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Hong Kong signed its fifth double tax treaty when it completed an agreement with Vietnam on December 16.

Features of the treaty include the abolition of interest withholding tax if the recipient is certain Vietnam government-controlled institutions; the Hong Kong government, the Hong Kong Monetary Authority or other recognised institutions as mutually agreed; a cap of 7% on withholding tax on royalties where payments are made for the use of a patent, design or model, plan, secret formula or process, and 10% in all other cases; and profits earned by Hong Kong or Vietnam companies from international shipping and air transport will only be taxable in the companies' home country.

Hong Kong has signed other tax treaties with Belgium, Thailand, mainland China and Luxembourg.

The agreement will come into force after each country ratifies it. For Hong Kong this means that the chief executive must make an order in council under the Inland Revenue Ordinance. The order is subject to negative vetting by the Legislative Council.

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