It aims to avoid double taxation on trade activities.
Finance Secretary Paul Chan has inked a comprehensive agreement with Indian Ambassador to China Gautam Bambawale to avoid double taxation on cross-border trade activities, according to a government press release.
India is the city’s seventh largest trading partner with bilateral trade valued at $266b in 2017.
The agreement clears the allocation of taxing rights between the two economies which will help investors evaluate potential tax liabilities from cross-border activities.
"Hong Kong has all along treasured its economic and trade connections with India, and I have every confidence that the signing of the (agreement) will bring trade relations between the two places to a new level," Mr Chan said.
The deal also provides for certain tax relief agreements including halving the cap on India's withholding tax rate for Hong Kong residents on interest to 10%, and taxing
Hong Kong airlines operating flights to India at Hong Kong's corporation tax rate.
Profits from international shipping transport earned by Hong Kong residents in India and subject to tax there will enjoy a 50% reduction in Indian tax.
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