Tax Agreement With Korea

On 8 July 2014, an agreement for the avoidance of double taxation and the prevention of fiscal evasion with respect to income taxes was signed between Hong Kong and Korea. The agreement sets out clearly the taxing rights allocation between the two jurisdictions, which will help investors better assess their potential tax liabilities from cross-border economic activities. As the result, the economic and trade connections between the two places may be more frequent and closer.

Following benefits will be resulted from the signing of this tax agreement with Korea :-

1. In the past, income earned by Korean residents in Hong Kong is subject to both Hong Kong and Korean income tax in the absence of the agreement. Since the agreement had been effective, credit against tax payable in Korea will be allowed if income was assessed and tax paid in Hong Kong already.

2. The profits of Hong Kong companies doing business through a permanent establishment in Korea may be taxed in both places for source of income in Hong Kong without signing agreement with Korea. From now onwards, double taxation will be avoided if any Korean tax paid will be offset as a credit against the tax payable in Hong Kong.

3. Receiving interest from Korea by Hong Kong residents are subject to Korea's withholding tax, which ranges from 14% to 20%. After the agreement signed, the withholding tax will be taxed at 10% at maximum. Also, for the Korean withholding tax on royalties will be change from 20% to 10% at maximum. The Korean dividends withholding tax on Hong Kong residents will be dropped from 20% to 10% or 15%, depending on their shareholdings percentage.

4. Outlining by this tax agreement, no more double tax was levied on airlines operating flights in between and profits from international shipping transport between Hong Kong and Korea.

For details, please refer to the following information in website of Inland Revenue Department www.ird.gov.hk/eng/pdf/Agreement_Korea_HongKong.pdf.

Disclaimer:

The publication contains information in summary form and is therefore intended for general guidance only.  This publication is not intended as legal, accounting or other professional advice and should not be relied upon as such.  If legal, accounting or other professional advice or expert assistance is required, the services of a competent professional should be sought.  Neither Reanda Lau & Au Yeung Limited nor any related entity shall have any liability to any person or entity that relies on the information contained in this publication.