Canada Signs a New Tax Treaty with Hong Kong

On November 11, 2012 Canada and Hong Kong dually signed a tax treaty outlining some new provisions related to cross border investing between the two countries.

The main provisions of the treaty are as follows:

• Withholding rates on dividends from companies that control directly or indirectly at least 10% of the voting power of the company will be 5%. A 15% rate apply to all other dividends.
• A 10% withholding rate applies to all related party interest. Non-related interest (arm’s length interest remains exempt).
• Withholding on royalty income of 10%.
• Capital gains are only taxable to the source country if more than 50% of the value of the immoveable property is located in that source state.
• General anti-avoidance and anti-treaty shopping provisions are included.
• General “exchange of information” article between the two countries are also included.

If you have any questions about the new treaty between Canada and Hong Kong please give us a call at 250-381-2400.

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