This document contains the following information: agreements between the United Kingdom and Hong Kong to avoid double taxation. “The conclusion of a comprehensive double taxation agreement with the continent, as well as the closer economic partnership agreement on the mainland and in Hong Kong, will further encourage international investors to enter the continental market via Hong Kong. In addition, cross-border financing agreements and the transfer of technical know-how and patents between the two sites will be improved. These will help stimulate Hong Kong`s economy, strengthen our competitiveness and attract foreign capital. The agreement to avoid double taxation of income and the prevention of tax evasion broadens the scope of the original agreement on the benefits and income of human services, which both parties signed in 1998. Governments have recognized that this would be unfair and discourage international trade/business. As a result, they each put in place their own rules to prevent the same income from being taxed twice. In some cases, the amount of tax paid in one country can be deducted from what is due in another country. These agreements or contracts are called Double Tax Agreements (DBA) and should be integrated into your tax planning system. In addition, there is a double taxation agreement between Hong Kong and Saudi Arabia, which is currently pending.
There is also a Memorandum of Understanding with China that says income tax can be a problem for international workers and individuals who may reside in more than one country. In countries where global taxation is applied, a non-resident national working abroad could be taxed on his or her income in his or her country of origin and in the country where he or she is earned. Hong Kong and the United Kingdom use the credit method to avoid double taxation. Dividends received by a UK-based company from a Hong Kong-based company are exempt from tax only to the extent that the exemption conditions under UK law are met.