On December 18, 2015 the Inland Revenue Department of Hong Kong issued a press release announcing that on December 10, 2015 the Agreement between Hong Kong and the United Arab Emirates for the avoidance of double taxation and prevention of fiscal evasion with respect to taxes on income (Hereafter: the DTA) entered into force.
Based on Article 27, Paragraph 2 of the DTA (“ENTRY INTO FORCE”) this means that he provisions of this Agreement shall thereupon have effect:
(a) in the Hong Kong Special Administrative Region,
in respect of Hong Kong Special Administrative Region tax, for any year of assessment beginning on or after April 1, 2016;
(b) in the United Arab Emirates,
(i) with regard to taxes withheld at source, for amounts paid or credited on or after January 1, 2016; and
(ii) with regard to other taxes, in respect of taxable periods beginning on or after January 1, 2016.
Below we will highlight some of the provisions included in the DTA.
Article 5, Paragraph 3 of the DTA (“PERMANENT ESTABLISHMENT”) arranges that the term "permanent establishment" also encompasses:
(a) a building site, a construction, assembly or installation project or supervisory activities in connection therewith, but only if such site, project or activities last for a period of more than six months;
(b) the furnishing of services, including consultancy services, by an enterprise directly or through employees or other personnel engaged by the enterprise for such purpose, but only if activities of that nature continue (for the same or a connected project) within a Contracting Party for a period or periods aggregating more than 183 days within any twelve-month period;
(c) a drilling rig or working ship used for exploration or exploitation of natural resources which is present or operating for more than 183 days.
Article 10, Paragraph 2 of the DTA (“DIVIDENDS”) maximizes the withholding tax a Source State is allowed to withhold over dividend distributions to 5 per cent of the gross amount of the dividends if the beneficial owner of the dividends is a resident of the other Contracting State. (0% of the gross amount of the dividends if the beneficial owner is the Government or local governments of that other Contracting Party or any of its institutions or other entity wholly-owned directly by the Government or local governments of that other Contracting Party)
Article 11, Paragraph 2 of the DTA (“INTEREST”) maximizes the withholding tax a Source State is allowed to withhold over interest payments to 5% of the gross amount of the interest if the beneficial owner of the interest is a resident of the other Contracting State.
Article 12, Paragraph 2 of the DTA (“ROYALTIES”) maximizes the withholding tax a Source State is allowed to withhold over royalties to 5% of the gross amount of the royalties. if the beneficial owner of the royalties is a resident of the other Contracting State.
Click here to be forwarded to the DTA as available on the website of the Government of Hong Kong, which will open in a new window.
Are you looking for an other DTA? Then check our section DTAs & TIEAs, a very efficient way to locate numerous DTAs.
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