ISLAMABAD: Pakistan and Hong Kong (HK) have ratified a treaty signed early this year to stave off double taxation on incomes of their individuals and companies.

“Pakistan and Hong Kong SAR (special administrative region) have ratified the avoidance of double taxation and prevention of fiscal evasion with respect to taxes on income,” a statement said. “The tax pact will come into force from November 24.”

The countries signed the agreement on February 17 after negotiations spreading over six years.

“The tax pact shall benefit individuals and companies working in Pakistan and Hong Kong SAR by providing safeguards against paying double taxation on the incomes of the residents of both jurisdictions,” the statement said.

“The agreement will also provide adequate certainty in respect of taxation rules applicable to cross-border business transactions, dividends, interest and royalties.”

Under the agreement, double taxation will be avoided as any Pakistani tax paid by Hong Kong companies will be allowed as a credit against the tax payable in Hong Kong on the same profits, subject to the provisions of the tax laws of Hong Kong.

Likewise, for Pakistani companies, the tax they paid in Hong Kong will be allowed as a deduction from the tax payable on the same income in Pakistan.

Pakistan’s Consul General for Hong Kong Qadir Memon said this was a great milestone to sign the agreement with Hong Kong, the world’s freest economy.

Internews