The Inland Revenue Department signed comprehensive double taxation agreements with Hungary and Kuwait on May 13, 2010. This takes to 10 the number of comprehensive double taxation agreements that Hong Kong has signed. With agreements having been reached with a number of other countries, including Austria, France, Ireland, Japan, Switzerland and Liechtenstein, Hong Kong has clearly demonstrated its willingness to meet the OECD’s requirements for tax transparency. Attached is a brief summary of the rates of withholding tax applicable to dividends, interest and royalties under the appropriate treaties. However, it should be noted that Hong Kong does not levy any withholding tax on dividends and interest, and levies only a “notional” withholding tax of 4.95% on royalties paid by a Hong Kong company to a non-resident (16.5% on a notional profit ratio of 30% of the royalty paid).
Withholding Tax Rates Under Hong Kong Treaties
|
Country
|
Dividends
|
Royalties
|
Interest
|
| Belgium |
5-15%(1)
|
5%
|
10%
|
| Brunei Darussalam |
Nil
|
5%
|
5-10%(2)
|
| Hungary |
5 – 10%(10)
|
5%
|
5%
|
| Indonesia |
5-10%(3)
|
5%
|
10%
|
| Kuwait |
0-5%(11)
|
5%
|
5%
|
| Luxembourg |
0-10%(4)
|
3%
|
Nil
|
| Mainland China |
5-10%(5)
|
7%
|
7%
|
| The Netherlands |
0-10%(6)
|
3%
|
Nil
|
| Thailand |
10%
|
5-10%(8)
|
10-15%(7)
|
| Vietnam |
10%
|
7-10%(9)
|
10%
|
| Explanatory notes | |
| Note (1) | 5% if the beneficial owner is a company that directly holds at least 10% of the capital of the company paying the dividends. In all other cases, 15%. |
| Note (2) | 5% if the recipient is a bank or financial institution. In all other cases, 10%. |
| Note (3) | 5% if the beneficial owner is a company directly owning at least 25% of the capital of the company paying the dividend. In all other cases, 10%. |
| Note (4) | 0% if the beneficial owner is a company directly owning at least 10% of the capital of the company paying the dividends or a participation with an acquisition cost of at least EUR1.2 million in the company paying the dividends. In all other cases, 10%. |
| Note (5) | 5% if the beneficial owner is a company that directly holds at least 25% of the capital of the company paying the dividends. In all other cases, 10% |
| Note (6) | 0% if the beneficial owner is a company directly owning at least 10% of the capital of the company paying the dividends, provided that:
In all other cases, 10%. |
| Note (7) | 10% if the recipient is a financial institution or insurance company, or in respect to arm’s-length transactions concerning the sale of equipment, merchandise or services. In all other cases, 15%. |
| Note (8) | 5% if for the use of or the right to use, any copyright of literary, artistic or scientific work. 10% if for the use of, or the right to use, any patent, trademark, design or model, plan, secret formula or process, and 15% in all other cases. |
| Note (9) | 7% if for the use of, or the right to use, any patent, design or model, plan, secret formula or process. In all other cases, 10%. |
| Note (10) | 5% if the beneficial owner is a company directly owning at least 10% of the capital of the company paying the dividends. In all other cases 10%. |
| Note (11) | 0% if the beneficial owner is the government, 5% in all other cases. |
