Dividend payments are made as a means of distributing profits from a company to its shareholders. In most cases, dividends in Hong Kong are paid in cash distributions and the frequency of the payments can be established to be a monthly, a quarterly or a yearly one.
This guide to dividends in Hong Kong highlights the main issues to be taken into consideration by investors, as presented by our team of lawyers in Hong Kong.
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The treatment of dividends in Hong Kong
Hong Kong has an attractive free market policy, meaning that the Special Administrative Region does not control the remittance or conversion of dividends derived from direct investments made in the city.
Hong Kong has signed a number of double tax treaties, allowing for preferential withholding tax rates on dividends for selected countries, in case one of these treaties is in force. This applies to companies that have a permanent establishment in Hong Kong and the other jurisdiction and the dividend payment is made between qualifying companies.
One of our attorneys in Hong Kong can help you with detailed information about the manner in which the double tax treaties apply and how you can benefit from these as a foreign investor in the city.
No withholding tax on dividends in Hong Kong
Hong Kong does not impose a withholding tax on dividends, however, there are several other taxes for businesses, including the corporate income tax and the stamp duty.
Companies in Hong Kong that distribute dividends to their shareholders should follow a cash entitlement announcement protocol, meaning that the shareholders should be informed on the manner in which the dividend payment will be made. This includes the currency of the dividend payment and how the currency conversion may be performed if needed. The shareholders should also be informed on the taxation of dividends, specifically the withholding tax and its value in relation to an applicable tax treaty.
Contact our Hong Kong lawyers for more detailed information about the double tax treaties and the taxation laws applicable to companies and individuals.