Dubai: Hong Kong and the UAE will soon start negotiations to sign an investor protection agreement on a bi-lateral basis, John C Tsang, Financial Secretary of Hong Kong told Gulf News during his visit to the UAE.
“The agreement will create a lot more comfort for people who are investing here and vice-versa they will have the protection agreed by the two respective governments,” Tsang said.
Hong Kong last week signed in Dubai an agreement on the avoidance of double taxation with the UAE.
This is the 32nd comprehensive agreement for the avoidance of double taxation (CDTA) that Hong Kong has signed with its trading partners. It sets out clearly the allocation of taxing rights between the two jurisdictions and thus will help investors better assess their potential tax liabilities from cross-border economic activities.
“The agreement will bolster the economic and trade connections between the two places, and offer added incentives for companies in the UAE to do business or invest in Hong Kong, and vice-versa,” Tsang said.
In the absence of a CDTA, income earned by UAE residents in Hong Kong is subject to both Hong Kong and Emirati income tax. Under the agreement, tax paid in Hong Kong will be allowed as a credit against tax payable in the UAE. Furthermore, in the absence of a CDTA, the profits of Hong Kong companies doing business through a permanent establishment in the UAE may be taxed in both places if the income is Hong Kong-sourced. Under the agreement, double taxation will be avoided in that any Emirati tax paid by the companies will be allowed as a credit against the tax payable in Hong Kong in respect of the income, subject to the provisions of the tax laws of Hong Kong.
The Hong Kong-UAE CDTA has incorporated an article on exchange of information, which enables Hong Kong to fulfil its international obligations on enhancing tax transparency and combating tax evasion. The CDTA will come into force after the completion of ratification procedures on both sides.
