Secretary for Financial Services & the Treasury Prof KC Chan today signed an agreement on the avoidance of double taxation with Latvia in Riga.
Prof Chan said the agreement clearly sets out the allocation of taxing rights between Hong Kong and Latvia, which will help investors better assess their potential tax liabilities from cross-border economic activities.
"The agreement will bolster the economic and trade connections between the two places. It will also offer added incentives for companies in Latvia to do business or invest in Hong Kong, and vice-versa," Prof Chan added.
Under the agreement, tax paid in Hong Kong by Latvian residents will be allowed as a credit against the tax payable on the same income in Latvia.
Double taxation will be avoided in that any Latvian tax paid by Hong Kong companies will be allowed as a credit against the tax payable in Hong Kong on the same profits, subject to the provisions of the tax laws of Hong Kong.
Latvia's withholding tax rate on royalties, currently up to 23%, will be capped at 3%. Latvia's dividend and interest withholding tax on Hong Kong residents will be reduced from a maximum of 30% to a maximum of 10%.
Hong Kong airlines operating flights to Latvia will be taxed at Hong Kong's corporation tax rate, and will not be taxed in Latvia.
Profits from international shipping transport earned by Hong Kong residents that arise in Latvia will not be taxed in Latvia under the agreement.
This is the 35th comprehensive agreement for the avoidance of double taxation that Hong Kong has signed with its trading partners.
It will come into force after both sides complete ratification procedures.
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