Double taxation avoidance between Russia and Hong Kong

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Double taxation avoidance between Russia and Hong Kong - OLIESERVE

New agreement as a tool of profitable tax planning

There is great news for businessmen who consider new options for business operation and want to streamline tax planning.

On January 18, 2016 Russia and Hong Kong entered into an intergovernmental Comprehensive Agreement for the Prevention of Fiscal Evasion and the Avoidance of Double Taxation which will come into force after ratification by both parties and mutual acknowledgement. Consequently, it is expected that the agreement will be applied from new fiscal year (after year of treaty ratification): in Hong Kong from April 1, in Russia from January, 1.

According to the agreement, Russian companies will be able to take advantage of all the privileges of Hong Kong working at Asian markets. It should be noticed that assets of Russian companies will also become more attractive for investors from Asia who have been already operating in Hong Kong.

Considering that Hong Kong is the Special Administrative Region of China nowadays, many Russian companies are functioning in China through Hong Kong.

Prospects opened for Russian business

The Government of the Russian Federation is sure that this agreement will be able to attract businessmen from Asia and Europe operating under the jurisdiction of Hong Kong to invest in Russian companies’ assets as well as to create in Hong Kong new subsidiary companies of Special Purpose Vehicle (SPV) with special function, considering Russian legislation and determined regulations of stock placement performed by Russian companies at international equity markets.

The main milestones of the Comprehensive Double Tax Agreement between Russia and Hong Kong are the following: regulation of aspects connected to taxation of companies’ income, income received from maritime transport and airlift logistics, income gained from dividends, interests, etc., personal income and profit received from property usage. Under the agreement, there will be zero rate of income tax and dividend withholding tax rate will be 5%.

Analogous agreements have been already signed between the Russian Federation and Singapore and China. Consequently, it is possible to come to a logical conclusion, that execution of an agreement with Hong Kong will become an irreplaceable tool to control tax evasion, will make business management methods more transparent and clear and will allow Russian entrepreneurs to operate applying all Hong Kong privileges.

The specialists of OLIESERVE know that business relocation and registration of a company in Hong Kong, the world business center, is a brilliant option not only for successful entrepreneurship, but, considering latest amendments, for profitable tax planning.

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