1. DOUBLE TAXATION ARRANGEMENT ("DTA") BETWEEN HONG KONG AND OVERSEAS JURISDICTIONS
1.4 DTA WITH LUXEMBOURG
This is a comprehensive avoidance of double taxation arrangement signed between HKSAR government and Luxembourg on 2 November 2007 and it takes into effect on 1 April 2008 in HK side whereas it takes into effect on 1 January 2008 in Luxembourg side.
The following areas are covered in this new DTA:
1.41 WITHHOLDING TAX RATE ON DIVIDEND RECEIVED:
There are the major areas to be entitled to the tax benefit on dividend received and royalty income received if certain criteria are satisfied:
(i) the withholding tax rate on the dividend is normally significantly reduced from 10% to zero;
(ii) the withholding tax rate on the royalty income is reduced from 5.25% to 3%.
1.42 CAPITAL GAINS (“CG”)
According to DTA - HK/Luxembourg, CG derived by a HK company through the disposal of shares in a Luxembourg company is not subject to tax regardless of the amount of shareholding. Unless the disposal of a real property holding company in which more than 50% of the asset value of this Luxembourg company, which is arisen from immovable property located in Luxembourg. In which case, the CG is subject to tax.
1.43 DEFINITION OF RESIDENTS
According to IRO of Hong Kong, there is no concept of residence, so Hong Kong side has to follow the definition of resident construed in article 4 to define the term of “resident ” under the DTA - HK / Luxembourg.
In fact, the definition of resident in this DTA is similar to those in DTA between HK with PRC, Belgium and Thailand.
For dual residency encountered by persons other than an individual, the concept of residency will be taken into consideration with reference to the place of effective management.
1.44 PERMANENT ESTABLISHMENTS FOR SERVICE-RENDERED PROJECTS
Under the DTA - HK / Luxembourg, a permanent establishment (“PE”) will be concluded to set up if a HK company renders service in Luxembourg for a connected project for the total more than 180-service days within any twelve months period.
1.45 WE PROVIDE SERVICES FOR TAX PLANNING.
We can provide the related tax planning services to those clients which has investment in Hong Kong, Luxembourg and other countries in which is the member of European Union. If you have problem regarding the group structure or intend to restructure your group of companies to minimize your tax liabilities, please feel free to contact us.