France, Hong Kong seal double taxation pact

16th December 2011, Comments 0 comments

An agreement to eliminate double taxation between France and Kong Kong should provide a major boost to trade and investment between the two markets, a French official said Friday.

The Comprehensive Double Taxation Agreement was eight years in the making and will take effect at the start of 2012, French Consul General Arnaud Barthelemy told reporters.

"By removing uncertainty and bringing legal security I'm quite confident that the CDTA will encourage investment between France and Hong Kong," he said.

After Britain, France's biggest trade surplus is with Hong Kong, amounting to 3.8 billion euros (US$4.95 billion) last year, he said.

Around 700 French-owned companies operated in Hong Kong, employing more than 30,000 people and generating revenue of more than seven billion euros.

"For all those French businesses in Hong Kong, this agreement will be a major step forward," Barthelemy said.

The treaty contains detailed provisions to clarify how salaries tax and corporate tax should apply to individuals and companies, and thus avoid double taxation.

Salary and company tax will apply according to the rules in the jurisdiction where the individual or company is permanently based.

Hong Kong residents will benefit from a reduced maximum 10 percent withholding tax on dividends, interest and royalties originating from France, compared to higher charges applicable in the absence of the treaty.

They will not be subject to capital gains tax on shares sold in French companies as long as the stake represents less than 25 percent of the company's shareholding and the company does not derive more than 50 percent of its asset value from immovable property in France.

Residents of Hong Kong who hold vacant property for their own use in France will no longer be subject to the minimum taxation applicable on deemed rental value of the property.

© 2011 AFP

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