DTA entered into force between Russia and Hong Kong

Comprehensive agreement for the avoidance of double taxation (CDTA) was signed in January of this year between Hong Kong and Russia, which came into force on 29 July 2016. According to the sources, this agreement shall remain in force for Hong Kong each year since its signing to double taxation, which took place on or after April 1, 2017.

The CDTA is informed about what is required to support efforts to expand the tax obligations undertaken by the two countries in the framework of the «Belt and Road», which is a project of the Chinese government for the economic development aiming at the integration of trade and investment between the approximately 60 countries in Eurasia.

In the absence of the CDTA program, of Hong Kong companies income, which conduct their entrepreneurial activities with the help of permanent missions in Russia and taxed in both places if their earnings was received in Hong Kong. On this basis, in the new agreement, double taxation is eliminated, and now any Russian tax paid by the companies on their earnings, will be allowed to tax payable in Hong Kong.

Besides, in accordance with this agreement, the rate in Russia on income tax on royalties, up to the present time is 20% (for companies) or 30% (for individuals) will be limited to only 3%. A tax rate on dividends, which are in Russia for Hong Kong citizen will be reduced from the current rate of 15% to 5% or 10% depending on the shares of the recipient.

According with further provisions, all Hong Kong airlines which fly to Russia, will be subject to taxation in accordance with the corporate tax rate in Hong Kong, and will not be subject to taxation in Russia. Profits from international shipping transport earned by citizens who have been in Hong Kong, now is also not planning to impose taxes in Russia.

This agreement contains in itself provide a basis for the exchange of tax information between jurisdictions in accordance with international standards.

Author: Olena Kutova

senior lawyer of the Finance Business Service company

Hong Kong Contract

Recently Hong Kong has signed DTA with Romania and Russia, which will cut tax for cross-border trade and investors. Due to Romanian double tax agreement, income tax of Romania can be paid from any other tax which has the same income.

Withholding of tax in Romania will cut to current 16 percent to 5 or even 3 percent.

The income profit earned by Hong Kong's residents will be enjoying to for full tax exemption.

Due to Russian DTA from Hong Kong will 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.

Withholding of tax in Russia will cut from current 20 percent or 30 to even 3 percent.

The cap of 5 percent will be allowed if even one of the official owner has more than 15 percent of common profit of the company.

Profit from international shipping transport also will be enjoying to for full tax exemption. Hong Kong airlines which operating in Russia will pay tax only due to Hong Kong's tax rate.

Author: Sergey Panov

managing partner Finance Business Service