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Hong Kong-Thailand

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The first-time income tax treaty and protocol between Hong Kong and Thailand, signed on 7 September 2005, entered into force on 7 December 2005. The treaty generally applies from 1 January 2006 in Thailand and 1 April 2006 in Hong Kong

The maximum rates of withholding tax are:

-   10% on dividends;
-   15% on interest, in general; and 10% if the interest is beneficially owned by any financial institution, insurance company, or, supplier selling goods/services on credit in an arm's length transaction. Interest paid to the respective governments, local authorities, designated banks, etc. are exempt from tax; and
-   15% on royalties in general; 10% if the royalty is in respect of the use of or the right to use any patent, trademark, design or model, plan, secret formula or process; and 5% if the royalty is in respect of the use of or the right to use a copyright of literary, artistic or scientific work.

Deviations from the OECD Model Convention include that:

-   a building site, construction or installation project or a related supervisory activity constitutes a permanent establishment (PE) if it continues for a period of more than 6 months; (ii) the furnishing of services including consulting services constitutes a PE if the activity lasts for a period or periods aggregating more than 6 months within any 12-month period; and (iii) a warehouse in relation to a person providing storage facilities for others constitutes a PE; and
-   the definition of royalties includes payments for the use of, or the right to use, industrial, commercial or scientific equipment.

Both states generally utilize the credit method to avoid double taxation and also provide for a tax sparing credit for a period of 7 years with respect to the tax which is otherwise payable in the other State but has been reduced or waived in accordance with special incentive laws designed to promote economic development in that other State.

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