For the purposes of this article, we consider that a person is tax resident in the United Kingdom and resident of an additional country, although double taxation agreements may exist between two countries. In another scenario, a double taxation agreement may provide that non-exempt income is calculated at a reduced rate. For more information, see HMRC HS304`s “Non-Residents – Discharge under Double Taxation Agreements” on the GOV.UK. Under the agreement, Hong Kong residents who receive dividends from New Zealand that are not attributable to an institution in New Zealand are subject to a reduced withholding rate of 15%. The withholding rate is further lowered to 5% or 0% for eligible beneficiaries. Hong Kongers who receive royalties from New Zealand pay a withholding tax capped at 5%. If you live in two countries at the same time or if you live in a country that taxes your global income and you have income and profits from another country (and that country taxes that income on the basis of which it comes from that country), you may be taxed on the same income in both countries. This is called “double taxation.” Governments have recognized that this would be unfair and discourage international trade/business. As a result, they each put in place their own rules to prevent the same income from being taxed twice. In some cases, the amount of tax paid in one country can be deducted from what is due in another country. These agreements or contracts are called Double Tax Agreements (DBA) and should be integrated into your tax planning system.
The agreement to avoid double taxation of income and the prevention of tax evasion broadens the scope of the original agreement on the benefits and income of human services, which both parties signed in 1998. In November 2010, the DBA Hong Kong/Luxembourg was updated to open the exchange of information to ensure that the agreement complies with international standards of the Organisation for Economic Co-operation and Development. You will probably need to seek professional advice if you are in a double taxation situation. We`ll tell you how to find an advisor on our “Get help” page. People who live or work abroad and have dual residences are taxable in both countries. In order to determine which country has a tax priority, the DBA will have a set of tie-break rules or tests between the two countries to determine where to pay taxes in order to avoid paying taxes in both countries. Look at the UK government`s help sheet to see if the second country has an agreement with the United Kingdom. Finally, some countries, such as Brazil, do not have a double taxation agreement with the United Kingdom. If this is the case, you can still apply for unilateral tax breaks for the foreign tax you pay.
There is a list of current double taxation agreements on GOV.UK. If a person is considered non-resident in the United Kingdom under double taxation agreements, that person would only be taxable in the United Kingdom if the income comes from activities in the United Kingdom. This is important because it means that all non-UK income and investment profits are protected from UK tax. The legislation allows Hong Kong to conclude comprehensive DBAs that contain the International Standards of the Organisation for Economic Co-operation and Development (OECD) for the exchange of information. Until June 2001, there were no comprehensive double taxation agreements in Hong Kong. Since then, the number of contracts has changed quite rapidly. The following information provides succinct details on some important double tax evasion agreements signed by SADA Hong Kong. Under the Convention, Switzerland is exempt from double taxation.