Tax treaty with Hong Kong on the anvil

India will by October discuss with Hong Kong the modalities of a treaty against double taxation.

“We have the treaty with the US, UK, many European and middle-eastern countries, and China. We should have the treaty with Hong Kong as well, because it is a part of China,” said Sunil Talati, former president, Institute of Chartered Accountants of India.

Nine other countries or entities have been approved for the treaty: Bermuda, British Virgin Islands, Cayman Islands and Gibraltar (British overseas territories); Guernsey, Isle of Man and Jersey (British crown dependencies); the Netherlands Antilles (an autonomous part of the Kingdom of Netherlands); and Macau (a special administrative region of the People’s Republic of China).

“The Centre can initiate and negotiate agreements for the exchange of information for the prevention of evasion or avoidance of income tax and assistance in collection of income tax with these territories,” the Central Board of Direct Taxes said on Tuesday.

“A treaty against double taxation encourages bilateral trade and intellectual property exchange. There is a clear disadvantage if a person has to pay tax twice,” Talati said.

The treaty with the countries and entities will mean a person wanting to invest in India can come through any of those regions but will pay tax just once, depending on his or her status (resident, non-resident Indian or resident of any of the approved countries).