Double Taxation Agreement Between Hong Kong and UK: All You Need to Know
The double taxation agreement between Hong Kong and the UK is an important agreement that has been signed to promote economic relations between the two countries. The agreement aims to eliminate double taxation for individuals and companies who have income and investments in both Hong Kong and the UK.
What is Double Taxation?
Double taxation refers to the situation where a taxpayer is required to pay tax on the same income or gains twice, in two different jurisdictions. This can happen when two countries have different tax laws that apply to the same income or assets, resulting in a taxpayer being taxed twice on the same income.
Double taxation can create a significant burden on taxpayers, reducing their income and discouraging investment. This is where double taxation agreements come into play, aiming to provide taxpayers with relief from double taxation.
What is the Double Taxation Agreement (DTA) between Hong Kong and the UK?
The double taxation agreement between Hong Kong and the UK was signed on 21 June 2018, and it came into force on 20 December 2019. The DTA is designed to provide relief from double taxation for individuals and companies who have income or investments in both Hong Kong and the UK.
The agreement covers all types of taxes, including income tax, corporation tax, capital gains tax and stamp duty. It also covers inheritance tax in the UK and estate duty in Hong Kong.
How does the DTA work?
The DTA works by providing taxpayers with relief from double taxation in two main ways:
1. Elimination of double taxation: The DTA ensures that taxpayers who have income or investments in both Hong Kong and the UK do not pay tax twice on the same income. Taxpayers are entitled to claim relief from double taxation under the DTA by submitting a claim to the relevant tax authority.
2. Prevention of tax evasion: The DTA also includes provisions that prevent taxpayers from avoiding or evading tax by shifting income or assets between Hong Kong and the UK.
Who is covered by the DTA?
The DTA applies to individuals and companies who are resident in either Hong Kong or the UK. The agreement also covers dividends, interest, royalties, and other income arising in Hong Kong or the UK.
What are the benefits of the DTA?
The DTA provides several benefits for taxpayers, including:
1. Elimination of double taxation: Taxpayers can avoid paying tax twice on the same income, thereby reducing their tax burden.
2. Increased trade and investment: The DTA promotes economic relations between Hong Kong and the UK by encouraging trade and investment.
3. Increased certainty: The DTA provides taxpayers with certainty and clarity on their tax obligations, reducing the risk of disputes with tax authorities.
In conclusion, the double taxation agreement between Hong Kong and the UK is an important agreement that aims to promote economic relations between the two countries. The agreement provides relief from double taxation for individuals and companies who have income or investments in both Hong Kong and the UK, thereby reducing their tax burden and promoting trade and investment.
