List of tax treaties signed with Hong Kong
The France-Hong Kong tax treaty
The existence of a tax treaty between two countries allows the declarant to avoid double taxation through the simultaneous application of the tax legislation of the country of origin and the host country.
There is a tax treaty between France and Hong Kong, as well as between Hong Kong and Austria, Belgium, Brunei, Canada, China, the Czech Republic, the island of Guernsey, Hungary, Indonesia, Ireland, Italy, Japan, the island of Jersey, Kuwait, Liechtenstein, Luxembourg, Malaysia, the island of Malta, Mexico, the Netherlands, New Zealand, Portugal, South Africa, Spain, Switzerland, Thailand, the United Kingdom and, finally, Vietnam.
Understand a tax treaty
An international tax treaty is an agreement between two states concerning all or part of their tax relations.
International tax treaties prevent taxpayers from being taxed twice as a result of the simultaneous application of the tax legislation of the two contracting states.
Each international tax treaty concluded between two states concerns:
- individuals (income tax, inheritance tax, etc.) and legal entities,
- and a period of application, with retroactive effect when the income to which it applies is from years preceding its entry into force.
Each treaty provides, in particular:
- the allocation of taxing rights,
- and the arrangements for avoiding double taxation.
How tax treaties allocate taxation
1. Concept of residence
The taxpayer’s country of tax residence, for an individual, generally indicates the applicable taxation rules. It is determined according to certain criteria, in order of priority:
- permanent home,
- centre of vital interests (personal and economic ties),
- habitual place of residence,
- possibly nationality, etc.
2. Allocation of the right to tax
International tax treaties generally provide, for each category of income, three methods of taxation:
- exclusive taxation in the state of residence,
- exclusive taxation in the source state,
- non-exclusive taxation in the source state.
Methods for avoiding double taxation
Exemption method
Two variants:
- Full exemption, which consists of disregarding income that has already been taxed.
- Exemption with progression (or “effective tax rate method”), whereby the amount of income already taxed is taken into account to determine the tax rate to be applied to other income.
Imputation method
Two methods:
- Full credit, which consists of calculating tax on the total amount of income that has been taxed, regardless of its source, and then deducting the tax paid in the other state.
- Ordinary credit (the most widely used), which consists of deducting the tax already paid, up to the amount of tax in the state of residence attributable to the income taxed abroad (application of a tax credit).