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Will Hong Kong taxpayers face double taxation problems?

Hong Kong’s tax incentives are well-known both at home and abroad, providing a favorable business environment for many business operators. However, do companies still need to pay attention to whether there is a double taxation problem? In fact, the Hong Kong government has always had policies to help Hong Kong taxpayers avoid double taxation.

What is double taxation?

If a taxpayer needs to pay tax in two or more tax jurisdictions of different countries on the same income and profit, double taxation or double taxation may occur due to differences in taxation and legal systems. Phenomenon.

Simply put, a taxpayer may be liable for more than one tax jurisdiction.

Will there be double taxation issues in Hong Kong?

Proprietors operating businesses in Hong Kong will not face double taxation problems. This is because the taxation principle in Hong Kong is based on geographical division, that is, only income and profits from Hong Kong are subject to taxation, and all profits from outside Hong Kong are exempt from taxation.

If residents of other countries come to Hong Kong to do business, and the profits or income earned by them are subject to taxation in Hong Kong, some countries will also tax their residents globally, although tax credits may be provided.

Then, if a certain income is subject to taxation in both Hong Kong and foreign countries, Hong Kong will generally deduct the foreign tax paid as operating expenses when calculating the tax, so there is no need to worry about double taxation.

Comprehensive Double Taxation Agreement

Although Hong Kong merchants will not face double taxation problems, the Hong Kong government said in an online log last year that the formulation of a “Comprehensive Double Taxation. Agreements” (CDTA) with neighboring countries will have Its “rewards” can also help attract foreign investment, reduce tax burdens, reduce the chance of double taxation of Hong Kong and overseas residents, and promote the flow of talent between the two sides.

As of August 2020, Hong Kong has signed similar agreements with a total of 43 tax jurisdictions and economies, including:

Austria, Italy, Pakistan, Belarus, Japan, Portugal, Belgium, Jersey, Qatar, Brunei, South Korea, Romania, Cambodia, Kuwait, Russia, Canada, Latvia, Saudi Arabia, Czech Republic, Liechtenstein, South Africa, Estonia, Luxembourg, Spain, Finland, Macau SAR, Switzerland, France, Mainland China, Thailand, Guernsey, Malaysia, United Arab Emirates, Hungary, Malta, United Kingdom, India, Mexico, Vietnam, Indonesia, Netherlands, Ireland, New Zealand, India, Mexico, Vietnam, Indonesia, Netherlands, Ireland, and New Zealand.

The Hong Kong government is currently negotiating the agreement, including Germany, Norway, Cambodia, and Cyprus.

The above information is for reference only. If you have any questions about dual classes or taxation, we welcome your inquiries.

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