The officials of Hong Kong and Estonia signed the
double taxation treaty between two jurisdictions on 25 September 2019. This step is made by both parties with the purpose to further develop economic relationship and to enhance cooperation in tax matters.
It is the 42nd agreement signed Hong Kong with its trading partners around the world.
As it is stated in the
official press release, any Estonian tax paid by Hong Kong residents in respect of income derived from sources in Estonia will be allowed as a credit against the Hong Kong tax payable on the same income, subject to the provisions of the tax laws of Hong Kong. For Estonian residents, double taxation will be avoided by way of exemption of the income taxed in Hong Kong from the Estonian tax, or deduction of Hong Kong tax paid from the Estonian tax in respect of the same income.
Moreover, the provisions of the double taxation treaty provide the following tax relief arrangements:
- Estonia's withholding tax rate for Hong Kong residents on royalties will be capped at 5 per cent while the current rate is at 10 per cent;
- Hong Kong airlines operating flights to and from Estonia will be taxed at Hong Kong's profits tax rate, and will not be taxed in Estonia; and
- Profits from international shipping transport earned by Hong Kong residents arising in Estonia will not be taxed in Estonia.
Additionally, it should be noted that the double taxation treaty between Hong Kong and Estonia is based on the requirements of the BEPS minimum standard as it follows from the wording of preamble, Art. 23 (Mutual Agreement Procedure) and Art. 26 (Entitlement to Benefits).
The double taxation treaty will come into force after the completion of ratification procedures by both parties.
