The Hong Kong Inland Revenue Department has announced that the income tax treaty with Saudi Arabia entered into force on 1 September 2018. The treaty, signed 24 August 2017, is the first of its kind between the two jurisdictions.
The treaty covers Hong Kong profits tax, salaries tax, and property tax. It covers Saudi Zakat and income tax, including the natural gas investment tax.
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.
The following capital gains derived by a resident of one Contracting Party may be taxed by the other Party:
Gains from the alienation of other property by a resident of a Contracting Party may only be taxed by that Party.
Both countries apply the credit method for the elimination of double taxation.
The treaty does not include a non-discrimination article, although the final protocol provides that if Saudi Arabia enters into a tax treaty that does include an article on non-discrimination (with certain exceptions), then negotiations will be entered into to introduce provisions on non-discrimination into the Hong Kong-Saudi Arabia treaty.
The treaty applies in Saudi Arabia from 1 January 2019 and in Hong Kong from 1 April 2019.
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