HONG KONG: Hong Kong and Belarus have agreed to lower withholding tax rates on cross-border income under a new comprehensive double tax agreement (CDTA).
The CDTA is part the Government’s efforts to expand Hong Kong’s tax treaty network, to support Mainland China’s Belt and Road initiative, which is intended to promote economic co-operation among countries along its route.
In the absence of a CDTA, the profits of Hong Kong companies doing business through a permanent establishment in Belarus may be taxed in both places if the income is Hong Kong sourced. For Belarusian companies, the income they earned in Hong Kong is subject to both Hong Kong and Belarusian tax.
Under the new agreement, double taxation will be avoided in that any Belarusian tax paid by Hong Kong companies will generally be allowed as a credit against the tax payable in Hong Kong on the same profits. For Belarusian companies, the tax they paid in Hong Kong will also be allowed as a credit against the tax payable on the same income in Belarus.
In addition, Belarus’s withholding tax rate for Hong Kong residents on royalties (currently at 15 percent for companies and 13 percent for individuals) will be capped at five percent, and it will be further reduced to five percent if the royalties are for the right to use aircraft.
Belarus’s withholding tax rate for Hong Kong residents on dividends (currently at 12 percent for companies and 13 percent for individuals) and interest (currently at 10 percent for companies and 13 percent for individuals) will also be capped at five percent.
Hong Kong airlines operating flights to Belarus will be taxed at Hong Kong’s corporation tax rate, and will not be taxed in Belarus; and profits from international shipping transport earned by Hong Kong residents that arise in Belarus, which are currently subject to tax there, will no longer be taxed in Belarus.
The Hong Kong/Belarus CDTA also incorporates an article on the exchange of information, which will enable Hong Kong to enhance the fulfillment of its international obligations on tax transparency.
At the signing of the agreement, Hong Kong’s Secretary for Financial Services and the Treasury, K C Chan, confirmed that the agreement “is the 36th CDTA that Hong Kong has signed with its trading partners.” The CDTA will come into force after the completion of ratification procedures on both sides.
