Hong Kong signs double taxation avoidance agreement with Bahrain in effort to expand CDTA network

The Secretary for Commerce and Economic Development, Mr Algernon Yau (second left), and the Minister of Finance and National Economy of Bahrain, Shaikh Salman bin Khalifa Al Khalifa (second right), yesterday (March 3, Manama time) sign a comprehensive avoidance of double taxation agreement.

4th March 2024 – (Hong Kong) Hong Kong took another significant step in expanding its network of comprehensive avoidance of double taxation agreements (CDTAs) by signing a new agreement with Bahrain. The agreement, the 49th of its kind for Hong Kong, demonstrates the ongoing efforts of the Hong Kong Special Administrative Region (HKSAR) Government to strengthen economic ties with tax jurisdictions involved in the Belt and Road Initiative.

The CDTA with Bahrain establishes clear guidelines for the allocation of taxing rights between the two jurisdictions. This clarity will enable investors to make informed decisions regarding potential tax liabilities arising from cross-border economic activities.

Christopher Hui, the Secretary for Financial Services and the Treasury, expressed confidence in the agreement’s potential impact. As Bahrain is actively involved in the Belt and Road Initiative, Hui believes that the CDTA will further enhance economic and trade connections between Hong Kong and Bahrain. Additionally, it will provide incentives for businesses on both sides to engage in commercial activities and investments. Hui emphasized that Hong Kong will continue to negotiate with trading and investment partners to expand its CDTA network. This strategic approach aims to strengthen Hong Kong’s appeal as a global business and investment hub while solidifying its status as an international economic and trade center.

The Hong Kong-Bahrain CDTA brings several benefits to Hong Kong companies. It allows for double taxation relief, meaning that any tax paid in Bahrain, either directly or through deduction, can be credited against the tax payable in Hong Kong for the same income. However, these benefits are subject to the provisions of Hong Kong’s tax laws.

During an official visit to Manama, Algernon Yau, the Secretary for Commerce and Economic Development, signed the CDTA on behalf of the HKSAR Government. Representing Bahrain was Shaikh Salman bin Khalifa Al Khalifa, the Minister of Finance and National Economy.

The agreement will come into force once both jurisdictions complete the necessary ratification procedures. In Hong Kong, implementation will involve an order issued by the Chief Executive in Council under the Inland Revenue Ordinance (Cap. 112). This order will be subject to scrutiny by the Legislative Council through the negative vetting process.