Double taxation deal signed between India and Hong Kong Double taxation deal signed between India and Hong Kong

Double taxation deal signed between India and Hong Kong
28 Mar 2018

Indian employers will pay a lower withholding tax on royalty and interest income thanks to a new double taxation avoidance agreement (DTAA) that has been signed with Hong Kong.

The pact is expected to boost investment flows, prevent double taxation and also provide for a more effective exchange of information. It will create a more level playing field with Indian domestic law as the withholding tax will be just 10% on interest, royalty and fees for technical services. Until now, it has been as high as 40%.

Rakesh Nangia, managing partner at Nangia & Co told The Hindu Business: "The DTAA will give protection against double taxation to over 1,500 Indian companies and businesses that have a presence in Hong Kong, and also to Hong Kong-based companies providing services in India."

The agreement includes a provision for taxing the indirect transfer of a company’s capital assets, enabling any gains from the sale of immovable property to be taxed by the country from where 50% of the asset value is derived. It also provides exemptions to airline and shipping companies: profits gained from operating ships on an international basis may be taxed in the other country but will be cut by 50%.

Articles on Permanent Establishment and Dependent Personal Service are expected to provide certainty and stability when administrating tax related to business activity.

 Emma Woollacott

Emma Woollacott is a freelance business journalist. Her work has appeared in a wide range of publications, including the Guardian, the Times, Forbes and the BBC.

Indian employers will pay a lower withholding tax on royalty and interest income thanks to a new double taxation avoidance agreement (DTAA) that has been signed with Hong Kong.

The pact is expected to boost investment flows, prevent double taxation and also provide for a more effective exchange of information. It will create a more level playing field with Indian domestic law as the withholding tax will be just 10% on interest, royalty and fees for technical services. Until now, it has been as high as 40%.

Rakesh Nangia, managing partner at Nangia & Co told The Hindu Business: "The DTAA will give protection against double taxation to over 1,500 Indian companies and businesses that have a presence in Hong Kong, and also to Hong Kong-based companies providing services in India."

The agreement includes a provision for taxing the indirect transfer of a company’s capital assets, enabling any gains from the sale of immovable property to be taxed by the country from where 50% of the asset value is derived. It also provides exemptions to airline and shipping companies: profits gained from operating ships on an international basis may be taxed in the other country but will be cut by 50%.

Articles on Permanent Establishment and Dependent Personal Service are expected to provide certainty and stability when administrating tax related to business activity.

 Emma Woollacott

Emma Woollacott is a freelance business journalist. Her work has appeared in a wide range of publications, including the Guardian, the Times, Forbes and the BBC.

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