Hong Kong Tax Alert: 27 November 2012
Hong Kong signs comprehensive double tax agreement with Canada
Hong Kong has recently signed a comprehensive double taxation agreement (CDTA) with Canada. This alert summarizes the salient points of the provisions as applicable to Hong Kong residents.
On 11 November 2012, Hong Kong signed a CDTA with Canada. This is the second CDTA that Hong Kong has concluded with a jurisdiction on the North American continent, the first one being with Mexico. This brings the number of CDTAs Hong Kong has concluded with other jurisdictions to twenty-six.
Who is covered by the CDTA
The CDTA only applies to persons who are residents of either Hong Kong or Canada. In this regard, a company that is incorporated or constituted under the laws of Hong Kong automatically qualifies as a Hong Kong resident. A company which is not so incorporated or constituted will only be regarded as a Hong Kong resident if it is “centrally managed and controlled” in Hong Kong.
This is the fifth CDTA (after those with Belgium, the United Kingdom, Ireland and the Czech Republic) that adopts this more stringent residence test than the “normally managed or controlled” test commonly used in other CDTAs that Hong Kong has concluded.
This alert summarizes:
- Tax benefits available to Hong Kong residents under the CDTA
- Several favorable provisions under the CDTA, which are expected to boost closer economic and trade ties between Hong Kong and Canada
- The status of Hong Kong’s current CDTA network and treaties currently under negotiation or pending ratification