Tax treaty with Czech

Hong Kong signs tax treaty with Czech Republic

香港與捷克共和國簽訂稅務協定

Professor Chan presents a souvenir to Mr Kalousek

The Secretary for Financial Services and the Treasury, Professor K C Chan, signed in Prague on June 6, Prague time an agreement with the Czech Republic for the avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income on behalf of the Hong Kong Special Administrative Region Government. The Czech Minister of Finance, Mr Miroslav Kalousek, signed on behalf of his Government.

This is the 21st comprehensive agreement for the avoidance of double taxation (CDTA) concluded by Hong Kong with its trading partners, coming after those with Belgium, Thailand, the Mainland of China, Luxembourg, Vietnam, Brunei, the Netherlands, Indonesia, Hungary, Kuwait, Austria, the United Kingdom, Ireland, Liechtenstein, France, Japan, New Zealand, Switzerland, Portugal and Spain.

As the CDTA sets out clearly the allocation of taxing rights between the two jurisdictions and the relief on tax rates on different types of passive income, it will help investors better assess their potential tax liabilities from cross-border economic activities. The agreement will boost closer economic and trade ties between the two places, and provide added incentives for companies in the Czech Republic to do business or invest in Hong Kong, and vice versa.

In the absence of a CDTA, income earned by Czech residents in Hong Kong is subject to both Hong Kong and Czech income tax. Profits of Czech companies doing business through a branch in Hong Kong are fully taxed in both places. Under the agreement, tax paid in Hong Kong will be allowed as a credit against Czech tax payable.

In the absence of a CDTA, Hong Kong residents receiving dividends from the Czech Republic not attributable to a permanent establishment in the Czech Republic are subject to the Czech withholding tax, which is currently set at 15%. Under the agreement, this withholding tax rate will be capped at 5%. Hong Kong residents will be exempted from Czech withholding tax on interest, currently set at 15%. The Czech withholding tax on royalties, currently at 15%, will be capped at 10%.

Under the CDTA, Hong Kong airlines operating flights to the Czech Republic will be taxed at Hong Kong's corporation tax rate (which is lower than that of the Czech Republic). Profits from international shipping transport earned by Hong Kong residents that arise in the Czech Republic, which are currently subject to tax there, will not be taxed in the Czech Republic under the agreement.

The Hong Kong/Czech Republic CDTA has incorporated the latest Organisation for Economic Co-operation and Development standard on exchange of information.

The Hong Kong/Czech Republic CDTA will come into force after the completion of ratification procedures on both sides. In the case of Hong Kong, an order is required to be made by the Chief Executive in Council under the Inland Revenue Ordinance. The order is subject to negative vetting by the Legislative Council.

Hong Kong is actively seeking to expand its network of CDTAs with major trading and investment partners. Where CDTA discussions with some jurisdictions cannot be started for the time being, Hong Kong will seek to conclude limited double taxation avoidance arrangements for airline and shipping income with relevant partners. So far, 27 avoidance of double taxation agreements on airline income, six agreements on shipping income and two agreements on airline and shipping income have been reached.

Details of the Hong Kong/Czech Republic CDTA are available at the Inland Revenue Department's website (www.ird.gov.hk/eng/pdf/Agreement_Czech_HongKong.pdf).

財經事務及庫務局局長陳家強於布拉格時間六月六日在布拉格與捷克財政部長米羅斯拉夫．卡盧塞克簽訂香港與捷克共和國就收入避免雙重徵稅及防止逃稅的協定。

財經事務及庫務局局長陳家強代表香港特別行政區政府，於布拉格時間六月六日在布拉格與捷克共和國就收入避免雙重徵稅及防止逃稅簽署協定。捷克財政部長米羅斯拉夫．卡盧塞克則代表該國政府簽署。

該協定是香港簽訂的第二十一份全面性避免雙重徵稅協定(全面性協定)。在此之前，香港已先後與比利時、泰國、中國內地、盧森堡、越南、文萊、荷蘭、印尼、匈牙利、科威特、奧地利、英國、愛爾蘭、列支敦士登、法國、日本、新西蘭、瑞士、葡萄牙和西班牙等貿易夥伴簽訂全面性協定。

全面性協定闡明協定雙方的徵稅權及各種被動收入的稅率寬免，有助投資者更有效地評估其跨境經濟活動的潛在稅務負擔。全面性協定亦有助加強兩地的經濟貿易連繫，以及進一步鼓勵捷克和香港公司在彼方營商投資。

在沒有該協定的情況下，捷克居民在香港所賺取的收入會同時被香港和捷克徵收入息稅。捷克公司透過在香港的分行所賺取的利潤，須在兩地課稅。在該協定下，在香港所繳的稅款，可以從捷克所徵收的相關稅項中抵免，從而避免雙重徵稅。

在沒有該協定的情況下，香港居民若在捷克收取股息收入，而該等股息收入並非源於在當地所設的常設機構，現時須向捷克繳交15%的預扣稅。在該協定下，有關預扣稅稅率將會以5%為上限。現時捷克向香港居民徵收的15%利息預扣稅稅率將獲豁免；而特許權使用費的預扣稅稅率亦會由現時的15%降至以10%為上限。

在該協定下，香港的航空公司經營往來捷克的航線，只須就有關利潤按香港稅率（比捷克的稅率為低）繳納香港利得稅，而無須在捷克繳稅。現時香港居民從捷克國際航運收入賺取的利潤，須在該國課稅。在該協定下，捷克將豁免香港居民該等航運收入的稅項。

香港與捷克的全面性協定採用了經濟合作與發展組織的最新資料交換準則。

香港與捷克的全面性協定將待雙方完成有關的批准程序後開始生效。就香港而言，行政長官會同行政會議須根據《稅務條例》就協定作出一項命令，該項命令須經立法會審議通過。

香港正積極與主要的貿易及投資夥伴建立全面性協定的網絡。假若不能即時就全面性協定與其他地區展開磋商，香港亦會尋求與有關夥伴訂立僅限於國際航運或空運業務收入的有限度避免雙重徵稅協定。現時，香港已簽訂二十七份限於空運的避免雙重徵稅協定、六份限於航運的避免雙重徵稅協定及兩份限於空運與航運的避免雙重徵稅協定。

有關香港與捷克的全面性協定的詳情載於稅務局網頁(www.ird.gov.hk/chi/pdf/Agreement_Czech_HongKong.pdf)