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Important Information

Hong Kong-Mexico Double Tax Pact In Force


The Convention for the Avoidance of Double Taxation between Hong Kong and Mexico, signed on June 18, 2012, entered into force on March 7, 2013, following the completion of both territories' domestic ratification procedures.

According to the text of the agreement, the pact will be effective for profits tax, salaries tax and property tax in Hong Kong for any year of assessment beginning on or after April 1, 2014, and from January 1, 2014, in Mexico for federal income tax and business flat-rate tax.

The text provides for lower rates of withholding taxes in the contracting state in which the income is derived, in respect of dividends, interest and royalties.

Income from dividends is only taxable in the country of the recipient. Interest income can be taxed in both territories, but in the territory that the income arises withholding tax will be capped at 4.9% if the beneficial owner is a bank; and at 10% in all other cases where the receipient is the beneficial owner of the asset from which interest income is derived. For royalties income, if the recipient is the beneficial owner of the income, the withholding tax rate is capped at 10%.

Under the pact, permanent establishment (tax residency) rules apply to entities with a physical base in one territory for a period of more than six months; or where an entity has offered services to another territory for a period or periods aggregating more than 183 days in any twelve-month period.

The agreement also includes provisions for the exchange of tax information in line with the Organization for Economic Cooperation and Development's standard, to allow the two territories' tax authorities to share data to support investigations into fiscal crime on request.



Related jurisdictions:
Hong Kong