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HK, Russia sign tax plan

January 18, 2016
Tax pact

Tax pact:  Secretary for Financial Services & the Treasury Prof KC Chan (second right) exchanges documents with Russia's State Secretary and Deputy Minister of Finance Yuriy Zubarev after signing the tax agreement, witnessed by Financial Secretary John Tsang (right) and Russian Deputy Prime Minister Arkady Dvorkovich.

Secretary for Financial Services & the Treasury Prof KC Chan has signed a comprehensive agreement for the avoidance of double taxation (CDTA) with Russia, signifying the Government's ongoing efforts to expand its CDTA network, particularly with Belt & Road economies.

 

He signed the deal today with Russia's State Secretary and Deputy Minister of Finance Yuriy Zubarev. Financial Secretary John Tsang and Russian Deputy Prime Minister Arkady Dvorkovich witnessed the signing.

 

It is the 34th CDTA Hong Kong has signed with its trading partners, Prof Chan said, adding that it clearly sets out the allocation of taxing rights between the two jurisdictions and will help investors better assess their potential tax liabilities from cross-border economic activities.

 

The agreement will bolster economic and trade connections between the two places and offer added incentives for companies in Russia to do business or invest in Hong Kong and vice-versa, Prof Chan said.

 

Under the agreement Russia's withholding tax rate on royalties, currently at 20% for companies or 30% for individuals, will be capped at 3%. Russia's dividend withholding tax rate on Hong Kong residents will be reduced from the current rate of 15% to 5% or 10%, depending on the percentage of their shareholdings.

 

Hong Kong airlines operating flights to Russia will be taxed at Hong Kong's corporation tax rate and will not be taxed in Russia. Profits from international shipping transport earned by Hong Kong residents that arise in Russia, which are currently subject to tax there, will not be taxed in Russia under the agreement.

 

The deal will come into force after the completion of ratification procedures on both sides. In the case of Hong Kong, it will be implemented by way of an order to be made by the Chief Executive in Council under the Inland Revenue Ordinance. The order is subject to Legislative Council scrutiny.

 

Details of the Hong Kong-Russia CDTA can be found on the Inland Revenue Department's website.



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