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20-Mar-2010

Hong Kong and the Netherlands sign agreement for avoidance of double taxation The CDTA applies to taxes on income and intends to avoid double taxation as well as to prevent tax evasion. Under the CDTA, withholding tax rates on passive income including dividends and royalties will be lowered. A withholding tax rate of 0%, instead of the 15% rate currently applicable in the Netherlands in the absence of a CDTA, applies to dividends received by qualifying persons holding at least 10% of the share capital of the paying companies, as well as dividends received by banks and insurance companies, pension funds, headquarters companies and certain other qualifying entities. To other dividends, a withholding tax rate of 10% will apply. No source taxation will apply to interest payments, as there is no withholding tax for such payments in either party. For royalties, Hong Kong has agreed to limit its withholding tax to 3%. The CDTA needs to be ratified in the Netherlands and Hong Kong before it can enter into force. Details of the Hong Kong/Netherlands CDTA can be found on the websites of the Dutch Ministry of Finance (www.minfin.nl/Onderwerpen/Internationaal/Belastingverdragen) or the Hong Kong Inland Revenue Department (www.ird.gov.hk/eng/pdf/Agreement_Netherlands_HongKong.pdf)