Hong Kong issues ratification order for tax treaty with Mauritius

The Hong Kong government gazetted, on 28 April, an order under the Inland Revenue Ordinance (Cap. 112) to give effect to a Comprehensive Avoidance of Double Taxation Agreement (CDTA) signed with Mauritius last year. It is the first tax treaty between the two jurisdictions.

Under the treaty, 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.

Income derived by a Hong Kong resident from employment exercised in Mauritius will be exempt from tax in Mauritius if, amongst other things, the resident’s aggregate stay in Mauritius in any relevant 12-month period does not exceed 183 days.

Mauritius withholding tax rates for Hong Kong residents in interest and royalties will generally be capped at 5%, while profits from international shipping transport earned by Hong Kong residents arising in Mauritius will not be taxed in Mauritius.

“Under the CDTA, investors will not have to pay tax twice on a single source of income. This will bring tax savings and a greater certainty on taxation liabilities for the residents of Hong Kong and Mauritius when they engage in cross-border trade and investment activities,” said a Hong Kong government spokesman.

The CDTA will enter into force once the ratification instruments are exchanged and will apply in Hong Kong from 1 April next following its entry into force and in Mauritius from 1 July next following its entry into force.

Hong Kong has also concluded negotiations for an income tax treaty with Croatia. This treaty will be the first of its kind between the two jurisdictions and must be signed and ratified before entering into force.

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