Hong Kong's tax basis is territorial, therefore income derived by a resident from places outside Hong Kongwill generally not face double taxationin Hong Kong.
Many countries which tax their residents on a world-wide basis also provide their residents who operate businesses in Hong Kongwith unilateral tax relief for Hong Kongtax paid on income derived from Hong Kong.
Hong Kong also allows a deduction for foreign tax paid in respect of an income which is also subject to tax in Hong Kong. Businesses operating in Hong Kong therefore do not generally have problems with double taxationof income.
Hong Kongdoes however have three comprehensive double tax agreements.
In August 2006, Hong Kong and the Mainland of China replaced the limited scope arrangement for the avoidance of double taxationwith a comprehensive double tax arrangement. This is yet another example of the cross border agreements that are being developed to strengthen links between the two economies.
Hong Konghas double tax arrangements for shipping and airline income with a number of countries.
