1. DOUBLE TAXATION AVOIDANCE AGREEMENT BETWEEN FRANCE AND HONG KONG PRESS CONFERENCE CONSULATE GENERAL OF FRANCE 8 DECEMBER 2011

2. What is a Double Taxation Avoidance Agreement (DTA)?  Double taxation arises when two jurisdictions overlap:  The same item of income or profit is subject to tax in each.  DTA organizes and provides:  Relief from double taxation  Certainty to investors on tax rights of the Parties to DTA  DTA helps the assessment of tax liability  DTA provides incentive:  for company to do business  for individuals to move about

3. History of Negotiation between Hong Kong & France  First round as early as 2003  Second round 2004  In 2005 HK endorses OECD’s principles for exchange of information  IR(A)O 2010 and Disclosure Rules commenced on 12 March 2010  Signature of France/HK DTA on 21 October 2010 in Paris  Entry into force: 1st December 2011  Commencement date:  France: 1st January 2012  HK: 1st April 2012

4. Criteria for organizing taxation between the Parties to DTA  DTA is drafted on the base of the OECD Model Tax Convention  Various technical criteria are used in order to avoid or reduce double taxation:  Residence  Establishment  Nature of income, etc.

5. Residence  Definition of the residence is key in determining where the individual taxpayer belongs to.  A Resident of a Party, which activity is exercised in that Party, is liable to tax in that Party for:  Income from employment  Any other income not specifically dealt with in the DTA

6. Permanent Establishment  This is the key criterion for enterprises  In physical terms: a fixed place  In terms of duration: more than 6 months  Business profits are taxed in the Party where an enterprise has its permanent establishment

7. Immovable Property  Situation of the property determines the place of taxation  Income from such property is taxed by the Party where immovable property is situated  Likewise for capital gains from such property

8. Dual Taxation Withholding tax applies to  DIVIDENDS  INTEREST  ROYALTIES  The payee is liable to tax in the Party where it is a resident, but  the Party of origin taxes also the items at 10% (instead of 25% and 33% before)

9. Elimination of Double Taxation  France:  Exemption from tax on business profits for enterprises located in HK (if profits are exempted under French law);  For other incomes: allowance of a tax credit equal to the amount of the tax paid in HK  Hong Kong:  For all incomes: allowance of a tax credit equal to amount of the tax paid in France

10. Exchange of Information  No retrospectif effect  No obligations as regards automatic or spontaneous exchange of information  Requested information cannot be disclosed to other authorities or a third jurisdiction.  Prohibition of « fishing expedition »  Obligation for a Party to provide requested information, even in the absence of a specific interest for that Party

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