Hong Kong and Canada signed a Double Taxation Agreement on November 11, 2012. This is the 26th DTA in place for Hong Kong, while Canada has tax treaties with 90 countries.
The DTA puts in place a clear structure of taxing rights between the two nations and clarifies the relief on tax rates on various types of passive income. This helps investors assess their potential tax liabilities between jurisdictions. The relief from double taxation is anticipated to increase trade between the two countries.
The treaty provides a 10% cap on Canada’s withholding tax on Hong Kong investments. The aviation industry will also benefit as Hong Kong based airlines flying to Canada will not be taxed in Canada. Meanwhile, international shipping profits earned by Hong Kong residents in Canada will also not be taxed in Canada.
The most obvious benefit is to Canadians who have income in Hong Kong, and Hong Kong Citizens who have income in Canada – as they will no longer be subject to taxation in both jurisdictions.
According to Canadian Prime Minister Stephen Harper: “Our government is committed to reducing impediments to commerce with our valued commercial partners. The new treaty will reduce tax barriers between Canada and Hong Kong. This will increase trade and investment flows while reducing incidents of double taxation and tax evasion.”
The DTA will be implemented after ratification procedures are completed on both sides.
Source: www.icstrust.com
