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Key Points of the Tax Agreement between the Government of Japan and the Government of the Hong Kong

[Provisional translation]

  1. Provisions concerning dispute resolution between the tax authorities of the two parties
    If a taxpayer considers that any tax imposed on him/her is not in accordance with the provisions of the Agreement, he/she may request for dispute resolution between the tax authorities (mutual agreement procedure).
    In addition, a taxpayer may, as part of mutual agreement procedure, request for arbitration with respect to issues not resolved between the tax authorities within two years.
  2. Provisions concerning exchange of information between the tax authorities of the two parties
    The Agreement enables the tax authorities of the two parties to exchange information regarding tax matters.
  3. Provisions to reduce taxation on investment income in the source party
    Taxation on investment income (dividends, interest and royalties) in the source party is reduced as follows.
    DividendsInterestRoyalties
    Between parent and subsidiary (Shareholding requirement)Others
    5% (at least10%) 10% Exemption (government, etc.)
    10% (others)
    5%
  4. Provisions concerning business profits resulting from business activities
    In the sole event that an enterprise establishes permanent establishment (branch, etc.) in the partner party and conducts business activities, only business profits resulting from business activities carried out through the permanent establishment is to be subject to tax in the said party.
  5. Others
    In addition to the above, the following provisions are also included:
    • (1) Provisions concerning the time limits for transfer pricing taxation (7 years from the end of the taxable year)

    • (2) Provisions concerning taxation on income derived by a sleeping partner in respect of a sleeping partnership contract

    • (3) Provisions to prevent abuse of the Agreement