Hong Kong Expands Tax Treaty Network: Agreements with Bangladesh and Croatia Take Effect
Hong Kong has officially enacted comprehensive double taxation avoidance agreements (CDTAs) with Bangladesh and Croatia, marking another milestone in its efforts to broaden its global tax treaty network. These agreements, signed in August 2023 and January 2024 respectively, will apply to any tax years beginning on or after April 1, 2025, following the completion of the necessary ratification procedures by all parties.
////
Enhancing Tax Certainty and Reducing Costs
ONE
Under the CDTAs, residents of Hong Kong and the respective jurisdictions are exempt from paying tax on the same income twice, significantly reducing the tax burden for businesses and individuals engaged in cross-border economic activities. The Hong Kong government emphasizes that these treaties provide greater certainty regarding tax liabilities, fostering bilateral trade and investment. To date, Hong Kong has signed CDTAs with 51 jurisdictions, underscoring its commitment to facilitating international business.
////
Tailored Tax Benefits for Cross-Border Investors
TWO
The treaty with Bangladesh provides specific tax relief measures, including:
-
Withholding Tax Reductions:
-
Dividend withholding tax capped at 10% or 15%, depending on shareholding levels.
-
Interest, royalties, and technical service fees subject to a maximum 10% withholding tax rate.
-
Shipping Tax Relief:
-
Hong Kong residents engaged in international shipping can benefit from a 50% reduction in Bangladeshi tax on related profits.
Similarly, the agreement with Croatia ensures transparent allocation of taxing rights between the two jurisdictions, allowing investors to better evaluate potential tax liabilities arising from cross-border activities. As part of Hong Kong's growing network of CDTAs, this agreement represents the 17th treaty concluded with a European Union member state.
////
Strengthening Economic Partnerships with Strategic Jurisdictions
THREE
Financial Secretary Christopher Hui has hailed the agreements as pivotal steps in advancing economic and trade relationships with these jurisdictions, particularly in the context of the Belt and Road Initiative. By reducing tax costs and providing a clear framework for taxation, these treaties create favorable conditions for businesses seeking to expand operations in Bangladesh and Croatia.
Croatia's participation as an EU member state and Bangladesh's growing prominence as an emerging economy further underscore the strategic importance of these agreements. Such partnerships reinforce Hong Kong's position as a leading international business hub, equipped to bridge global markets.
////
Risk Prevention and Fiscal Discipline
FOUR
To address rising local government debt, the Ministry pledged systematic reforms and enhanced oversight. Lan Fo’an stressed the importance of mitigating hidden debt risks and strengthening fiscal governance through:
-
Zero-Based Budgeting: Promoting rational allocation of public funds.
-
Enhanced Supervision: Stricter audits to improve accountability and prevent resource misuse.
-
Debt Management: Transparency measures to curb municipal debt risks and improve financial stability.
First, please LoginComment After ~