The income tax treaty between Hong Kong and India entered into force on 30 November 2018. The treaty, signed 19 March 2018, is the first of its kind between the two jurisdictions.
The treaty covers Hong Kong profits tax, salaries tax, and property tax, and covers Indian income tax, including any surcharge.
If a company is considered resident in both Contracting Parties, the competent authorities will determine the company's residence for the purpose of the treaty through mutual agreement. If no agreement is reached, the company will not be entitled to any relief or exemption from tax provided by the treaty except to the extent and in such manner as may be agreed upon by the competent authorities of the Contracting Parties.
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.
The following capital gains derived by a resident of one Contracting Party may be taxed by the other Party:
Unlike most treaties, the Hong Kong-India treaty provides that gains from the alienation of any other property may be taxed in each Contracting Party in accordance with the provisions of its domestic law.
Both countries apply the credit method for the elimination of double taxation.
The beneficial provisions of Articles 10 (Dividends), 11 (Interest), 12 (Royalties), 13 (Fees for Technical Services), and 14 (Capital Gains) will not apply if the main purpose or one of the main purposes of any person concerned with:
was to take advantage of those Articles by means of that creation or assignment, performance, or alienation. The limitation is included in each of those Articles.
Further, Article 28 (Miscellaneous Rules) includes that:
Cases of legal entities not having bona fide business activities are also covered by the provisions of Article 28.
The treaty applies from 1 April 2019.
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