Tax treaty with France delayed by euro crisis
Urgent talks to contain a government debt crisis in Europe has forced the French finance minister to postpone the ratification of a bilateral tax treaty between France and Hong Kong.
Christine Lagarde, France's Minister for Economy, Industry and Employment, was due to sign a comprehensive double taxation agreement in Hong Kong this afternoon but her trip was put off at the last minute.
A spokesman for the French consulate in Hong Kong said Lagarde's trip was not cancelled and would be rescheduled.
The delay is not expected to affect the bilateral tax treaty.
France is heavily exposed to Greek debt, which is threatening to drag the European Union into an unprecedented financial crisis while the global economy is still struggling to recover from last year's downturn. As part of a Euro750 billion (HK$7.25 trillion) aid package announced this month to help boost liquidity and prevent the crisis from spreading, France is contributing Euro111 billion.
Meanwhile, Secretary for Financial Services and the Treasury Chan Ka-keung today will sign a comprehensive double taxation agreement with Andreas Schieder, State Secretary of Austria's Federal Ministry of Finance.
The agreement with Austria brings to six the number of comprehensive double taxation agreements Hong Kong has signed so far. These agreements adopt the latest Organisation for Economic Co-operation and Development standards on the exchange of information.
Since March, Hong Kong has signed such treaties with Brunei Darussalam, the Netherlands, Indonesia, Hungary and Kuwait. Local tax authorities have also reached agreement on such treaties with Ireland, Japan, Switzerland and Liechtenstein while negotiations are under way to upgrade existing treaties with the mainland, Vietnam, Belgium and Luxembourg to the OECD's newest standards.
Hong Kong, this year, is expected to satisfy international requirements set out by the OECD to sign at least 12 such tax treaties. The city's growing network of bilateral tax treaties is expected to bring about fresh business, trade and investment opportunities for all parties.
Double taxation arises when two or more tax jurisdictions overlap, so that the same income or profit is subject to tax in each place. Hong Kong adopts the territorial principle of taxation, which only taxes income sourced in Hong Kong.