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PwC ITS ASIA TAX UPDATE
On March 31, 2010, the governments of Japan and the Hong Kong Special Administrative Region of the People's Republic of China ("Hong Kong") reached "agreement in principle" on a comprehensive income tax treaty. The negotiations leading to the conclusion of this new double tax agreement (DTA) were not widely publicized, in contrast to many other treaty negotiations, and so came as unexpected good news. The new tieatyis intended to clarify the taxation on business profits and investment income of enterprises operating- in Japan and Hong Kong. Although it may take another year before the draft treaty is signed and ratified, the "agreement in principle" is a significant development.
For U.S. multinationals with significant operations in the Asia Pacific region, a new Japan-Hong Kong income tax treaty could have a major impact on their analysis of regional holding companies and regional entrepreneur structures. Summarized below are some high-level observations about the new draft treaty, taking into account that so far the governments have issued only limited information. However, the information that...