Hong Kong-Türkiye tax treaty signed

Hong Kong SAR (HK) signed a Comprehensive Double Tax Agreement (CDTA) with Türkiye on 24 September 2024. Türkiye is one of the economies participating in the Belt and Road Initiative. This is the 51st CDTA concluded by HK.

Below is a comparison of the withholding tax rates applicable to dividends, interest and royalties, under the respective domestic tax law and the HK-Türkiye CDTA:

NB1: The 4.95% rate generally applies. If the royalty is paid to an associated entity and the intellectual property has been owned by a person carrying on business in HK, 16.5% applies. If the taxpayer is eligible for two-tiered tax rates, 2.475% (or 8.25% if higher rate) applies on the first HKD 2 million of assessable profits and 4.95% (or 16.5% if higher rate) on the remaining amount.

NB2: 0% for interest on loans payable to a foreign state, an international institution, a foreign bank, or a foreign corporation that qualifies as a “financial entity”; 10% in all other cases.

NB3: If dividends are not taxed in HK, a 5% rate would apply if the beneficial owner is a company which holds directly at least 25% of the capital of the company paying the dividends throughout a 365-day period; otherwise, the rate would be 10%. However, if dividends are taxed in HK, a 10% rate would apply to dividends paid to a company that holds directly at least 25% of the capital of the payer company throughout a 365-day period; otherwise, the rate would be 15%.

NB4: 7.5% if it is received by a financial institution in respect of a loan or debt instrument with a maturity period exceeding 2 years; 10% in all other cases.

NB5: 7.5% for the use of or right to use industrial, commercial or scientific equipment; 10% in all other cases.

The HK-Türkiye CDTA will come into force after the completion of ratification procedures by both jurisdictions. The CDTA can be downloaded from this link.

Tax Newsflash is published for the clients and professionals of Deloitte Touche Tohmatsu. The contents are of a general nature only. Readers are advised to consult their tax advisors before acting on any information contained in this newsletter.

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Authors

Doris Chik
Tax Partner
+852 2852 6608
dchik@deloitte.com.hk

Carmen Cheung
Senior Tax Manager
+852 2740 8660
carmcheung@deloitte.com.hk

International and M&A Tax

National Leader

Vicky Wang
Tax Partner
+86 21 6141 1035
vicwang@deloitte.com.cn

Hong Kong

Anthony Lau
Tax Partner
+852 2852 1082
antlau@deloitte.com.hk