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Tax Treaty between Hong Kong and Russia has Entered into Force — Orbitax Tax News & Alerts

The income tax treaty between Hong Kong and Russia entered into force on 29 July 2016. The treaty, signed 18 January 2016, is the first of its kind between the two jurisdictions.

Taxes Covered

The treaty covers Hong Kong profits tax, salaries tax and property tax. It covers Russian tax on profits of organizations and tax on income of individuals.

Service PE

The treaty includes the provision that a permanent establishment will be deemed constituted when an enterprise furnishes services within a Contracting Party through employees or other engaged personnel for the same or connected project for a period or periods aggregating more than 183 days within any 12-month period.

Withholding Tax Rates

  • Dividends - 5% if the beneficial owner is a company directly holding at least 15% of the paying company's capital; otherwise 10%
  • Interest - 0%
  • Royalties - 3%

Capital Gains

The following capital gains derived by a resident of one Contracting Party may be taxed by the other Party:

  • Gains from the alienation of immovable property situated in the other Party;
  • Gains from the alienation of movable property forming part of the business property of a permanent establishment in the other Party; and
  • Gains from the alienation of shares of a company deriving more than 50% of its asset value directly or indirectly from immovable property situated in the other Party, with an exemption for:
    • Shares quoted on a stock exchange as may be agreed to by both Parties;
    • Shares alienated or exchanged in the framework of a reorganization of a company, a merger, a scission or a similar operation; and
    • Shares in a company deriving more than 50% of its asset value from immovable property in which it carries on its business

Gains from the alienation of other property by a resident of a Contracting Party may only be taxed by that Party.

Limitation on Benefits

The beneficial provisions of Articles 10 (Dividends), 11 (Interest), 12 (Royalties) and 13 (Capital Gains) will not apply if it was the main purpose or one of the main purposes of any person concerned with the creation, assignment or alienation of the shares, debt-claims, other rights or property in respect of which the dividends, interest or royalties are paid or gains realized was to take advantage of those Articles by means of that creation, assignment or alienation. The limitation is included in each of those Articles.

Double Taxation Relief

Both Parties apply the credit method for the elimination of double taxation.

Effective Date

The treaty will apply in Hong Kong from 1 April 2017 and in Russia from 1 January 2017.