The Hong Kong Special Administrative Region Government signed a comprehensive avoidance of double taxation agreement (CDTA) with Bangladesh on 30 August. It is the 47th CDTA that Hong Kong has concluded worldwide.
This CDTA sets out the allocation of taxing rights between the two jurisdictions and will help investors better assess their potential tax liabilities from cross-border economic activities. Bangladesh is one of the economies participating in the Belt and Road Initiative
Under the treaty, Hong Kong companies can enjoy double taxation relief in that any tax paid in Bangladesh, whether directly or by deduction, in accordance with the CDTA will be allowed as a credit against the tax payable in Hong Kong in respect of the same income, subject to the provisions of the tax laws of Hong Kong.
The Hong Kong-Bangladesh CDTA also provides the following tax relief arrangements:
- Bangladesh’s withholding tax rates for Hong Kong residents on dividends will be capped at 10% or 15% (depending on the percentage of shareholdings).
- Bangladesh’s withholding tax rates for Hong Kong residents on interest, royalties and fees for technical services will be capped at 10%.
- Hong Kong residents deriving profits from international shipping transport in Bangladesh will enjoy 50% tax reduction in Bangladesh in respect of the profits subject to tax there.
“I have every confidence that this CDTA will further promote economic and trade ties between Hong Kong and Bangladesh, and offer additional incentives for the business sectors of both sides to do business or make investment,” said Secretary for Financial Services and the Treasury Christopher Hui.
The CDTA will come into force after the completion of ratification procedures by both jurisdictions. In the case of Hong Kong, it will be implemented by way of an order to be made by the Chief Executive in Council under the Inland Revenue Ordinance, which is subject to negative vetting by the Legislative Council.