The Tax Hub

On 10 December 2014, the income tax treaty between Hong Kong and the United Arab Emirates entered into force. The treaty, signed 11 December 2014, is the first of its kind between the two jurisdictions.

Taxes Covered

The treaty covers Hong Kong profits tax, salaries tax and property tax. It covers United Arab Emirates income tax and corporate tax.

Service PE

The treaty includes the provision that a permanent establishment will be deemed constituted when an enterprise furnishes services within a Contracting Party through employees or other engaged personnel for the same or connected project for a period or periods aggregating more than 183 days within any 12-month period.

Withholding Tax Rates

• Dividends - 5%
• Interest - 5%
• Royalties - 5%

Capital Gains

The following capital gains derived by a resident of one Contracting Party may be taxed by the other State:

• Gains from the alienation of immovable property situated in the other Party;
• Gains from alienation of movable property forming part of the business property of a permanent establishment in the other Party; and
• Gains from the alienation of shares of a company deriving more than 50% of its asset value directly or indirectly from immovable property situated in the other Party, with an exemption for shares:
  • Quoted on a recognized stock exchange;
  • Alienated or exchanged in the framework of a reorganization of a company, a merger, a scission or a similar operation; or
  • In a company that carries on its business in the immovable property from which the value is derived

Gains from the alienation of other property by a resident of a Contracting Party may only be taxed by that Party.

A protocol to the treaty, signed the same date, further clarifies that gains from the alienation of shares or comparable interests in a company or of securities or debentures will only be taxable in the Contracting Party in which the alienator is a resident.

Double Taxation Relief

Both jurisdictions apply the credit method for the elimination of double taxation.

Effective Date

The tax treaty applies in Hong Kong from 1 April 2016 and in the United Arab Emirates from 1 January 2016.