Financial Secretary John Tsang today signed an agreement on the avoidance of double taxation with United Arab Emirates Financial Affairs Minister Obaid Humaid Al Tayer in Dubai.
It is the 32nd comprehensive agreement for the avoidance of double taxation Hong Kong has signed with its trading partners.
It clearly sets out the allocation of taxing rights between the two jurisdictions and will help investors assess their potential tax liabilities.
Mr Tsang said it will bolster economic and trade connections between the two places and offer added incentives for companies in the UAE to do business and invest in Hong Kong and vice-versa.
Under the agreement, double taxation will be avoided in that any Emirati 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 UAE residents will be allowed as a credit against tax payable in the UAE.
The agreement also sets out rules on exchange of information, which enhance tax transparency and can help combat tax evasion.
It will come into force after the completion of ratification procedures in both places.
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