The Comprehensive Avoidance of Double Taxation Arrangement between Hong Kong and Macao (“DTA-HK/MC”) has entered into force on 18 August 2020. It will be applied in Macao and Hong Kong as from 1 January 2021 and 1 April 2021 respectively.
The DTA-HK/MC stipulates, amongst others, the taxing rights of each jurisdiction (i.e. Hong Kong and Macao) on the relevant income, the methods for elimination of double taxation and the mutual agreement procedure. This can give a greater degree of certainty on the tax liabilities of taxpayers engaging in the cross-border activities (e.g. a Hong Kong tax resident working/carrying out business activities in Macao, or vice versa). In addition, taxpayers are eligible to double taxation relief/credit pursuant to the DTA-HK/MC, provided that certain conditions can be met. Moreover, the Hong Kong withholding tax rate in respect of royalty fees paid to unrelated non-resident corporations can potentially be reduced from the standard rate of 4.95% to a preferential rate of 3% under the DTA-HK/MC.
Our firm HKWJ Tax Law & Partners Limited can provide further advice on the application of the DTA-HK/MC, analyse the tax exposures of the corporations/individuals concerned and explore whether any tax benefits/relief can be obtained by applying the DTA-HK/MC.