The double taxation agreement between two jurisdictions was signed in January this year and entered into force at the end of July. In Hong Kong the year of assessment for it is 2017/2018.
The agreement’s aim is to support the Chinese Government ongoing efforts to expand its tax treaty network among Eurasian countries.
Under the agreement, double taxation of Hong Kong companies with a permanent establishment in Russia is avoided. Any Russian tax paid by the companies on their income is allowed as a credit against tax payable in Hong Kong.
In addition, Russia’s withholding tax rate on royalties, currently at 30 per cent for individuals and 20 per cent for companies is capped at three per cent. Further, Russia’s dividend withholding tax rate on Hong Kong residents is reduced from the current rate of 15 per cent to 5 or 10 per cent, depending on the recipient’s shareholding.