictions and the tax relief on different types of passive income, which, it is hoped, will help investors to better assess their potential tax liabilities from cross-border economic activities.

In the absence of the DTA, for example, income earned by Malta residents in Hong Kong was subject to both Hong Kong and Malta income tax. Profits of Malta companies doing business through a branch in Hong Kong were fully taxed in both places. Under the agreement, however, tax paid in Hong Kong will now be allowed as a credit against tax payable in Malta.

In addition, under the DTA, Hong Kong airlines operating flights to Malta will now be taxed at Hong Kong's corporation tax rate (which is lower than that of Malta). Profits from international shipping transport earned by Hong Kong residents that arise in Malta, which are currently subject to tax there, will not be taxed in Malta under the agreement.

The agreement also incorporates the latest Organization for Economic Co-operation and Development standard on exchange of information relating to tax matters.

The provisions of the DTA will have effect in Hong Kong for any year of assessment beginning on or after April 1, 2013.

TAGS: compliance | tax | business | tax information exchange agreement (TIEA) | double tax agreement (DTA) | tax compliance | Malta | aviation | corporation tax | offshore | agreements | Hong Kong

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