The Double Taxation Agreement (DTA) signed between the Hong Kong Special Administrative Region and Mauritius on 7 November 2022 entered into force on 23 June following the completion of ratification procedures by both treaty partners.
It is the first such tax treaty between the two jurisdictions and will apply from the year of assessment 2024/25 in Hong Kong and from 1 July 2023 in Mauritius.
Benefits under the DTA include reduced withholding tax (WHT) rates for interest and royalties, elimination of WHT on service/consultancy fees and tax exemption for business profits in the absence of a permanent establishment. The treaty covers Hong Kong profits tax, salaries tax and property tax, and covers Mauritius income tax.
Under the DTA, any tax paid in Mauritius, whether directly or by deduction, by Hong Kong companies in accordance with the CDTA will be allowed as a credit against the tax payable in Hong Kong on the same income, subject to the provisions of the tax laws of Hong Kong.
In respect of dividends received by a Mauritius resident that controls at least 5% of the capital of the Hong Kong company paying the dividends, Mauritius will also provide a credit for the Hong Kong tax payable on the profits out of which the dividends are paid.
The treaty includes the provision that a permanent establishment will be deemed constituted when an enterprise furnishes services through employees or other engaged personnel if the activities continue for the same or connected project within a contracting party for a period or periods aggregating more than 183 days within any 12-month period.
The treaty provides that a benefit under the treaty will not be granted in respect of an item of income if it is reasonable to conclude, having regard to all relevant facts and circumstances, that obtaining that benefit was one of the principal purposes of any arrangement or transaction that resulted directly or indirectly in that benefit, unless it is established that granting that benefit in these circumstances would be in accordance with the object and purpose of the relevant provisions of the treaty.