(December 11, 2014)
On December 11, 2014 the Inland Revenue Department of The Government of the Hong Kong Special Administrative Region issued a press release announcing that on December 11, 2014 the Governments of the Hong Kong Special Administrative Region of the People’s Republic of China and the United Arab Emirates signed an Agreement for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with respect to Taxes on Income.
The DTA will come into force after the completion of ratification procedures on both sides.
The existing taxes to which this Agreement shall apply are:
a) in the case of the Hong Kong Special Administrative Region,
i. profits tax;
ii. salaries tax; and
iii. property tax;
whether or not charged under personal assessment;
b) in the case of the United Arab Emirates,
i. income tax; and
ii. corporate tax.
The DTA limits the dividend withholding taxes to be withheld by the Source State to a maximum zero per cent of the gross amount of the dividends if the beneficial owner is the Government or local governments of the other State or any of its institutions or other entity wholly-owned directly by the Government or local governments of that other State and to five per cent of the gross amount of the dividends in all other cases.
The DTA limits the interest withholding taxes to be withheld by the Source State to a maximum of five per cent of the gross amount of the interest if the beneficial owner of the interest is a resident of the other State. Special regulations apply regarding interest payments made to certain Governmental organizations (See Article 11 of the Agreement).
The DTA limits the royalty withholding taxes to be withheld by the Source State to a maximum of five per cent of the gross amount of the royalties if the beneficial owner of the royalties is a resident of the other State.
The Article on Capital Gains (Article 13) reads as follows:
- Gains derived by a resident of a Contracting Party from the alienation of immovable property referred to in Article 6 and situated in the other Contracting Party may be taxed in that other Party.
- Gains from the alienation of movable property forming part of the business property of a permanent establishment which an enterprise of a Contracting Party has in the other Contracting Party, including such gains from the alienation of such a permanent establishment (alone or with the whole enterprise), may be taxed in that other Party.
- Gains derived by an enterprise of a Contracting Party from the alienation of ships or aircraft operated in international traffic or movable property pertaining to the operation of such ships or aircraft shall be taxable only in that Party.
- Gains derived by a resident of a Contracting Party from the alienation of shares of a company deriving more than 50 per cent of its asset value directly or indirectly from immovable property situated in the other Contracting Party may be taxed in that other Party. However, this paragraph does not apply to gains derived from the alienation of shares:
a) quoted on such stock exchange as may be agreed between the Parties; or
b) alienated or exchanged in the framework of a reorganisation of a company, a merger, a scission or a similar operation; or
c) in a company deriving more than 50 per cent of its asset value from immovable property in which it carries on its business.
- Gains from the alienation of any property, other than that referred to in paragraphs 1, 2, 3 and 4 shall be taxable only in the Contracting Party of which the alienator is a resident.
For further information click here to be forwarded to the text of the Agreement between the Government of the Hong Kong Special Administrative Region of the People’s Republic of China and the Government of the United Arab Emirates for the avoidance of Double Taxation and the Prevention of Fiscal Evasion with respect to Taxes on Income.
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