India and the Hong Kong Special Administrative Region (HKSAR) of China signed a double tax avoidance agreement (DTAA).
The DTAA, titled the ‘Avoidance of Double Taxation and the prevention of Fiscal Evasion’ comes after a year of negotiation and was signed into effect by India’s ambassador to China, Gautam Bambawale, on behalf of the Indian government and Hong Kong’s Financial Secretary, Paul Chan Mo-po.
The India-Hong Kong DTAA holds important tax implications for international businesses operating in both countries. It will also benefit trading companies that do not have a permanent presence in India but service to an India-based entity.
India has over 86 DTAA with many countries which provide tax relief on transactions carried out between India and those countries. But the DTAA specifies the agreed rates of tax and the jurisdiction on the specified types of income involved.
The India-Hong Kong DTAA offers similar provisions. The DTAA will give protection against double taxation to over 1,500 Indian companies and businesses that have a presence in Hong Kong as well as to Hong Kong-based companies providing services in India.
It will provide clarity to businesses regarding tax rates and tax jurisdictions, as they will now be taxed in only one of the signatory countries. This will allow investors to be more confident about their investment decisions.