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Korea, Rep of-Hong Kong

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Tax Treaty between South Korea and Hong Kong Signed

On 8 July 2014, an income tax treaty between South Korean and Hong Kong was signed. The treaty is the first of its kind between the two jurisdictions.

Taxes Covered

The treaty covers South Korean income tax, corporation tax, the special tax for rural development, and the local income tax. It covers Hong Kong profits tax, salaries tax, and property tax.

Residence

If a company is a resident in both Contracting Parties, the competent authorities will determine the company's residence for the purpose of the treaty through mutual agreement. If the authorities cannot reach mutual agreement, the company will not be entitled to the benefits of the treaty, except those provided by Articles 21 Methods for Elimination of Double Taxation, 22 Non-Discrimination, and 23 Mutual Agreement Procedures.

Withholding Tax Rates

  • Dividends - 10% if the beneficial owner is a company directly holding at least 25% of the paying company's capital, otherwise 15%
  • Interest - 10%
  • Royalties - 10%

Double Taxation Relief

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

Limitation on Benefits

The treaty includes a limitation on benefits provision whereby the benefits of the treaty articles on dividends, interest, royalties, capital, and other income will not apply if the main purpose or one of the main purposes of a resident or any person concerned with the creation or assignment of any share, debt-claim, property or right in respect of which income is paid is to take advantage of those articles.

Entry into Force and Effect

The treaty will enter into force 15 days after the ratification instruments are exchanged. It will apply for Hong Kong from 1 April of the year following its entry into to force. For South Korea it will apply for withholding taxes from 1 April of the year following its entry into force, and for other taxes from 1 January of the year following its entry into force.

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