Secretary for Financial Services and the Treasury Christopher Hui Ching-yu (right) exchanges documents with Croatian Minister of Finance Marko Primorac after signing a comprehensive avoidance of double taxation agreement in Hong Kong, Jan 24, 2024. (PHOTO / HKSAR GOVT)

The Hong Kong Special Administrative Region government signed a comprehensive avoidance of double taxationagreement with Croatia on Wednesday, signifying the government's sustained efforts in expanding the city’s CDTA network, in particular with tax jurisdictions participating in the Belt and Road Initiative.

Signed in Hong Kong, the agreement sets out the allocation of taxing rights between the two jurisdictions and will help investors better assess their potential tax liabilities from cross-boundary economic activities, the government said in a statement.

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The agreement will come into force after the completion of ratification procedures by both jurisdictions. In the case of Hong Kong, it will be implemented by way of an order to be made by the Chief Executive in Council under the Inland Revenue Ordinance, added the statement.

This could enhance the attractiveness of Hong Kong as a business and investment hub, and consolidate the city's status as an international economic and trade center.

Christopher Hui Ching-yu, Secretary for Financial Services and the Treasury, HKSAR 

The SAR has so far signed CDTAs with 17 member states of the European Union, including Croatia.

Secretary for Financial Services and the Treasury Christopher Hui Ching-yu and Minister of Finance of Croatia Marko Primorac signed the pact on behalf of their respective governments.

“I have every confidence that this CDTA will further promote economic and trade connections between Hong Kong and Croatia, and offer additional incentives for the business sectors of both sides to do business or make investments,” Hui said pointing out that Croatia is one of the economies participating in the Belt and Road Initiative.

Hong Kong will continue to negotiate with trading and investment partners with a view to expanding its CDTA network, he said. “This could enhance the attractiveness of Hong Kong as a business and investment hub, and consolidate the city's status as an international economic and trade center.”

Hong Kong's Secretary for Financial Services and the Treasury, Christopher Hui Ching-yu (fifth right); Minister of Finance of Croatia, Marko Primorac (fifth left); State Secretary in Ministry of Finance of Croatia, Stipe Župan (fourth left);  Ambassador of the Republic of Croatia to the People’s Republic of China, Dario Mihelin (third left); Director of the Tax Administration of Croatia, Božidar Kutleša (first left); Commissioner of Inland Revenue, Tam Tai-pang (fourth right); and Deputy Secretary for Financial Services and the Treasury (Treasury), Maurice Loo (third right) with other representatives of both sides after the signing ceremony of the comprehensive avoidance of double taxation agreement in Hong Kong, Jan 24, 2024. (PHOTO / HKSAR GOVT)

Under the agreement, Hong Kong companies can enjoy double taxation relief in that any tax paid in Croatia, whether directly or by deduction, will be allowed as a credit against the tax payable in Hong Kong in respect of the same income, subject to the provisions of Hong Kong’s tax laws, according to the government statement.

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The agreement also provides certain tax relief arrangements such as Croatia's withholding tax rates for Hong Kong residents on dividends, interest and royalties will be capped at 5 percent; and profits from international shipping transport earned by Hong Kong residents arising in Croatia will not be taxed in Croatia.