(August 17, 2015)
On August 14, 2015 a press release was published on the website of the Inland Revenue Department of Hong Kong announcing that the Agreement between the Government of the Hong Kong Special Administrative Region of the People’s Republic of China and the Government of the Italian Republic for the Avoidance of Double Taxation with respect to Taxes on Income and the Prevention of Fiscal Evasion (Hereafter: the DTA) entered into force on August 10, 2015.
Based on Article 28 of the DTA (“ENTRY INTO FORCE “) the fact that the DTA entered into force on August 10, 2015 means that the DTA shall have effect:
(a) in Italy:
(i) in respect of taxes withheld at source, to income derived on or after January 1, 2016;
(ii) in respect of other taxes on income, to taxes chargeable on or after January 1, 2016;
(b) in the Hong Kong Special Administrative Region:
in respect of Hong Kong Special Administrative Region tax, for any year of assessment beginning on or after 1st April 2016.
Other regulations included in the DTA of which we think they might interest our readers include a.o.
Taxes covered
Based on Article 2, Paragraph 3 of the DTA (“TAXES COVERED”) the existing taxes to which this Agreement shall apply are in particular:
(a) in the case of the Hong Kong Special Administrative Region,
(i) profits tax;
(ii) salaries tax; and
(iii) property tax;
whether or not charged under personal assessment;
(b) in the case of Italy,
(i) the personal income tax;
(ii) the corporate income tax;
(iii) the regional tax on productive activities;
whether or not they are collected by withholding at source.
Paragraph 4 of Article 2 of the DTA subsequently arranges that the Agreement shall apply also to any identical or substantially similar taxes that are imposed after the date of signature of this Agreement in addition to, or in place of, the existing taxes, as well as any other taxes falling within paragraphs 1 and 2 of this Article which a Contracting Party may impose in future.
Resident
With respect to residency Paragraph 1 of Article 4 of the DTA (“RESIDENT”) States the following:
"For the purposes of this Agreement, the term “resident of a Contracting Party” means:
(a) in the case of the Hong Kong Special Administrative Region,
(i) any individual who ordinarily resides in the Hong Kong Special Administrative Region;
(ii) any individual who stays in the Hong Kong Special Administrative Region for more than 180 days during a year of assessment or for more than 300 days in two consecutive years of assessment one of which is the relevant year of assessment;
(iii) a company incorporated in the Hong Kong Special Administrative Region or, if incorporated outside the Hong Kong Special Administrative Region, being normally managed or controlled in the Hong Kong Special Administrative Region;
(iv) any other person constituted under the laws of the Hong Kong Special Administrative Region or, if constituted outside the Hong Kong Special Administrative Region, being normally managed or controlled in the Hong Kong Special Administrative Region;
(b) in the case of Italy, any person who, under the laws of Italy, is liable to tax therein by reason of his domicile, residence, place of management or any other criterion of a similar nature. This term, however, does not include any person who is liable to tax in Italy in respect only of income from sources in Italy;"
Permanent establishment
Paragraph 3 of Article 5 of the DTA (“PERMANENT ESTABLISHMENT”) arranges that he term “permanent establishment” also encompasses:
(a) a building site, a construction, assembly or installation project or supervisory activities in connection therewith, but only if such site, project or activities last more than six months;
(b) the furnishing of services (including consultancy services) by an enterprise, through employees or other personnel engaged by the enterprise for such purpose, in connection with a site, a project or supervisory activities referred to in subparagraph (a), if those services continue within a Contracting Party in connection with such site, project or activities for a period or periods aggregating more than six months within any twelve-month period.
Associated enterprises
Paragraph 2 of Article 9 of the DTA (“ASSOCIATED ENTERPRISES”) contains a so-called appropriate adjustment clause.
Dividends
Paragraph 2 of Article 10 of the DTA (“DIVIDENDS”) maximizes the dividend withholding tax that a Source State is allowed to withhold over dividend distributions to 10 per cent of the gross amount of the dividends.
Paragraph 6 of Article 10 of the DTA contains the following anti-abuse measure:
“The provisions of this Article shall not apply if it was the main purpose or one of the main purposes of any person concerned with the creation or assignment of the shares or other rights in respect of which the dividend is paid to take advantage of this Article by means of that creation or assignment.”
Interest
Paragraph 2 of Article 11 of the DTA (“INTEREST”) maximizes the withholding tax that a Source State is allowed to withhold over interest payments to 12.5 per cent of the gross amount of the interest.
Paragraph 8 of Article 11 of the DTA contains the following anti-abuse measure:
“The provisions of this Article shall not apply if it was the main purpose or one of the main purposes of any person concerned with the creation or assignment of the debt-claim in respect of which the interest is paid to take advantage of this Article by means of that creation or assignment.”
Royalties
Paragraph 2 of Article 12 of the DTA (“ROYALTIES”) maximizes the withholding tax that a Source State is allowed to withhold over royalty payments to 15 per cent of the gross amount of the royalties.
Paragraph 7 of Article 12 of the DTA contains the following anti-abuse measure:
“The provisions of this Article shall not apply if it was the main purpose or one of the main purposes of any person concerned with the creation or assignment of the rights in respect of which the royalties are paid to take advantage of this Article by means of that creation or assignment.”
Capital Gains
With respect to capital gains Paragraph 1 of Article 13 of the DTA (“CAPITAL GAINS”) arranges that gains derived by a resident of a Contracting Party from the alienation of immovable property referred to in Article 6 and situated in the other Contracting Party may be taxed in that other Party.
Paragraph 4 of Article 13 subsequently arranges that gains derived by a resident of a Contracting Party from the alienation of shares of a company deriving more than 50 per cent of its asset value directly or indirectly from immovable property situated in the other Contracting Party may be taxed in that other Party. However, this paragraph does not apply to gains derived from the alienation of shares quoted on a stock exchange of either Contracting Party or any other stock exchange as may be agreed between the competent authorities.
Other
The DTA furthermore includes an article arranging for a Mutual Agreement Procedure (Article 24 of DTA) and an article on the Exchange of Information (Article 25 of the DTA).
Click here to be forwarded to DTA and relating Protocol that were signed in January 2013 and entered into force on August 10, 2015 as available in English and Chinese on the website of the Inland Revenue Department of the Hong Kong Special Administrative Region, which will open in a new window. Unfortunately we were not able to locate a version of the DTA in Italian yet.
Click here to be forwarded to the press release as published on the website of the Inland Revenue Department of the Hong Kong Special Administrative Region.
Are you looking for an other DTA? Then check our section DTAs & TIEAs, a very efficient way to locate numerous DTAs.
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