The Hong Kong-Georgia Double Taxation Agreement (DTA), which was signed in October 2020, will come into force from 1 July 2021. The DTA will have effect in respect of Hong Kong tax for any year of assessment beginning on or after 1 April 2022, i.e., 2022/23. This brings the number of DTAs entered into by Hong Kong to 45, with 43 DTAs being signed and ratified. Please refer to https://henrykwongtax.com/home/hong-kong-tax-treaty-network/ for the summary of Hong Kong’s DTA network.
Below is the summary of Withholding Tax rate for payments from Georgia to Hong Kong:
Double taxation relief | Withholding tax rate | |
Normal rate | DTA rate | |
Dividend | 5% | 0% |
Interest | 5% | 0% |
Royalty | 5% | 5% |
Capital gain on disposal of shares | 15% | 0% |
Note: Particular conditions might have to be fulfilled in order to enjoy the above preferential tax rates. We are open for further discussion for any investment planning in Georgia.
By clearer clarification of taxing rights between Hong Kong and Georgia, the enforcement of Hong Kong-Georgia DTA shall enhance cross-border business activities and transactions as business could better assess their potential tax liabilities. Georgia is one of the key members in the Belt and Road initiative.
Points to Note
Same as other DTAs, the requirements for being a “Hong Kong tax resident” has never changed to enjoy the preferential tax rates stipulated in the DTAs. The enforcement of such requirements will get stricter across global tax authorities.
A separate application has to be lodged by companies to the Hong Kong Inland Revenue Department (IRD) to obtain the Certificate of Tax Resident Status to prove its Hong Kong tax residency status. In most DTA countries, such Certificate is one of the necessary documents to be presented to the overseas tax authorities for claiming the preferential tax rates under corresponding DTA.
We observe an increasingly stringent approach implemented by the IRD in granting the Certificate of Tax Resident Status to applicants in recent years. In case of insufficient documents provided or weak grounds proposed by applicants to prove that the management and control are exercised in Hong Kong, follow-up challenges from the IRD should be expected. To enhance the chance of successful application, pre-application tax planning is necessary and sufficient time should be retained for implementation of plan before application.
You are welcome to connect with us to evaluate your chance of successful application.
