Pakistan, HK sign accord to avoid double taxation

ISLAMABAD: Pakistan and Hong Kong on Friday signed an agreement to help their businesses get rid of double taxation and exchange information to curb tax evasion and avoidance. 

“The agreement once ratified, shall benefit individuals and companies working in Pakistan and Hong Kong SAR (special administrative regions) by providing safeguards against paying double taxation on the incomes of the residents of both jurisdictions,” said a statement received from Hong Kong.

Pakistan’s Ambassador for China Masood Khalid and Hong Kong Secretary for Financial Services and the Treasury Professor KC Chan signed the agreement of avoidance of double taxation and prevention of fiscal evasion with respect to taxes on income.

Under the agreement, any tax paid by Hong Kong companies in Pakistan will be allowed as a credit against the tax payable in Hong Kong on the same profits, subject to the provisions of the tax laws of Hong Kong.  

Likewise, for Pakistani companies, the tax they paid in Hong Kong will be allowed as a deduction from the tax payable on the same income in Pakistan.  The agreement will also provide adequate certainty in respect of taxation rules applicable to cross-border business transactions, dividends, interest and royalties.

“The agreement would promote economic cooperation, investment and would strengthen the existing bilateral economic relations between Pakistan and Hong Kong,” Khalid said. “This is a step forward bringing economies along the belt and road initiative, closer.”

The ambassador said the agreement sets out clearly the allocation of taxing rights between the two jurisdictions, “which would eventually help investors better assess their potential tax liabilities from cross-border economic activities.”

Consul General for Hong Kong Abdul Qadir Memon said the agreement would help confidence building in Pakistan’s economy.

Ali Ahmed Arain, consul general for Guangzhou and other officials witnessed the signing ceremony.  Pakistan has a signed double taxation treaties with a number of companies 

In September last year, the country also signed a multilateral convention on mutual administrative assistance in tax matters of the Organisation for Economic Cooperation and Development (OECD) to facilitate international cooperation on tax laws and to combat tax evasion. Currently, more than 80 countries are signatories to the OECD convention.

OECD is an intergovernmental forum, which focuses on issues, including trade, taxation, environment, technology and education. The forum has 35 member countries in Europe, Americas and Asia-Pacific. Pakistan, though not a member of OECD, is regularly invited to participate in its various committee meetings.