Hong Kong Signs Multitude of Tax Agreements

March 23, 2010 International Tax CooperationTaxation in AustriaTaxation in FranceTaxation in Hong KongTaxation in NetherlandsTaxation in Switzerland

Hong Kong night sceneryHong Kong is heralding a new era of taxation transparency and cooperation, having signed three bilateral tax agreements and provided definite indications that it intends to amass the 12 required to be warranted a place on the Organization for Economic Development and Cooperation’s (OECD) list of nations adequately implementing international tax standards.

The Hong Kong Government began the week with the signing of three separate Comprehensive Agreements for the Avoidance of Double Taxation (CDTA) with the Netherlands, Brunei and Indonesia. The signings, combined with negotiations currently being held with other nations, and the Government’s aim to have at least 12 signed agreements by the end of 2010, has prompted analysts to say that Hong Kong is attempting to equal its regional financial competitor Singapore.

On March 20rd John C Tsang, Hong Kong Financial Secretary, and Pehin Dato Abdul Rahman Ibrahim, Second Minister of Finance of Brunei, signed the first of the three CDTAs. The agreement was also the first for Hong Kong to implement the OECD standard on exchange of tax information. Key tax features within the agreement include lowered withholding rates and legislative changes which see airline and shipping profits arising in Brunei being taxed in Hong Kong. On March 22nd the second CDTA agreement was signed between Hong Kong and its fourth biggest trading partner the Netherlands. The third CDTA is expected to be signed on March 23rd by representatives of Hong Kong and Indonesia. Ongoing negotiations are currently being held with several nations including France, Austria and Switzerland, which if successful promise to fulfill Hong Kong’s goal of 12 signed agreements by 2011.

The rapid increase in tax agreements signed or negotiated by Hong Kong have led several economic analysts to compare the country to Singapore in its aim to attain comparable image. Currently, Singapore holds the 12 tax information exchange agreements, as required by the OECD’s transparency standards. With Hong Kong’s expanding private banking and financial sector, the Government is taking prudential steps to remain competitive with Singapore by applying adequate tax transparency measures and distancing itself from a tax haven image. Commenting on the new and upcoming CDTAs K C Chan, Hong Kong Secretary for Financial Services and the Treasury, said:” …it serves as the strongest rebuttal against any negative perception to compare Hong Kong with a tax haven. It also demonstrates our staunch support for international efforts in enhancing tax transparency while at the same time providing sufficient safeguards to protect taxpayers’ privacy and confidentiality of information exchanged.”

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