Russia - Hong Kong Double Taxation Agreement Came into Force
The Comprehensive Double Taxation Agreement («CDTA») between Russia and Hong Kong came into force from 1 January 2017 with regard to Russian taxes and is applicable with regard to Hong Kong taxes for the year of assessment 2017/2018.
The CDTA was signed on 18 January 2016 and aims for the avoidance the double taxation between Russia and Hong Kong and to raise the attractiveness for Russian companies to make investments in and to do business in Hong Kong and vice versa.
Under the CDTA, Russian tax paid by the companies will be allowed as a credit against the tax payable in Hong Kong. While income received in and tax paid in Hong Kong will be admitted as a credit against the tax payable on the same income in Russia.
The CDTA defines the terms «resident» and «permanent establishment» and taxes to which the Agreement shall apply.
The scope of taxes covered by agreement:
1. In the Hong Kong Special Administrative Region:
- Profits tax
- Salaries tax
- Property tax
2. In Russia
- The tax on profits of organizations;
- The tax on income of individuals
Essential features set by agreement:
- Dividends withholding tax rate is lowered to 10%. And to 5% in case when the beneficial owner of the dividends is a company which directly holds at least 15% of the capital of the company paying dividends.
- Withholding tax rate on royalties is lowered to 3%.
- Withholding tax rate on interest is 0%.
- Tax on capital gains is 0%, with the exception that the rate is 20% in cases:
- the gains are derived from alienation of immovable property;
- the gains are derived from alienation of shares of a company deriving more than 50 percent of its asset value directly or indirectly from immovable property. The exceptions of the rule applies in case of companies listed on the Stock Exchange
Moreover, the agreement provides for the exchange of information between the Hong Kong and Russian tax authorities in relation to taxes covered by the CDTA. Any information exchanged can’t be disclosed to any third party unless to persons or authorities concerned with the assessment or collection of, the enforcement or prosecution in respect of or determination of appeals.
For further information, please contact Alina at alinam@zetland.biz.
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