16 January, 2017 Hong Kong and Belarus signed an agreement on avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income and on capital. The agreement was concluded under the Hong Kong initiative to expand the network of tax agreements.
The main advantage of the agreement is a clear allocation of taxation rights between two jurisdictions and it will help investors to evaluate their potential tax liabilities.
In the absence of an agreement profits of Hong Kong companies, which receive income in Hong Kong and carry out activities through a permanent establishment in Belarus, are taxed in both countries. Similarly, revenues which are received by Belarus residents in Hong Kong have been taxed in Belarus. This situation will be resolved since the agreement between two countries entry into force.
Under the agreement, double taxation will be avoided as Belarusian tax which is paid by Hong Kong companies will be allowed as a credit against the tax payable in Hong Kong on the same profits, subject to the provisions of the tax laws of Hong Kong. Likewise, for Belarusian companies, the tax they have paid in Hong Kong will be allowed as a credit against the tax payable on the same income in Belarus.
In addition, the agreement provides some tax exemption:
- according to the signed agreement, the tax rate for royalty will be 5%. It will be further reduced to 3% if the royalties will be used/for the right to use aircraft;
- the tax rate on dividends and interest will be reduced to 5%.
Hong Kong airlines flying to Belarus will be taxed at the rate of corporate tax in Hong Kong, and will not be taxed in Belarus.
In accordance with the realities of the modern world and the international standards, the agreement on avoidance of double taxation between Hong Kong and Belarus shall provide the procedure for the exchange of information for tax purposes.
The Agreement shall enter into force on the date of receipt of the last notification by each party after the completion of the ratification procedure of each country.
