The UAE signed the final agreement for the avoidance of double taxation on income with Hong Kong on Thursday, during a meeting between businessmen and commercial banks from both parties in Dubai. Hong Kong's Financial Secretary John Tsang stated that, "The agreement will bolster the economic and trade connections between the two places and offer added incentives for companies in the UAE to do business or invest in Hong Kong, and vice versa."
In the absence of a CDTA, income earned by UAE residents in Hong Kong is subject to both Hong Kong and Emirati income tax. Under the agreement, tax paid in Hong Kong will be allowed as a credit against tax payable in the UAE. Furthermore, in the absence of a CDTA, the profits of Hong Kong companies doing business through a permanent establishment in the UAE may be taxed in both places if the income is Hong Kong-sourced. Under the agreement, double taxation will be avoided, so that any Emirati tax paid by the companies will be allowed as a credit against the tax payable in Hong Kong in respect of the income, subject to the provisions of the tax laws of Hong Kong. The Hong Kong-UAE CDTA has incorporated an article on exchange of information, which enables Hong Kong to fulfil its international obligations on enhancing tax transparency and combating tax evasion.
"This is the 32nd CDTA that Hong Kong has signed with its trading partners," Hong Kong's Financial Secretary said, adding that it sets out clearly the allocation of taxing rights between the two jurisdictions and will therefore help investors to better assess their potential tax liabilities from cross-border economic activities.
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