22 March 2018
INDIA: Hong Kong Double Taxation Avoidance Agreement Sees Withholding Tax Cut to 10%
A reduction in the applicable level of Withholding Tax (WHT) from 20% to 10% in the case of Hong Kong residents is one of the key benefits of the Comprehensive Agreement for the Avoidance of Double Taxation (CDTA) that has just been signed between India and Hong Kong.
At present, a 20% WHT is payable on all interest, royalties and fees for technical services sourced in India. In order to qualify for the reduced rate, however, Hong Kong investors will have to satisfy the Indian tax authorities that any such transactions have not been carried out explicitly to avoid paying higher taxes.
Among the other CDTA benefits, Hong Kong carriers operating flights to India are exempt from corporate taxation in India and are liable to be taxed solely in Hong Kong. Furthermore, any profits accruing from India-bound international shipping services operated by Hong Kong businesses will enjoy a 50% reduction in their Indian tax liability. In addition to tackling the problem of double taxation, the new agreement is also expected to help counter tax evasion by allowing for the freer exchange of information between the tax authorities of the two jurisdictions.
For further details, see: Hong Kong and India Conclude Double Taxation Avoidance Agreement