Hong Kong’s Secretary for Financial Services & the Treasury, Professor KC Chan, and Portuguese Consul-General, Manuel Carvalho, signed a double taxation agreement (DTA) between their two jurisdictions in Hong Kong on March 22.
The DTA determines the allocation of taxing rights between Hong Kong and Portugal and the relief on tax rates on different types of passive income. It is designed to help investors better assess their potential tax liabilities from cross-border economic activities, foster closer economic and trade links between the two countries, and provide added incentives for companies from one country to do business or invest in the other.
Under the agreement, the withholding tax rate on dividends received from Portugal is cut to 10%, and will be further reduced to 5% if the beneficial owner of the dividends is a company (other than a partnership) holding directly at least 10% of the capital of the company paying the dividends.
In addition, the Portuguese withholding tax on interest will be capped at 10% and the Portuguese withholding tax on royalties will be capped at 5%.
Hong Kong airlines operating flights to Portugal will be taxed at Hong Kong's corporation tax rate, which is lower than that of Portugal; and profits from international shipping transport earned by Hong Kong residents that arise in Portugal, which are currently subject to tax there, will not be taxed.
The agreement, which also incorporates the internationally-agreed Organization for Economic Co-operation and Development standard on the exchange of tax information, will come into force after the completion of ratification procedures on both sides.
This is the 19th comprehensive DTA concluded by Hong Kong with its trading partners. In addition, Hong Kong has also reached 27 DTAs solely on airline income, six such agreements on shipping income and two agreements on airline and shipping income combined, with other trading partners.
The DTA determines the allocation of taxing rights between Hong Kong and Portugal and the relief on tax rates on different types of passive income. It is designed to help investors better assess their potential tax liabilities from cross-border economic activities, foster closer economic and trade links between the two countries, and provide added incentives for companies from one country to do business or invest in the other.
Under the agreement, the withholding tax rate on dividends received from Portugal is cut to 10%, and will be further reduced to 5% if the beneficial owner of the dividends is a company (other than a partnership) holding directly at least 10% of the capital of the company paying the dividends.
In addition, the Portuguese withholding tax on interest will be capped at 10% and the Portuguese withholding tax on royalties will be capped at 5%.
Hong Kong airlines operating flights to Portugal will be taxed at Hong Kong's corporation tax rate, which is lower than that of Portugal; and profits from international shipping transport earned by Hong Kong residents that arise in Portugal, which are currently subject to tax there, will not be taxed.
The agreement, which also incorporates the internationally-agreed Organization for Economic Co-operation and Development standard on the exchange of tax information, will come into force after the completion of ratification procedures on both sides.
This is the 19th comprehensive DTA concluded by Hong Kong with its trading partners. In addition, Hong Kong has also reached 27 DTAs solely on airline income, six such agreements on shipping income and two agreements on airline and shipping income combined, with other trading partners.
