Hong Kong: Instrument of ratification of MLI deposited with OECD
The MLI will become effective for some of the treaties from 1 April 2023 (for withholding taxes) and year of assessment 2024/2025 (for other taxes).
Effective for some of the treaties from 1 April 2023 (for withholding taxes)
Hong Kong on 21 February 2023 deposited with the OECD its instrument of ratification of the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting (MLI).
While the final MLI positions of Hong Kong (deposited with the OECD on 25 May 2022) indicated that 39 out of 46 existing Hong Kong income tax treaties would be covered by the MLI, the notification deposited on 21 February 2023 only applies to 31 of the 39 covered Hong Kong treaties.
The MLI will thus become effective in respect of some of the Hong Kong treaties from 1 April 2023 (for withholding taxes) and year of assessment 2024/2025 (for other taxes).
For a discussion of the modifications to Hong Kong’s existing income tax treaties under the MLI, read TaxNewsFlash
KPMG observation
The effect of the MLI and the specific dates/periods from which the changes brought by the MLI will take effect may vary depending on the individual treaties of Hong Kong. Hong Kong resident business groups wishing to apply for a treaty benefit (e.g., a reduced withholding tax rate on dividends, interest or royalties, or a tax exemption for capital gains) from a treaty jurisdiction, and foreign resident entities wishing to obtain a treaty benefit (e.g., a reduced withholding tax rate on royalties) from Hong Kong, need to (1) understand how the MLI provisions will be applied to change the relevant treaties, (2) assess the potential effect on their treaty benefit applications, and (3) determine whether any modifications to their current holding or investment structure may be required.
For more information, contact a KPMG tax professional:
David Ling | davidxling@kpmg.com
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