Hong Kong signs tax treaty with Czech Republic

An agreement between Hong Kong and the Czech Republic for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income was signed on Jun 6. This is the 21st comprehensive agreement for the avoidance of double taxation (CDTA) concluded by Hong Kong with its trading partners.

In the absence of a CDTA, income earned by Czech residents in Hong Kong is subject to both Hong Kong and Czech income tax. Profits of Czech companies doing business through a branch in Hong Kong are fully taxed in both places. Under the agreement, tax paid in Hong Kong will be allowed as a credit against Czech tax payable.

In the absence of a CDTA, Hong Kong residents receiving dividends from the Czech Republic not attributable to a permanent establishment in the Czech Republic are subject to the Czech withholding tax, which is currently set at 15%. Under the agreement, this withholding tax rate will be capped at 5%. Hong Kong residents will be exempted from Czech withholding tax on interest, currently set at 15%. The Czech withholding tax on royalties, currently at 15%, will be capped at 10%.

Details of the this CDTA are available at :

(www.ird.gov.hk/eng/pdf/Agreement_Czech_HongKong.pdf).

The agreement will boost closer economic and trade ties between the two places, and provide added incentives for companies in the Czech Republic to do business or invest in Hong Kong, and vice versa.