Before heading to the two day G20 summit in Mexico, president Hu Jintao visited Denmark in a first such trip by a Chinese head of state since 1950, when the two sides established diplomatic relations.
During his visit, he met with Danish Prime Minister Helle Thorning-Schmdit as they witnessed the signing of a host of cooperation agreements including one covering the avoidance of dual taxation on income earned by Danish nationals residing in China (or vice versa) and the prevention of fiscal evasion.
In the absence of a DTA, that income would be subject to both Chinese and Danish taxes, instead of one counting as payable towards the other.
The two countries also agreed to cooperate in a number of fields including renewable energy, culture and agriculture.
Chinese Vice Premier Wang Qishan was also present in the Nordic country and attended the signing of 20 new business deals between Chinese and Danish companies, with a total value close to $3.35 billon.
Hong Kong DTA with Mexico was signed by its Financial Secretary, John C Tsang, and Mexican Secretary of Finance and Public Credit, José Antonio Meade Kuribreña. The agreement was drafted according to the latest Organization for Economic Cooperation and Development (OECD) standards on the exchange of tax information.
The comprehensive dual taxation agreement will provide investors with a clear understanding of their newly adjusted tax liabilities on investments in the Latin American country and in China Special Administrative Region.
Prior to the ratification of the treaty by both sides, Hong Kong residents receiving interest earned in Mexico are subject to a Mexican withholding tax of 30 percent. Under the DTA, this tax rate will be capped at 10 percent in general cases, and 4.9 percent if the interest beneficiary is a bank.
Taxes levied on royalties in Mexico will also be reduced from the current 25 or 30 percent (depending on the category of the royalty) to a maximum of 10 percent.
Airlines and international shipping companies will similarly benefit from tax reductions under the DTA. Hong Kong airlines running flights to Mexico will no longer be taxed there, and will only be subject Hong Kong corporate tax which is the lower of the two rates. A similar status has been reached for Mexico-sourced profits of transport businesses residing in Hong Kong.
Hong Kong based companies undertaking business activities through a permanent presence in Mexico, currently being double taxed by both tax authorities on profits arising in Hong Kong, will not be subject to such dual taxation in the future. Companies will be allowed to credit Mexican income taxes against those payable in Hong Kong.
