Expanding the network of avoidance of double taxation agreements to create a more business-friendly environment for enterprises
On behalf of the Hong Kong Special Administrative Region (HKSAR) Government, I signed a comprehensive avoidance of double taxation agreement (CDTA) with the Government of Bangladesh today. The Agreement will reduce the withholding tax rates for certain passive income in Bangladesh, which will in turn help minimise the tax costs for Hong Kong businesses investing in Bangladesh, thereby facilitating the trade and economic development in both places. Together with the CDTA with Bangladesh, Hong Kong has now signed CDTAs with 47 economies.
When expanding the coverage of Hong Kong’s CDTA network, the Government has on one hand sought to sign CDTAs with Hong Kong’s major trading and investment partners, while on the other hand striving to initiate negotiations with emerging economies with potential for growth in bilateral trade and investment. This is conducive to consolidating our relationship with our established trading partners while fostering links with new trading partners with a view to helping our enterprises tap vast business potential in new markets.
Among our top 20 trading partners, 15 are Hong Kong’s current treaty partners, which accounted for over 70 per cent of Hong Kong’s total trade last year. This illustrates that our work in expanding Hong Kong’s treaty network meets the practical needs of our business community. Twenty-nine of our treaty partners, including Bangladesh, are tax jurisdictions participating in the Belt and Road Initiative. Among them, member states of the Association of Southeast Asian Nations (ASEAN) and the Middle East countries are important Belt and Road markets of Hong Kong as well as one of our key focuses in expanding Hong Kong’s CDTA network. At present, Hong Kong has entered into CDTAs with six Member States of ASEAN (namely Brunei, Cambodia, Indonesia, Malaysia, Thailand and Vietnam) as well as four countries of the Middle East region (namely Kuwait, Qatar, Saudi Arabia, and the United Arab Emirates).
The COVID-19 epidemic over the past three years inevitably posed difficulties to our work in signing and negotiating CDTAs with other tax jurisdictions. Nevertheless, we have not slowed down or halted our efforts to expand the CDTA network. During the epidemic, we conducted negotiations with eight countries via virtual meetings. After the epidemic, we immediately resumed face-to-face negotiations with our partners. We have just commenced negotiations with Azerbaijan, and will soon commence negotiations with a few countries participating in the Belt and Road Initiative.
This year, the HKSAR Government also sought the approval of the Legislative Council to create a permanent directorate post in the Inland Revenue Department (IRD) dedicated to expanding the CDTA network in a more strategic manner. Compared with the average in previous years of commencing negotiations with two to three tax jurisdictions every year, the Government aims to double the output of our negotiating work with the strengthened directorate support in the IRD. In particular, the focus will be on tax jurisdictions participating in the Belt and Road Initiative and emerging markets such as ASEAN, the Middle East, Central Asia and Africa.
In view of the challenging external economic environment, the expansion of the CDTA network is no easy task. The decision to commence negotiations and the progress of negotiations depend primarily on the CDTA policy of our negotiation partners. Notwithstanding this, our efforts never stop. We will continue to actively strive to conclude the negotiations with our negotiation partners with a view to signing the CDTAs as early as possible. Through setting out the allocation of taxing rights between two tax jurisdictions and providing relief on tax rates in respect of different types of income, CDTAs facilitate investors in better assessing the potential tax liabilities of their economic activities, thereby creating a more favourable business environment for enterprises and helping Hong Kong enterprises venture into overseas markets. Foreign enterprises also need not worry about being double taxed when doing business in Hong Kong, which will attract them to establish or expand their business here.
The HKSAR Government will continue to step up efforts to expand our CDTA network, and actively identify suitable trading and investment partners to commence negotiations. To help us accelerate the expansion of the CDTA network, I very much welcome your views in this regard, such that we can further enhance the attractiveness of Hong Kong as a business and investment hub, and jointly consolidate Hong Kong’s status as an international economic and trade centre.
30 August 2023
When expanding the coverage of Hong Kong’s CDTA network, the Government has on one hand sought to sign CDTAs with Hong Kong’s major trading and investment partners, while on the other hand striving to initiate negotiations with emerging economies with potential for growth in bilateral trade and investment. This is conducive to consolidating our relationship with our established trading partners while fostering links with new trading partners with a view to helping our enterprises tap vast business potential in new markets.
Among our top 20 trading partners, 15 are Hong Kong’s current treaty partners, which accounted for over 70 per cent of Hong Kong’s total trade last year. This illustrates that our work in expanding Hong Kong’s treaty network meets the practical needs of our business community. Twenty-nine of our treaty partners, including Bangladesh, are tax jurisdictions participating in the Belt and Road Initiative. Among them, member states of the Association of Southeast Asian Nations (ASEAN) and the Middle East countries are important Belt and Road markets of Hong Kong as well as one of our key focuses in expanding Hong Kong’s CDTA network. At present, Hong Kong has entered into CDTAs with six Member States of ASEAN (namely Brunei, Cambodia, Indonesia, Malaysia, Thailand and Vietnam) as well as four countries of the Middle East region (namely Kuwait, Qatar, Saudi Arabia, and the United Arab Emirates).
The COVID-19 epidemic over the past three years inevitably posed difficulties to our work in signing and negotiating CDTAs with other tax jurisdictions. Nevertheless, we have not slowed down or halted our efforts to expand the CDTA network. During the epidemic, we conducted negotiations with eight countries via virtual meetings. After the epidemic, we immediately resumed face-to-face negotiations with our partners. We have just commenced negotiations with Azerbaijan, and will soon commence negotiations with a few countries participating in the Belt and Road Initiative.
This year, the HKSAR Government also sought the approval of the Legislative Council to create a permanent directorate post in the Inland Revenue Department (IRD) dedicated to expanding the CDTA network in a more strategic manner. Compared with the average in previous years of commencing negotiations with two to three tax jurisdictions every year, the Government aims to double the output of our negotiating work with the strengthened directorate support in the IRD. In particular, the focus will be on tax jurisdictions participating in the Belt and Road Initiative and emerging markets such as ASEAN, the Middle East, Central Asia and Africa.
In view of the challenging external economic environment, the expansion of the CDTA network is no easy task. The decision to commence negotiations and the progress of negotiations depend primarily on the CDTA policy of our negotiation partners. Notwithstanding this, our efforts never stop. We will continue to actively strive to conclude the negotiations with our negotiation partners with a view to signing the CDTAs as early as possible. Through setting out the allocation of taxing rights between two tax jurisdictions and providing relief on tax rates in respect of different types of income, CDTAs facilitate investors in better assessing the potential tax liabilities of their economic activities, thereby creating a more favourable business environment for enterprises and helping Hong Kong enterprises venture into overseas markets. Foreign enterprises also need not worry about being double taxed when doing business in Hong Kong, which will attract them to establish or expand their business here.
The HKSAR Government will continue to step up efforts to expand our CDTA network, and actively identify suitable trading and investment partners to commence negotiations. To help us accelerate the expansion of the CDTA network, I very much welcome your views in this regard, such that we can further enhance the attractiveness of Hong Kong as a business and investment hub, and jointly consolidate Hong Kong’s status as an international economic and trade centre.
30 August 2023