DT Agreements: Hong Kong - Income from a UK source paid to a resident of Hong Kong
The DTC allows full relief from UK tax on interest beneficially owned by
- Pension schemes. A pension scheme is defined in the protocol to the DTC as any plan, scheme, fund, trust or other arrangement which is generally exempt from income taxation and operated principally to administer or provide pension or retirement benefits or to earn income for the benefit of one or more such arrangements.
Beneficial owners that are not individuals or pension schemes must meet the conditions set out in Article 11(3). For example, full relief is available where the interest is beneficially owned by:
- A company whose principal class of shares is regularly traded on a recognised stock exchange. A recognised stock exchange is defined in the protocol to the DTC as the Stock Exchange of Hong Kong Limited and any Hong Kong Special Administrative Region stock exchange recognised under the law of the Hong Kong Special Administrative Region.
- A financial institution unrelated to and dealing wholly independently with the payer. A “financial institution” means a bank or other enterprise substantially deriving its profits by raising debt finance in the financial markets or by taking deposits at interest and using those funds in carrying on a business of providing finance.
- A company other than those described above, provided that the Competent Authority determines that there is no abuse. A claim involving a company in this category should be referred to The Business DTR Technical Support Group, Yorke House, Castle Meadow Road, Nottingham NG2 1BG.
Relief may be restricted, where there is a “special relationship” between the lender and borrower, on the amount of interest which exceeds that appropriate to arms-length terms. There is also a general anti-abuse provision at Article 11(7).
Any cases of doubt or difficulty involving pension schemes or companies should be referred to The Business DTR Technical Support Group, Yorke House, Castle Meadow Road, Nottingham NG2 1BG.