Hong Kong Signs Double Tax Agreement (DTA) with Russia
On 18 January 2016, Hong Kong signed a DTA with Russia. This agreement comes shortly after Hong Kong concluded a DTA with Romania in November 2015, and brings the number of DTAs in Hong Kong to 34. The DTA will come into force following ratification procedures on both sides. If these can be concluded in 2016, the DTA will be effective from 1 April 2017 in Hong Kong and 1 January 2017 in Russia.
The DTA reduces withholding tax on dividends from 15% to 10% in most cases. This is reduced to 5% if the beneficial owner of the dividend is a parent company with at least 15% of the capital of the distributing company. A 0% rate applies to dividends paid to the Hong Kong Monetary Authority, the Exchange Fund or any entity owned by the Hong Kong government.
Withholding tax on interest is reduced from 20% to 0%, and withholding tax on royalties is reduced from 20% to 3%. Generally, no withholding tax will be charged on capital gains from the sale of a Russian company by a Hong Kong company provided the company derives less than half of its asset value from Russian immovable property (such as real estate, agriculture and forestry).
The DTA also includes a provision for the exchange of tax information between the two jurisdictions plus any specific anti-avoidance provisions.
Date: 17 February 2016