Hong Kong, India tax treaty enters into force

The first-ever tax treaty between India and Hong Kong has entered into force, the Hong Kong government today announced.

The new treaty, signed March 19, will enter into effect for Hong Kong for tax year of assessment beginning on or after April 1, 2019, the government said.

The new Hong Kong-India tax treaty reduces withholding tax rates for both Indian and Hong Kong residents.

Dividend withholding is reduced to 5 percent and interest, royalties, and technical services fees withholding is reduced to 10 percent.

The treaty also provides for source country taxation of capital gain on sales of shares sales. Further, the new treaty includes modern anti-treaty shopping provisions that aim to thwart transactions that lack substance.