Hong Kong and Saudi Arabia have concluded a double tax agreement for the avoidance of taxation on income from both jurisdictions. The treaty defines the taxation rights each of the two jurisdictions has in respect to income derived by companies operating in both places. One of our Hong Kong company formation agents is able to provide you with comprehensive information on the treaty conditions and how they apply to foreign investors in Hong Kong from Saudi Arabia.
Hong Kong – Saudi Arabia DTA
The double tax treaty (DTA) between Hong Kong and Saudi Arabia
is part of Hong Kong’s ongoing efforts to expand its double tax treaty network. The agreement encourages foreign investments in Hong Kong
by providing relief from taxation on income performed both by the jurisdiction is incorporated (either Hong Kong or Saudi Arabia) and the jurisdiction in which the same company has a branch or a subsidiary.
According to the agreement for the avoidance of double taxation, Hong Kong companies that pay Saudi Arabian taxed can be used as a credit against the tax payable in Hong Kong on the same types of profits. The same principle applies to Saudi Arabian companies that pay profits tax in Hong Kong
The double tax treaty also establishes a preferential withholding tax rate for dividends: this is capped at five percent. Royalties paid for the right to use industrial, scientific or commercial equipment will have a five percent value, while all other royalties will be taxed at an eight percent rate.
Many foreign investors choose to open a Hong Kong company because of the low rates which are even more advantageous when a double tax treaty applies.
Taxation in Hong Kong
Hong Kong has a low taxation regime
, making it an attractive destination to base a branch or a subsidiary.
The current corporate income tax for companies incorporated in Hong Kong is 16.5% and a lower rate applies to unincorporated businesses. Only Hong Kong-source profits are taxed for non-Hong Kong companies.