The double taxation agreement (DTA) between Hong Kong and France, which was
originally signed by Hong Kong’s Financial Secretary, John C Tsang, and the
then French Minister of Economy, Industry and Employment, Christine Lagarde,
on October 21, 2010, came into effect on December 1, 2011.
Speaking at the signing ceremony, Tsang had hailed the agreement as elevating
the bilateral relationship between Hong Kong and France to a new level. "I
am fully confident that the agreement we have just signed will represent a win-win
for all parties, as Hong Kong continues to ride on the dynamic growth in the
Asian region and offer tremendous opportunities to French companies seeking
to expand their presence in our region," he said.
“The French business community in Hong Kong is one of the largest in
the Asia Pacific,” he added, “and French companies are doing well
in all major sectors of our economy including banking, finance, transport, media,
construction, catering and tourism.”
In the absence of the DTA, profits earned by French residents in Hong Kong
were subject to both Hong Kong and French income tax. Profits of French companies
doing business through a branch in Hong Kong were fully taxed in both places.
Under the agreement, double taxation will be avoided as the income taxed in
Hong Kong is allowed as a tax credit against French tax attributable to such
income.
Hong Kong residents receiving dividends from France not attributable to a permanent
establishment in France were subject to a French withholding tax, which is currently
25%. Under the agreement, such withholding tax rate is reduced to 10%.
Hong Kong residents receiving royalties from France were subject to a withholding
tax of 33.33% in France. Under the DTA, the royalties’ withholding tax
is capped at 10%. The French interest withholding tax on Hong Kong residents
is reduced from the rate of 19% to 10%.
Furthermore, under the DTA, Hong Kong airlines operating flights to France
are to be taxed at Hong Kong's corporation tax rate (which is lower than that
of France). Profits from international shipping transport earned by Hong Kong
residents that arise in France, which were subject to tax there, enjoy tax exemption
under the agreement.
The Hong Kong/France DTA also incorporates the latest Organization for Economic
Cooperation and Development standard on the exchange of information for tax
purposes.
The agreement will have effect in Hong Kong for any year of assessment beginning
on or after April 1, 2012.
LAWANDTAX-NEWS.COM
