Walt King

UK/HONG KONG DOUBLE TAX TREATY The story so far. The HMRC web site says it is in force. This help site says it is in force. The Hong Kong IRDC web site says it is in force. The IRDC help line says it is in force. But our UK accountants says it is not effective because it lacks a Non-Discrimination provision. I point out that it is there in black and white, Article 22. They do not reply. I ask you for comment on their opinion but you refuse to do so. I am getting nowhere with this enquiry. So let’s cut to the chase. Please answer this simple question, a YES or NO will suffice. IF WE TRANSFER A DIVIDEND FROM OUR HONG KONG SUBSIDIARY TO THE UK HOLDING COMPANY, WILL YOU TAX IT?

How do it do that? I thought I was contacting you direct?

The ending there is my comment to you: "I have pointed out that Article 22 is titled Non Discrimination. Is there some defect with the wording?" I have since pointed out to the accountants that the UK/HK and UK/China Double Tax treaties' Non Discrimination articles are virtually identical so if one is active then so must be the other. If that is correct, I would appreciate a statement from you to that effect. Thank you.

Thank you for your replies. I have put them to our accountants Darnells of Newton Abbot, Devon, and they insist that the Double Tax treaty does not apply to to us. Here is their reasoning. ……………………………………………... The issue is not that there is no UK/HK Double Tax treaty or that it is no longer effective, but that the treaty of 2010 which was attached to my email of 3 July does not contain an appropriate “non-discrimination” provision. Please note that the UK/HK Double Tax treaty is separate from the UK/China Double Tax treaty which does contain an appropriate “non-discrimination” provision. In the absence of an appropriate “non-discrimination” provision, any dividends paid from Hong Kong to a “Small” company under the Companies Act in the UK will be liable to corporation tax in the hands of DS UK (subject to the possible deduction of any withholding tax paid in Hong Kong). The UK Government has been aware of the issue with the UK/HK Double Tax treaty for many years, but has never amended the treaty. Finally, I would point out that we have checked the tax with a tax expert, who agreed with our conclusions.  I have pointed out that Article 22 is titled "Non Discrimination.” Is there some defect with the wording?

Perhaps I did not explain clearly enough. We are a family company in the UK which set up a subsidiary in Hong Kong some years ago to ease export trade to China and Hong Kong. Profits were annually returned via the UK company for shareholders taking advantage of the Double Tax agreement. A few years ago our accountants in the UK told us that the UK government had torn up the agreement. We have been unable to solve the problem and the profit has since been left accumulating in the Hong Kong company bank account. Last week I did some web searches and as far as I can see from both HMRC and IRD the agreement is still in place. I would like some confirmation or otherwise as to whether that is true.

Some time ago our UK accountants told us that the UK/HK double tax agreement had been dissolved and we have suspended dividend payments back to the UK parent company for some time while we figure out how to deal with it. But I have searched the web including IRD and gov.uk sites and there is no indication that this has happened. Is it true that the Agreement no longer exists?