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Signature of a tax treaty with Hong Kong
To this end, on November 11, 2012, Prime Minister Stephen Harper announced the signing of a new tax treaty between Canada and Hong Kong which will remove tax barriers between the two economies and encourage bilateral trade and investment.
The Canada-Hong Kong Tax Treaty, which provides for the elimination of double taxation and the reduction of withholding taxes on cross-border payments, is based largely on the Model Tax Convention on Income and on Capital developed by the Organisation for Economic Co-operation and Development (OECD). Consistent with the Government of Canada’s policy announced in Budget 2007, the tax treaty includes provisions reflecting the standard developed by the OECD for the effective exchange of tax information. These provisions assist Canadian tax authorities in obtaining the necessary information to enforce Canadian tax laws and to combat international tax evasion.
Canada has a wide tax treaty network, with treaties in force with 90 countries. The Government of Canada is committed to keeping its tax treaties updated and to negotiating new tax treaties, where warranted, to support the competitiveness of Canadian businesses abroad as well as to attract investment to Canada.
Benefits of tax treaties include:
- providing greater certainty to taxpayers regarding their potential liability to tax in the foreign jurisdiction;
- allocating taxing rights between the two jurisdictions so that the taxpayer is not subject to double taxation;
- reducing the occurrence of high taxation that may arise because of high withholding taxes; and
- ensuring that taxpayers will not be subject to discriminatory taxation in the foreign jurisdiction.
Tax treaties also serve to prevent international tax evasion and avoidance, and include provisions for the exchange of tax information.
