On 30 November 2018, the tax treaty between India and Hong Kong entered into force and the treaty will be effective from 1 April 2019.
The tax treaty provides for a low withholding tax rate of 5% for dividend payments. Interest, royalties, and fees are subject to a low withholding tax rate of 10%.
Under the treaty, the definition of a “permanent establishment” includes the furnishing of services, including consultancy services, by an enterprise through its employees if such activities continue for a period exceeding 183 days within any 12-month period.
Conflicts relating to dual-tax residence of companies shall be resolved through the mutual agreement procedure.
The tax treaty also contains a detailed exchange of information clause.
The tax treaty was signed in March 2018.
