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Hong Kong signs tax treaty with Malaysia

DTA inked 25 April 2012

This is the 24th 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, Portugal, Spain, the Czech Republic, Switzerland, Malta and Jersey.

In the absence of a CDTA, the profits of Hong Kong companies doing business through a permanent establishment, such as a sales outlet, in Malaysia may be taxed in both places if the income is Hong Kong sourced. Under the agreement, double taxation will be avoided in that any Malaysian tax paid by the companies will be allowed as credit against the tax payable in Hong Kong in respect of the income, subject to the provisions of the tax laws of Hong Kong.

In the absence of a CDTA, Hong Kong residents receiving interest from Malaysia are subject to Malaysian withholding tax, which is currently at 15 per cent. Under the agreement, such withholding tax rate will be capped at 10 per cent. The interest withholding tax rate will be further reduced to 0 per cent if the interest is paid or credited to the HKSAR Government, the Hong Kong Monetary Authority, etc. The Malaysian withholding tax on royalties, currently at 10 per cent, will be capped at 8 per cent. The Malaysian withholding tax on fees for technical services, currently at 10 per cent, will be capped at 5 per cent.

www.ird.gov.hk