Hong Kong and Romania enter into CDTA

On 18 November 2015, the Government of the Hong Kong Special Administrative Region of the People’s Republic of China signed an agreement with the Government of Romania for the Avoidance of Double Taxation.  This is the 33rd comprehensive agreement for the avoidance of double taxation (“CDTA”) that Hong Kong has signed with its trading partners.  The CDTA will come into force after the completion of ratification procedures on both sides.

Tax benefits of the CDTA are summarized as follows:

Tax position

with the CDTA

Tax position

without the CDTA

Income earned by Romanian residents in Hong Kong

Tax paid on the income taxed in Hong Kong will be allowed as a deduction from Romanian tax.

Subject to tax in both sides.

Profits of Hong Kong companies through permanent establishment in Romania

Tax paid on the income taxed in Romanian will be allowed as tax credit in Hong Kong.

If the income is Hong Kong sourced, it may be taxed in both sides.

Romania’s withholding tax rate from Hong Kong residents in respect of the following income: -

Royalty

Dividend

Interest

Capped at 3%

3% or 5%

Capped at 3%

16%

16%

16%

The CDTA has also incorporated an article on exchange of information, which enables Hong Kong to fulfill its international obligations as to enhance tax transparency and to combat tax evasion.

For the details of the Hong Kong, Romania tax treaty to be in force, please refer to the following Inland Revenue Websites:

www.ird.gov.hk/eng/ppr/archives/15111801.htm

www.ird.gov.hk/eng/pdf/Agreement_Romania_HongKong.pdf