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Treaty between Hong Kong and Qatar – details

Details of the Hong Kong - Qatar Income Tax Agreement (2013), signed on 13 May 2013, have become available. The treaty was concluded in the Chinese, Arabic and English languages, all texts having equal authenticity. In the case of divergence, however, the English text will prevail. The treaty generally follows the UN Model (2001).

The maximum rates of withholding tax are:

-   0% on dividends;
-   0% on interest; and
-   5% on royalties.

Deviations from the UN Model (2001) include that:

-   the term permanent establishment (PE) defined under article 5(2) includes within its ambit any premises used as sales outlet or a farm or plantation;
-   article 7(1) does not include a provision on the force of attraction;
-   article 7(3) does not impose any restriction as regards deduction in respect of payments made by way of royalties, fees or other similar payments made to the head office, but leaves the calculation of the profits according to the domestic laws of the contracting state in which the PE is situated;
-   paragraph 1 of the protocol provides with regard to article 9(2) that adjustments made in respect of transactions between associated enterprises of a contracting party will be accepted by the other contracting party only if the adjustment made by the first-mentioned contracting party is justified both in principle and as regards the amount;
-   no relief under articles 10, 11 or 12 would be available if the main purpose of any person concerned with the creation or assignment of the rights in respect of which the payments are made is only to take advantage through such creation or assignment;
-   article 13 (Capital Gains) follows the OECD Model (2010);
-   article 13(4), which allocates taxing rights in respect of capital gains derived from alienation of shares in a company which derives 50% or more of its value directly or indirectly from immovable property to the contracting state in which the immovable property is situated, includes certain exceptions covering capital gains on the alienation of shares:
(a)   quoted on a stock exchange;
(b)   exchanged in the framework of a reorganization of a company, a merger, a scission or a similar operation; or
(c)   in a company deriving more than 50 per cent of its asset value from immovable property in which it carries on its business;
-   article 21 (Other Income) follows the OECD Model (2010);
-   paragraph 3 of the protocol provides that non-taxation of Qatari nationals would not be regarded as a discrimination under the provisions of article 23 (Non-Discrimination);
-   article 24 (Mutual Agreement Procedure) does not contain an arbitration provision to resolve disputes between the contracting states; and
-   the treaty does not contain an article in respect of assistance in the collection of taxes.

Both states provide for the credit method to avoid double taxation.

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