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Tax Credit Claim (Avoidance of Double Taxation)

Hong Kong Foreign Tax Credit Claim

Hong Kong adopts the territorial basis of taxation, i.e. only income / profit sourced in Hong Kong is subject to tax. Income / profit derived from outside Hong Kong by a local resident is generally not taxable in Hong Kong. Therefore, Hong Kong residents generally do not suffer from double taxation. However, many jurisdictions tax their residents on a worldwide basis, so some taxpayers suffer from double taxation.

In this regard, foreign tax credit claim is available in Hong Kong if foreign tax is paid by a Hong Kong tax resident on income derived from a jurisdiction that has entered into a comprehensive double taxation agreement (CDTA) with Hong Kong and the same income is subject to tax in Hong Kong, or foreign tax credit claim is also available for specified foreign-sourced income under the FSIE regime even foreign tax is paid in a jurisdiction without CDTA with Hong Kong. However, taxpayers should take reasonable steps to relieve the foreign tax before making a foreign tax credit claim.

To claim foreign tax credit, taxpayers must provide supporting documents, such as foreign tax payment receipts, together with the tax credit calculation to the IRD.

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As tax experts, we offer comprehensive services to help taxpayers making a foreign tax credit claim and ensuring them not suffering from double taxation.

We provide consultation to our clients to help them understand whether they are eligible for foreign tax credit claim. Tax credit calculation could be complex, and we assist in such calculation and application for tax credit claim in Hong Kong Profits Tax filing.

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