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Double Taxation Avoidance Agreement (DTAA) is a treaty signed between two countries to avoid the double taxation of income and assets. Such treaties help residents and businesses in both countries to avoid paying taxes twice, once in their home country and again in the country where the income or assets are earned or located.

Hong Kong and the United Kingdom have signed a DTAA to eliminate double taxation and to prevent tax evasion. This agreement is beneficial for taxpayers who are residents of either Hong Kong or the UK, or who have business interests in both countries.

The DTAA between Hong Kong and the UK was signed on 21 June 2018 and came into force on 1 January 2019. The treaty applies to income received on or after 1 January 2019.

Under the DTAA, individuals and businesses in Hong Kong and the UK are exempt from paying tax on certain types of income in the other country. For example, Hong Kong residents do not have to pay UK tax on dividends, interest, or royalties received from a UK source. Similarly, UK residents do not have to pay Hong Kong tax on dividends, interest, or royalties received from a Hong Kong source.

The treaty also sets out rules for determining tax residency, which is important for determining which country has the right to tax a taxpayer`s income. The general rule is that an individual is considered a resident of the country where they have a permanent home available to them. If an individual has permanent homes in both countries, their residency is determined by considering where their personal and economic ties are closer.

The DTAA also includes provisions for avoiding double taxation on profits earned by enterprises in both countries, and for resolving disputes between the tax authorities of the two countries.

To benefit from the DTAA, taxpayers must provide documentation to show that they are entitled to the benefits of the treaty. This may include a certificate of residency issued by the tax authorities in their home country.

In conclusion, the Double Taxation Avoidance Agreement between Hong Kong and the United Kingdom is a significant development in international tax law. It provides taxpayers with certainty and clarity on their tax obligations in both countries, and helps to promote cross-border trade and investment between the two economies.