Hong Kong and Finland have signed a comprehensive agreement for the avoidance of double taxation.
Secretary for Financial Services & the Treasury James Lau and Finnish Consul-General Jari Sinkari signed the agreement on 24 May.
Last week Hong Kong’s Financial Services Development Council, in its report, Maritime Leasing Paper, had berated Hong Kong for the limited number of double taxation agreements it had achieved with its trading partners compared to Singapore with 84 such agreements under its belt.
The document sets out the allocation of taxing rights between the two jurisdictions which will help investors better assess their potential tax liabilities from cross-boundary economic activities.
It is the 40th tax agreement Hong Kong has signed with its trading partners, including the 16 member states of the European Union.
Under the agreement, any Finnish tax paid by Hong Kong companies will be allowed as a credit against the tax payable in Hong Kong on the same profits, subject to the provisions of Hong Kong tax laws.
For Finnish companies, the tax they pay in Hong Kong will be allowed as a deduction from the tax payable on the same income in Finland.
The agreement will come into force after the completion of ratification procedures on both sides.
For Hong Kong, it will be implemented by an order to be made by the Chief Executive in Council under the Inland Revenue Ordinance, subject to Legislative Council vetting.