Foreign and Military Affairs
HK, Brunei sign pact to avoid double taxation
(Xinhua)
Updated: 2010-03-20 20:23
 |
Large Medium Small |
HONG KONG - Hong Kong signed an agreement with Brunei for the avoidance of double taxation and the prevention of fiscal evasion with respect to income taxes, the HK Special Administrative Region government said on Saturday.
According to an official news release, Financial Secretary John Tsang signed the deal with Brunei Second Minister of Finance Abdul Rahman Ibrahim on Saturday during his visit to the southeast Asian country.
It will eliminate double taxation instances encountered by Hong Kong and Bruneian investors, and bring about tax savings and certainty in tax liabilities in connection with cross-border economic activities.
It is also believed to help foster closer economic and trade links between the two places, and provide added incentives for Brunei's enterprises to do business or invest in Hong Kong.
Profits of Hong Kong trading companies doing business through a permanent establishment in Brunei may be taxed in both places if the income is Hong Kong sourced. Under the agreement, double taxation is avoided in that any Brunei tax paid by the companies can be deducted from the tax payable in Hong Kong.
Hong Kong residents receiving interests from Brunei are subject to a withholding tax, which is currently at 15 percent. Under the agreement, this will be reduced to 10 percent. If the recipient is a bank or financial institution, the withholding tax rate will be further reduced to 5 percent. Brunei has agreed to lower the withholding tax on royalties received by Hong Kong residents from Brunei from the current rate of 10 percent to 5 percent.
Both sides agreed to allow Hong Kong airlines operating flights to Brunei to be taxed at Hong Kong's corporation tax rate, which is lower than Brunei's. Profits from international shipping transport earned by Hong Kong residents arising in Brunei, which are currently subject to tax there, will enjoy tax exemption under the agreement.
The news released said Hong Kong would sign similar agreements with the Netherlands and Indonesia in the following days.
