Hong Kong and Serbia Sign Double Taxation Avoidance Treaty

Hong Kong and Serbia Came Together to Sign Double Taxation Avoidance Pact

The Secretary for Financial Services and the Treasury of Hong Kong has signed a comprehensive avoidance of double taxation agreement (CDTA) with Serbia on behalf of the Hong Kong Special Administrative Region Government. The avoidance of double taxation agreement signifies the Government’s efforts in enlarging Hong Kong’s tax treaty network.

 

Growing Trade Connections

The CTDA will be the 44th such agreement that Hong Kong has signed. The CTDA sets out the allocation of taxing rights between the two jurisdictions. This consequently helps investors to better assess their potential liabilities in tax from cross-border economic activities.

Serbia is among the expanding list of economies coming onboard the Belt and Road Initiative, and the participation of Serbia is expected to bring an influx of lucrative business opportunities as well. The CDTA will further show support in the trade connections between the two economies. Plus, the CDTA will offer attractive additional incentives for Hong Kong and Serbia in terms of business and investments.

Under the said pact, double taxation will be avoided. According to the agreement, any tax paid in Serbia by Hong Kong companies will be allowed as a credit against the tax payable in Hong Kong on the same income. This, however, will be subjected to the tax law provisions of Hong Kong. Similarly, Serbian companies that paid their tax in Hong Kong will serve as a deduction from the tax payable on the same income in Serbia.

 

Hong Kong-Serbia Tax Relief Arrangements

The CDTA pact will also provide the following tax relief arrangements:

1. Serbia’s withholding tax rates for Hong Kong resident companies on dividends, interest and royalties will be capped at 10 per cent; and
2. Serbia will not tax Hong Kong residents on profits from international shipping transport earned in Serbia.

The Hong Kong-Serbia CDTA will come in action after the settlement of ratification procedures by both jurisdictions. In Hong Kong’s case, the regulation will be implemented by the Chief Executive in Council under the Inland Revenue Ordinance (Cap. 112); the order will be subjected to negative vetting by the city’s Legislative Council.

The full agreement of Hong Kong-Serbia CDTA can be found here.