As with all DTAs, the agreement is expected to provide companies and investors in both HK and Qatar with a better understanding of their respective tax liabilities and future tax exemptions with respect to cross-border business ties.
Reallocating taxing rights, and specifically eliminating the withholding rate on interest, should boost economic and trade relations between the two jurisdictions on the long-term. It will act as an added incentive for HK-based companies to invest and follow business opportunities in Qatar and vice versa.
The DTA will only come into force when both jurisdictions finalize their ratification procedures. In Hong Kong, it will be implemented for "any year of assessment beginning on or after April 1st of the calendar year following the year in which the agreement enters into force."
In Qatar the DTA will have effect "(i) with regard to taxes withheld at source, in respect of amounts paid or credited on or after 1 January in the calendar year following the year in which the DTA enters into force; (ii) with regard to other taxes, in respect of taxable years on or after 1 January in the calendar year following the year in which the DTA enters into force."
During a press conference earlier this month HK Commissioner of Inland Revenue Chu Yam-yuen revealed that the Special Administrative Region tax receipts hit an annual record. He also expected them to register another record next year.
In the 2012-2013 fiscal year the Inland Revenue Department (IRD) collected some HKD 242 billion ($31.2 billion), a two percent year-on-year increase. The rise was largely attributed to a healthy economic environment for the 2011-2012 period, which led to an increase in overall assessable profits for businesses and in turn led to a spike in profit taxes. Salaries tax in HK, however, did decrease due to rising personal allowances.
Chu forecasted another two percent rise in overall tax collectables for the coming year, predicting the total to be near HKD 246 billion.
He also pointed out that Hong Kong has entered into five DTAs since April with Malaysia, Mexico, Canada, Italy and Guernsey - in addition to its latest agreement with Qatar. Negotiations with three more jurisdictions have been completed with formal announcements and signings expected in the near future.
Chu confirmed that government plans towards extending HK's network of double taxation agreements is gaining traction with partners in Europe, Asia Pacific, the Middle East and Africa.
