Hong Kong (China) and Finland signed a comprehensive agreement for avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income (hereinafter as “the agreement”). This agreement will come into force on the 30th day after both contracting parties notify the completion of their domestic ratification procedures and the Double Taxation Agreement with respect to Taxes on Income from Aircraft Operation signed in 2007 will cease to have effect.
This treaty applies to taxes on income, including taxes on gains from the alienation of movable or immovable property as well as taxes on capital appreciation. A summary of some key provisions can be found below:
Generally, the credit method is adopted to eliminate the double taxation arising between the two Contracting States. However, dividends should be exempt from Finish tax if they are paid by a company being a resident of Hong Kong to a company which is a resident of Finland and which controls directly at least 10 percent of the voting power in the company paying the dividends.
The principle purpose test is included in Article 21 of this Treaty. Treaty benefits could be denied if obtaining that benefit was one of the principal purpose of the arrangement or transaction, unless it is established that granting that benefit would be in accordance with the object and purpose of the relevant provisions of this Agreement. Besides that, the agreement gives priority to domestic law and measures concerning the prevention of tax avoidance of each Contracting Party, which insofar do not give rise to taxation contrary to the agreement.
With the fast growth of China’s economy and the continuous improvement of the comprehensive strength of domestic enterprises, as well as the implementation of the “One Belt, One Road” policy, an increasing amount of Chinese enterprises are beginning to expand their global footprint and establish their presence in Europe.
TPA Global has developed a practical roadmap of 6 steps meant to guide CFOs in their Journey of rising above troubles to reach a situation of full control. These steps are presented in a series of short video clips (3-5 minutes):