Finland and the Hong Kong Special Administrative Region signed a Comprehensive Double Tax Agreement (“CDTA”) on 24 May 2018. This is the 40th CDTA concluded by Hong Kong. The DTA will enter into force when both jurisdictions have completed their formal ratification procedures.
Withholding tax rate
The Agreement will provide a more preferential withholding income tax rate on dividends and royalties. Below is a comparison of the withholding tax rates on dividends and royalties with and without the CDTA.
|Hong Kong without CDTA rate||0%||4.95%/ 16.5% (note 1)|
|Finland without CDTA rate||20%/30%
|HK-Finland with CDTA rate||5/10% (note 3)||3%|
Note 1: 4.95% rate is only applied to the royalty paid to a non-related party unless the intellectual property has never been owned in whole or in part by a person carrying on business in Hong Kong.
Note 2: Currently at 20% for companies and 30% for individuals
Note 3: 5% applies for a company that holds / controls directly or indirectly at least 10% of the voting power.
Airlines operating flight
If Hong Kong airlines operates flights to Finland, it will be subject to Hong Kong Profits Tax and it will not be taxed in Finland.
International shipping transport
Hong Kong resident carries on shipping business and its profits arises in Finland, such profits will be exempted from tax in Finland.
Competitive capabilities of edge Hong Kong’s airlines and shipping industries would be increased after signed CDTA either providing platform or attracting new comers.
CTDA also provides incentive to Finland investors to use Hong Kong as an investment platform for enjoying the tax credit against HONG KONG tax payable in respect of that income.