An agreement for the avoidance of double taxation
is in place between Hong Kong and the Netherlands
. This bilateral treaty is important for foreign investors
from the Netherlands who are looking to do business in Hong Kong and is also serves an additional purpose in preventing fiscal evasion.
Taxes and persons covered by the Hong Kong – Netherlands double tax treaty
The agreement for the avoidance of double taxation
applies to companies and individuals that are residents of one or both signatory states. A Hong Kong resident
is an individual who normally resides in Hong Kong or who stays for more than 180 days during one tax year. Likewise, a tax resident is also a company incorporated in Hong Kong
or a legal entity incorporated in another jurisdiction but which is managed/controlled from Hong Kong.
The taxes for which the double tax treaty
applies in the case of Hong Kong are the profits tax
, the salaries tax
, and the property tax
. In the Netherlands, the treaty applies to the income tax, the wages tax and the company tax as well as the dividend tax.
The double tax agreement (DTA) also applies to taxes that have been imposed on income after the date the agreement was signed. It also applies to taxes levied in place of or in addition to the listed taxes.
Treaty provisions regarding taxation
One of the most important provisions of the comprehensive double taxation agreement is that it allows for reduced rates on the withholding tax on dividends, interest, and royalties. Under the DTA between Hong Kong and the Netherlands, the withholding tax on dividends is 0% or 10%, the withholding tax on interest is 0% and royalties are taxed at 3%.
The 0% tax on dividends applies if the company receiving the dividends owns at least 10% of the company making the dividend payment.