IRD`s position has had consequences for a number of taxpayers, particularly those operating through branches in Hong Kong – although there may be a contract with the jurisdiction where the tax was levied, non-Hong Kongers could not benefit from it. It also raised doubts as to the situation of non-interest payments that had suffered from withholding tax abroad, as it was difficult to see how these fit into IRD`s analysis. U.S. Tax Convention in Hong Kong: Although the U.S. has nearly 60 tax treaties with other countries, the U.S. and Hong Kong did not sign a bilateral tax treaty in 2019. The IRS`s general international tax laws apply. The United States has tax treaties with a number of countries. Under these contracts, residents (not necessarily citizens) of foreign countries are taxed at a reduced rate or are exempt from U.S. tax on certain items of income they receive from sources located in the United States.
These reduced rates and exemptions vary by country and income. Under the same conventions, U.S. residents or citizens are taxed at a reduced rate or are exempt from foreign taxes on certain items of income they receive from foreign sources. Most income tax treaties include a so-called “savings clause” that prevents a U.S. citizen or resident from using the provisions of a tax treaty to avoid taxing income withheld in the United States. If the contract does not cover a certain type of income, or if there is no agreement between your country and the United States, you must pay income taxes in the same way and at the same rates as indicated in the instructions for the corresponding U.S. tax return. Many individual states in the United States tax revenue received in their states. Therefore, you should contact the tax authorities of the state from which you receive income to find out if your income is subject to state tax. Some U.S. states do not comply with tax treaty provisions. This page contains links to tax treaties between the United States and certain countries.
More information on tax treaties is also available on the Department of Finance`s Tax Treaty Documents page. See Table 3 of the Tables of the Tax Convention for the general date of entry into force of each agreement and protocol. There is no tax treaty between Hong Kong and the United States. There is a tax treaty between the United States and China, but it does not apply to Hong Kong. As a jurisdiction that only taxes local income, Hong Kong has traditionally offered little double taxation relief. The proliferation of income tax treaties over the past 15 years has changed this treatment for jurisdictions with which an agreement exists, but Hong Kong still does not offer unilateral tax breaks unless there is an income tax treaty. However, there were two important exceptions to this principle: when the law was revised in 2019, Article 16(1)(c) was amended to apply only if the corresponding tax was incurred in a country with which Hong Kong did not have an income tax treaty (on the basis that the company would claim a credit under the Income Tax Convention, if such a provision is in force). The basic principles of deductibility set out in § 16 have not been changed.
There is no U.S. tax treaty in Hong Kong. ==References=====External links===And Hong Kong does not have a bilateral tax treaty if a U.S. person (citizen, lawful permanent resident, or foreigner who meets the substantial presence criterion) with Hong Kong assets and/or income may be required to report to the IRS. The proposed amendments would clarify that a deduction is available for foreign withholding taxes levied on Hong Kong income tax. It also addresses the abnormal situation in which a non-resident company has not been able to obtain tax relief in a jurisdiction with which Hong Kong has entered into a tax treaty. These changes would be welcomed by the business community. In the absence of a U.S. double taxation treaty in Hong Kong, the IRS`s general tax and reporting rules apply. Hong Kong has concluded several double taxation treaties with other countries. So, if you are a Hong Kong resident or a citizen with investments in other countries, you should check this with Hong Kong to determine your potential tax obligations, exemptions and exclusions.
In July and August 2019, the Inland Revenue Department (IRD) published two revised versions of ministerial Interpretation and Practice Notes (DIPN) 28, which updated IRD`s position to reflect the new legislation. This view represented a significant change from accepted practice and was controversial. In particular, IRD argued that under the general principles of withholding tax, no deduction was possible even if it was deducted on a gross basis. A deduction would only be possible under paragraph 16(1)(c) if no provision of the Income Tax Convention was available. Read TaxNewsFlash Hong Kong`s tax treaty network aims to remove the double taxation barrier for foreign investment by helping to structure transactions at minimal tax costs. Preparing a high-quality tax return after proper tax planning should allow these and other strategies to be used to minimize or possibly eliminate tax liability. Note that in most cases, it is necessary to file a tax return, even if no tax is due. Hong Kong has concluded 40 double taxation treaties classified as follows: Employees may choose to make voluntary contributions by sending written notice to their employer […].