Hong Kong and China have a double tax agreement that governs how taxes are levied on income earned in both countries. This agreement is designed to promote trade and investment between the two territories, while also preventing double taxation.
The double tax agreement was originally signed in 1998 and has since been revised multiple times. The most recent amendments took effect in April 2020, providing greater clarity and simplifying the administration of the agreement.
Under the agreement, Hong Kong residents who earn income in China are subject to Chinese tax, while mainland residents who earn income in Hong Kong are subject to Hong Kong tax. The agreement covers income from employment, business profits, and dividends, among others.
The agreement also includes provisions for tax relief, such as exemptions and reduced tax rates, which are intended to prevent double taxation and promote investment. For example, if a Hong Kong resident earns income from a business in China, they may be able to claim a tax credit in Hong Kong for any taxes paid in China.
In addition, the agreement contains mechanisms for resolving disputes between the tax authorities of Hong Kong and China. This helps prevent conflicts and ensures that taxpayers are treated fairly.
Overall, the Hong Kong-China double tax agreement is an important framework for promoting trade and investment between the two territories while ensuring that taxpayers are not subject to double taxation. The revised agreement provides greater clarity and is expected to further enhance economic ties between Hong Kong and China.