Table of Contents
A comprehensive double tax agreement
Hong Kong and Russia have signed a comprehensive double tax avoidance agreement at the beginning of the year. This is the 34th double tax treaty (DTA) signed by Hong Kong and it offers important tax advantages to foreign investors who derive income from both jurisdictions.
The provisions of the new comprehensive double tax agreement will ease the economic and business relationship between Russia and Hong Kong and will facilitate trade. The representatives at our law firm in Hong Kong can give you detailed information about how this treaty can influence your business if you are a Russian foreign investor.
The provisions of the Hong Kong – Russia DTA
The provisions of the Hong Kong – Russia double tax treaty apply to individuals or legal entities that are residents of one or both jurisdictions. A company incorporated in Hong Kong is automatically a resident company. Otherwise, a company can be considered a resident Hong Kong legal entity if it is managed or controlled from the city.
Business profits produced by a Hong Kong resident company in Russia are not liable to tax in the Russian Federation; the only case where they are subject to tax is if the said Hong Kong company has a permanent establishment in Russia. If the latter is the case, the Hong Kong company will only be taxed on the profits made in the Russian Federation.
The taxes covered by the Hong Kong – Russia agreement
The double tax treaty offers preferential rates for the withholding taxes on dividends, interest, royalties and capital gains. The normal withholding rate for dividends was 15% but under the treaty is can be 0%, 5% or 10%. The withholding tax rate of interest according to the DTA is 0% and for royalties is 3%.
The 0% withholding tax rate for dividends applies to those dividend payments made to the Hong Kong Government, the Hong Kong Monetary Authority or the Exchange Fund. The 5% rate applies if the company receiving the dividends holds at least 15% of the company making the dividend payment. Our lawyers in Hong Kong can help you with detailed explanations regarding the cases in which the reduced treaty rates apply.
For more information about tax exemptions in Hong Kong and a list of the existing double tax treaties, you may contact our law firm in Hong Kong.