HK and Mainland cooperate over FTA Transhipments

On May 24, 2016, Hong Kong’s Commissioner of Customs and Excise, Roy Tang, and the Chinese Minister of Customs Administration, Yu Guangzhou, signed a Co-operation Arrangement on the origin of transhipment cargo in Hong Kong under the Mainland’s free trade agreements (FTAs).

The Co-operation Arrangement is intended to strengthen Hong Kong’s role as an international trade and logistics hub, as well as to encourage traders to choose Hong Kong as a transhipment location for their goods. It will also further enable Mainland-bound consignments passing through Hong Kong to enjoy Mainland tariff reductions.

The Co-operation Arrangement covers goods traded between the Mainland and its trading partners, including the 10 member states of the Association of Southeast Asian Nations (Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand, and Vietnam), Australia, Bangladesh, Chile, Costa Rica, Iceland, India, New Zealand, Pakistan, Peru, South Korea, Switzerland, Sri Lanka, and Taiwan.

To provide a supervision service and issue certificates of non-manipulation, Hong Kong Customs rolled out an FTA Transhipment Facilitation Scheme on December 20, 2015.

Filed under: Business and Economy, Hong Kong and China

Hong Kong gazettes DTAs with Russia and Romania

Hong Kong has newly gazetted 2 new double tax agreements (DTA) with Russia and Romania, which will lower tax rates on cross-border trade and investment.

Under the double tax agreement between Hong Kong and Russia, any Hong Kong income tax paid by Russian residents or companies shall be allowed as a credit against any tax payable in respect of the same income in Russia. The withholding tax rate on royalties derived by Hong Kong residents in Russia will be reduced from the current rate of 20% for companies or 30% for individuals to 3%. The withholding tax rate on dividends derived by Hong Kong residents in Russia will be reduced from the current rate of 15% to 5% or 10%. The cap of 5% would be applicable if the beneficial owner is a company which holds directly at least 15% of the capital of the company paying the dividends. Profits from international shipping transport earned by Hong Kong residents that arise in Russia will enjoy full tax exemption. Hong Kong airlines operating flights to Russia will only be taxed in Hong Kong at Hong Kong’s corporation tax rate.

Under the double tax agreement between Hong Kong and Romania, Hong Kong income tax paid by Romanian residents or companies will be allowed as a deduction from any tax payable in respect of the same income in Romania. The withholding tax rate on royalties derived by Hong Kong residents in Romania will be reduced from the current rate of 16% to 3%. The withholding tax rate on interest derived by Hong Kong residents in Romania will be reduced from the current rate of 16% to 0% or 3%. The 0 rate would be applicable if Hong Kong levies no withholding tax on interest. The withholding tax rate on dividends derived by Hong Kong residents in Romania will be reduced from the current rate of 16% to 3% or 5%. The cap of 3% would be applicable if the beneficial owner is a company which holds directly at least 15% of the capital of the company paying the dividends. Profits from international shipping transport earned by Hong Kong residents that arise in Romania will enjoy full tax exemption.

Filed under: Business and Economy, News and politics, Offshore Legislation, Taxation

HK to negotiate FTAs with Georgia and Maldives

The Government of Hong Kong has announced that the jurisdiction will soon commence free trade agreement (FTA) negotiations with Georgia and Maldives. Hong Kong has prepared a consultation document so that interested parties can put forward suggestions on areas to be covered in the 2 documents.

A Government spokesperson said: “Both Georgia and Maldives are emerging markets with potential for further growth. Forging FTAs with these 2 economies has strategic value for Hong Kong. These FTAs, once signed, will help expand Hong Kong’s FTA network into the respective regions including Eurasia”. He added: “To minimize the risk of being marginalized, it is important for Hong Kong to take part in FTA negotiations that involve our major trading partners. FTA negotiations of Mainland China, our largest trading partner that accounts for about 50 percent of our total trade, are of particular value for maintaining Hong Kong’s position as a major trading and logistics hub”.

Provisions in the 2 new FTAs, which Hong Kong will complete as a separate customs territory and a separate signatory, would likely include the elimination or reduction of tariffs; the liberalization of non-tariff barriers; the liberalization as well as the promotion and protection of investment; and the liberalization of trade in services.

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