Hong Kong and the Netherlands

Hong Kong and the Netherlands have a long history of close bilateral economic ties. The Netherlands is Hong Kong's fourth largest trading partner among the European Union Member States. The Netherlands is also a significant investor in Hong Kong, ranking third in the league of source countries of external investment in Hong Kong. At least 220 Dutch companies are incorporated in Hong Kong and 6000 Dutch nationals live there. 

Hong Kong and the Netherlands share many characteristics. They are both situated in a delta in a densely populated area. They are strategic hubs for global trade and economic activities, serving a vast hinterland. Both have busy airports and seaports. Both rank among the freest economies in the world, supported by sophisticated private enterprises and a vibrant and talented workforce.

Tax Agreement between the Netherlands and Hong Kong

On the 22 March 2010 the Netherlands and Hong Kong signed comprehensive agreement for avoidance of double taxation (CDTA). Minister De Jager of Economic Affairs signed on behalf of the Netherlands while  Secretary for Financial Services and the Treasury, Professor K C Chan, signed for the Hong Kong SAR.

The treaty makes it possible for Asian investors to hold their European and non-European participations through a Dutch subsidiary of a Hong Kong parent while benefiting from the Netherlands' 100 percent participation exemption, the typical absence of withholding taxes, and the extensive Dutch treaty network. Similarly, the agreement creates the opportunity for US and other investors to use the Netherlands as a gateway to Asia via Hong Kong. Hong Kong grants access to Asia, particularly mainland China, through a favorable tax arrangement it concluded with China in 2006 and amended in 2008.

The treaty calls for significantly lower withholding tax rates on passive income, including dividends and royalties.

For dividends, a withholding tax rate of 0 percent will apply to dividends received by qualifying persons holding at least 10 percent of the share capital of the paying companies. The 0 percent rate will also apply to dividends received by banks and insurance companies, pension funds, headquarters companies, and certain other qualifying entities. A withholding tax rate of 10 percent will apply to other dividends. Hong Kong does not levy withholding tax on dividends.

For interest, no source taxation will apply to interest payments. Neither Hong Kong nor the Netherlands levy withholding tax on interest based on domestic legislation.

For royalties, Hong Kong has agreed to limit its withholding tax to 3 percent.

The treaty, which must still be ratified in both Hong Kong and the Netherlands, does not include specific beneficial ownership or limitation on benefits clauses.

The Netherlands in Hong Kong

The Netherlands is an important trading partner of Hong Kong. In Europe, it is the third largest destination for Hong Kong exports, ahead of Italy, France and Spain. In 2011, Hong Kong’s total exports to the Netherlands amounted to over US$ 5.4 billion, 4.1% less than in 2010. 

As a supplier of Hong Kong, the Netherlands currently ranks 18th worldwide. The value of Dutch exports fo Hong Kong amounted to almost US$ 2.8 billion in 2011, an increase of 25.1% compared to 2010.

More than 220 Dutch companies have established an office in Hong Kong. Of these, about half have the status of Regional Head or  regional office. Some well known Dutch companies in Hong Kong are ING Bank, ABN AMRO Bank, Rabo Bank, KLM, Martinair, Philips Electronics, Endemol, Princess, TNT, Kema and the Macintosh Retail Group.

"Living and Working in Hong Kong" we meet Bart-Jens and Sytske Kimman, who arrived in the territory from Holland 25 years ago.They combine busy office and commercial lives with living aboard a boat in Discovery Bay, Hong Kong.