Hong Kong and South Africa have signed an agreement for the avoidance of double taxation and prevention of income tax evasion.
Secretary for Financial Services & the Treasury Prof KC Chan said the agreement, which sets out the allocation of taxing rights between the two jurisdictions, will help investors better assess their potential tax liabilities from cross-border economic activities.
It will bolster economic and trade connections between the two places and offer added incentives for companies in South Africa to do business and invest in Hong Kong, he added.
Under the agreement, double taxation will be avoided in that any South African tax paid by Hong Kong companies doing business through a permanent establishment there will be allowed as a credit against the tax payable in Hong Kong in respect of the income, subject to the provisions of Hong Kong's tax laws.
Tax paid in Hong Kong by South African residents will be allowed as a credit against tax payable in South Africa.
The agreement also set out rules on handling interest, royalties, airline and shipping profits.
The agreement is the 31st of its kind Hong Kong has concluded with its trading partners. It will come into force after the completion of ratification procedures in both places.
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