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These notes are issued for the information of taxpayers and their tax - page 52 / 68

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Article 20

OTHER INCOME

126.

Article 20 is written by reference to the United Nations Model.

It

provides that items of income of a resident of One Side, wherever arising, not dealt with in the Articles of the Comprehensive Arrangement shall be taxable

only in that Side.

However, the abovementioned income, if arising in the

Other Side, may also be taxed in that Other Side.

127.

Article 20 also provides that the provisions of Article 7 (Business

Profits) shall apply to income, other than income from immovable property as defined in paragraph 2 of Article 6, if the recipient of such income, being a resident of One Side, carries on business in the Other Side through a permanent establishment situated therein and a right or property in respect of which the

income is paid is effectively connected with such permanent establishment.

Article 21

METHODS FOR ELIMINATION OF DOUBLE TAXATION

128.

Under the Comprehensive Arrangement, both Sides eliminate double

taxation by the allowance of a tax credit. In accordance with the provisions of the Comprehensive Arrangement, Mainland tax paid in the Mainland in respect of any item of income derived by a resident of Hong Kong will be allowed as a credit against the Hong Kong tax payable on that income by that resident. However, the amount of tax credit will not exceed the amount of tax payable in respect of that item of income, computed in accordance with the provisions of

the Ordinance.

129.

In processing an application for tax credit, One Side will consider

whether the relevant tax is imposed by the Other Side under the laws of that Other Side (and such laws being in accordance with the provisions of the

Comprehensive Arrangement). is in the affirmative.

A tax credit will be granted only if the answer

130.

The Comprehensive Arrangement provides that the method for

elimination of double taxation adopted in Hong Kong will be subject to the provisions of the Ordinance relating to the allowance of a deduction and a

credit.

Section 50 of the Ordinance provides for the allowance of a tax credit

in respect of arrangements having effect under section 49.

This section

48

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