This update was first published in the February 2011 Malaysia edition of Accounting and Business magazine.
In December 2010, the Hong Kong government signed two comprehensive agreements for the avoidance of double taxation (DTAs) with Switzerland and New Zealand.
Under the DTA with Switzerland, withholding tax on dividends received by Hong Kong residents from Switzerland, not attributable to a permanent establishment in Switzerland, will be reduced from 35% to 10%.
The dividends withholding tax will be exempt if the beneficial owner of the dividends is a company directly holding at least 10% of the capital of the company paying the dividends, a pension fund or the Hong Kong Monetary Authority.
The Swiss interest withholding tax on Hong Kong residents, which is currently 35%, will be exempt. On the other hand, Switzerland will provide exemption to its residents for profits earned in Hong Kong.
New Zealand DTA
Under the DTA with New Zealand, tax paid by Hong Kong companies doing business through a permanent establishment in New Zealand will be allowed a credit against the tax payable in Hong Kong.
In addition, withholding tax rate on dividends received by Hong Kong residents from New Zealand, not attributable to a permanent establishment in New Zealand, will be reduced from 30% to 15%. This rate will be further lowered to 5% or 0% for qualifying beneficial owners.
Withholding tax rate on royalties from New Zealand, currently 15%, will also be capped at 5%. The New Zealand interest withholding tax on Hong Kong residents will be reduced from the current rate of 15% to 10%.
Sonia Khao, head of technical services, ACCA Hong Kong