Details of the income tax treaty and protocol between Hong Kong and Kuwait, signed on 14 May 2010, have become available. The treaty was concluded in the Chinese, Arabic and English languages, each text having equal authenticity. In the case of divergence, however, the English text prevails. The treaty generally follows the OECD Model Convention.
The maximum rates of withholding tax are:
|-||5% on dividends in general; 0% applies if the beneficial owner is the government or any of its institutions or wholly-owned entities;|
|-||5% on interest in general; an exemption applies on interest payments to the government and other government bodies and institutions as defined; and|
|-||3% on royalties.|
Deviations from the OECD Model include:
|-||A building site, a construction, assembly or installation project or supervisory activities in connection therewith constitute a permanent establishment only if such site, project or activities last more than 6 months (Art. 5(3)(a)).|
|-||An enterprise furnishing services (including consultancy services) in the other contracting state is deemed to have a PE if the services are provided for a period(s) exceeding 180 days in any 12-month period, and these services are performed for the same or a connected project directly or through employees or other personnel engaged by the enterprise (Art. 5(3)(b)).|
Hong Kong generally applies the credit method to avoid double taxation. Hungary generally applies the deduction method for the avoidance of double taxation.
Neither contracting party can terminate this treaty during a period of 5 years starting from the date of its entry into force (Art. 29).
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