it is not the policy of the Hong Kong authorities to enter into
and for our part we double taxation agreements of this kind;
would need to consider in the light of Hong Kong's tax system at the time, whether it would be appropriate for the provisions of the Agreement to be applied to it. Clearly this is something
But in the which will need to be kept under close review. meantime, I am sure the Committee will recognise that British businesses will wish to have the benefits of the Agreement.
Background Note
This is a grey area and the following is based on advice from the FCO legal advisers. The answer will depend, inter alia, on:
i.
ii.
whether the Agreement is then in force in its present, or a similar, form. Although expressed to continue indefinitely, notice to terminate the Agreement may be given by either side after it has been in force for five years; and it may be amended at any time by mutual agreement by means of a Protocol.
whether the laws relating to Chinese tax covered by the Agreement are in force in Hong Kong after June 1997. For the purpose of the Agreement, "China" is defined
(in Article 3) by reference to the territory of China "in which the laws relating to Chinese tax are in force". It is agreed by both the United Kingdom and China that Hong Kong will be part of China after 1997. However, Article 2 of the Double Tax Agreement sets out the "existing" Chinese taxes to which the Agreement applies (there is no mention of Hong Kong taxes) and goes on to provide that the Agreement is also to apply to "any identical or substantially similar taxes" which are imposed (by either party) after signature of the Agreement. This is a fairly common (OECD) provision in nearly all our agreements.
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