Hong Kong Investment Immigration focuses on Hong Kong Finance: A spokesperson for the Hong Kong government announced today (17th) that Hong Kong has signed an agreement with South Africa to avoid double taxation on income tax and prevent tax evasion.
This agreement is the thirty-first comprehensive agreement for the avoidance of double taxation signed by Hong Kong (comprehensive agreement).
The Secretary for Financial Services and the Treasury, Chan Ka-keung, welcomed this comprehensive agreement, stating that it clarifies the taxing rights of both parties, helping investors more effectively assess the potential tax burden of their cross-border economic activities.
Chan Ka-keung also pointed out that the comprehensive agreement helps promote economic and trade ties between the two regions and further encourages companies from South Africa and Hong Kong to invest and operate in each other's territories.
In the absence of this agreement, income earned by South African residents in Hong Kong would be taxed by both Hong Kong and South Africa. Under this agreement, taxes paid in Hong Kong can be deducted from the taxes levied by South Africa on that income. Furthermore, in the absence of this agreement, profits earned by Hong Kong companies from a permanent establishment in South Africa, if sourced from Hong Kong, may be subject to taxation in both jurisdictions. Under this agreement, taxes paid by these companies in South Africa can be credited against the relevant taxes levied in Hong Kong, thereby avoiding double taxation.
Under this agreement, the withholding tax rate on royalties charged by South Africa to Hong Kong residents will be reduced from the current 15% to a maximum of 5%. The withholding tax rate on dividend income received by Hong Kong residents from South Africa will also be reduced from the current 15% to 10% or 5% (depending on the percentage of their holdings). The withholding tax rate on interest income earned by Hong Kong residents from South Africa will be capped at 10%.
Under this agreement, Hong Kong airlines operating routes to South Africa will only need to pay Hong Kong profits tax on the relevant profits at the Hong Kong tax rate (which is generally lower than South Africa's tax rate), without being taxed in South Africa. Currently, profits earned by Hong Kong residents from international shipping in South Africa are subject to taxation in that country. Under this agreement, South Africa will exempt Hong Kong residents from taxes on such shipping income.
The comprehensive agreement between Hong Kong and South Africa includes provisions for data exchange.
This comprehensive agreement will come into effect after both parties complete the necessary approval procedures. For Hong Kong, the Chief Executive, together with the Executive Council, must issue an order regarding the agreement under the Inland Revenue Ordinance, which must be approved by the Legislative Council.
Hong Kong will continue to strive to expand its network of comprehensive agreements with trade and investment partners.
