South Africa and Hong Kong have signed on October 16th a double taxation agreement which will help prevents double taxation for Hong Kong companies doing business in South Africa. Under the new agreement, any tax paid by such company in Hong Kong will be allowed as tax credit against tax payable in Hong Kong in respect of income.
Another aspect on the agreement is the lowering of South Africa’s withholding tax on royalties from 15% to 5%, while the withholding tax on dividend income will be reduced from 15% to either 5 or 10% depending on the shareholding percentage. There will be a further cap of 15% on withholding tax on interest.
Additional provisions are included in terms of the exchange of information between the tax authorities of both countries.
The agreement will help develop investment between both countries.
For Chinese and other Asian companies, this agreement will further make using a Hong Kong entity as investment vehicle a very interesting option.