China promises measures to boost Hong Kong economy

On June 27, China’s Cabinet announced measures that are aimed to boost Hong Kong’s anemic economic growth as the semiautonomous territory prepares for a weekend visit by Chinese President Hu Jintao.

The China’s Cabinet promised to promote Hong Kong’s status as a offshore financial centre using the mainland’s tightly controlled currency, the yuan. Also, it intends to encourage closer trade, travel and investment links.

It should be noted that Vice Premier Li Keqiang, who is expected to become China’s premier in 2013, announced similar yuan trade-boosting measures when he visited Hong Kong in 2011.

Filed under: Business and Economy, HK as a Financial Centre

Hong Kong signs DTA with Mexico

On June 18, 2012, Hong Kong’s Financial Secretary, John C Tsang, and the Mexican Secretary of Finance and Public Credit, José Antonio Meade Kuribreña, signed a comprehensive double taxation agreement (DTA) that will provide legal certainty regarding the tax system applicable to investments in Mexico and Hong Kong. The signing took place in Los Cabos.

In the absence of a comprehensive DTA, income earned by Mexican residents in Hong Kong is subject to both Hong Kong and Mexican income tax. Under the newly-signed treaty, tax paid in Hong Kong will be allowed as a credit against tax payable in Mexico.

It is worth noting that, under the comprehensive double taxation agreement, Hong Kong airlines operating flights to Mexico will be taxed at Hong Kong’s corporation tax rate, which is lower than the corporation tax rate of Mexico, and will not be taxed in Mexico. Profits from international shipping transport earned by Hong Kong residents that arise in Mexico, which are currently subject to tax there, will not be taxed in Mexico under the agreement.

The Hong Kong-Mexico DTA has incorporated the latest OECD standard on the exchange of tax information.

The document will come into force after the completion of ratification procedures on both sides.

This is the 25th such agreement concluded by Hong Kong with its partners.

Filed under: Business and Economy, Taxation

HK and Macao discuss Tax and Financial Cooperation

Hong Kong’s Financial Secretary, John C Tsang, and Macao’s Secretary for Economy and Finance, Tam Pak-yuen, co-chaired the recent Fifth Hong Kong Macao Co-operation High Level Meeting in Macao.

The event aimed at reviewing the progress and future direction of co-operation between the two jurisdictions. Particularly, environmental, taxation and financial matters were discussed at the meeting.

To revise the achievements made in Hong Kong-Macao co-operation, Tsang said: “Since the establishment of the Hong Kong-Macao liaison officers’ mechanism in 2008, co-operation and exchange between the two sides have been increasing both in depth and breadth … Hong Kong and Macao have been working hand in hand to promote regional development and implement projects that have a synergy effect.”

He also added that, under the principle of mutual benefits, Hong Kong proposed to the government of Macao and the Monetary Authority of Macao at the meeting to capitalise on the financial platform in Hong Kong in order to make long-term investments so as to maintain and enhance the value of the fiscal reserves of Macao. The Macao is going to consider this proposal.

Filed under: Business and Economy, International Business Environment

HKMA releases HK’s latest Foreign Currency Reserve Assets Figures

On June 7, the Hong Kong Monetary Authority (HKMA) announced that the official foreign currency reserve assets of Hong Kong amounted to USD 291.9 billion as at the end of May 2012.

The total foreign currency reserve assets of US$291.9 billion represent over 8 times the currency in circulation or about 54% of Hong Kong dollar M3.

Filed under: Financial statistics

HK and Portugal DTA comes into force

The agreement for the avoidance of double taxation (DTA) that was signed between Hong Kong and Portugal on March 2, 2011, was announced to come into force on June 3, 2012, after the completion of ratification procedures on both sides.

The DTA determines the allocation of taxing rights between Hong Kong and Portugal and the relief on tax rates on different types of passive income. It is expected to help investors better assess their potential tax liabilities from cross-border economic activities, foster closer economic and trade links between the two jurisdictions, as well as provide added incentives for companies from one country to do business or invest in the other. Under the terms of the DTA, the withholding tax rate on dividends received from Portugal is cut to 10%, and will be further reduced to 5% if the beneficial owner of the dividends is a company (other than a partnership) holding directly at least 10% of the capital of the company paying the dividends. Also, the Portuguese withholding tax on interest will be capped at 10% and the Portuguese withholding tax on royalties will be capped at 5%.

The double tax agreement incorporates the internationally-agreed Organization for Economic Co-operation and Development standard on the exchange of tax information. It will be in effect in Hong Kong for any year of assessment beginning on or after April 1, 2013.

Filed under: International Business Environment, Taxation

HK tops World Competitiveness rankings

In its recently-issued World Competitiveness Yearbook 2012, the International Institute for Management Development (IMD) has ranked Hong Kong as the world’s most competitive economy. This was marked for the 2nd consecutive year.

The rankings measure how 59 countries all over the world manage their economic and human resources to increase their prosperity.

In 2011, Hong Kong and the United States had the same score and were both rated by IMD as number one, while in 2012 Hong Kong’s score has surpassed that of the US, which is now in 2nd place.

Among the competitiveness factors assessed, Hong Kong continues to take the lead in government efficiency and business efficiency, and remains 4th in economic performance.

Hong Kong is followed by other most competitive nations – Switzerland (3), Sweden (5) and Germany (9).

Filed under: Business and Economy, HK as a Financial Centre, International Business Environment