On 24 September 2024, Hong Kong signed a double taxation agreement with Turkey (“DTA-HK/TR”). This DTA will enter into force after completion of the ratification procedures by both jurisdictions.
The DTA-HK/TR shall help investors better assess their tax position and potential tax liabilities arising from cross-border transactions/economic activities, as well as deepen the tax co-operation between the two governments under the Belt and Road Initiative.
Similar to the Hong Kong DTAs entered into with other foreign tax jurisdictions, the DTA-HK/TR stipulates, amongst others, the taxing rights of each jurisdiction on the covered income, the definition of permanent establishments (“PEs”) and the mutual agreement procedure (“MAP”).
In addition, pursuant to the DTA-HK/TR, Hong Kong taxpayers are eligible to double taxation relief on the basis that tax paid in Turkey on the covered income will be allowed as a credit against the tax payable in Hong Kong in respect of the same income, subject to the provisions of the tax laws of Hong Kong and certain conditions.
Moreover, the Turkish withholding tax rate in respect of dividends distributed to Hong Kong tax residents can potentially be reduced from the standard rate of 15% to a preferential rate of 5%/10% under the DTA-HK/TR.
The tax team of HKWJ Tax Law & Partners Limited can offer comprehensive advice on the application of the DTAs, including but not limited to the PE exposures, the entitlement to tax treaty benefits and double tax relief as well as application for the MAP and exchange of information.
