HK, Macau Sign Tax Pact

Hong Kong and Macau have signed a comprehensive avoidance of double taxation arrangement, the 43rd agreement of its kind that Hong Kong has signed with its trading partners. 

Under the arrangement, any Macau tax paid by Hong Kong residents in respect of income derived from sources in Macau will be allowed as a credit against the Hong Kong tax payable on the same income, subject to the provisions of the tax laws of Hong Kong. 

For Macau residents, double taxation will be avoided by way of exemption of the income taxed in Hong Kong from the Macau tax, or by crediting the Hong Kong tax paid against the Macau tax payable in respect of the same income.

The arrangement also provides tax relief for profits earned by Hong Kong residents in Macau from cross-boundary shipping, air and land transport.

Moreover, an eligible teacher or researcher who is employed in Hong Kong and engages in teaching and research activities at a recognised educational or scientific research institution in Macau shall be exempt from tax in Macau for three years, provided that the relevant income has been subject to tax in Hong Kong. 

The Financial Services & the Treasury Bureau said the signing of the comprehensive avoidance of double taxation arrangement will deepen economic and trade ties with Macau, offer additional incentives for the business sector of both sides to invest, promote nurturing and exchange talents.

It will also drive the development of the Guangdong-Hong Kong-Macao Greater Bay Area, the bureau added.

The agreement will take effect once both parties ratify the procedures.

In 2018, Macau was Hong Kong's 19th largest trading partner. Following the conclusion of the arrangement between both sides, Hong Kong has signed relevant agreements with 14 of its top 20 trading partners.