The Secretary for Financial Services and the Treasury of Hong Kong, Professor K C Chan, and the Minister of Finance of the Netherlands, Mr J C de Jager, on 22 March 2010 signed a comprehensive double tax agreement ("DTA") between Hong Kong SAR and the Netherlands.

This is the first DTA adopting the latest international standard on exchange of information that Hong Kong has concluded with an OECD member country.

Under the DTA, withholding tax rates on passive income including dividends and royalties will be lowered.  A withholding tax rate of 0%, instead of the 15% rate currently applicable in the Netherlands in absence of a DTA, applies to dividends received by qualifying persons holding at least 10% of the share capital of the paying companies, and also dividends received by banks and insurance companies, pension funds, headquarters companies and certain other qualifying entities. To other dividends, a withholding tax rate of 10% will apply.

No source taxation will apply to interest payments, as there is no withholding tax for such payments in either party. For royalties, Hong Kong has agreed to limit its withholding tax to 3%.  Furthermore, the DTA contains a provision on exchange of information relating to tax matters, according to the OECD standard.

The DTA needs to be ratified in the Netherlands and Hong Kong before it can enter into force.  Details of the DTA can be found on the websites of the Dutch Ministry of Finance (www.minfin.nl/Onderwerpen/Internationaal/Belastingverdragen) or the Hong Kong Inland Revenue Department (www.ird.gov.hk/eng/pdf/Agreement_Netherlands_HongKong.pdf).